Case: Anil Sachar  Vs. M/S Shree Nath Spinners P.Ltd.& Ors.Etc

ANIL R. DAVE, J. 1. Leave granted. 2. Being aggrieved by the common Judgment delivered in Criminal Appeal Nos.379-MA of 2007 and 381-MA of 2007 dated 16th December, 2008 by the High Court of Punjab and Haryanaat Chandigarh, the original complainants have filed these appeals. By virtue of the aforestatedjudgment and order, the High Court has confirmed the Orders dated 4th May, 2007 passed in Criminal Complaint Nos. 46 and 99 of 1999 by the Judicial Magistrate, First Class, Ludhianawhereby the accused in the aforestatedcomplaints had been acquitted of the charges levelledagainst them. 3. The facts leading to the present litigation in a nut shell are as under: On 23rd February, 1999, Respondent no.4 - MunishJain, a Director of M/s. A.T. Overseas Ltd. had given in all four chequesfor different amounts to Anil Sachar, partner of M/s. RatiWoolen Mills who are appellant Nos. 1 and 2 respectively. According to the case of the complainants, the said chequeswere given to M/s. RatiWoolen Mills, of which appellant no.1 is a partner, in consideration of supply of goods to M/s. ShreeNathSpinners Pvt. Ltd. 4. The aforestatedcheques, which had been given by MunishJain as Director of M/s. A.T. Overseas Ltd., had not been honouredand due to dishonourof the said cheques, the complainant, namely, Anil Sachar, as a partner of M/s. RatiWoolen Mills had issued notice as required under the provisions of Section 138 of the Negotiable Instruments Act (hereinafter referred to as `the Act). 5. In spite of the said notice, the complainant was not paid the amount covered under the aforestatedchequesand, therefore, complaints had been filed against the present respondents.6. The case of the present respondents before the trial court as well as before the High Court was that the dispute was of a civil nature and with an oblique motive it was given a colourof criminal litigation. The said reply had been given especially in view of the fact that the complaint had also been filed making out a case against the accused under the provisions of Sections 406 & 420 of the Indian Penal Code.7. The case of the complainants was that M/s. A.T. Overseas Ltd. is a sister concern of M/s. ShreeNathSpinners Pvt. Ltd. and the aforestatedchequeswere given by MunishJain towards dues of M/s. ShreeNathSpinners Pvt. Ltd. as a Director of M/s. A.T. Overseas Ltd. After considering the evidence adduced and the arguments made before the trial court, the trial court acquitted the accused for the reason that the goods had been supplied by the complainants to M/s. ShreeNathSpinners Pvt. Ltd. and the chequeshad not been given by M/s. ShreeNathSpinners Pvt. Ltd. but they had been given by M/s. A.T. Overseas Ltd. As M/s. ShreeNathSpinners Pvt. Ltd. and M/s. A.T. Overseas Ltd. are two different legal entities and as there was nothing on record to show that the chequeswere given by M/s. A.T. Overseas Ltd. in consideration of goods supplied by the complainants to M/s. ShreeNathSpinners Pvt. Ltd., the conclusion was that there was no liability of M/s. A.T. Overseas Ltd. and, therefore, dishonourof the aforestatedchequeswould not make signatory of the chequesfrom the account of M/s. A.T. Overseas Ltd. liable under the provisions of the Act.8. Being aggrieved by the orders passed by the learned Judicial Magistrate, First Class, Ludhiana, dated 4th May, 2007, criminal appeals were filed before the High Court of Punjab and Haryanaat Chandigarh, but the said appeals have been dismissed and, therefore, the original complainants have approached this Court by way of these appeals.9. It may be noted here that during the pendencyof the proceedings, MohinderJain, accused/respondent no.3 expired and, therefore, deleted from the array of parties. 10. Mr. NidheshGupta,learned Senior Counsel appearing for the complainants mainly submitted that the learned Judicial Magistrate as well as the High Court committed an error by acquitting the accused simply because the goods had been supplied to M/s. ShreeNathSpinners Pvt. Ltd. whereas the chequeswere given by M/s. A.T. Overseas Ltd. He submitted that both the concerns, referred to hereinabove, are sister concerns having common Directors and, therefore, the courts below ought to have lifted the corporate veil so as to find out the realities. He also submitted that MunishJain, who had signed the aforesaid chequeswas Director in both the sister concerns viz. M/s. ShreeNathSpinners Pvt. Ltd. and M/s. A.T. Overseas Ltd. Moreover, he submitted that once the chequeshad been issued by the accused, as per provisions of Section 139 of the Act, burden was on the accused to show that there was no consideration. So as to substantiate his aforestatedsubmission, the learned counsel relied upon the Judgments delivered by this Court in ICDS Ltd. v. BeenaShabeerand Anr. [2002(6) SCC 426], K.K. Ahujav. V.K. Voraand Anr.,[2009(10) SCC 48] and K.N. Beenav. Muniyappanand Anr. [2001(8) SCC 458]. 