Prashant and Others vs M/s. Astha Innovation Private Limited

T.P. Sharma, J.—Since the above petitions filed for quashment of criminal complaint cases are involving common question, they are being disposed of by this common order. By filing Cr.M.P. No. 215/2012 u/s 482 of the Cr.P.C., the petitioners have challenged legality and propriety of the order dated 12-11-2010 passed by the Judicial Magistrate First Class, Raipur in Criminal Complaint Case No. 832/2011, whereby the Trial Court has registered complaint against the petitioner for the offence punishable u/s 138 of the Negotiable Instruments Act, 1881 (for short "the Act").

By filing Cr.M.P. No. 216/2012 u/s 482 of the Cr.P.C., the petitioners have challenged legality and propriety of the order dated 11-10-2010 passed by the Judicial Magistrate First Class, Raipur in Criminal Complaint Case No. 831/2011, whereby the Trial Court has registered complaint against the petitioners for the offence punishable u/s 138 of the Act.

By filing Cr.M.P. No. 217/2012 u/s 482 of the Cr.P.C., the petitioners have challenged legality and propriety of the order dated 8-11-2010 passed by the Judicial Magistrate First class, Raipur in Criminal Complaint Case No. 4/2011, whereby the Trial Court has registered complaint against the petitioners for the offence punishable u/s 138 of the Act.

Following common questions of law emerge in these three petitions:

(1) Whether, non-compliance of the amended provisions of Section 202(1) of the Cr.P.C, regarding enquiry, especially in case of accused residing outside the jurisdiction of the Court and even in case of complaint for the offence punishable u/s 138 of the Act, vitiates the criminal proceeding?

(2) Whether, specific allegation against the petitioners/members of the Board of Directors of the Company relating to conduct of business of the company is sine qua non in terms of Section 141(1) of the Act?

(3) Whether, the allegation made in the complaint satisfied the requirement of Section 141(1) of the Act?

(4) Whether, mere issuance of notice gives cause of action for filing complaint?

As per brief facts, the petitioners are members of the Board of Directors of Shri Giriwar Enterprises Pvt. Ltd., a Company which runs wholesale business of steel and they are responsible for the conduct of business of the Company. They used to purchase steel from the respondent on credit basis. Cheques for payment of dues have been issued by the accused persons, which were presented for encashment before Axis Bank, Nagpur, and same were dishonoured on the ground of payment sopped by the drawer. Information was given by Axis Bank, Nagpur to the respondent. Notice Under Postal Certificate (UPC) has been served upon the accused persons including the petitioners. When same has failed to satisfy the demand, registered notice was issued to the accused persons including the petitioners and same was received back un-served with an endorsement that they are regularly absent on the given address. Thereafter, complaints for the offence punishable u/s 138 of the Act were filed by the respondent. The respondent has examined K. Ravi Shankar, authorised authority of the respondent, on affidavit. On the basis of aforesaid affidavit, complaint has been registered against the accused persons including the petitioners and process has been issued.

I have heard learned Counsel for the petitioners and perused the orders impugned.

Learned Counsel for the petitioners submitted that in case of order taking cognizance on the basis of complaint, Courts are required to comply with the procedure prescribed in Chapter XV of the Cr.P.C, and the Court is required to examine the complainant on oath. In the present case, all the accused persons are residents of the area beyond the area which the Court exercises the jurisdiction and, therefore, it was sine qua non upon the Court to enquire into the case in accordance with the provisions of Section 202(1) of the Cr.P.C. However, without any enquiry, the Judicial Magistrate First Class, Raipur has issued process against the accused persons including the petitioners and thereby committed illegality. Amended provisions of Section 202(1) of the Cr.P.C, are not mere formality, it has to be complied in its letter and spirit to ensure that process has been issued against the persons responsible. Learned Counsel further submitted that entire cause of action in the present case, has arose within the territorial jurisdiction of the Court situate at Nagpur and not within the territorial jurisdiction of the Court situate at Raipur, therefore, the Court situate at Raipur is also not having jurisdiction to try such offence. On the aforesaid basis, quashment of criminal proceedings and orders impugned have been prayed for.

