Sunil Choudhary & Anr. vs Alisha Enterprises

This petition under section 561A Code of Criminal Procedure has been filed seeking issuance of orders by this court for quashing the complaint

and for quashing the proceedings and order dated 17th March 2009 filed by respondent against the petitioners Under Section 138 Negotiable

Instruments Act, 1881 (hereinafter referred to as the Act of 1881).

The facts are briefly summarized as under;

Respondent has filed a complaint against the petitioners u/s 138 of the Act of 1881 which complaint is pending on the files of Ld. Judicial

Magistrate First Class (4th Addl. Munsiff) Jammu. The complaint is filed on behalf of 'M/s Alisha Enterprises' which is a proprietorship concern of

Smt. Rashmi Gupta and Smt. Rashmi Gupta has filed this complaint through her attorney holder Sh. Karnail Chand, Manager Accounts, of the said

business concern, who is an attorney holder of the complainant Smt. Rashmi Gupta. Copy of power of attorney has been annexed with the

complaint. In the complaint it is alleged that petitioner No.1 is a partnership concern/firm and petitioner No.2 is one of its partners who is incharge

and responsible for conduct and control of business of the partnership firm. It is further alleged that accused No.1 through accused No.2

approached the complainant in the month of Dec. 2007 and requested the complainant for providing financial assistance in the shape of loan of Rs.

3 lacs. The petitioners promised that the loan amount will be repaid to the complainant within a period of two months. The complainant acting on

the said request and promise of the petitioners accordingly advanced loan amount of Rs.3/ lacs by issuance of cheque No. 1257659 dated

19.12.2007 drawn on the Citizen Cooperative Bank branch office Kanak Mandi issued in the name of petitioner No.1. It is further alleged in the

complaint that the cheque amount was paid to the accused by banker of the complainant which fact has been confirmed by the bank by issuance of

certificate dated 31st of Sept. 2007.

The case of the respondent is that even after two months petitioners did not pay back the loan amount which was borrowed by them from the

respondent, repeated requests were made, which evoked no response. However, respondent No.2 issued cheque No. 885655 dated 22nd

March 2007 in the capacity of partner of the partnership firm of petitioner No.1 which was to be drawn on ""Punjab National Bank"" Jammu Tawi.

The cheque was issued for an amount of Rs. 3/ lacs, which was borrowed by the petitioners. The cheque was deposited with his bank ""Citizen

Cooperative Bank B/O Kanak Mandi"" for its presentation and for its encashment, cheque was dishonored by banker of the petitioners for the

reason ""account closed"". The respondents accordingly sent registered notice through ld. counsel Sh. Harshwardhan Gupta, to the petitioners and

after failure of the petitioners to repay the borrowed amount and liquidate the debt, the complaint was filed by Smt. Rashmi Gupta, through her

attorney holder, praying therein that the petitioners have committed the offence which is punishable in accordance with law and petitioners be

further directed to pay double the amount of the cheque which consists Rs.6/ lacs. The ld. Trial Magistrate after considering the complaint and the

statement of the attorney holder of the complainant being satisfied primafacie about commission of offence took cognizance thereof u/s 138 of the

Act of 1881. Vide order dated 06th August 2008 and consequently issued process to the petitioners. During pendency of the complaint, the

respondents filed application seeking substitution of attorney holder in the complaint, but thereafter filed another application praying therein that she

be permitted to prosecute the complaint in person. In the application, it is stated that respondent at the time of filing of the complaint was busy in

affairs personal in nature and was also suffering from disc problem. The objections were filed by petitioners to the said application and the ld. trial

Magistrate vide order dated 17th March 2007 allowed the application and respondent smt. Rashmi Gupta was permitted to prosecute the

complaint personally.

Heard ld. counsel for petitioner. Considered the matter.

