IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA Cr.Revision No. 3 of 2005 Judgment Reserved on 1st July, 2011 Date of Decision 18th July ,2011 ________________________________________________________ Devi Saran ….Petitioner. Versus Keshav Ram & others ….Respondents. ________________________________________________________ Coram The Hon’ble Mr. Justice Dev Darshan Sud, J. Whether approved for reporting?1 ________________________________________________________ For the Petitioner: Mr. Sanjeev Kuthiala, Advocate. For the Respondent: None ____________________________________________________________ Dev Darshan Sud, J This revision petition has been instituted by the petitioner who was the complainant before the learned trial Court which dismissed his complaint under Section 138 of the Negotiable Instruments Act against the respondents. 2. Before the learned trial Court, a complaint was instituted against the three persons namely (1) Shri K.D. Sharma, Chairman-cum-Managing Director, Veer Bhumi Forests Plantation (1) Ltd., (2) the Director and (3) Shri Keshav Ram Chauhan, 1 Whether Reporters of Local Papers may be allowed to see the judgment? 2 Manager, Veer Bhumi Forests Plantation (1) Ltd. The allegations made in the complaint were that the complainant on the recommendations of the Manager, invested a sum of ` 25,000/- with the company and the amount was paid to Shri Keshav Ram Chauhan, and receipt No. 3198 dated 12.6.1997 was issued. It was promised by the General Manager as wll as by the Company that the amount will be doubled in three years i.e. on 6.6.2000 and for this purpose post dated cheque No. RNT 560348 dated 6.6.2000, Punjab National Bank, Panchkula for ` 50,000/- was handed over to the accused Keshav Ram Chauhan which was signed by accused Nos. 1 and 2 jointly. The said cheque when presented for collection, was dishonoured for insufficient funds. The allegations then continue that a number of requests were made by the complainant for repayment of the amount, but nothing was returned. It states that the request was made to respondent No.3/third accused Keshwa Ram for repayment of the money, but of no avail. 3. The averments made in the complaint in para Nos 4 and 5 are noted for the purpose that since they form the core of acquisition against the respondents as under: “4. That the complainant issued a Registered notice U/S 138 of Negotiable Instrument Act on dated 25-7-2000 demanding therein the encashment of cheque within fifteen days, but the notice was not received by the accused No. 1 and 2 intentionally but accused No. 3 received the notice, but no arrangement was made to encash the cheque payment. The postal receipt of notice is attached herewith for proof. 5. That the accused No. 1 & 2 who are said to have issued the cheque knowingly well that the amount was not sufficient to honour the said cheque in their account but 3 they have intentionally issued the cheque to allure and defraud the complainant and had also ignored the request of the complainant for payment. Therefore, all the accused have committed an offence which is punishment U/S 138 of Negotiable Ins. Act.” 4. Before proceeding with the case further, I must observe that respondent No. 2 in the complaint “the Director” is not a person who can be prosecuted in law. That only leaves respondent Nos. 1 and 3 namely Shri K.D. Sharma and Keshav Ram Chauhan. The names of both respondents Nos 1 and 2 have been deleted by order of this Court dated 13.1.2006. The order reads: “Cr. Revision Nos 3 & 4 of 2005 13.1.2006 ………. Cr.MPs No. 17 and 16 of 2006 The person mentioned in para 3 of the application, namely, Smt. Sudesh Sharma undoubtedly was not an accused at the state of the filing of the complaint, or during the trial of the case till the stage of the final judgment pronounced by the trial Magistrate. There is no allegation also that at any relevant time she was Incharge and was responsible for the conduct of the business of the Company. She thus cannot be substituted in place of the deceased respondent No.1 K.D. Sharma. It appears that the applicant-petitioner is under a mistaken belief (flowing from the concept of civil proceedings) that in a criminal case (at the stage of the Criminal Appeal or Criminal Revision) a deceased party can be substituted by a successor or a legal representative. This is not permissible under Criminal Jurisprudence. The applications are dismissed. Cr. Revisions No. 3 & 4 of 2005 4 Order dated 26th May, 2005 suggests that after admitting these petitions the Court had directed the issuance of notice to respondents No. 1 and 2. Mr. Kuthiala submits and it is also apparent on a readng of the averments in Cr.MP No. 17 of 2006 that respondent No. 1 has died. I have already declined the prayer of the petitioner for substituting the successor of deceased respondent No.1. In so far as respondent No. 2 is concerned, I have perused the complaint in original as well as the judgment of the trial Magistrate and find that in the complaint the petitioner-complainant had arrayed respondent No. 2 as Director, Veer Bhumi Forests Plantation (I) Ltd. The complaint clearly suggests that the petitioner-complainant also revealed that Veer Bhumi Plantation India Ltd. is a Company. A Company might have more than one Directors yet the complainant-petitioner preferred to style respondent No. 2 as a Director without naming the individual who has a Director was responsible for