Learned Counsel for the petitioners placed reliance in the matter of Saroj Kumar Poddar Vs. State (NCT of Delhi) and Another, in which the Supreme Court has held that compliant not making out as to how and in what manner accused was responsible for conduct of the business of the company, accused had not issued any cheques and at relevant time he had resigned as Director, though it was not known as to on what dale his resignation was accepted, in these circumstances, in absence of substantive allegations against members of the Board of Directors, the complaint did not disclose any offence as against members of the Board of Directors and proceeding is liable to be quashed. Learned Counsel further placed reliance in the matter of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, , in which the Supreme Court has held that it is necessary to specifically aver in a complaint u/s 141 of the Act that at the time the offence was committed, the person accused was in-charge of, and responsible for the conduct of business of the company. This averments is an essential requirement of Section 141 of the Act and has to be made in a complaint. Without this averments being made in a complaint, the requirements of Section 141 of the Act cannot be said to be satisfied. Therefore, the criminal proceeding against such member of the Board of Directors is liable to be quashed. Learned Counsel also placed reliance in the matter of K.K. Ahuja Vs. V.K. Vora and Another, , in which the Supreme Court has held that in case of offence committed by the Company and its Board of Directors, the complainant is required to make specific allegation against each of the members of the Board of Directors that how they were responsible to the Company or the conduct of business of the Company. Mere-reproduction of the wording of Section 141(1) of the Act is not sufficient for issuance of process against the members of the Board of Directors.

In the present case, the Magistrate has not examined the complainant on oath, but the complainant has given his evidence on affidavit. While dealing with the question of requirement of examination of the complainant on oath, this Court in the matter of Amarjit Singh Vs. Jasjit Singh, while considering various provisions of the special Act, i.e., the Negotiable Instruments Act. 1881 has held that in accordance with Section 145 of the Act evidence of the complainant on affidavit is sufficient compliance of the requirement of Section 200 of the Cr.P.C. Same view was reiterated by this Court in Rupesh Kumar Dhivar Vs. Nitin Shrivastava, Cr.M.P. No. 879/2011 vide order dated 15-3-2012.

While dealing with the question of applicability of the provisions of Section 145(1) of the Act, the Supreme Court in Mandvi Co-op. Bank Ltd. Vs. Nimesh B. Thakore, , has held that omission by Legislature to incorporate word "accused", with word "complainant" in Section 145(1) of the Act, accused cannot be allowed to tender his evidence on affidavit, though the complainant is permitted/allowed to tender his evidence on affidavit. The Supreme Court has observed in Paras 31 and 32 of its judgment as follows:-

On this issue, we arc afraid that the High Court overreached itself and took a course that amounts to taking over the Legislative functions.

On a bare reading of Section 145, it is clear that the Legislature provided for the complainant to give his evidence on affidavit and did not provide for the accused to similarly do so. But the High Court thought that not mentioning the accused along with the complainant in sub-section (1) of Section 145 was merely an omission by the Legislature that it could fill up without difficulty, Even though the Legislature in their wisdom did not deem it proper to incorporate the word ''accused'' with the word ''complainant'' in Section 145(1), it did not mean that the Magistrate could not allow the accused to give his evidence on affidavit by applying the same analogy unless there was a just and reasonable ground to refuse such permission. There are two errors apparent in the reasoning of the High Court. First, if the Legislature in their wisdom did not think "it proper to incorporate a word ''accused'' with the word ''complainant'' in Section 145(1)......". it was not open to the High Court to fill up the self perceived blank. Secondly, the High Court was in error in drawing an analogy between the evidences of the complainant and the accused in a case of dishonoured cheque. The case of the complainant in a complaint u/s 138 of the Act would be based largely on documentary evidence. The accused, on the other hand, in a large number of cases, may not lead any evidence at all and let the prosecution stand or fall on its own evidence. In case the defence does lead any evidence, the nature of its evidence may not be necessarily documentary; in all likelihood the defence would lead other kinds of evidences to rebut the presumption that the issuance of the cheque was not in the discharge of any debt or liability. This is the basic difference between the nature of the complainant''s evidence and the evidence of the accused in a case of dishonoured cheque. It is, therefore, wrong to equate the defence evidence with the complainant''s evidence and to extend the same option to the accused as well.

In the light of special provision in the Special Act, i.e., the Negotiable Instruments Act. 1881 for giving evidence on oath, the Court is not required to examine the complainant on oath u/s 200 of the Cr.P.C.

