Criminal Misc. No.M-22823 of 2008 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. Cr.M.No.M-22823 of 2008 (O&M) DATE OF ORDER : 7.9.2011 M.S.Masand PETITIONER VERSUS Raj Pal and another RESPONDENTS CORAM : HON'BLE MR.JUSTICE MAHESH GROVER Present:- Shri R.S.Rai, Senior Advocate with Shri Gautam Dutt, Advocate and Ms.Tarunpreet, Advocate for the petitioner. Shri Rajiv Sharma, Advocate for the respondents. MAHESH GROVER, J. This petition has been preferred by the petitioner under Section 482 Cr.P.C. with a prayer for quashing of the complaint (Annexure P-1) preferred by respondent No.1 (complainant) under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the Act) and the summoning order issued by the learned trial Court Annexure P-2. The brief facts of the case are that the petitioner claims that he had issued the cheques in the capacity of an officer dealing with the Company at the relevant time. He ceased to be a Director of the Company on January 31, 2007. The Company on whose behalf the cheques were issued, stopped the payment of Criminal Misc. No.M-22823 of 2008 -2- cheques by giving directions to the Bank on 13.4.2007. The cheque was presented on 16.4.2007 and because of the directions issued by the Company, they were not honoured. The cheques were returned on 20.4.2007 and the complaint preferred in May, 2007. Learned counsel appearing for the petitioner has made a three-fold prayer, one, that he was not the Incharge of the affairs of the Company at the relevant time when the directions for stopping the payment to the Bank were issued, as he had relinquished the Directorship of the Company, as would be evident from Form-32 issued by the Registrar of Companies indicating the change of Directors of the Company. He has placed reliance on Section 1 of the Act to contend that the offence is committed only when the cheque is dishonoured and the mere issuance of a cheque ipso-facto is not an offence. The second limb of the argument is that according to Section 202(1) of the Cr.P.C. as amended, the procedure to summon the petitioner was not followed. It is stated that the petitioner was a resident of Delhi and according to the amended provisions of the Cr.P.C., it was mandatory upon the Court to postpone the process and hold an enquiry regarding the residence of the accused. Thirdly, it was argued that the agreement to sell is between the complainant and the Company and the petitioner was merely acting on behalf of the Company, and not in his individual capacity and consequently, the process against the petitioner is an abuse of law. Learned counsel for the respondents, on the other hand, has stated that the petitioner has merely been summoned and all these facts which have been agitated before this Court, can be raised before the learned trial Court. Besides, it has been stated that these are the matters of evidence and whether the petitioner was a Director of the Company or not, cannot straightway be believed, as he has neither implicated the Company as a respondent, nor is the Registrar of Companies Criminal Misc. No.M-22823 of 2008 -3- the respondent herein and thus, it cannot be said whether Form-32 upon which reliance has been placed, is genuine or not. He has further stated that respondent No.2 has suffered loss on account of the transaction which has been stopped by the petitioner. Reliance was placed by the learned counsel for the respondents upon a judgment of the Hon'ble Supreme Court in N.Rangachari v. Bharat Sanchar Nigam Ltd., 2007(2) R.C.R.(Criminal) 875 and a judgment of this Court in Smt.Anita Gupta v. M/s Cotton Worth 2010(1) R.C.R. (Criminal) 874, wherein while following the judgment of the Hon'ble Supreme Court in N.Rangachari v. Bharat Sanchar Nigam Ltd., in para-4 of the judgment observed as follows :- “A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at the promoters and Board of Directors and the nature and extent of its business and its Memorandum or Articles of Association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are incharge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it, so, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are Criminal Misc. No.M-22823 of 2008 -4- incharge of its affairs. The Directors are prima facie in that position. In the instant case, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the two dishonoured cheques were issued by the company, the appellant and another were Directors of the Company and were incharge of the affairs of the company is not proper to split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time the appellant and the other are not alleged to be persons incharge of the affairs of the company. Obviously, the complaint refers to the point of time when the two cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonour. Thus it cannot be said that the allegations in the complaint against the appellant did not contain sufficient averments to justify the issue of process to the appellant and therefore, the complaint ought to be quashed under Section 482 Cr.P.C. In fact, an advertence to Sections 138 and 141 of the Negotiable Instruments Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the Officers in-charge of the affairs of the company to show that they are not liable to be convicted. Any restriction on their power or existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial such a restriction or to show that at the relevant time they were not incahrge of the affairs Criminal Misc. No.M-22823 of 2008 -5- of the company. Reading the complaint as a whole, it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion of the trial.” Similarly, in Malwa Cotton & Spinning Mills Ltd. v. Visra Singh Sidhu and others 2008(4) R.C.R. (Criminal) 25, the Hon'ble Supreme Court approved the view taken in N.Rangachari v. Bharat Sanchar Nigam Ltd. (supra). Learned counsel for the petitioner, on the other hand, placed reliance on a judgment of the Hon'ble Supreme Court in Harshendra Kumar D. v. Rebatilata Koley etc. 2011(2) Law Herald (SC) 839, wherein it was observed in the backdrop of the fact that a Director who had resigned from the post, cannot be vicariously liable held if the dishonourment of the cheque takes place subsequent to his relinquishment of the office. Similarly, in DCM Financial Services Ltd. v. J.N.Sareen and another 2008(3) R.C.R.