Ld. Counsel for petitioner while referring to section 138 as also section 142 of the Act of 1881 argued that taking of cognizance and issuance of

process in the complaint which was filed by attorney holder is bad in law, as same is not envisages by section 142 of the Act of 1881. Ld. Counsel

submitted that;

a) Section 142 of the Act of 1881 provides that notwithstanding anything contained in the Code of Criminal Procedure no court shall take

cognizance of any offence punishable u/s 138 of the Act of 1881 except upon complaint in writing made by the payee or as the case may be, the

holder in due course of cheque;

b) such complaint be made within one month of the date on which the cause of action arise.

The ld. Counsel would canvass that the complaint having not been filed by payee or the holder of the cheque but by attorney holder, the

cognizance could not have been taken. The ld. Counsel further submitted that it is on this short legal ground that the complaint as also proceedings

initiated thereon being an abuse of process of trial court require to be quashed. Ld. Counsel in support of his contention has referred to judgment

reported in AIR 2008 (NOC) 2539 (ALL.) and the judgment of Madras High Court reported in 2005 (1) Crimes 423.

In both the judgments it is held that the complaint having not been signed by the payee but by attorney holder who cannot be either said to be

payee or holder in due course, was disentitled to file complaint.

The amendment in section 138 of the Act of 1881 was inserted by Act of 66 of 1988 which made dishonor of the cheque for insufficiency etc

funds in the account to be an offence. The purpose of making the said amendment is to achieve the solemn object of preventing fraudulent acts by

borrowers of money. It is a common knowledge that when a person borrows money or incur debt and on refusal to repay the same, the only legal

course open to the lender was to institute a civil original suit for seeking recovery of the borrowed money. It is also common knowledge that civil

suit take some time in getting settled for variety of reasons. In order to ensure that the borrowed money is repaid without creating any hassles the

amendment was made in the Act of 1881. The said amendment in the Act of 1881 reveals one other facet viz to enthuse and instill morale behavior

in business dealings. Economy of nations and countries can survive only when the people follow morale values in economic dealings. If a person,

for whatsoever, reasons advances money on the promise that it will be repaid, may himself be reduced to a pauper in case the money is not paid

back. Assume a situation that business man is persuaded to advance substantial part of his money to another person as loan and that borrowed

money is not repaid, it has the potential of collapsing the business of the lender. The immoral activities in economic field, has potential of not only

collapsing business concern but has the monstrous power of destabilizing economic strength of countries. Such efforts of the unscrupulous

borrowers have to be dealt with strenuously and law has to come down with heavy hand on such elements of the society.

Viewed thus, the purpose to be achieved by amendment incorporated in the Act of 1881 cannot be sought to be defeated on the technical

grounds. A person who borrows money and thereafter in the discharge of the debt or liability issues a cheque, and subsequently by any mode

frustrates payment thereof, cannot be permitted to wriggle out of his liability to discharge the debt and commitment to repay the same on pure

technical pleas. If the hypertechnical pleas are accepted then it will be not only protecting a fraud and an immoral act but would also tantamount to

perpetuating the same through process of the court.

The provisions of law are to be interpreted in a manner which allow to achieve the purpose underlying such statute or provisions of Statutes.

In this case, Smt. Rashmi Gupta is the person from whom the money was borrowed. She is the named complainant in the complaint and she

was disabled to personally appear before the court because of health reasons. The complaint was filed on her behalf by her attorney holder,

otherwise being Manger Accounts of the complainant's company was fully aware about the financial affairs of the respondent. The complaint is

filed by complainant who is payee/or holder in due course.

Under section 142 of the Act of 1881 the ld. Magistrate is to take cognizance of offence when he gets information about the same. Section

190 Cr.P.C provides that ld. Magistrate to take cognizance of offence on report made by police agency or on complaint made by person or

otherwise. The purpose underlying section 142 of the Act of 1881 is complied with in this case as the complaint has been filed and Smt. Rashmi

Gupta is named complainant. On complaint the ld. Magistrate being satisfied about commission of the offence has taken cognizance thereof and

has also ordered for issuance of process. There is nothing wrong in law which can be said to have been committed by the ld. Magistrate. In this

case Smt. Rashmi Gupta has been permitted to prosecute the complaint herself, no grievance could be made by petitioners about the same. The

judgment referred to by ld. Counsel for petitioners with great respect cannot be followed. The said judgment otherwise also would not be followed

in view of the law laid down by Hon'ble Supreme Court in case titled M/s. Shanker Finance & Investments v. State of A.P and other reported in

AIR 2009 SC 422. In this case the facts were almost identical as the complaint under section 138 of Act of 1988 was filed through Manager. The

Hon'ble Supreme Court held that there is a compliance with section 142 of the Act of 1881 and accordingly held complaint to be maintainable.

