upa 1 fb-cri-wp2523-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL WRIT PETITION NO. 2523 OF 2010 ALONG WITH CRIMINAL APPLICATION NO. 3478 OF 2010 CRIMINAL WRIT PETITION NO.2523 OF 2010 Mr. Rajesh Bhalchandra Chalke ) Age : 37 years, Occupation : Business ) Indaga House, 82, Dr. Annie Basent Road ) Worli, Mumbai 400 018. ).. Petitioner Versus 1) State of Maharashtra ) 2) M/s Emco Dynatorq Pvt. Ltd. ) (Formerly known as Emco Lenze Pvt. Ltd.) ) having its office located at 1st Floor ) Sita Mauli, Above Bank of Maharashtra ) Madanlal Dhingra Road, Panch Pakhadi ) Thane (W), 400 602. ).. Respondents Mr. S.V. Marwadi i/b Mr. S.P. Narkar for the Petitioner. Mr. M.R. Tidke, Additional Public Prosecutor, for the State. ALONG WITH CRIMINAL APPLICATION NO. 3478 OF 2010 1) Nikhil Vasantlal Merchant, age 48 years ) a) 347-A, Pancharatna, Opera House, M.P. Marg ) Mumbai 400 004. ) b) H-2, Breach Candy Apts., Bhulabhai Desai ) Road, Mumbai 400 026. ) upa 2 fb-cri-wp2523-10 2) Manepanda Joyappa Subbaiah ) a) 347-A, Pancharatna, Opera House, M.P. Marg ) Mumbai 400 004. ) b) 201, Skyline Apts., Langford Road, ) Shanthinagar, Bangalore, Karnataka 560025 ) 3) Ashok Kumar Ram Gopal Doda ) a) 347-A, Pancharatna, Opera House, M.P. Marg ) Mumbai 400 004. ) b) A-203/204, Mt. Everest, Bhakti Park ) Wadala (East), Mumbai 400031 ).. Applicants Versus 1) The State of Maharashtra ) 2) Global Trade Finance Ltd. ) through its Registered Office situated at ) Metropolitan Building, 6th Floor, Bandra-Kurla ) Complex, Bandra (East), Mumbai 400 051 ).. Respondents Mr. Ashish Chavan for the Applicant. Mr. Jatin Shah for the Respondent in other matter. Mr. Yashpal Thakur i/b M/s Paras Kuhad and Associates for Respondent No.2. Mr. M.R. Tidke, Additional Public Prosecutor, for the State. CORAM : MOHIT S. SHAH, C.J., V.M. KANADE AND SMT. R.P.SONDURBALDOTA, JJ. JUDGMENT RESERVED ON : OCTOBER 12, 2010 JUDGMENT PRONOUNCED ON : DECEMBER 07, 2010 upa 3 fb-cri-wp2523-10 JUDGMENT (Per Chief Justice) This petition has been placed before the Full Bench for considering the question about interpretation of Section 145 of the Negotiable Instruments Act, 1881 read with Sections 118, 138, 139, 142, 143 and 146 of the Negotiable Instruments Act, 1881 (for short referred to as “NI Act”) and its interplay with Section 200 of the Code of Criminal Procedure, 1973 (for short referred to as “CrPC”). 2. Shortly put, the question is - “whether, in view of the provisions of Section 145 NI Act (added by Act No.55 of 2002), a Metropolitan Magistrate or Judicial Magistrate, First Class, taking up a complaint under Section 138 of the NI Act, along with documents in support thereof and a verification made in the affidavit in support of the complaint, is still obliged to examine on oath the complainant and his witnesses before issuing process on the complaint? 3. The reference has been made as the learned Single Judge expressed the prima facie view that the judgment of a learned Single Judge of this Court in Amarnath Baijnath Gupta and another vs Mohini Organics Pvt Ltd and another, 2009 ALL MR CRI 184 = 2009 Crl LJ 995 and the judgment of a Division Bench of this Court in Maharaja Developers and another vs Udaysing s/o Pratapsinghrao Bhonsale and another, 2007 ALL MR CRI 1339 = 2007 Crl LJ 2207 require reconsideration inasmuch as the said Benches have held that provisions of Section 145 of the NI Act would not have an over-riding effect over the provisions of Section 200 of Cr PC, and in so far as the said judgments have held that before issuing process under Section 200 CrPC, it is mandatory for the Magistrate to examine the complainant, upa 4 fb-cri-wp2523-10 who has filed the complaint under Section 138 of the NI Act, even though the complaint has been filed along with verification on solemn affirmation. 4. The learned Single Judge, while referring the matter to the Full Bench, also made the following observations in the order dated 20th September 2010 :- “4. Large number of cases have been filed in this Court for quashing complaints on account of improper verification. There are 3,44,000 cases pending in the City of Mumbai alone and about 7,00,000 cases pending in the State of Maharashtra. The judgment in the case of Amarnath Baijnath Gupta (supra) was passed since it was brought to the notice of this Court that verification statements are not recorded in a proper manner and mechanically process is being issued by the learned Magistrates. Under these circumstances, various guidelines were laid down in the case of Amarnath Baijnath Gupta (supra). However, by that time, in almost, most of the matters which were filed at that time, the practice of accepting affidavits in lieu of examination of the complainant was followed in the State of