Sun Bright Exporters and Others vs Srinivasa Rao

C.T. Selvam, J.—The petitioners, who are facing prosecution for offence u/s 138 of the Negotiable Instruments Act in C.C. No. 11373 of

2006, on the file of the Hon''ble VII Metropolitan Magistrate, George Town, Chennai, seek to quash the proceedings against them.

The first petitioner is a partnership firm by name M/S. Sun Bright Exporters and the petitioners 2 to 5 are the partners thereof. The complainant

along with two others was an employee in the leather industry run by the first accused firm for a long period. The complainant informs that the first

accused firm itself was closed in the month of October 2005 without any notice to the employees. The employees were deprived of employment

since 30.10.2005, and were not provided suitable compensation which was their legal entitlement. The first accused having promised to pay the

employment benefits to the complainant and the fellow workers, and having failed to effect payment to them as promised, issued a cheque bearing

No. 521762 dated 15.07.2006 in a sum of Rs. 2,00,000/- in favour of the complainant requesting him to share the amount along with the other

two employees. The complainant was to get compensation in a sum of Rs. 90,000/- while the other two sums of Rs. 50,000/- and Rs. 60,000/-

respectively. The cheque was presented for collection on 15.07.2006 and returned unpaid on 17.07.2006 for the reason ""Funds Insufficient"". The

complainant issued a statutory notice u/s 138 of Negotiable Instruments Act on 28.07.2006 demanding that payment be made within 15 days from

the date of receipt of the notice. The complainant states that the accused acknowledged the receipt of notice on 02.08.2006. A reply notice

denying liability had been caused on behalf of the accused. Stating that the first accused is a partnership firm, the accused 2 to 5 are the partners of

the first accused firm, that they are directly involved in the day to day affairs of the first accused firm and the second accused is the signatory of the

said dishonored cheque, the complaint has been lodged against all the petitioners.

The learned Counsel for the petitioners would submit that no offence u/s 138 of Negotiable Instruments Act would be made out, when the very

complaint informs that the cheque was made to meet the liability not of one person but of several persons. The next contention is that the cheque

giving rise to the complaint was meant for the specific purpose of mercantile transaction between the one bank and another and could not be

utilised for the purpose of making out an offence u/s 138 of Negotiable Instruments Act. In this regard, the learned Counsel would submit that the

certificate issued by the Indian Bank, Harbour Branch, Chennai-1, informs that the particular cheque book was issued to the account holder for

transferring the balance in the account from the said bank to the credit of their Account No:OD/10 with Central Bank of India, International

Business Branch, Chennai and no other operations are allowed in the account since the account specifically was opened for that purpose. It is his

contention, that the cheque has been misused fraudulently by the complainant.

The learned senior counsel for the respondent Mr. K.V. Sridharan in response to the above contentions, would rely upon the decision of the

Hon''ble Apex Court in Amar Chand Agarwalla Vs. Shanti Bose and Another, etc., towards informing that it would be improper for this Court to

quash proceedings in exercise of its powers u/s 482 of Cr.P.C., once the trial is in progress before the trial court. The learned Counsel submits that

in the instant case, the proof affidavit of the complainant has been filed and the matter is at the stage of questioning of accused u/s 313 Cr.P.C.,

and as such, this Court would not now interfere.

On perusal of the decision cited above, this Court finds that the decision thereon arose on the particular facts and circumstances of the case. It

cannot be taken as informing an inviolable rule that once trial commences before the lower Court, this Court cannot exercise its power u/s 482 of

Cr.P.C., even in a fit case.

In addition to the above submissions, the learned Counsel for the respondent submitted that the cheque had been admittedly issued towards

liability of several persons. The learned Counsel relied upon the decision of the Kerala High Court reported in Gopi Vs. Sudarsanan, , wherein it

has been held that the drawer of the cheque would be liable for prosecution u/s 138 of Negotiable Instruments Act, whether the cheque is issued

towards discharge of his own liability or is issued towards the discharge of liability of others. The submission is that the same reasoning would

apply also in the case on hand. A reading of Section 138 of Negotiable Instruments Act, shows that there is nothing to the effect that the amount

covered by the cheque must be due only to one individual. The requirement only is that the cheque must be issued towards discharge of a debt or

other liability. The learned Counsel also relied upon the decision of the Supreme Court in 2001 (3) ACR 2774 (SC) wherein it has been stated that

a pay order issued by a bank would be a cheque, within the meaning of Section 138 of Negotiable Instruments Act. Drawing attention of this

Court to a copy of the cheque involved in the case learned Counsel informed that such cheque on the face of it, did not show that it was meant for

a particular transaction and so, the defence taken by the accused in such regard would have to be taken only at the trial.

After hearing the rival submissions and on perusal of the materials on record this Court finds that the contention made on behalf of the petitioners

do not merit acceptance. However, we find that in the complaint as many as five persons have been made as accused. The first accused is the

partnership firm, while the second accused is the partner, who admittedly has signed the cheque. The first and second accused necessarily would

have to face the trial. As against the accused 3 to 5, we find that there is no averment in the complaint that these persons were in-charge of and

responsible to the partnership firm in the conduct of its business, at the time of commission of offence. Such an averment has been found to be an

absolute must if a person was to be made liable, by virtue of Section 141 of Negotiable Instruments Act. Thus, in the absence of such averment,

the complaint case as against the accused 3 to 5 would fail.

Accordingly, this criminal original petition partly is allowed and the proceedings in C.C. No. 11373 of 2006 shall stand quashed as against the

accused 3 to 5. The proceedings in C.C. No. 11373 of 2006 shall continue as regards the accused 1 and 2. The miscellaneous petitions are

closed in so far as the accused 3 to 5 is concerned. As the matter relates to the year 2006, the lower court is directed to dispose of the case within

a period of three months from the date of receipt of a copy of this order.