K. Pannir Selvam vs MMTC Limited and another

This petition u/s 482 of Cr.PC has been filed by the 6th accused in CC No.218 of 1997 on the file of the VI Metropolitan Magistrate, for Railways, Visakhapatnam for quashing the proceedings in the said case.

Respondent No.1 is a company wholly owned by the Government of India is the complainant in this case. There were some transactions between the complainant and Al company (M/s.Raghunath Cotton and Oil Products) as commission agent. Certain amounts were found due from the accused No. 1 company to the complainant and subject to final settlement the accused agreed to pay Rs.135 lakhs and issued a cheque dated 6-11-1994 for Rs.65,00,000/-drawn on State Bank of India, Ongole Branch on the account of accused No.l company. Another cheque dated 29-11-1994 for Rs.70 lakhs drawn on the same bank on the same account was also issued under the signature of the Managing Director of the Company who is the second accused in that CC. The complainant presented the cheques for collection in their bank, namely, State Bank of India, Ongole on 22-11 -1994. The cheques were returned on the ground that sufficient funds are not available in the accounts concerned.

It is stated that these facts brought to the notice of accused 2 to 7 who are incharge of the affairs of the company relating to the transactions under reference. The accused requested the complainant to re-present the cheques with a promise that enough funds would be available in the account to honour the cheques. The complainant re-presented one of the cheques in its State Bank of India, Overseas Branch, Visakhapatnam on 1-12-1994. The said cheque was sent for collection by the said bank to the State Bank of India, Ongole Branch on which the cheque was drawn. The said bank dishonoured the cheque and transmitted the same along with memo dated 9-12-1994 mentioning the reason for dishonour as "exceeds arrangements". The complainant received this intimation on 22-12-1994. The complainant got issued a lawyer''s notice dated 23-12-1994 setting out the above facts and required Al and A2 to make the payments within 15 days from the date of service of notice. Accused Nos.1 and 2 received notice but did not choose to make any payments within the period of 15 days. On the other hand, the complainant received a contentious reply with false allegations. Hence, the complaint for the offence u/s 138 of the Negotiable Instruments Act was filed with a liberty to take such a civil and other criminal actions as are warranted. Thus, it would be seen that the complaint is in respect of dishonour of cheque of Rs.65,00,000/-.

The learned Counsel for the petitioner Sri Tamada Gopala Krishna seeks quashing of these proceedings on various grounds.

Firstly, it is contended that the petitioner herein is accused No.6 in the complaint and admittedly notice as required u/s 138 of Negotiable Instruments Act was issued to the company and its Managing Director i.e., accused Nos.1 and 2 respectively and no notice was issued separately to the petitioner herein and as such requirement u/s 138 of Negotiable Instruments Act has not been complied with.

The learned Counsel for the respondent, Sri P. Srinivas Reddy, contends that the petitioner herein, accused No.6 is being sought to be made liable for the offence u/s 138 of the Negotiable Instruments Act in view of the provisions in Section 141 of the Negotiable Instruments Act inasmuch as he as an officer of the company was incharge of and was responsible to the conduct of the business of the company. This contention on behalf of the learned Counsel for the petitioner is based on u/s 138(b) of the Negotiable Instruments Act which reads as follows:

"b. The payee or the holder in due course of the cheque, as the case may be, 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."

This provision mandates that a notice has to be given by the payee under a cheque which has been dishonoured to the drawer of the cheque. In this case, as the cheque has been drawn on behalf of the company under the signature of its Managing Director, A2, the requirement u/s 138(b) of the Negotiable Instruments Act shall be deemed to have been complied with if notice is given to the company and represented by its Managing Director.

Section 141 of the Negotiable Instruments Act provides that if the person committing an offence u/s 138 of Negotiable Instruments Act is a company, then not only the company will be liable but every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company shall be deemed to be guilty of the offence.

Reading together the provisions in Sections 138 and 141 of the Negotiable Instruments Act, it would be clear that while Section 141 of the Negotiable Instruments Act creats the basis for liability against the employees of the company if the requirements under the said section arc satisfied, there is no contemplation of notice to be issued in respect of such employees whose liability is based on Section 141 of the Negotiable Instruments Act. As observed above, the requirement of Section 138(b) of the Act is that notice should be sent to the drawer of the cheque and not to all the persons who can be deemed to be liable apart from the drawer of the cheque by virtue of the provision in Section 141 of the Act.

