Krishan Bai vs Arti Press

Padmini Jesudurai, J.—The accused in C.C. No. 46 of 1990, pending trial before the Judicial Magistrate, Sivakasi, for an offence u/s 138 of

the Negotiable Instruments Act, 1881, as amended by the Act 66 of 1988, on a complaint given by the respondent herein, invokes the inherent

powers of this court u/s 482 of the Criminal Procedure Code, to quash the above proceedings.

The allegation in the complaint is that, for liabilities arising out of supply of pictorial calendars by the respondent to Surya Advertising P. Ltd.,

whose sister concern is Mudra Graphic P. Ltd., the petitioner being the managing director of both the concerns, representing that funds in Surya

Advertising P. Ltd. were not sufficient and that there was sufficient funds in Mudra Graphics P. Ltd., issued a cheque for Rs. 20,000 in Mudra

Graphics P. Ltd. account.

The cheque when presented by the respondent through the Tamil Nadu Mercantile Bank Ltd., Sivakasi, was returned unpaid for want of funds

with an endorsement by the bank ""refer to drawer"". The statutory notice of demand was given to the petitioner requiring him to pay the amount

within 15 days of the receipt of the notice and the petitioner not having paid the amount, the complaint was filed. On receipt of the summons from

the trial court, the petitioner has filed the present application to quash the above complaint.

Thiru V. Sairam, learned counsel for the petitioner, urged two contentions in support of his prayer :

(i) According to the complaint, the cheque was issued by Mudra Graphics P. Ltd. which owed no debt or was under no liability to the respondent,

whereas the liability for calendars supplied was that of Surya Advertising P. Ltd. and as such, the petitioner who is shown as the managing director

of Surya Advertising P. Ltd., cannot be prosecuted.

(ii) The cheque had been issued by Mudra Graphics P. Ltd. and when the cheque is dishonoured for want of funds, the offence, if any, is

committed only by Mudra Graphics P. Ltd., which is not the accused in the case and hence the present petitioner cannot be prosecuted even

though he had signed the cheque as managing director of Mudra Graphics P. Ltd.

Meeting the above contentions, Thiru K. S. Rajagopalan, learned counsel for the respondent, would contend that at this stage, this court has

merely to accept the complaint as it is and find out whether an offence has been committed and in the present case, there is a specific averment in

the complaint that Surya Advertising P. Ltd. and Mudra Graphics P. Ltd. are sister concerns and the petitioner is the managing director of both the

concerns and the cheque has been issued by the petitioner from out of the account of Mudra Graphics P. Ltd. on the specific representation that

funds in Surya Advertising P. Ltd. were not sufficient and that there were sufficient funds in Mudra Graphics P. Ltd. According to learned counsel,

either way, the petitioner would be liable, particularly when to the notice of demand sent after the dishonour of the cheque, the petitioner had not

chosen to send even a reply or to pay the amount and, as such, the complaint has to be sustained.

The question that arises for consideration is whether any one of the contentions put forward by learned counsel for the petitioner can be

accepted.

It is settled law that, at this stage, this court while acting u/s 482 of the Criminal Procedure Code, has to accept the averments in the complaint

as they are, without adding anything thereto or subtracting anything therefrom and find out if the offence is made out against the accused. If the

complaint discloses the offence against the accused and there is no legal impediment to the continuance of the proceedings, this court cannot stifle

the prosecution by quashing it at its very threshold. Every opportunity must be given to a complainant to prove his case during trial. It is in this

background that the legal contentions have to be analysed.

For considering the first contention, namely, that the respondent had supplied pictorial calendars only to Surya Advertising P. Ltd. and that the

cheque had been issued by Mudra Graphics P. Ltd., which had no debt and was under no liability to the respondent, a reading of the relevant

portion of section 138 would be useful.

Dishonour of cheque for insufficiency, etc., of funds in the accounts. - Where any cheque drawn by a person on an account maintained by

him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any

debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that 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 that bank, such person shall be

deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term

which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both.