The relevant portion para 6, 10 to 12 are reproduced as under:

In MMCC Ltd. Vs. MEDCHL Chemicals and Pharama (P) Ltd., 2002 (1) SCC 234, a complaint was filed by MMTC Ltd. through the

Manager of its Regional Office. Subsequently, the Manager was substituted by Dy. General Manager who was duly authorized. The High Court

held that the complaint was not maintainable as it was signed and presented by a person, who was neither an authorized agent nor a person

empowered under the articles of association or by any resolution of the Board to do so. It held that only the Executive Director of MMTC Ltd.

had the authority to institute legal proceedings. Reversing the said decision, this Court held:

In our view the reasoning given above cannot be sustained. Section 142 of the Negotiable Instruments Act provides that a complaint under

section 138 can be made by the payee or the holder in due course of the said cheque. The two complaints, in question, are by the appellant

company who is the payee of the two cheques. This Court Vishwa Mitter v. O. P. Poddar, (1983) 4 SCC 701, held that it is clear that anyone can

set the criminal law in motion by filling a complaint of facts constituting an offence before a Magistrate entitled to take cognizance. It has held that

no court can decline to taken cognizance on the sole ground that the complaint was not competent to file the complaint. It has been held that if any

special statute prescribes offences and makes any special provision for taking cognizance of such offences under the statute, then the compliant

requestioning the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the Statute. In the present case, the

only eligibility criteria prescribed by Section 142 is that the complaint must be by the payee or the holder in due course. This criteria is satisfied as

the complaint is in the name and on behalf of the appellant company.

Referring to the decision in Associated Cement Co. Ltd. v Keshwan and [1998 (10 SCC 6871]. this Court held:

It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, along can

continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can

represent the company. It has been held that it is open to the de jure complainant company to seek permission of the court for sending any other

person to represent the company in the court. Thus, even presuming that initialing there was no authority, still the company can, at any stage, rectify

that defect. At a subsequent stage the company can send a person who is competent to represent the company. The complaints could thus not

have been quashed on this ground.

This Court has always recognized that the Power of Attorney Holder can initiate criminal proceedings on behalf of his Principal. In Ram

Chander Prasad Sharma V. State of Bihar and Anr. [AIR 1967 SC 349], the prosecution was commenced in regard to tampering of electric

meter seals, with a chargesheet submitted by the police after investigation on a first information report by one Bhattacharya. Mains Superintendent

of Patna Electric Supple Co. ('PES Co.' for short). An objection was raised by the accused that the prosecution was incompetent to do so. The

said objection was based on section 50 of the Indian Electricity Act, 1910, which provides that no prosecution shall be instituted against any

person for any offence against that Act or any rule, license or order thereunder, except at the instance of the Government or an Electric Inspector,

or of a person aggrieved by the same. This Court held:

The P.E.S. Co., however, is a body corporate and must act only though its directors or officer. Here we have the evidence of Ramaswami to the

effect that he held a general power of attorney from the P.E.S. Co., and that he was specifically empowered thereunder to act on behalf of P.E.S.

Co., in all legal proceedings. The evidence shows that it was at his instance that Bhattacharya launched that first information report said, therefore,

it would follow that the law was set in motion by the ""persona aggrieved"". The objection based on Section 50 must, therefore, be held to be

untenable.

