Reserved Judgment IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Criminal Misc. Application (C482) No.20 of 2004. 1. Garhwal Mandal Vikas Nigam Ltd. 74/1 Rajpur Road, Dehradun through its Managing Director Sri R.K.Verma. 2. Sri R.K.Verma, Managing Director, Garhwal Mandal Vikas Nigam Ltd. 74/1 Rajpur Road, Dehradun through its Managing Director Sri R.K.Verma. 3. Sri G.B.S. Sajwan, General Manager (Finance) Garhwal Mandal Vikas Nigam Ltd. 74/1 Rajpur Road, Dehradun through its Managing Director Sri R.K.Verma. Vs. … Applicants. 1. M/s Mata Garg & Co. Chartered Accountants, 15, Astley Hall, Rajpur Road, Dehradun through its Partner Sri S.K.Natta. 2. Judicial Magistrate II Dehradun. …Respondents. Mr. U.K.Uniyal, Senior Advocate with Mr. Sandeep Kothari, Advocate, for the applicants. Mr. S.K.Jain, Advocate, for the respondent No.1. Mr. B.S.Parihar, Brief Holder of the State-respondent no.2. Date June 08 , 2010. Hon’ble B.S.Verma, J. This application under Section 482 of the Code of Criminal Procedure has been moved by the applicants to quash the proceedings of Case No. 334 of 2000 under Section 138 of the Negotiable Instruments Act 1881 (for short the Act) pending in the court of Judicial Magistrate II Dehradun. 2. Relevant facts giving rise to the present application, in brief, are that the respondent no. 1 was appointed as Auditors of the company for the year 1993-94 for Garhwal Mandal Vikas Nigam Ltd. and the respondent no. 1 submitted its bill dated 30-11-1998 to the applicant no.1 for the amount of Rs. 1,36,115/-, out of which amount of Rs. 32,315/- was in lieu of travelling and out of pocket expenses. It appears that no vouchers/documents were submitted by the respondent no. 1 in support of travelling and out of pocket expenses at the time of submission of bill and the same were even not submitted thereafter. 2 3. A cheque No. 174624 dated 8-3-2000 for an amount of Rs. 34,393/- payable at Ganga Yamuna Gramin Bank Dehradun along with covering letter dated 15-3-2000 was issued in favour of the respondent no. 1 against part payment of the said bill in lieu of travelling and out of pocket expenses and service tax. In the covering letter the applicant no.1 had asked the respondent no. 1 to submit the bills of expenditures to the applicants and then to tender the cheque for encashment to the bank. A copy of the covering letter was also endorsed to the bank concerned with stop payment remark. However, the respondent no. 1 presented the cheque No. 174624 dated 8-3-2000 for Rs. 34,393/- to the bank for encashment, which was returned to the respondent no.1 with the remark “payment stopped”. 4. It appears that after the cheque was returned by the Bank with the remark “stop payment by the drawer” to the respondent no.1, the respondent no.1 issued a registered notice dated 21-3-2000 to Garhwal Mandal Vikas Nigam Ltd. Dehradun asking the applicant no.1 to send demand draft for the aforesaid amount within a period of fifteen day from the date of receipt of the notice. The applicants sent reply of the registered notice by letter dated 4-4-2000 to the respondent no.1 alleging therein that the respondent no. 1 was required to submit the vouchers of expenses before tendering the cheque to be bank for encashment. 5. A complaint was filed by the respondent no.1 against the three applicants under Section 138 of the Act in the court of the Chief Judicial Magistrarte Dehradun. In paragraph 8 of the complaint, the respondent no. 1 had mentioned that vide notice dated 21-3-2000 sent by registered post on 22-3-2000, complainant intimated the accused No. 1 about the fate of the said cheque and made a demand for the payment of the amount of said cheque within fifteen days of the receipt of notice. The complaint was registered as Criminal Case No. 334 of 2000 in the Court of Judicial Magistrate, II Dehradun. 3 6. It appears that the learned Magistrate after satisfying himself that there is sufficient ground for proceeding with the complaint, passed an order dated 12-6-2000 summoning the accused- applicant nos. 1 to 3 to answer the complaint. The accused-applicants filed objection, paper no. 18-A dated 27-11-2000 before the learned Magistrate. However, the learned Magistrate after hearing both the parties did not find favour with the applicants’ objection and rejected the same by his order dated 14-6-2001. Aggrieved by that order, the applicants preferred a revision before the revisional court. The revisional court after hearing the parties has observed that the applicant no. 2 is not protected under Section 197 of the Code of Criminal Procedure. The revisional court also did not find favour that the applicant no.2 is protected from prosecution under proviso second appended to Section 141 (1) of the Act. Ultimately, the revision was dismissed vide order dated 18-11-2003. 7. The applicants have approached this Court by making an application under Section 482 of the Code of Criminal Procedure for quashing the proceedings of Criminal Case No. 334 of 2000, under Section 138 of the Act pending against the applicants in the court of Judicial Magistrate II, Dehradun. 