Maharashtra. As a result of the judgment of Amarnath Baijnath Gupta (supra), large number of cases are being filed here for quashing all those cases.” FACTS 5. The short facts leading to filing of the writ petition are as under :- Respondent No.2 M/s Emco Dynatorq Pvt Ltd (formerly known as Emco Lenze Pvt Ltd) filed a complaint against M/s Champagne Indage Ltd (now called Indage Vintners Ltd.), its Managing upa 5 fb-cri-wp2523-10 Director Mr. Ranjit S. Chougule and its Chief Financial Officer Mr. Rajesh Chalke in the Court of learned Judicial Magistrate, First Class at Thane (Case No.4743 of 2009) under Section 138 of the Negotiable Instruments Act, 1881 pointing out that it was formerly known as M/s Emco Lenze Pvt Ltd and is engaged in the business of manufacturing of various electro magnetic clutches, brakes, clutch-brakes, etc. for their different clients as per their requirement. Accused No.1 is a company with its registered office at Worli, Mumbai and that accused Nos.2 and 3 are Managing Director and Chief Financial Officer respectively and, therefore, they being in-charge, they are controlling the day to day affairs and management of accused company. The complainant further stated that it had given Rs. 20,00,000/- (Rupees Twenty lakh only) as Inter Corporate Deposit to accused No.1 for the period from 19/09/2008 to 18/12/2008 (for 90 days) with a view to earn interest on it at 13.75% as promised, and that the said amount was paid by the complainant to accused No.1 company by cheque dated 19th September 2008; that upon receipt of payment accused No.2 had sent certified copy of the resolution of accused No.1 in respect of borrowing the funds and also copy of a board resolution dated 29th May 2008 in respect of the authorized person who was competent to sign the letter of undertaking for post-dated cheques, money receipts and undertaking under Section 293 of the Companies Act wherein, names of accused Nos.2 and 3 are shown, that the accused had also sent copy of the letter in respect of the signature verification of the authorised person vide letter dated 25th April 2006 and the letter dated 3rd June 2008, same having been verified by the bankers of the accused, wherein the name and specimen signatures of accused Nos.2 and 3 were shown. Copies of the above resolutions and letters were produced along with complaint. upa 6 fb-cri-wp2523-10 Upon receipt of the payment of Rs.20,00,000/- from the complainant, the accused issued two post-dated cheques dated 18th December, 2008, in favour of the complainant – one for Rs.20,00,000/- towards the principal amount and the other for Rs.46,661/- towards interest for 90 days. However, in view of the letter dated 29th November 2008 sent by accused No.2, the complainant did not deposit the said cheques with their bankers and the accused issued two fresh cheques dated 28th March, 2009, in favour of the complainant - one for principal amount of Rs. 20,00,000/- and the other of Rs.53,392/- towards interest. The complainant produced copies of the letters dated 29th November 2008 and 18th December 2008 with which the cheques dated 28th February 2009 were sent. In the said letter dated 18th December 2008, the accused had also agreed and undertaken that the cheques dated 28th February 2009 will not be dishonoured. In spite of such agreement and undertaking, the cheques were dishonoured on account of “Exceeds Arrangement”. Thereupon, the accused informed the complainant vide letter dated 28th July 2009 to return the dis-honoured cheques so as to issue fresh cheques. Accused again issued fresh cheque to the complainant being cheque dated 29th August 2009 for Rs.20,00,000/- towards principal amount. The said cheque of Rs.20,00,000/- was again deposited by the complainant with its bankers. However, the cheque was dishonoured vide memo of dishonour dated 10th September 2009 for the reason “Funds Insufficient”. As the complainant’s bankers informed the complainant on 11th September 2009, in view of the memo of dishonour dated 10th September 2009 from the bankers of the accused, the complainant sent a statutory notice dated 19th September 2009 within the specified time to all the accused calling upon the accused to pay the amount of cheque within a period of 15 days from the date of receipt of the notice. The accused were also informed about the consequences of upa 7 fb-cri-wp2523-10 non-payment. The notices were sent to all the accused by registered post with acknowledgments due as well as under certificate of posting. The registered acknowledgments were received back by the complainant. The complainant accordingly produced copies of all the above documents and the acknowledgments. The complainant stated that the cheques were tendered to the complainant towards the