D.S. Shenoy and Others vs Baldev Lulla

A.N. Venugopal Gowda, J—Respondent is the complainant and the petitioners are accused Nos. 3 and 5 in C.C. Nos. 11689/2011, 11698/2011, 11699/2011, 14316/2011, 21865/2011 and 26226/2011, pending on the file of the XIII Additional Chief Metropolitan Magistrate, Bengaluru. The said criminal cases were instituted against Green Wood High Trust and four others, alleging commission of an offence under Section 138 of Negotiable Instruments Act, 1881 (for short ''the Act''). Indisputedly, accused No. 3 - D.S. Shenoy, is not a trustee of accused No. 1 - Trust. Accused No. 5 - Smt. Rajashree, is the wife of accused No. 2 - Mr. K.C. Vijaya Kumar. Both K.C. Vijaya Kumar and his wife, no doubt are the trustees of accused No. 1 - Green Wood High Trust. Accused No. 2 having issued 16 post dated cheques and the cheques, when presented having been dishonoured by the Bank, on which they were drawn, for the reason "funds insufficient", after demanding payment by issue of notice/s, the complaint/s were filed by alleging that accused No. 2 issued the cheques on behalf of accused No. 1, without keeping sufficient fund in the bank account, to honour the cheques issued to the complainant. According to the allegation in the complaint, cause of action for the complaint/s arose when accused No. 2 issued the cheques through accused No. 1, in discharge of their liability to the complainant and on account of failure to pay the amount even after service of demand notice/s. To quash the above said criminal cases, these petitions were filed by accused Nos. 3 and 5, on the ground that the cheques were not issued on the account of accused No. 1 and that they are not signatories to the cheques and that there is no debt or other legal liability, which they are liable to discharge.

Learned advocates contended that the ingredients of the offence under Section 138 of the Act, as against the petitioners being not existing in the complaint/s filed by the respondent, the prosecution of the petitioners in the court below amounts to abuse of process of law and hence, these petitions are liable to be allowed and the impugned proceedings, insofar as accused Nos. 3 and 5/petitioners are concerned, are liable to be quashed.

Learned advocate for the respondent, on the other hand, submitted that in view of Memorandum of Understating dated 09.12.2009 entered into by the respondent No. 2, representing respondent No. 1 and issuance of the cheques towards the payment of the sum shown in Annexure-C, accused No. 5 has rightly been included in the complaint/s filed before the court below. Learned counsel submitted that there being disputed facts, insofar as petitioner No. 2/accused No. 5 is concerned, and she being the wife of accused No. 2, should face the trial. However, learned advocate, fairly conceded that the petitioner No. 1/accused No. 3, being not the trustee of accused No. 1, is not liable for prosecution on the criminal side. However, learned counsel submitted that suit/s having been instituted against the trustees of accused No. 1 and the petitioners, the same would be pursued for passing of decree/s, in accordance with law.

In order to constitute an offence under Section 138 of the Act, in Jugesh Sehgal Vs. Shamsher Singh Gogi, (2009) CLT 1451 : (2009) 9 JT 292 : (2009) 9 SCALE 455 : (2009) 14 SCC 683 : (2009) 10 SCR 857 , the ingredients require to be fulfilled have been enumerated as follows:

"(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;

(ii) the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;

(iii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier;

(iv) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;

(v) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;

(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice;"

It has been held that being cumulative, it is only when all the aforesaid ingredients are satisfied, that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of N.I. Act.

Learned advocate for the respondent conceded that the cheques in question are not drawn on the account maintained in the name of accused No. 1 by its trustee/s. Indisputedly, neither of the petitioners herein i.e., accused Nos. 3 and 5 have signed and issued the cheques in question to the complainant. Concededly, no notice was also served on either of the petitioners, demanding payment of amounts covered by the cheques.

No doubt, in Kirshna Texport and Capital Markets Ltd. Vs. Ila A. Agrawal and Others(2015) 4 AD (SC) 421 : AIR 2015 SC 2091 : (2015) 2 ALD(Cri) 253 : (2015) 89 ALLCC 949 : (2015) ALLMR(Cri) 2414 : (2015) 3 BomCR 544 : (2015) 2 BomCR(Cri) 593 : (2015) 126 CLA 202 : (2015) 190 CompCas 241 : (2015) 2 CompLJ 431 : (2015) CriLJ 2847 : (2015) 3 Crimes 28 : (2015) 3 JLJR 62 : (2015) 2 KHC 793 : (2015) 2 KLJ 534 : (2015) 2 KLT 543 : (2015) 2 MLJ(Cri) 708 : (2015) 3 PLJR 253 : (2015) 2 RCR(Criminal) 949 : (2015) 3 RLW 2200 : (2015) 6 SCALE 95 : (2015) 8 SCC 28 : (2015) 6 SCJ 277 : (2015) 131 SCL 57 : (2015) 2 UC 1085 , it has been held that, the Directors, who are incharge of affairs of the company and responsible for the affairs of the company would be aware of receipt of notice by the company under Section 138 of the Act and therefore, neither on literal construction nor on the touchstone of purposive construction, there would be need to serve the notice on individual Directors.

In the present cases, accused No. 1 is not a Company and the other accused are not its Directors. Concededly, accused No. 3/petitioner No. 1, is not even a trustee of the accused No. 1. Even though accused No. 5/petitioner No. 2 herein, is a trustee of accused No. 1, the cheques of accused No. 1 having not been issued and the cheques in question having been issued on the individual bank account of accused No. 2 - Mr. K.C. Vijaya Kumar, there cannot be any prosecution of his wife i.e., accused No. 5, in a proceeding under Section 138 of N.I. Act. The decision in the case of Jugesh Sehgal (supra), comes to the aid of accused No. 5 - Smt. Rajashree Vijaya Kumar W/o. K.C. Vijaya Kumar.

In view of the foregoing, the prosecution of these petitions by the respondent, in the aforesaid cases pending before the court below being abuse of process of law, they are entitled to the relief.

In the result, these petitions are allowed and the proceedings in C.C. Nos. 11689/2011, 11698/2011, 11699/2011, 14316/2011, 21865/2011 and 26226/2011, pending on the file of the XIII Additional Chief Metropolitan Magistrate, Bengaluru, as against accused Nos. 3 and 5 is quashed. However, learned Magistrate shall proceed as against the other accused, with expedition and in accordance with law. It is made clear that the quashing of the criminal proceedings will not have any bearing on the pending civil suit/s and the same shall be decided on their respective merit or in accordance with law.