8. Counter affidavit has been filed on behalf of the respondent no. 1, wherein the averments made on material points in the application under Section 482 Cr.P.C. have been denied. 9. Learned counsel for the applicants has vehemently contended firstly that the complaint under Section 138 of the Act was not maintainable because the respondent no. 1 was not legally entitled to the amount of the cheque in question therefore it cannot be termed as legally enforceable debt. Learned counsel for the applicants secondly argued that the criminal complaint is not at all maintainable as against the applicant nos. 2 and 3 as no notice as envisaged by Section 93 of the Act was ever given to the them. According to the 4 learned counsel the alleged notice dated 21-03-2003 was issued to the applicant no.1 Garhwal Mandal Vikas Nigam Ltd. alone by the respondent no.1. Learned counsel for the applicants thirdly argued that the complaint cannot be proceeded with as against the applicant nos. 2 and 3 as both of them are protected under Proviso second appended to Section 141(1) of the Act. Lastly, the learned counsel for the applicants has contended that the accused no. 2 is a public servant and the cheque in question was issued by him in discharge of his official duties, therefore, the applicant no. 2 R.K.Verma could not have been prosecuted without obtaining sanction for his prosecution from the Government. 10. I have heard learned counsel for the parties and perused the material placed record. 11. At the outset, it may be mentioned that on 30-11-1998, a bill for amount of Rs. 1,36,115-00 was sent by the respondent no.1 addressed to Garwal Mandal Vikas Nigam Limited which included amount of Rs. 32,315.00 towards Travelling and out of pocket expenses and Rs. 4,800.00 towards service tax for payment. This bill is neither addressed to the applicant no.2 Sri R.K.Verma, Managing Director nor to Sri G.B.S.Sajwan, General Manager (Finance). Moreover, the registered notice dated 21.03.2000 is addressed to applicant no.1. The relevant extract thereof is reproduced hereunder:- “Registered A/D Garhwal Mandal Vikas Nigam Ltd. 74/1, Rajpur Road, DEHRADUN. 21.03.2000 Dear Sir, Kind Attn.: Mr. R.K.Verma-M.D. Your cheque no. 174624 dated 08.03.2000 for Rs. 34,393/- (Rs Thirty four thousand three hundred ninty three only) payable at Ganga Yamuna Gramin Bank, Dehradun issued in our favour against part payment of our bill dated 30.11.98 has been received back by us on 18.03.2000 unpaid with the remark “Stop Payment by the drawer”. 5 You are called upon to remit this amount by demand draft within 15 days of receipt of this letter. Yours faithfully, For Matta Garg & Co., Chartered Accountants. Signed. (S.K.Matta) Partner” 12. Thus, from a conjoin reading of the bill in question as well as the registered A/D notice dated 21-3-2000 sent by the respondent no.1, it would be seen that the debt or liability for payment, if any, was upon the applicant no.1-Garhwal Mandal Vikas Nigam Ltd. and the applicant nos. 2 and 3 are the Managing Director and General manager of the accused no.1. Moreover, it is an undisputed fact between the parties that the bill was sent to the accused-applicant no.1 for payment of amount of Rs. 1,36,115-00. It is also not disputed that the cheque no. 174624 dated 8-3-2000 was issued by the accused- applicant no.1. The notice sent by the respondent no. 1 is addressed only to the accused no.1-Garhwal Mandal Vikas Nigam. It has to be examined in this case whether compliance of mandatory provisions Section 138 read with Section 93 of the Act stands made against the applicants or not. 13. For a just decision of the case, a reference to Sections 93, 138 and 141 of the Act is necessary. 14. Section 93 reads as under:- “93. By and to whom notice should be given.- When a promissory note, bill of exchange or cheque is dishonoured by non- acceptance or non-payment, the holder thereof, or some party thereto who remains liable thereon, must give notice that the instrument has been so dishonoured to all other parties whom the holder seeks to make severally liable thereon, and to some one of several parties whom he seeks to make jointly liable thereon. 6 Nothing in this section renders it necessary to give notice to the maker of the dishonoured promissory note, or the drawee or acceptor of the dishonoured bill of exchange or cheque.” 15. Section 138 of the Act reads as under:- “138. Dishonour of cheque for insufficiency, etc., of funds in the account.- Where any cheque drawn by a person on an account maintained by him with a banker for payment for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from the account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. 7 Explanation- For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.” 16. Section 141 of the Act reads as follows:- “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: 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 office shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) “company” means any body corporate and includeds a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.” 