legal and enforceable liability of the accused and that the accused had committed an offence punishable under Section 138 of the Negotiable Instruments Act, 1881. In all, 14 documents were produced along with the complaint, as per the details given in the body of the complaint itself. The complainant prayed that the Court may issue process, summon all the accused and try and punish them for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881. The complainant also gave the list of its witnesses. After the complaint was filed on 16th November 2009, the complainant also gave verification under affidavit dated 18th December 2009 of its Manager :- “1. I say that, I am the Manager Legal & Administration and POA Holder of the Complainant, I am well conversant with the facts of this complaint. 2. I say that the Accused have issued cheques, in favour of Complainant, towards the legal and enforceable liability of the Complainant being the debt i.e. a cheque No. 939127 dated 29-08-2009 for Rs. 20,00,000/- (Rs. Twenty Lac Only) drawn on Punjab National Bank Large Corporate Branch, Cuffe Parade, Mumbai-400 005. 3. I say that, I have deposited the said cheque in our bank Axis Bank Ltd., Thane (W) Branch for encashment, however, the same is returned dishonoured with memo dated 10-09-2009 with remarks “Funds Insufficient” and the same was intimated to the Complainant by their banker vide letter of intimations dated 11-09-2009. upa 8 fb-cri-wp2523-10 4. The Complainant has issued legal notice on 19-09-2009 to all the Accused by R.P.A.D. & U.C.P. however the packet containing statutory demand notice forwarded by Reg Post with acknowledgment due as well as under the Certificate of Posting and same were duly received by all the Accused on or about 08-10-2009, as the registered acknowledgment have been duly received back by the Complainant. I say that the Accused have failed to comply the requisitions of the notice within the time stipulated. Thus the Accuseds have committed an offence punishable u/s 138 of N.I. Act. I have filed the complaint on behalf of the Complainant against all the Accused U/S 138 of N.I. Act. All the Accused be tried and punished according to law. Solemnly affirmed at Thane on this 18th day of December 2009. Filed in court on 18/12/09 Sd/- Authorised signatory of complainant” The complaint was numbered as Summary Criminal Case No.4743 of 2009 and the learned Judicial Magistrate, First Class, Court No.5, Thane, passed the following order on the said complaint on 18th December, 2009 :- “Issue summons against the accused under section 138 of negotiable instrument Act.” 6. Accused No.3 Mr. Rajesh Balchandra Chalke filed Criminal Writ Petition No.2523 of 2010 before this Court under Article 227 of the Constitution of India and under Section 482 of the CrPC contending that upa 9 fb-cri-wp2523-10 the learned Magistrate was required to examine the authorised signatory of the complainant on oath and reduce into writing the substance of his examination as per Section 200 of CrPC; that such procedure is mandatory but instead of examining the complainant on oath and reducing into writing the substance of his examination in accordance with Section 200 of CrPC, learned Magistrate accepted the affidavit and on that basis passed the impugned order. Hence, the order is contrary to law. It is, therefore, submitted that the learned Magistrate erred in taking cognizance of the offence without following the procedure laid down by Section 200 of CrPC. 7. When the writ petition reached hearing before the learned Single Judge, reliance was placed on behalf of the petitioner upon the decisions of this Court in Amarnath Baijnath Gupta and another vs Mohini Organics Pvt Ltd and another, 2009 ALL MR CRI 184 and the judgment of a Division Bench of this Court in Maharaja Developers and another vs Udaysing s/o Pratapsinghrao Bhonsale and another, 2007 ALL MR CRI 1339 holding that it is mandatory for the learned Magistrate to examine the complainant on oath, when the complaint is filed under Section 138 of the NI Act, even though the complainant has filed verification on affirmation. While referring the matter to the larger Bench, the learned Single Judge also made the observations already quoted in paragraph 4 hereinabove. RIVAL SUBMISSIONS 8. Mr. Marwadi, learned counsel for the petitioner accused, made the following submissions : upa 10 fb-cri-wp2523-10 8.1 Section 200 of CrPC mandates the learned Magistrate to examine upon oath the complainant and his witnesses present, if any, and to reduce the substance of such examination into writing, before the Magistrate can take cognizance of an offence on complaint. There is no other provision for taking cognizance of an offence except Sections 200 and 202 of