11. For the aforestatedreasons, the learned counsel strenuously submitted that the High Court had erred in confirming the orders of acquittal because upon lifting the corporate veil, the correct position could have been revealed and the correct position according to the learned counsel was that the chequeshad been given by a sister concern, namely, M/s. A.T. Overseas Ltd. in consideration of the goods supplied to M/s ShreeNathSpinners Pvt. Ltd. The learned counsel also drew our attention to the fact that there were several inter se transactions between the above-named two sister concerns and, therefore, the courts below ought to have believed that the payment had been made by one company for another company and the courts below ought to have believed that there was a consideration behind issuance of the aforestatedtwo cheques. He also drawour attention to the relevant evidence which was adduced by the complainants to establish the aforestatedfacts. 12. On the other hand, the learned counsel appearing for the respondents supported the reasons recorded by the courts below while acquitting the accused. He mainly submitted that the chequeshad been issued by M/s. A.T. Overseas Ltd. to whom no goods had been supplied by the complainants and, therefore, there was no consideration. In absence of any consideration, according to the learned counsel, the accused could not have been held guilty and, therefore, the courts below rightly acquitted the respondents. The learned counsel relied upon the judgments delivered in IndowindEnergy Ltd. v. Wescare(India) Ltd. and Anr. [2010(5) SCC 306] and in RahulBuilders v. ArihantFertilizers & Chemicals and Anr. [2008(2) SCC 321]. According to him, even if two companies are having common Directors, both companies would remain different legal entities and, therefore, the submission made on behalf of the appellants that both the companies are sister concerns and, therefore, one company should be made liable for the dues of another company cannot be sustained. He further submitted that there was nothing to substantiate the submission that M/s. A.T. Overseas Ltd. had made payment in consideration of goods supplied to M/s. ShreeNathSpinners Pvt. Ltd. He, therefore, submitted that the appeals be dismissed. 13. Upon hearing the learned counsel appearing for the parties and upon perusal of the record pertaining to the cases and the impugned judgment delivered by the High Court confirming the order passed by the trial court and upon considering the judgments cited by the learned counsel, we are of the view that the decision rendered by the courts below cannot be sustained. 14. Upon perusal of the record, we find that the complainants had established before the trial court that there was an understanding among the complainants and the accused that in consideration of supply of goods to M/s. ShreeNathSpinners Pvt. Ltd., M/s. A.T. Overseas Ltd. was to make the payment. The aforestatedunderstanding was on account of the fact that directors in both the aforestatedcompanies were common and the aforestatedcompanies were sister concerns. In the circumstances, it can be very well said and it has been proved that in consideration of supply of goods to M/s. ShreeNathSpinners Pvt. Ltd., M/s. A.T. Overseas Ltd. had made the payment. In view of the above fact, in our opinion, the trial court was not right when it came to the conclusion that there was no reason for M/s. A.T. Overseas Ltd. to give the chequesto the complainants. The aforestatedfacts are very well reflected in the statement made in the complaint and in the evidence by the complainant whichhave not been controverted. Paras2 and 3 of the complaint are reproduced herein below: “2. That the accused had business dealings with the complainant and supply of the goods which duly supplied by my client vide separate bills from time to time which was duly acknowledged by the accused no. 5 VarunJain director of the accused no. 1.3. That in order to discharge the liability of making the payment, the accused issued following two chequesin favourof the complainant through their sister concern M/S A.T. Overseas Ltd. i.e. Accused No. 1 and the chequeswere duly signed by Mr. MunishJain one of its directors” 15. The trial court materially erred while coming to a conclusion that in criminal law no presumption can be raised with regard to consideration as no goods had been supplied by the complainants to M/s. A.T. Overseas Ltd..The trial court ought to have considered provisions of Section 139 of the Act, which reads as under:- “139. Presumption in favourof holder - It shall be presumed, unless the contrary is proved, that the holder of a chequereceived the chequeof the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.” 