In order to satisfy the provisions of Section 141(1) of the Act, the complainant is required to make specific allegation against members of the Board of Directors that how they are responsible for the conduct of business of the Company. The only allegation that they are members of the Board of Directors and, therefore, responsible for conduct of business of the Company is not sufficient averment for taking cognizance and issuing process against members of the Board of Directors.

While dealing with the question of averment required against members of the Board of Directors or other officers in terms of Section 141(1) of the Act, the Supreme Court in the matter of S.M.S. Pharmaceuticals (supra), has summarised the position of Section 141 of the Act in Para 20 of its judgment, which reads thus:-

In view of the above discussion, our answers to the questions posed in the Reference are as under:-

(a) It is necessary to specifically aver in a complaint u/s 141 that at the time the offence was committed, the person accused was incharge of and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

(b) The answer to question posed in sub-para (b) has to be in negative. Merely being a director of a company is not sufficient to make the person liable u/s 141 of the Act. A Director in a company cannot be deemed to be incharge of and responsible to the company for conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.

(c) The answer to question (c) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly incharge of the company and responsible to the company conduct of its business. When that is so, holders of such positions in a company become liable u/s 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are incharge of and responsible for the conduct of business of the company. Therefore, they get covered u/s 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.

While dealing with same question, the Supreme Court in the matter of Saroj Kumar Poddar (supra), has held that the complainant is required to make specific allegation that in what manner the accused was responsible for conduct of business of the company.

While dealing with same question, the Supreme Court in the matter of K.K. Ahuja (supra), has observed in Para 21 as follows:-

If a mere reproduction of the wording of Section 141(1) in the complaint is sufficient to make a person liable to face prosecution, virtually every officer/employee of a company without exception could be impleaded as accused by merely making an averment that at the time when the offence was committed they were in charge of and were responsible to the company for the conduct and business of the company. This would mean that if a company had 100 branches and the cheque issued from one branch was dishonoured, the officers of all the 100 branches could be made accused by simply making an allegation that they were in charge of and were responsible to the company for the conduct of the business of the company. That would be absurd and not intended under the Act. As the trauma, harassment and hardship of a criminal proceedings in such cases, may be more serious than the ultimate punishment, it is not proper to subject all and sundry to be impleaded as accused in a complaint against a company, even when the requirements of Section 138 read with Section 141 of the Act are not fulfilled.

In the matter of S.M.S. Pharmaceuticals (supra), the Supreme Court has held that the complainant is required to make specific averments in the complaint u/s 141 of the Act that at the time the offence was committed the person accused was in-charge of and responsible for the conduct of business of the company.

As regards the question of non-compliance of the provisions contained in Section 202(1) of the Cr.P.C, especially in the case of accused resident of outside of the territorial jurisdiction of the Court concerned, the word ''shall'' occurs in Section 202(1) of the Cr.P.C, which reads as follows:-

Section 202. (1) Any Magistrate, on receipt of a complaint of an offence of which he is authorised to take cognizance or which has been made over to him u/s 192, may if he thinks fit, and shall, in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction postpone the issue of process against the accused, and cither inquire into the case himself or direct an investigation to be made by a police officer or by such other person as he thinks fit for the purpose of deciding whether or not there is sufficient ground for proceeding:

Provided that no such direction for investigation shall be made.

(a) where it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Session; or

(b) where the complaint has not been made by a Court, unless the complainant and the witnesses present (if any) have been examined on oath u/s 200.

The word ''shall'' has also been used in sub-section (2) of Section 202 of the Cr.P.C. While dealing with the character of the word ''shall'' appearing in Section 202(2) of the Cr.P.C, the Supreme Court in the matter of Shivjee Singh Vs. Nagendra Tiwary and Others, has held that the word ''shall'' occurring in Section 202(2) of the Cr.P.C, is prima facie indicative of mandatory character. However, non-examination of any or some of the witnesses cited by complainant is by itself, not sufficient to denude Magistrate of jurisdiction to take cognizance and issue process provided he is satisfied that prima facie case is made out for doing so. In Paras 22 and 27 of its judgment, the Supreme Court has observed as follows:-