Explanation. - For the purposes of this section ''debt or other liability'' means a legally enforceable debt or other liability.

A reading of the above provision would indicate that the debt or liability towards which the cheque is issued should be a legally enforceable debt

or liability. This would have reference to the nature of the debt or liability and not to the person against whom the debt or liability could be

enforced. This is clear by the use of the words ""any debt or liability"" which would include a cheque drawn by one person towards a legally

enforceable debt or liability of another person. The significant omission of the words ""debt or other liability of that person"" after the words ""any

debt or liability"" would indicate the intention of Parliament. Hence, in the instant case, the liability or debt was legally enforceable against Surya

Advertising P. Ltd. but the cheque had been issued by Mudra Graphics P. Ltd. towards the liability due by Surya Advertising P. Ltd. to the

respondent. The only requirement of the section on this aspect is that the debt or liability should be a legally enforceable one - legally enforceable

against the person who owed the debt or is under liability but need not necessarily be a debt or liability of the person who actually draws the

cheque. Surya Advertising P. Ltd. and Mudra Graphics P. Ltd. are sister concerns and for a liability due by Surya Advertising P. Ltd., the sister

concern, Mudra Graphics P. Ltd. has issued the cheque. There is nothing in the language of section 138 or in any other provision of Chapter 17 to

exclude such a cheque out of the purview of that Chapter. While so, the cheque issued by Mudra Graphics P. Ltd. for a legally enforceable liability

of Surya Advertising P. Ltd. would come within the purview of Chapter 17 of the Act. The contention of learned counsel for the petitioner,

therefore, cannot be accepted.

The next contention is that the offence has been committed by Mudra Graphics P. Ltd. since the cheque is issued by it and when Mudra

Graphics P. Ltd. is not made an accused, the petitioner cannot be proceeded against for an offence committed by the company. Here again, a

reading of section 138 would show that when a cheque is drawn by a person and is returned unpaid by the bank, for the reasons mentioned in the

provision, such person shall be deemed to have committed an offence. The use of the words ""such person"" would clearly indicate that the person

who had drawn the cheque is the person who commits the offence. In the instant case, the cheque is drawn by Mudra Graphics P. Ltd., signed by

the petitioner herein as its managing director. The cheque, however, is drawn only by Mudra Graphics P. Ltd. When the cheque is dishonoured for

want of funds, the offence is committed only by the drawer, namely, Mudra Graphics P. Ltd. Section 141 of the Act provides that when a person

who has committed an offence u/s 138 is a company, 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, as well as the company, shall be deemed to be guilty of the offence.

The petitioner as managing director was in charge of and responsible to the company for the conduct of the business of the company. It is in such

capacity that he had signed the cheque also. The petitioner also would be liable since the offence has been committed by the company, of which he

is in charge. In the present complaint, Mudra Graphics P. Ltd., which has committed the offence, is not an accused. Unless the company is made

an accused, the person who is in charge of and responsible to the company for the conduct of the business of the company, cannot be made an

accused. This is the settled position of law reiterated by the Supreme Court in U.P. Pollution Control Board v. Modi Distillery [1988] 63 Comp

Cas 77, where a complaint against the chairman, vice-chairman, managing director and members of the board of directors of the company and the

unit of the company but without the company was quashed by the High Court on the ground that there could be no vicarious liability on the

chairman and others, unless there was prosecution of the company and the Supreme Court upheld that part of the legal finding but, on the facts of

that case, remitted the matter to the trial court to give a direction to the complainant to make a formal amendment of the complaint to make the

company also an accused. In the instant case, the offence is committed by Mudra Graphics P. Ltd. which is not an accused in this case. In such

circumstances, there can be no prosecution of the managing director when the company is not prosecuted.

In the result, the petition is allowed and the proceedings in C.C. No. 46 of 1990, pending before the Judicial Magistrate, Sivakasi, are

quashed.