16. According to the provisions of the aforestatedsection, there is a presumption with regard to consideration when a chequehas been paid by the drawer of the cheque. In the instant case, M/s. A.T. Overseas Ltd. paid the chequewhich had been duly signed by one of its Directors, namely, MunishJain. MunishJain is also a Director in M/s. ShreeNathSpinners Pvt. Ltd..As stated hereinabove, both are sister concerns having common Directors. Extracts of books of accounts had been produced before the trial court so as to show that both the companies were having several transactions and the companies used to pay on behalf of each other to other parties or their creditors. The above fact strengthens the presumption to the effect that M/s. A.T. Overseas Ltd. had paid the chequesto the complainants, which had been signed by MunishJain, in consideration of goods supplies to M/s ShreeNathSpinners Pvt. Ltd. Of course, the presumption referred to in Section 139 is rebuttable. In the instant case, no effort was made by MunishJain or any of the Directors of M/s. A.T. Overseas Ltd. for rebuttal of the aforestatedpresumption and, therefore, the presumption must go in favourof the holder of the cheques. Unfortunately, the trial court did not consider the above facts and came to the conclusion that there was no consideration for the chequeswhich had been given by M/s. A.T. Overseas Ltd. to the complainants.17. It is true that a limited company is a separate legal entity and its directors are different legal persons. In spite of the aforestatedlegal position, in view of the provisions of Section 139 of the Act and the understanding which had been arrived at among the complainants and the accused, one can safely come to a conclusion that the chequessigned by MunishJain had been given by M/s. A.T. Overseas Ltd. to the complainants in discharge of a debt or a liability, which had been incurred by M/s ShreeNathSpinners Pvt. Ltd.18. We may also refer to the judgment delivered by this Court in the case of ICDS Ltd. (supra). In the said judgment this Court has referred to the nature of liability which is incurred by the one who is a drawer of the cheque. If the chequeis given towards any liability or debt which might have been incurred even by someone else, the person who is a drawer of the chequecan be made liable under Section 138 of the Act. The relevant observation made in the aforestatedjudgment is as under: “ Thewords “any cheque” and “other liability” occurring in Section 138 are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the statute. These expressions leave no manner of doubt that for whatever reason it may be, the liability under Section 138 cannot be avoided in the event the chequestands returned by the banker unpaid. Any contra-interpretation would defeat the intent of the legislature. The High Court got carried away by the issue of guarantee and guarantors liability and thus has overlooked the true intent and purport of Section 138 of the Act.…….The language, however, has been rather specific as regard the intent of the legislature. The commencement of the section stands with the words “where any cheque”. The above noted three words are of extreme significance, in particular, by reason of the user of the word “any” - the first three words suggest that in fact for whatever reason if a chequeis drawn on an account maintained by him with a banker in favourof another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.” 19. Looking to the facts of the case and law on the subject, we are of the view that all the four chequesreferred to in both the complaints are presumed to have been given for consideration. The presumption under Section 139 of the Act has not been rebutted by the accused and, therefore, we are of the view that the trial court wrongly acquitted the accused by taking a view that there was no consideration for which the chequeswere given by MunishJain to the complainants. The aforesaid incorrect view was wrongly confirmed by the High Court. We, therefore, set aside the acquittal order and convict accused MunishJain under Section 138 of the Act.20. In view of the aforestatedfacts and legal position, in our opinion, the accused ought to have been held guilty, especially accused no. 4, MunishJain who had signed all the chequesfor M/s A.T. Overseas Ltd. We, therefore, hold MunishJain, accused no. 4 and respondent no. 4 herein, in both the cases guilty of the offence under Section 138 of the Act.