CrPC. Section 200 uses the words “shall examine” and not “may examine”. Hence, the procedure recording examination of the complainant on oath is mandatory and not optional. Reliance is placed on several decisions in support of the contention that examination of complainant on oath is mandatory before issuing process under Section 200 of CrPC. 8.2 Section 145 of NI Act, upon which reliance is placed by the complainant, provides that the evidence of the complainant may be given by him on affidavit, but what the Magistrate records under Section 200 CrPC is not evidence. The stage of recording evidence will be after commencement of trial and not at the stage when the Magistrate is yet to decide whether process should be issued or not. What the Magistrate is required to do under Section 200 CrPC is examination of the complainant on oath. This is the duty of the Court and, therefore, examination by the Magistrate under Section 200 CrPC is different from examination of the witness by prosecution/ complainant. 8.3 Section 145 of the NI Act is the same as Section 296 of Cr PC. Part I of each section deals with examination in chief as contemplated in Section 137 of the Evidence Act and, therefore, permits evidence in the form of examination in chief led by the affidavit. But neither of the said two Sections deal with any stage prior to issuance of process under Section 200 of Cr PC. (Section 137 of the Evidence Act). upa 11 fb-cri-wp2523-10 8.4 Section 145 gives right to the complainant to file an affidavit in lieu of evidence, but Section 200 of CrPC does not give any such right to complainant or discretion to the Court. 8.5 Section 142 of NI Act places restrictions on power of Court under Section 200 CrPC in respect of (i) complaint under Section 138 of NI Act has to be in writing; (ii) only the payee or the holder in due course of the cheque has a locus to file a complaint unlike the ordinary criminal law under which any person can set the law in motion and (iii) the complaint under Section 138 has to be filed within the time limit specified in Section 142, unlike complaint under the ordinary criminal law. Section 142 does not expand the powers of taking cognizance. 8.6 Sections 143 to 147 added by the amending Act of 2002 only deal with the stage of trial and none of them deals with the pre-trial stage. 9. The learned Counsel for the petitioner further submitted that Issuance of process by the Magistrate on the complaint is not so innocuous as is being contended on behalf of the complainant. Serious prejudice is caused to the accused as he is required to appear before the Magistrate at every hearing and during pendency of the complaint for years together and the accused is also required to give bond. 10. It is also vehemently contended on behalf of the accused that there may be cases where the complainant may have suppressed material documents. It is only by examining the complainant on oath that the Magistrate can get the complainant to produce such documents. If the complainant suppresses the documents and the Magistrate issues upa 12 fb-cri-wp2523-10 process on the complaint merely on the basis of his verification on affidavit and without examining the complainant on oath, thereafter the accused has no other option but to participate in the trial which will remain pending for a number of years. There is no provision enabling the accused to file an application for discharge. Once the plea of the accused is recorded under Section 252 of CrPC, the procedure laid down in Chapter XX for summary trial has to be followed and the entire trial is required to be taken to its logical conclusion. Our attention is also invited to the decision of the learned Single Judge of this Court in Peacock Industries Ltd. and others vs M/s Budhrani Finance Ltd. and another, 2006 ALL MR CRI 2233, decided on 14th July 2006. Referring to the various guidelines laid down in the said decision, it is submitted that on account of non-observance of these guidelines, serious prejudice is being caused to the accused. 11. Mr. Chavan for accused in Criminal Writ Petition No.3478 of 2010 reiterated the above submissions and further submitted that the ingredients of the offence punishable under Section 138 of the NI Act can be brought out only by examination of the complainant on oath by the Magistrate and not by mere verification on affidavit which may be like examination-in-chief of the complainant. The learned counsel further submitted that the Directors of a company are very often harassed by filing complaints against all the accused without the Magistrate making proper inquiry before issuing process and that puts even those persons who have already resigned as Directors, to avoidable hardship and inconvenience and compels such