8 17. Undoubtedly, when an offence under Section 138 of the Act is committed by a company, every person in charge of and responsible to the company for the conduct of the business of the company as well as the company shall be liable to be proceeded against and punished, provided the ingredients of Section 138 of the Act are fulfilled. 18. Before entering into further discussion, it is pertinent to mention here that in this case the applicants had approached the trial court against the summoning order by filing objection. The objection filed by the applicants was rejected. They preferred revision before the Additional Sessions Judge, which too was dismissed. I am of the considered view that against the summoning order passed by the Magistrate under Section 204 of the Code of Criminal Procedure, no revision was maintainable. The only course open to the applicants was to approach this Court in an application under Section 482 of the Cr.P.C. I am fortified in my view by the Apex Court judgment in the case of Adalat Prasad Vs. Rooplal Jindal and others [2004 Supreme Court Cases (Cri) 1927]. In paragraph 15, the Apex Court has observed as under:- “15. It is true that if a Magistrate takes cognizance of an offence, issues process without there being any allegation against the accused or any material implicating the accused or in contravention of provisions of Sections 200 and 202, the order of the Magistrate may be vitiated, but then the relief an aggrieved accused can obtain at that stage is not by invoking Section 203 of the Code because the Criminal Procedure Code does not contemplate a review of an order. Hence in the absence of any review power or inherent power with the subordinate criminal courts, the remedy lies in invoking Section 482 of the Code.” 9 19. As the applicants are aggrieved by the summoning order passed by the Magistrate in a complaint under Section 138 of the Act, the application under Section 482 Cr.P.C. is maintainable. 20. So far as the contention of the learned counsel for the applicants that the applicants were not legally liable to pay the amount of the cheque in question to the respondent no. 1 is concerned, I am not inclined to accept the same for the simple reason that Section 139 of the Act deals with presumption in favour of holder of a cheque, which reads as under:- “139. Presumption in favour of holder.- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.” 21. At this stage, it cannot be said that the applicant no.1 was not under legal obligation to pay the amount of the cheque in question to the respondent no.1 and that the complaint under Section 138 of the Act was, therefore, not maintainable. 22. Now, coming to the contention of the learned counsel for the applicants that no mandatory notice was issued to the applicant nos. 2 and 3 by the respondent no.1 as prescribed under Section 93 of the Act is concerned, I am of the considered view whenever any person is sought to be made liable for an offence under Section 138 read with Section 141 of the Act, service of statutory notice on the person sought to be made liable is essential amongst other essential ingredients. I am fortified in my view by the Apex Court judgment in the case of “S.M.S.Pharmaceuticals Ltd. Vs. Neeta Bhalla and another” [(2005) 8 Supreme Court Cases 89]. In that case, the Apex Court while considering the provisions of Sections 138 and 141 of the Act, has observed at the foot of paragraph no. 2 as under:- “It will be seen from the above provisions that Section 138 casts criminal liability punishable with imprisonment or fine or 10 with both on a person who issues a cheque towards discharge of a debt or liability as a whole or in part and the cheque is dishonoured by the bank on presentation. Section 141 extends such criminal liability in case of a company to every person who at the time of the offence, was in charge of, and was responsible for the conduct of the business of the company. By a deeming provision contained in Section 141 of the Act, such a person is vicariously liable to be held guilty for the offence under Section 138 and punished accordingly. Section 138 is the charging section creating criminal liability in case of dishonour of a cheque and its main ingredients are: (i) issuance of a cheque, (ii) presentation of the cheque, (iii) dishonour of the cheque, (iv) service of statutory notice on the person sought to be made liable, and (v) non-compliance or non-payment in pursuance of the notice within 15 days of the receipt of the notice.” 23. In the case at hand, as detailed above, admittedly, the notice dated 21-03-2000 was issued to the applicant no.1- Garhwal Mandal Vikas Nigam Ltd. Moreover, it is own case of the complainant-respondent no.1 that the respondent no. 1 had intimated the accused-applicant no 1 about the dishonour of the cheque in question and averment to this effect has been made in paragraph of the complaint under Section 138 of the Act. 24. The learned counsel for the respondent no.1, Mr. S.K.Jain, Advocate, has argued that the notice dated 21-3-2000 was served on Mr. R.K.Verma, Managing Director of the applicant no.1, therefore, there was sufficient service of notice on the applicant no.2. 