and had been Incharge of the affairs of the Company. Actually a perusal of the proceedings of the trial Court baffles me because I find from this perusal that the trial Court issued the processes against respondent No. 2 without bothering to specifically ask the petitioner- complainant to name that particular individual who would have been responsible for and had been Incharge of the affairs of the Company. In a criminal case, a specifically mentioned natural person has to be made an accused because it is that natural person who upon conviction has to receive the punishment. Not only that, the proclamation was also issued against respondent No. 2 without verifying as to who was that particular individual being the Director at the relevant time responsible for and Incharge of the affairs of the Company. Section 141 of the Negotiable Instruments Act makes this position abundantly clear and despite this binding requirement of law, the petitioner- complainant did not name the particular individual who in his capacity as the Director would have been responsible for and Incharge of the affairs of the Company and thus ought to have been impleaded as an accused. 5 The proceedings against respondent No. 3, therefore, from the very beginning stood vitiated on the aforesaid ground because respondent No. 2 was not properly impleaded as an accused person. One cannot expect a Director to be available as a omni present entity because an individual has to be specifically named who would have been the Director at the time of the commission of the offence responsible to answer the charge under criminal law. For the foregoing reasons, the name of respondent No. 2 shall stand deleted from the array of parties in this case for the aforesaid reasons. Amended memo of parties shall be filed in four weeks………..” 5. Only respondent No. 3 remains in this revision petition as a person against whom the petitioner seeks enforcement of criminal liability. 6. The learned Magistrate had formulated two points for adjudication. The first was as to whether the complainant had proved beyond a reasonable doubt that the accused had issued a cheque for ` 50,000/-, which on presentation was dishonoured. The learned Court holds that on examination of the evidence it was clear that money was deposited with Keshav Ram Chauhan on 12.6.1997 and in lieu of that he had given a cheque for ` 50,000/- dated 6.6.2000. Notice was issued and served upon Shri Keshav Ram Chauhan since the first accused namely Shri K.D. Sharma and “the Director” were declared proclaimed offenders. Since he did not return the amount, therefore, according to the learned Magistrate this respondent had played a significant role and he was held guilty for offence. 6 7. Appeal was instituted by this accused against the order of conviction. The learned Appellate Court, on reappraisal of the evidence, holds that it was the responsibility of the Devbhoomi Forests Plantation (1) Ltd. to pay the amount. The mere fact that the accused had handed over a cheque to the complainant, could not make him liable for repayment as the person incharge of the business affairs of the company. 8. The cheque according to the complainant was signed by two accused whose names stand deleted from the array of respondents, one account of his death and second because of improper impleadment. 9. Learned counsel appearing for the petitioner urges that the law is now well settled. It is the accused-respondent alone who would be guilty of offences under Section 138 of the Act. He places reliance in case Anil Nada vs. Indian Acrylic Ltd., AIR 2000 SC 145. The Court, on consideration of the provisions, holds that Sub-sections (1) and (2) of Section 141 of the Act provide: “12……….The effect of reading S. 141 is that when the company is the drawer of the cheque such company is the principal offender under S. 138 of the Act and the remaining persons are made offenders by virtue of the legal fiction created by the Legislature as per the section. Hence the actual offence should have been committed by the company, and then alone the other two categories of persons can also become liable for the offence. 13. If the offence was committed by a Company it can be punished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category the payee can succeed in 7 the case only if he succeeds in showing that the offence was actually committed by the Company. In such a prosecution the accused can show that the company has not committed the offence, though such company is not made an accused, and hence the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the Company is sine qua non for convicting those other persons. But if a Company is not prosecuted due to any legal snag or otherwise the other prosecuted persons cannot on that score alone, escape from the pwenal liability created through the legal fiction envisaged in S. 141 of the Act.” (at p. 148) 10. He also places reliance on the judgment in R. Rajgopal vs. S.S. Venkat AIR 2001 SC 2432 holding 2. The only ground on which the complaint filed by the petitioner against the respondent for the offence under Section 138 of the Negotiable Instruments Act has been quashed by the High Court is that the Company (the partnership firm in this case) on whose behalf the cheque was issued was not made an accused in the complaint. Respondent who is the partner has been made an accused. 