The assumption of the High Court that where the payee is a proprietary concern, the complaint can be signed only by the proprietor of the

proprietary concern and not by a Power of Attorney holder of the proprietor, is not sound. It is not in dispute that in this case a power of attorney

has been granted by Atmakumari Shankara Rao, as proprietor of M/s Shankar Finance & Investments in favour of Thamada Satyanarayana and

the same was produced along with the complaint. The description of the complainant is as under:

M/s Shankar Finance and Investments, (a proprietary concern of Sri Atmakumari Sankara RAo s/o Late Shri A.B.Rama Murthy, Hindu, aged

about 65 years), having its office office at Flat No.SB, Third Floor, Maharaja Towers, Vishakhapatnam3 represented by its Power of Attorney

Holder Sri Thamada Satyanaryana, s/o Late Adinarayana, Hindu, aged 50 years, Service, residing at MIGB230, Sagarnagar, VUDA Layout,

Vishakhapatnam43.

The said description is proper and, therefore, the complaint has been duly filed by the payee.

The High Court has referred to the fact hat the sworn statement before the learned Magistrate was of the Attorney holder of the payee and not

by the payee in person. According to the tenor of the order of the High Court, this was also irregular. But we find nothing irregular in such a

procedure. It is now well settled that the object of section 200 of the Code in providing for examination of the complainant and his witnesses by

the court is to satisfy itself about the existence of a prima facie case against the person accused of the offence and to ensure that such person is not

harassed by false and vexatious complaints by issue of process; (See Nirmaljit Singh Hoon v. State of West Bengal. 1973 (3) SCC 753). Where

the proprietor of the proprietary concern has personal knowledge of the transaction and the proprietor has signed the complaint, he has to be

examined under section 200 of the Code. A power of Attorney holder of the complaint was does not have personal knowledge, cannot be

examined. But where the Attorney holder of the complainant is in charge of the business of the payeecomplainant and the Attorney holder alone is

personally aware of the transactions and the complaint is signed by the Attorney holder on behalf of the payee complainant. We may, in this

connection, refer to the decision of this Court in Janki Vashdeo Bhojwani v. Indusind Bank Ltd. [2005 (2) SCC 217] where the scope of an of the

principal in a civil suit governed by Code of Civil Procedure was examined. This Court observed:

Order 3, Rules 1 and 2, CPC empower the holder of Power of Attorney to ""act"" on behalf of the principal. In our view the work ""acts"" employed

in Order 3, Rules 1 and 2, CPC confines only to in respect of ""acts"" done by the powerofattorney holder in exercise of power granted by the

instrument. The term ""acts"" would not include deposing in place and instead of the principal. In other words, if the powerofattorney holder has

rendered some ""acts"" in pursuance of Power of Attorney, he may depose for the principal in respect of such acts, but he cannot depose for the

principal for the acts done by the principal and not by him. Similarly, he cannot depose for the principal in respect of the matter of which only the

principal can have a personal knowledge and in respect of which the principal is entitled to be cross examined. (Emphasis supplied)

The Principal underlying the said observations will apply to cases under section 138 of the Act. In regard to business transactions of

companies, partnerships or proprietary concerns, may a time the authorized agent or Attorney holder may be the only person having personal

knowledge of the particular transaction; and if the authorized agent or Attorney holder has signed the complaint, it will be absurd to say that he

should not be examined under section 200 of the Code, and only the Secretary of the Company or the partner of the firm or the proprietor of a

concern, who did not have personal knowledge of the transaction, should be examined. Of course, where the cheque is drawn in the name of the

proprietor of a proprietary concern. But an employee of such concern (who is not an Attorney holder) has knowledge of the transaction, the payee

as complainant and the employee who has knowledge of he transaction, may both have to be examined. Be that as it may. In this case we find no

infirmity.

A complaint or proceedings pending before criminal court are to be quashed in rarest of rare cases. It is noticed that even on slightest pretext

petitions under section 561A Cr.P.C are being filed and when notices are issued and proceedings stayed, record summoned, the disposal of the

case gets delayed and in process the purpose for filing of motion on such petitions is accomplished and rights of the complainant get defeated.

For the above stated discussions this petition is held to be not maintainable and is accordingly dismissed. The petitioners to pay costs of Rs.

5000/ to respondent.