25. I have pondered over this aspect of the case. The notice was addressed to applicant no.1, which is a statutory body and service 11 upon the applicant no.1 had been effected through Mr. R.K.Verma, M.D. as would be clear from a perusal of the notice. Had there been any intention of the respondent no.1 to issue notice to applicant nos. 2 and 3, the statutory notice would have been issued to and served on them in their individual capacity as well but it has not been done. The alleged notice is simply addressed to the applicant no.1 and from no stretch of imagination, it could be said that notice was ever issued or served on applicant nos. 2 and 3 in their individual capacity. Therefore, I am of the considered view that in the case at hand, the respondent no.1 had not issued statutory notice under Section 93 of the Act to applicant no.2 Mr. R.K.Verma, the Managing Director and the applicant no. 3, Mr. G.B.S.Sajwan, the General Manager of the applicant no.1. The contention of the learned counsel for the respondent no.1 is not convincing on this score. Accordingly, for want of statutory notice to the applicants no. 2 and 3, the complaint under Section 138 of the Act cannot be proceeded with against them. The summoning order dated 12-6-2000 passed by the learned Judicial Magistrate II, Dehradun as against the applicant nos. 2 and 3 is, therefore, not tenable in the eye of law. 26. It appears that the applicant nos. 2 and 3 are full time salary paid Officers employed in the establishment of the applicant no.1 and they are not the officers nominated as a Director of a company by virtue of their 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. In my view, the contention of the learned counsel for the applicants that the second proviso appended to Section 141(1) of the Act gives protection to applicant nos. 2 and 3 from prosecution is not acceptable. Undisputedly, the applicant nos. 2 and 3 are full time appointed Officers, i.e. Managing Director and General Manager of the applicant no. 1, hence, the second Proviso of Section 141(1) of the Act is not at all attracted to the present case. 12 27. So far as the contention of the learned counsel for the applicants that the applicant no.2 Mr. R.K.Verma, the then Managing Director had issued the cheque in question in the discharge of his official duty and he being a public servant, sanction for his prosecution has not been obtained is concerned, I do not find any force in this contention. In my considered view, protection by way of sanction under Section 197 of the Code of Criminal Procedure is not applicable to the officers of government companies or the public undertakings even when such public undertakings are State. I am fortified in my view by the Apex Court judgment in the case of Mohd. Hadi Raja Vs. State of Bihar and another [1998 Supreme Court Cases (Cri) 1265] wherein the Apex Court in paragraph 27 has observed that the protection by way of sanction under Section 197 of the Code of Criminal Procedure is not applicable to the officers of government companies or the public undertakings even when such public undertakings are “State” within the meaning of Article 12 of the Constitution on account of deep and pervasive control of the Government. 28. For the reasons and discussion above, it is crystal clear that the service of notice under Section 138 read with Section 93 of the Act was effected upon the Garhwal Mandal Vikas Nigam Ltd., the applicant no. 1 alone and no statutory notice was ever issued or served upon applicant nos. 2 and 3, who have also been sought to be liable under Section 138 of the Act. Accordingly, I hold that the complaint under Section 138 of the Act cannot be legally proceeded with as against the applicant nos. 2 and 3 for want of statutory notice under Section 93 of the Act upon the applicant Nos. 2 and 3. The summoning order passed by the Judicial Magistrate II, Dehradun, so far as it relates to applicant nos. 2 and 3, is not tenable. The criminal compliant against the applicant nos. 2 and 3 is liable to be quashed. The Complaint Case No. 334 of 2000 shall proceed against the applicant no.1 alone. The application under Section 482 of the Code of Criminal Procedure is liable to be partly allowed. 13 29. The application under Section 482 Code of Criminal Procedure is partly allowed. The proceedings of criminal case under Section 138 of the Act against the applicant nos. 2 and 3, pending in the Court of Judicial Magistrate II, Dehradun are quashed. The learned Magistrate shall proceed with the complaint under Section 138 of the Act as against the applicant no.1, expeditiously, in accordance with law. 30. The interim order dated 14-1-2004 is vacated. RCP (B.S.Verma,J.)