Thus, in this case, the contention that the prosecution of the petitioner, A6, is bad for want of notice to him separately cannot be countenanced.

The next ground on which the proceedings are sought to be quashed is that admittedly the petitioner is only a Commercial Manager accused No.1. company and he is not even a Director of the said company.

According to the learned Counsel, the Commercial Manager may be assigned with some duties which may be considered very important and may take active part in the trading transactions of the company. But that itself will not be sufficient to mulct him with criminal liability u/s 138 of the Negotiable Instruments Act.

The learned Counsel for the respondents on the other hand contends that the complaint has laid sufficient basis, for rendering the petitioner liable for the offence attributable to the company in view of Section 141 of the Act. Section 141 of the Act contemplates that if a person committing an offence u/s 138 of the Act is a company then not only the said company is liable but every person who at the time of offence was committeed was incharge of and was responsible for the conduct of the business to the company" shall be deemed to be guilty of the offence and can be proceeded against and punished accordingly.

In this case, in Para 4 of the complaint, there is a specific averment in this regard as follows:

"When the facts were brought to the notice of accused Nos.2 to 7 who are incharge of the affairs of the accused company relating to the transaction under reference, they requested the complainant to re-present......"

Again in Para 6 of the complaint, the following assertion is found:

"The 2nd accused being the Managing Director and signatory of the cheque and 5th accused (6th accused?) as Commercial Manager who requested time with a promise to make the funds available and accused Nos.3 to 5 being the other Directors incharge of day-to-day affairs are responsible to see that the cheque is duly honoured when presented by the complainant."

The learned Counsel for the petitioner points out that in the averment referred to above in Para 6, the statement as to being incharge of day-to-day affairs is referable to only accused 3 to 5 who are the Directors but not in accused No.5 (accused No.6?) who has been shown as the Commercial Manager.

It is debatable whether a reference in question is to only against accused Nos.3 to 5 and it also includes accused No.5 (accused No.6) shown as Commercial Manager. In a petition u/s 482 of Cr.PC for quashing the proceedings a minute dissection as to the meaning of a particular statement in the complaint cannot be undertaken and if two interpretations are possible, the criminal proceedings cannot be quashed on the basis of one such interpretation. The question as to which of the interpretations is more possible has to be left to the trial Court to be decided in the light of other circumstances and facts brought on record during the trial. At any rate, in Para 4 of the complaint referred to above, there is a specific mention that accused Nos.2 to 7 are in-charge of the affairs of the accused company.

Thus, there is no scope for arguments based on the contents of the complaint that the allegations do not satisfy the requirement of Section 141 of the Negotiable Instruments Act. When there is a specific assertion that a particular accused along with others was in-charge of the affairs of the company, the mere fact that the exact words of Section 141 of the Act to the effect "was in-charge of, and was responsible to, the company for the conduct of the business of the company" are not produced in the complaint does not justify the quashing of the proceedings. At any rate, in this case there is not only an assertion that the petitioner as a Commercial Manager was in-charge of the affairs of the company, there is further elaboration in regard to his role inasmuch as it is stated that it was the petitioner who requested time for payment with a promise to make the funds available.

As observed by the Supreme Court in the case of Rajesh Bajaj Vs. State NCT of Delhi and Others, , in a petition u/s 482 of Cr.PC it is not permissible to adopt a strictly hyper technical approach and "sieve the complaint through a cullendar of finest gauzes for testing the ingredients" of the offence alleged against the accused. As to whether the person in question was really incharge of the affairs of the company and was responsible to the affairs of the company or not, and as to what functions he was assigned in the affairs of the company and whether those functions could be considered sufficient to hold that he was incharge of the affairs of the company are matters which have to be gone into during the trial. The trial Court will come to its own conclusions on this aspect and the observations in this order shall not be related as findings of fact.

In the result, the criteria laid down by the Supreme Court in the case of State of Haryana and others Vs. Ch. Bhajan Lal and others, , cannot be said to have been satisfied in this case.

In the result, this petition is dismissed.

However, it is open to the petitioner to move the trial Court for dispensing with his personal attendance inasmuch as it is now stated that he has left the company and has accepted a job in ''some other place and there is no reason for the trial Court for not considering such a request subject to the requirement that he is represented by some one and subject to the requirement of his presence on the specific dates of hearing as directed by the trial Court.