Decision reasoning: 1[ds]14. Upon perusal of the record, we find that the complainants had established before the trial court that there was an understanding among the complainants and the accused that in consideration of supply of goods to M/s. ShreeNathSpinners Pvt. Ltd., M/s. A.T. Overseas Ltd. was to make the payment. The aforestatedunderstanding was on account of the fact that directors in both the aforestatedcompanies were common and the aforestatedcompanies were sister concerns. In the circumstances, it can be very well said and it has been proved that in consideration of supply of goods to M/s. ShreeNathSpinners Pvt. Ltd., M/s. A.T. Overseas Ltd. had made the payment. In view of the above fact, in our opinion, the trial court was not right when it came to the conclusion that there was no reason for M/s. A.T. Overseas Ltd. to give the chequesto the complainants. The aforestatedfacts are very well reflected in the statement made in the complaint and in the evidence by the complainant whichhave not been controverted. Paras2 and 3 of the complaint are reproduced hereinThat the accused had business dealings with the complainant and supply of the goods which duly supplied by my client vide separate bills from time to time which was duly acknowledged by the accused no. 5 VarunJain director of the accused no. 1.3. That in order to discharge the liability of making the payment, the accused issued following two chequesin favourof the complainant through their sister concern M/S A.T. Overseas Ltd. i.e. Accused No. 1 and the chequeswere duly signed by Mr. MunishJain one of itsThe trial court materially erred while coming to a conclusion that in criminal law no presumption can be raised with regard to consideration as no goods had been supplied by the complainants to M/s. A.T. Overseas Ltd..The trial court ought to have considered provisions of Section 139 of the Act, which reads asPresumption in favourof holder - It shall be presumed, unless the contrary is proved, that the holder of a chequereceived the chequeof the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.According to the provisions of the aforestatedsection, there is a presumption with regard to consideration when a chequehas been paid by the drawer of the cheque. In the instant case, M/s. A.T. Overseas Ltd. paid the chequewhich had been duly signed by one of its Directors, namely, MunishJain. MunishJain is also a Director in M/s. ShreeNathSpinners Pvt. Ltd..As stated hereinabove, both are sister concerns having common Directors. Extracts of books of accounts had been produced before the trial court so as to show that both the companies were having several transactions and the companies used to pay on behalf of each other to other parties or their creditors. The above fact strengthens the presumption to the effect that M/s. A.T. Overseas Ltd. had paid the chequesto the complainants, which had been signed by MunishJain, in consideration of goods supplies to M/s ShreeNathSpinners Pvt. Ltd. Of course, the presumption referred to in Section 139 is rebuttable. In the instant case, no effort was made by MunishJain or any of the Directors of M/s. A.T. Overseas Ltd. for rebuttal of the aforestatedpresumption and, therefore, the presumption must go in favourof the holder of the cheques. Unfortunately, the trial court did not consider the above facts and came to the conclusion that there was no consideration for the chequeswhich had been given by M/s. A.T. Overseas Ltd. to the complainants.17. It is true that a limited company is a separate legal entity and its directors are different legal persons. In spite of the aforestatedlegal position, in view of the provisions of Section 139 of the Act and the understanding which had been arrived at among the complainants and the accused, one can safely come to a conclusion that the chequessigned by MunishJain had been given by M/s. A.T. Overseas Ltd. to the complainants in discharge of a debt or a liability, which had been incurred by M/s ShreeNathSpinners Pvt. Ltd.18. We may also refer to the judgment delivered by this Court in the case of ICDS Ltd. (supra). In the said judgment this Court has referred to the nature of liability which is incurred by the one who is a drawer of the cheque. If the chequeis given towards any liability or debt which might have been incurred even by someone else, the person who is a drawer of the chequecan be made liable under Section 138 of the Act. The relevant observation made in the aforestatedjudgment is asoccurring in Section 138 are the two key expressions which stand as clarifying the legislative intent so as to bring the factual context within the ambit of the provisions of the statute. These expressions leave no manner of doubt that for whatever reason it may be, the liability under Section 138 cannot be avoided in the event the chequestands returned by the banker unpaid. Any contra-interpretation would defeat the intent of the legislature. The High Court got carried away by the issue of guarantee and guarantors liability and thus has overlooked the true intent and purport of Section 138 of the Act.…….The language, however, has been rather specific as regard the intent of the legislature. The commencement of the section stands with the wordsThe above noted three words are of extreme significance, in particular, by reason of the user of the word- the first three words suggest that in fact for whatever reason if a chequeis drawn on an account maintained by him with a banker in favourof another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment.Looking to the facts of the case and law on the subject, we are of the view that all the four chequesreferred to in both the complaints are presumed to have been given for consideration. The presumption under Section 139 of the Act has not been rebutted by the accused and, therefore, we are of the view that the trial court wrongly acquitted the accused by taking a view that there was no consideration for which the chequeswere given by MunishJain to the complainants. The aforesaid incorrect view was wrongly confirmed by the High Court. We, therefore, set aside the acquittal order and convict accused MunishJain under Section 138 of the Act.20. In view of the aforestatedfacts and legal position, in our opinion, the accused ought to have been held guilty, especially accused no. 4, MunishJain who had signed all the chequesfor M/s A.T. Overseas Ltd. We, therefore, hold MunishJain, accused no. 4 and respondent no. 4 herein, in both the cases guilty of the offence under Section 138 of the Act.