The use of the word ''shall'' in Proviso to Section 202(2) is prima facie indicative of mandatory character of the provision contained therein, but a close and critical analysis thereof along with other provisions contained in Chapter XV and Sections 226 and 227 and Section 465 would clearly show that non-examination on oath of any or some of the witnesses cited by the complainant is by itself, not sufficient to denude the Magistrate concerned of the jurisdiction to pass an order for taking cognizance and issue of process provided he is satisfied that prima facie case is made out for doing so, Here, it is significant to note that the word "all" appearing in proviso to Section 202(2) is qualified by the word "his". This implies that the complainant is not bound to examine all the witnesses named in the complaint or whose names are disclosed in response to the order passed by the Magistrate. In other words, only those witnesses are required to be examined whom the complainant considers material to make out a prima facie case for issue of process.

Shah, J. also referred to the judgments of the Full Bench of Kerala High Court in Moideenkutty Haji and Others Vs. Kunhikoya and Others, , and of Madras High Court in M. Govindaraja Pillai Vs. Thangavelu Pillai (deceased) and Others, , approved the ratio of the latter decision that Section 202 is an enabling provision and it is the discretion of the Magistrate depending upon the facts of each case, whether to issue process straightaway or to hold the inquiry and held: Rosy and Another Vs. State of Kerala and Others,

We agree with the conclusion of the Madras High Court to the effect (sic: extent) that Section 202 is an enabling provision and it is the discretion of the Magistrate depending upon the facts of each case, whether to issue process straightaway or to hold the inquiry. However, in case where inquiry is held, failure to comply with the statutory direction to examine all the witnesses would not vitiate further proceeding in all cases for the reasons that-

(a) in a complaint filed by a public servant acting or purporting to act in discharge of his official duties, the question of holding inquiry may not arise,

(b) whether to hold inquiry or not is the discretionary jurisdiction of the Magistrate,

(c) even if he has decided to hold an inquiry it is his further discretion to examine the witnesses on oath. If he decides to examine witnesses on oath in a case triable exclusively by the Court of Sessions, he shall call upon the complainant to produce all his witnesses and examine them on oath,

(d) it would also depend upon the facts of each case depending upon the prejudice caused to the accused by non-compliance with the said Proviso (Section 465), and

(e) that the objection with regard to non-compliance with the Proviso should be taken at the earlier stage when the charge is framed by the Sessions Court.

(Emphasis supplied)

The Magistrate is competent to issue process straightaway without holding enquiry, but if he holds enquiry and fails to comply with the provisions, even then same would not vitiate the further proceeding. Even otherwise, in the light of Section 202 of the Cr.P.C, and Section 145 of the Act, evidence can be taken u/s 202 of the Cr.P.C, on affidavit in terms of Section 145 of the Act.

Therefore, following points emerge from aforesaid discussion:-

(1) The Negotiable Instruments Act, 1881 is a Special Act having overriding effect over the general Act, i.e., the Code of Criminal Procedure. 1973.

(2) Examination of the complainant by producing evidence on affidavit u/s 145 of the Act is sufficient compliance of the provisions of Section 200 of the Cr.P.C.

(3) The word "shall" occurring in Section 202 of the Cr.P.C, is discretionary in character.

(4) The Magistrate is competent to issue straightaway the process, but if he holds enquiry into the complaint and fails to comply with the mandatory provisions, then, even same would not vitiate the proceeding in case prejudice has not been shown to have caused to the accused by such non-compliance.

In the light of aforesaid proposition of law, on examination of the complaint it clearly reveals that the complainant has made allegation against the petitioners in Paras 3, 4, 5 and 6 of the complaint that they are members of the Hoard of Directors, they are well acquainted with the business of the Company and are responsible for the conduct of the business of the Company. Further, it has been specifically alleged that the accused persons used to purchase steel from the complainant on credit basis and cheques have been issued for payment of dues. In Para 8 of the complaint, it has also been alleged that after dishonour of the cheques notice of demand has been issued to the petitioners and all accused persons Under Postal Certificate (UPC), but same has not been replied by the petitioners and accused persons. Further, registered notice has been issued which has been returned unserved with an endorsement that they are regularly absent in the said place. Clear and specific allegations have been made against the petitioners, i.e., all members of the Board of Directors. Notice under Postal Certificate (UPC) has been issued to the petitioners, but for the reasons best known to the petitioners, they have failed to reply such notice and have failed to show that they are nominal Directors or they are not responsible for the conduct of business of the Company or that they have resigned from the membership or some other person excluding the petitioners are responsible, In the present petitions, the petitioners have not pleaded that they have not received the notice sent by UPC.