3. The aforesaid stand of the High Court cannot now be sustained in view of the pronouncement of law on the subject in Anil Handa v. India Acrylic Limited (2001) 1 SCC 1 : (1999 AIR SCW 4228 : AIR 2000 SC 145 : 2000 Cri LJ 373). I do not find that in the facts of the present case the foundation for application of this law has been pleaded or proved. The next decision relied upon is Saroj Kumar Poddar vs. State (NCT of 8 Delhi) and another (2007) 3 SCC 693. Adverting to the provisons of Sections 138 and 141 of the Act, the Court holds: 12. A person would be vicariously liable for commission of an offence on the part of a Company only in the event the conditions precedent laid down therefor in Section 141 of the Act stand satisfied. For the aforementioned purpose, a strict construction would be necessary. 14. Apart from the Company and the appellant, as noticed hereinbefore, the Managing Director and all other Directors were also made accused. The appellant did not issue any cheque. He, as noticed hereinbefore, had resigned from the directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the Company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act. (at p. 697) 11. In Sabitha Ramamurthy and another vs. R.B.S. Channabasavaradhya (2006) 10 SCC 581 where the Court holds that: “7. A bare perusal of the complaint petitions demonstrates that the statutory requirements contained in Sectio 141 of the Negotiable Instruments Act had not been complied with. It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie 9 opinion that the accused are vicariously liable. Section 141 raises a legal fiction. By reason fo the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the company. Before a person can be made vicariously liable, strict compliance with the statutory requirements would be insisted. Not only the averments made in para 7 of the complaint petitions do not meet the said statutory requirements, the sworn statement of the witness made by the son of the respondent herein, does not contain any statement that the appellants were in charge of the business of the Company. In a case where the court is required to issue sumons which would put the accused to some sort of harassment, the court should insist strict compliance with the statutory requirements. In terms of Section 200 of the Code of Criminal Procedure, the complainant is bound to make statements on oath as to who the offence has been committed and how the accused persons are responsible therefor. In the event, ultimately, the prosecution is found to be frivolous or otherwise mala fide, the court may direct registration of case against the complainant for mala fide prosecution of the accused. The accused would also be entitled to file a suit for damages. The relevant provisions of the Code of Criminal Procedure are required to be construed from the aforementioned point of view.” (at p. 584-585) (emphasis supplied) The petitioner also relies upon the decision N.K. Wahi vs. Shekhar Singh and others, (2007) 9 SCC 481 which decision again 10 reaffirmed that to invoke the principle of constructive liability, necessary pleadings under Section 141 are required. I have referred to the portion of the complaint filed before the learned Magistrate to ascertain as to whether they satisfy the principles of law. Adverting to the provision of Section 141 what is required to be established is that offence has been committed by any person who at the time of commission of offence was Incharge of, responsible for the Company for the conduct of its business, shall be deemed to be guilty of the offence. The proviso states nothing 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. The second proviso was inserted w.e.f. 6.6.2003 and is not relevant. Sub-section 2 of Section 141 is a non- obstante clause and states that where any offence under the Act has been committed and it is proved that such commission is with the consent or in connivance of or is attributable to, any neglect on the part of any director, manager, secretary or any other officer he shall be deemed to be guilty of that offence. 12. Adverting to the pleadings in the complaint, I do not find that the complainant has pleaded the responsibility of the respondent herein in the manner as required by law that he was the person responsible for the affairs of the Company in the manner as contamplated by the statute. To repeat merely handing over a cheque to a particular person does not attract criminality. The provision has to be construed strictly as has been held by the Supreme Court. Merely saying that cheque was handed over to the respondent itself attracted criminal liability 11 cannot form the basis for conviction. I find from the record that one of the accused “the Director” of the company is not entity in law against whom prosecution could have been launched. So far as Mr. K.D. Sharma is concerned he is dead and the allegations made in the complaint with respect to signing of cheque, affairs of the Company are squarely on these two respondents. To stretch the provision any further would be to make any person liable for the offence. Viewed from any angle, I do not find any substance in the submissions made on behalf of the learned counsel appearing for the petitioner that complicity/involvement of the third accused has been established on record. In these circumstances, this petition is dismissed. Bail bonds furnished by the respondent shall stand discharged. July 18th, 2011 (Dev Darshan Sud), ms Judge 12