Directors to invoke the powers of this Court under Article 227 of the Constitution of India and Section 482 of the Cr PC. upa 13 fb-cri-wp2523-10 12. On the other hand, Mr.Thakur and Mr. Jatin Shah, learned counsel for the complainants opposed the writ petitions and submitted that the very object for which the Legislature added Sections 143 to 147 and particularly Sections 143, 145 and 147 would be defeated if the petitioner’s contentions were to be accepted. Relying on the Statement of Objects and Reasons for the Amending Act 55 of 2002, it was submitted that the Legislature noticed the alarming state of affairs about huge pendency of complaints under Section 138 of NI Act and, therefore, the Legislature was keen to ensure that the complaints under Section 138 of the NI Act were taken up and tried and decided at the earliest. That is why the Legislature prescribed procedure for dispensing with the stage of preliminary evidence in the form of examination of complainant under Section 200 CrPC and achieved this object by providing at the commencement of Section 145(1) of NI Act, “Notwithstanding anything contained in the Code of Criminal Procedure, 1973”, which would include Section 200 of the Criminal Procedure Code. The evidence of the complainant may be given by him on affidavit and may be read in evidence in any enquiry, trial or other proceeding under the CrPC. It was submitted that the stage prior to issuance of process under Section 200 of CrPC may not be trial but it would certainly be enquiry or other proceeding and even in such inquiry or other proceeding, the complainant is permitted to give his evidence on affidavit. 13. It is further submitted on behalf of the complainants that in order to expedite the decision on the complaint under Section 138 of NI Act, Section 143 thereof provides that notwithstanding anything contained in the Cr PC. the complaints under Section 138 of NI Act shall upa 14 fb-cri-wp2523-10 be tried by a Metropolitan Magistrate or by a Judicial Magistrate of the First Class as summary trial under Sections 262 to 265 of CrPC. The very fact that the Legislature specifically provided in sub-section (3) of Section 143 that every trial shall be conducted as expeditiously as possible and an endeavour shall be made to complete the trial within six months from the date of filing of the complaint clearly indicates the legislative intent that issuance of process was also intended to be expedited after filing of the complaint. 14. Sections 138 to 147 in Chapter XVII of the NI Act are a Code by itself and the very fact that the Legislature specifically provided for the non-obstante clause in Sections 143, 144 and 145 of NI Act that those provisions were “Notwithstanding anything contained in the Code of Criminal Procedure, 1973”, the said provisions added on the statute book by Amending Act 55 of 2002 with effect from 6th February 2003 were obviously intended to give over-riding effect over Section 200 of CrPC which is on the statute book since the date of coming into force of the Code in 1974. 15. Strong reliance is placed on decisions of the Karnataka High Court in K. Srinivasa vs Kashinath, (2004) Cri LJ 4566, Kerala High Court in K. Vasudevan vs State of Kerala, 2005 BGLKS (Doc) 113 decided on 24th June 2004 and H.D.F.C. vs Anilesh, 2008 (2) Crimes 164 (Ker.), the Special Leave Petition against which was dismissed by the Apex Court on 13th September 2004. 16. The learned counsel for the complainants have submitted that the decisions relied upon by the learned counsel for the accused deal with cases which were filed prior to the addition of Section 145 on the upa 15 fb-cri-wp2523-10 statute book or such decisions relied on previous decisions of the Apex Court which were rendered prior to Section 145 of NI Act coming on the statute book. 17. The learned counsel for the respondent accused have also submitted that the decision of the learned Single Judge of this Court deprecating “pre-conceived format” of the complaint is not at all in consonance with the provisions of NI Act as amended in 2002 and that such approach has resulted into gross delay even in examination of the complainant on oath under Section 200 CrPC, resulting into pendency of almost three lakh complaints under NI Act in spite of as many as 32 Magistrates trying such complaints. STATUTORY PROVISIONS 18. Before dealing with the rival submissions, we may briefly note the relevant statutory provisions. Section 118 of the NI Act, which is on the statute book since 1881, provides as under :- “118. Presumptions as to negotiable instruments – Until the contrary is proved, the following presumptions shall be made :- (a) of consideration – that every negotiable instrument was made or drawn for consideration,