As regards territorial jurisdiction, as per the complaint, the complainant is running its business within the territorial jurisdiction of the Court situate at Raipur. The Company runs its business at Raipur. The accused have purchased steel from the complainant. Cheques have been issued to the complainant for payment of cost of steel purchased by them at Raipur and cheques have been deposited at Nagpur. Information of dishonour has been intimated to the complainant at Raipur. This is not the case in which only on the basis of issuance of notice, complaint is filed before the Court situate at Raipur, but substantive part of offence/incident took place within the territorial jurisdiction of the Court situate at Raipur. K. Ravi Shankar authorised person of the respondent, has given evidence in terms of Section 145(1) of the Act, on affidavit. In his detailed affidavit, he has specifically deposed the details of the offence required in terms of Section 141(1) of the Act.

The scope of enquiry under Chapter XV and Section 202 of the Cr.P.C, is extremely restricted only to finding out the truth or otherwise of the allegations made in the complaint in order to determine whether process should be issued or not u/s 204 or whether the complaint should be dismissed by resorting to Section 203 on the footing hat there is no sufficient ground for proceeding on the basis of the statements of the complainant and of his witnesses, if any. Hut the enquiry at that stage does not partake the character of full dress trial which can only lake place after process is issued u/s 204 calling upon the proposed accused to answer the accusation made against him for adjudging the guilt or otherwise of the accused person. Further, the question whether the evidence is adequate for supporting the conviction can be determined only at the trial and not at the stage of the enquiry contemplated under this section. To say in other words, during the course of the enquiry under this section, the Enquiry Officer has to satisfy himself simply on the evidence adduced by the prosecution whether prima facie case has been made out so as to put the proposed accused on a regular trial and that no detailed enquiry is called for during the course of such enquiry.

In the present case, necessary allegation has been made against the petitioners that how they are responsible for conduct of business of the company. Notice has been served to the petitioners by UPC, but for the reasons best known to the petitioners, they have failed to reply and to show their grievances. Substantive cause of action has arose within the territorial jurisdiction of the Court situate at Raipur. The word ''shall'' occurring in Section 202 of the Cr.P.C, is discretionary in character and non-compliance of the provisions contained in Section 202 of the Cr.P.C, especially in the light of Section 145 of the Act, by itself is not fatal or sufficient to vitiate the proceeding in absence of any prejudice caused to have been shown by the shown by the petitioners on the ground of such non-compliance.

On due consideration, common questions of law formulated in Para 5 of this order are answered in the following manner:

(1) I inquiry under the amended provisions of Section 202(1) of the Cr.P.C, even in case of accused residing beyond the jurisdiction of the Court exercising the jurisdiction for the offence punishable u/s 138 of the Act, is not sine qua non and the provisions are discretionary in nature

(2) The Court is competent to issue straightaway process if it satisfies on the basis of material produced on behalf of the complainant in case of complaint for the offence punishable u/s 138 of the Act.

(3) The complainant is required to make specific allegation against members of the Board of Directors that how they are responsible for conduct of business of the company. In the present case allegation made in the complaint coupled with issuance of notice by UPC and not replying he notice satisfy the requirement of Section 141(1) of the Cr.P.C.

(4) Mere issuance of notice u/s 138(c) of the Act does not give cause of action for filing complaint, but, in the present case, substantive cause of action arose within the territorial jurisdiction of the Court situate at Raipur.

After evidence on affidavit of the complainant giving detailed description supporting the complaint and documentary evidence like cheques copy of notice and copy of bank slip, no further enquiry is necessary before issuance of process and the Court is competent to issue process straightaway on satisfaction on the basis of material available before it. By issuing process, the Trial Court has not committed any illegality requiring any interference in exercise of extraordinary inherent jurisdiction in terms of Section 482 of the Cr.P.C. Consequently, the petitions are liable to be dismissed and are hereby dismissed, in limine.