(Criminal) 152, it was held that a Director who had resigned prior to the dishonourment of the cheque, cannot be held responsible. I have heard the learned counsel for the parties and perused the impugned order of summoning and also the complaint. Section 141 of the Negotiable Instruments Act, 1881 is extracted here below :- “141. Offences by companies.- (1) If the person committing an offence under Section 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 and shall be liable to be proceeded against and punished accordingly. : Criminal Misc. No.M-22823 of 2008 -6- Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence : Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purpose of this section,- (a) “company means any body corporate and includes a firm or other association of individuals ; and (b) “director”, in relation to a firm, means a partner in the firm.” On due consideration of the matter, I am of the opinion that there is Criminal Misc. No.M-22823 of 2008 -7- no dispute that the offence under Section 138 of the the Act is complete when dishonourment of the cheque takes place. It is also not in dispute that if the person committed the offence under Section 138 of the Act is a company. Then every person who at the time of the offence committed was incharge and was responsible to the Company for the conduct of the business of the Company, shall be deemed to be guilty of the offence. There is also no dispute about the fact that a person who issues the cheque on behalf of the Company, presumption may exist that he is incharge of the affairs of the company, but the plea of the petitioner is that he had relinquished the post of Director of the Company after the issuance of the cheque in question and since the directions to stop the payment were issued to the Bank subsequent to his relinquishing the office, he could not be held responsible for the same. The argument in the given set of circumstances is tempting to say the least, but the same cannot be accepted for the simple reason that the petitioner has not impleaded the Company as a respondent, and consequently, there is no affirmation of this fact of the petitioner having relinquished the post of Director of the Company. This Court under Section 482 Cr.P.C. cannot evaluate the authenticity of the document (Form-32) which has been appended to the petition. More so, when the respondents refute this. In the case relied upon by the learned counsel for the petitioner in DCM Financial Services Ltd. v. J.N.Sareen and another 2008(3) R.C.R.(Criminal) 152 (supra), one of the persuasive factors which weighed with the Hon'ble Supreme Court was the fact that the accused therein had resigned from the post of Director of the Company and intimation thereof was given to the complainant in writing on several occasions indicating complete knowledge of the same to the respondents and thus, the Court came to the conclusion that it is an abuse of the process of law. But in the instant case, in the absence of any such corroboration and supportive material regarding the plea Criminal Misc. No.M-22823 of 2008 -8- of the petitioner that he has resigned from the Directorship of the Company, it would be erroneous to evaluate the material on record and to comment upon its authenticity and legitimacy without submitting it to the test of proof. The observations made by the Hon'ble Supreme Court in N.Rangachari v. Bharat Sanchar Nigam Ltd., 2007(2) R.C.R.(Criminal) 875 (supra) are thus, relevant to the facts of the instant case. However, the second contention raised by the learned counsel for the petitioner regarding non-compliance of the provisions of Section 202(1) Cr.P.C. merits acceptance. The amended Section 202(1) of the Cr.P.C. is extracted here below :- “202. Postponement of issue of process.- (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 under Section 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 either enquire 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 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 Criminal Misc. No.M-22823 of 2008 -9- any) have been examined on oath under Section 200.” The observance of the procedure prescribed by the aforesaid Section is mandatory, as has been observed by this Court in a decision rendered in S.K.Bhowmilk v. S.K.Arora 2007(4) R.C.R. 650. Having regard to the aforesaid, it was incumbent upon the learned trial Court to postpone the process and hold an enquiry upon noticing the fact that the petitioner herein who is an accused in the complaint, was not a resident within the jurisdiction of the Court which was seized of the matter. On this score, the impugned order of summoning deserves to be set aside and the matter is remanded back to the learned trial Court for compliance of provisions of Section 202(1) of the Cr.P.C. and proceed with the matter thereafter. The last contention which was raised regarding the agreement to sell being between the Company and the complainant and the petitioner having nothing to do with the same, is also liable to be rejected because of the reason that by virtue of the petitioner acting on behalf of the Company, it would be his vicarious liability, if the material qua this comes on record. The petition is therefore partly accepted on the grounds which have been detailed above and the matter is remitted back to the learned trial Court for compliance of Section 202(1) Cr.P.C. (MAHESH GROVER) September 7,2011 JUDGE GD WHETHER TO BE REFERRED TO REPORTER? YES/NO