THE HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO CRIMINAL PETITION Nos.1881 AND 3237 OF 2008 COMMON ORDER: These two petitions are ﬁled under Section 482 of the Criminal Procedure Code to quash the proceedings in Calendar Case Nos.226 of 2007 and 35 of 2008 respectively pending on the ﬁles of the Judicial Magistrate of I Class, Adilabad. Both the cases were ﬁled for the oﬀence under Section 138 read with 142(1) of the Negotiable Instruments Act. 2. The substance of both the complaints is that one Sudhakar Pillai was indebted to the complainant to a tune of Rs.26,86,000/-, for which, S.Othiappan, who is the father- in-law of the said Sudhakar Pillai, gave a conﬁrmation letter dated 12.12.2006 and thereafter undertook to repay the amount and he has given a guarantee agreement. In pursuance of the said agreement, he has issued ten cheques and out of them, two cheques for Rs.2,50,000/-, dated 13.03.2007 and 13.02.2007 were presented and they were dishonoured with an endorsement ‘Payment Stopped by the drawer’. Thereafter, after giving notices, the complaints were ﬁled as the amount was not paid. These petitions are ﬁled mainly challenging that the prosecution was launched against the Company and not in the individual capacity and added to that the cheques were not issued in the individual capacity and that there is no enforceable liability. 3. The points that arise for consideration are: 1) Whether the cheques issued are towards any enforceable legal liability by M/s. Abhirami Electronics Private Limited? 2) Whether the present petitions to quash proceedings are validly instituted? 4. POINTS: Before going into the merits of the contentions on both sides, it is useful to refer to an admitted fact that it is the Sudhakar Pillai, who is said to be the person indebted to the complainant and thereafter, there seems to be a tripartite agreement between the said Sudhakar Pillai, the complainant and also Othiappan, who is the guarantor and the father of Sudhakar Pillai and under clause 7 of the agreement the father-in-law of Sudhakar Pillai has undertaken to repay the entire debts and consequently, the parties agreed for the same. It is useful to refer to the complaint, which have been instituted against the accused, which reads as follows: There is an outstanding balance of Rs.26,86,000/- payable to the complainant by the son-in-law of the accused i.e., Sudhakar Pillai towards purchase of cotton bales from the complainant. The accused has conﬁrmed the outstanding balance vide his letter dated 12.12.2006 as guarantor on behalf of his son-in-law and for discharging the said balance amount, the accused issued 10 post dated cheques, out of which 9 cheques for Rs.2,50,000/- each and one cheque for Rs.1,86,000/-. When the complainant presented two cheques bearing Nos.431111 and 431110, dated 13.03.2007 and 13.02.2007 for Rs.2,50,000/- each, they were dishonoured with an endorsement ‘Payment stopped by the drawer’. 5. It is also not in dispute that the cheque has been issued in both the cases for a sum of Rs.2,50,000/- each drawn on Oriental Bank of Commerce, Coimbatore, and they were issued by the Company M/s. Abhirami Electronics Private Limited signed by the Managing Director, who is no other than the father-in-law of the Sudhakar Pillai. Therefore, the cheques were issued by the Company. 6. The question for valid continuation of the proceedings under Section 138 of the Negotiable Instruments Act is whether there is enforceable liability between the parties and whether the person, who has issued the cheque, is liable to pay any amount to the complainant. In the absence of any enforceable liability, the prosecution cannot be maintained. So far as the prosecution against the company is concerned, the learned counsel for the complainant has relied on several decisions as to the mode of transaction and maintainability of the prosecution against the Managing Director and also the persons, who are in-charge of the management and also the person, who has issued the cheque. In these two cases, the question is whether M/s. Abhirami Electronics Private Limited is indebted to the complainant and whether there was any enforceable debt, for which the said cheques are said to have been given. Evidently, the tripartite agreement has been entered into in the individual capacity of Othiappan, the father-in-law of Sudhakar Pillai. There was no guarantee given by M/s. Abhirami Electronics Private Limited that it will indemnify Sudhakar Pillai for the money due by the Sudhakar Pillai. Therefore, when the allegations in the complaint clearly go to show that the cheques were issued by the Company without there being any obligation to discharge the debt and merely because the father-in-law of Sudhakar Pillai is the Managing Director of the said Company and he whether by intentionally or as a fraud issued cheques on behalf of the Company giving a go by to the tripatriate agreement, in which he has signed as individual guarantor, the prosecution against the Company though he was the Managing Director of the said Company does not arise. 7. The learned counsel for the complainant intending to rely upon the proceedings in O.S.No.280 of 2007 on the ﬁle of the Junior Civil Judge at Coimbatore, where-under he has reiterated that the cheques were issued in his personal capacity and that being the case he cannot misuse the position as Managing Director of the Company and cannot make the company liable unless and until there is an agreement or understanding between the members of the said Company and also a resolution to the eﬀect that the Managing Director is permitted to issue the cheques for the guarantee given by him individually to the complainant. In fact, a reading of the complaint without any ambiguity clearly goes to show that the obligation undertaken by the Othiappan is a personal obligation. 8. The learned counsel for the complainant contended that the quash proceedings are not ﬁled by the Company and consequently, it is not maintainable. 9. Before considering this aspect it is necessary for the Court to go into the allegations made in the quash proceedings, which unerringly point out to the claim of the company that the prosecution was against the Company for cheques issued and it is not hailed by individual and in fact, the description of the accused in the complaint also shows that he was the Managing Director of the M/s. Abhirami Electronics Private Limited and it is an attempt to overcome the cheque issued on behalf of the Company for the discharge of the personal guarantee given by the Othiappan. Therefore, in view of the above circumstances, there being no enforceable liability against the Abhirami Electronics Private Limited, any cheque issued by the Managing Director to the complainant cannot be said to be a valid one and consequently, the proceedings under Section 138 of the Negotiable Instruments Act cannot be sustained. 10. Accordingly, both the petitions are allowed and the proceedings in Calendar Case Nos.226 of 2007 and 35 of 2008 pending on the ﬁles of the Judicial Magistrate of I Class, Adilabad, are quashed. _______________________________ JUSTICE N.R.L. NAGESWARA RAO Date:01-12-2011 INL