THE HON’BLE SRI JUSTICE K.C.BHANU CRIMINAL PETITION NOS.2775, 2778 AND 2779 OF 2008 DATED: 14th SEPTEMBER, 2010 CRIMINAL PETITION NO.2775 OF 2008 Between: 1.A.H.S.V.Prasad and 7 others …Petitioners-A4 to A11 And 1.M/s Power Ventures Ltd., Rep. by its Managing Director, N.Venkat Narayana 2.The State of A.P. rep. by Public Prosecutor, High Court of A.P. Hyderabad and another. …Respondents-Complainants CRIMINAL PETITION NO.2778 OF 2008 Between: 1.M/s Agri Gold Farm Estates India Pvt. Ltd. Rep. by its Chairman V.R.Rao Avvas and two others …Petitioners-A1 to A3 And 1.M/s Power Ventures Ltd., Rep. by its Managing Director, N.Venkat Narayana 2.The State of A.P. rep. by Public Prosecutor, High Court of A.P. Hyderabad and another. …Respondents-Complainants CRIMINAL PETITION NO.2779 OF 2008 Between: 1.M/s Agri Gold Constructions Pvt. Ltd. Rep. by its Chairman V.R.Rao Avvas and another …Petitioners-A12 to A13 And 1.M/s Power Ventures Ltd., Rep. by its Managing Director, N.Venkat Narayana 2.The State of A.P. rep. by Public Prosecutor, High Court of A.P. Hyderabad and another. …Respondents-Complainants THE HON’BLE SRI JUSTICE K.C.BHANU CRIMINAL PETITION NOS.2775, 2778 AND 2779 OF 2008 COMMON ORDER: These Criminal Petitions under Section 482 Cr.P.C. are filed to quash the proceedings in C.C.No.230 of 2008 on the file of the X Additional Chief Metropolitan Magistrate, Malkajgiri, Ranga Reddy District, which were taken cognizance of the offence punishable under Section 138 of the Negotiable Instrument Act,1881 (for short ‘the Act’). 2. Brief facts, that are necessary for disposal of the present petition may be stated as follows: The complainant is a company registered under the Companies Act, 1956 and is incorporated with the primary objective of promoting power generating plants at suitable locations with good potentials in various parts of India and the complaint is being instituted and filed by its Managing Director, N.Venkata Narayana, who is duly authorized to institute the complaint. A13 approached the complainant through L.B. Kumar by stating that A12 has interest in sourcing/identifying and exploring new opportunities /avenues for investment in power sector and further represented that A12 has enough financial net worth to invest in large power projects of magnitude of 1000MW. Pursuant to the interest shown by the accused, negotiations were held between the complainant and A13 and the same was given effect to on 07-03-2007 in the form of investment agreement. A12 through A13 evinced interest and agreed to invest amount to the tune of Rs.25 crores in a phased manner unconditionally. Pursuant to the investment agreement, the complainant has ploughed in funds and incurred expenditure/committed itself irretrievably to spending to the tune of around of Rs.16 crores. A1 through A2 in discharge of liability issued three post dated cheques for Rs.3,24,78,933/- each. When the said cheques were presented for encashment, they were dishonoured on account of ‘stop payment’. Thereafter, the complainant issued legal notice. Pending presentation of the cheques, A12 issued notice to the complainant on frivolous and untenable grounds. A1 to A11 received notices and notices sent to A12 and A13 were not returned. Even after the expiry of 15 days, the accused failed to make the payment. A2 to A11 and A13 are in charge and responsible for day-to-day affairs of A1 and A12. Hence, the complaint. 3. Learned counsel appearing for the petitioners contended that the cheques in question were not given for legally enforceable debt or liability and the cheques were given as loan and the investor at his sale option would be free to convert the loan into equity in the complainant company, that the notices on A12 and A13 who are the signatories to the agreement were not served on them, that the complainant misrepresented some facts such as liability of the project, that A12 was constrained to cancel the agreement by giving a notice and advised the complainant not to present the post dated cheques, that the A4 to A11 are only nominal Directors, that it is only Chairman and Managing Director is responsible for day-to-day affairs of the company, that the petitioners in Crl.P.2775 of 2009 are not the signatories of the agreement nor signed the cheques on behalf of the company and therefore, continuation of proceedings is nothing but abuse of process of Court. 4. Inherent powers under Section 482 Cr.P.C. can be invoked to present abuse of process of Court or to secure the ends of justice. To constitute an offence incorporated in the main enacting clause of Section 138 of the Act, the following three conditions have to be established: “ 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 the 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.” Issuance of cheques is not denied because they have stated in the petition that the cheques were given as a loan. It is the case of the accused that the complainant approached the petitioners and requested them to invest monies in his company and promised that there will be good returns. Believing the representation made by the complainant, the petitioner’s company agreed to invest Rs.25 crores. As the complainant was urgent need of funds, the petitioner company paid an amount of Rs.4,13,46,560/-on 13-03-2007 and the balance was agreed to be paid upon completion of due diligence and upon furnishing of several documents. As the complainant did not deliberately perform his part of agreement, the petitioners constrained to cancel the agreement and advised the complainant not to present the post dated cheques for collection as the agreement stands cancelled. Therefore, there is no legally enforceable debt or liability. Whether A13 issued the cheques on behalf of A1 company to discharge the legally enforceable debt or liability or it was given towards loan cannot be decided. Prima facie once issuance of cheque is admitted, the presumption is that it was given for legally enforceable debt or liability. So the plea that the cheques were given towards discharge of loan is a matter to be decided after adducing necessary evidence in the trial Court. Basing on the defences taken by the accused, it cannot be decided whether the cheque in question was given for discharge of legally enforceable debt or liability or towards loan as contended by the learned counsel for the accused exercising the powers under Section 482 Cr.P.C. 5. On the aspect whether A4 to A11 were not in charge and responsible for day-to-day affairs of A1, it is pertinent to refer to a decision reported in S.M.S. PHARMACEUTICALS LTD., V NEETA BHALLA [1], wherein it was held thus: “The criminal liability has been fastened on those who, at the time of the commission of the offence, were in charge of and were responsible to the firm for the conduct of the business of the firm. These may be sleeping partners who are not required to take any part in the business of the firm; they may be ladies and others who may not know anything about the business of the firm. The primary responsibility is on the complainant to make necessary averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every partner knows about the transaction. The obligation of the appellants to prove that at the time the offence was committed they were not in charge of and were not responsible to the firm for the conduct of the business of the firm, would arise only when first the complainant makes necessary averments in the complaint and establishes that fact. The present case is of total absence of requisite averments in the complaint.” There is allegation that A2 to A13 are in charge and responsible for day-to-day affairs of A1 and A12 and that dishonour of cheque was as a result of deliberate connivance of all the Directors. Under Section 141 of the Act, every person, who, at the time of 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. To constitute the offence under Section 138 of the Act, the cheque issued by the person shall maintain account with the bank for payment, such cheque was presented in the bank and the cheque was returned unpaid and giving of notice calling upon the accused to pay that amount and failure by the drawer to pay the amount within the time, then the accused committed the offence. These five acts are present in this case. Hence, question of quashing the proceedings does not arise. 6. Accordingly, the Criminal Petitions are dismissed. --------------------- K.C.BHANU, J DATED:14th SEPTEMBER, 2010 Hsd [1] (20050 8 SCC 89