Case: Cref Finance Ltd Vs. Shree Shanthi Homes Pvt. Ltd. &amp;Anr

3. It is not in dispute that four cheques were issued by respondent No.2, the Managing Director of the respondent No.1 Company for the total amount of rupees five crores. The payments were made by respondent No.2 on behalf of the respondent No.1 company of which he was a Director. The cheques were dishonoured since the respondent No.2 stopped payment of those cheques. The appellant filed a complaint before the 14th Additional Chief Metropolitan Magistrate, Bangalore who on 19.4.2000, the date of filing of the complaint itself, directed the matter to be put up on 01.06.2000. The rubber seal order put on the complaint itself reads as follows:-"Presented on 19/4/2000Cognizance taken4. This has been signed by the 14th Additional Chief Judicial Magistrate. The order-sheet of the court of that date records that cognizance was taken against the accused persons in the presence of the complainant whose statement was to be recorded on 1.6.2000. It appears that the order sheet is not signed by the Magistrate himself, though the rubber seal order is signed by him. On 29.7.2000, the Magistrate proceeded to record the statement of the complainant and thereafter by order dated July 31, 2000, issued process against the respondents finding that there was ground to proceed against the accused for the offence under Section 138 of the Negotiable Instruments Act, 18815. After about four years, the respondents moved an application before the High Court under Section 482 of the Code of Criminal Procedure for quashing the proceeding. The said petition has been disposed of by a brief order, the relevant portion of which reads as follows:-"On presentation of the complaint before the Magistrate, the Magistrate neither endorsed on the complaint by applying his mind to proceed with the complaint by taking cognizance nor in the order sheet produced. It is mandatory that the word taking cognizance necessarily requires application of mind by perusing the complaint and taking of cognizance precedes recording of sworn statement in respect of P.C.R. like this. The Magistrate did not take cognizance before proceeding to sworn statement and after recording the sworn statement going through the documents he has formed an opinion that it is a case to proceed against the petitioners and accordingly issued summons. The same has been assailed in this petition on various grounds. Since taking of cognizance is a condition precedent as noted above, without entering into the merits of the case on various grounds raised by the petitioners in this petition, it would be appropriate to quash the order of issuance of summons and to remit back the matter to the Magistrate to proceed from the stage of taking cognizance in accordance with law and it is left open to the parties to raise all the contentions before the Magistrate at the appropriate stage."

Court's reasoning:
10. In the instant case, the appellant had filed a detailed complaint before the Magistrate. The record shows that the Magistrate took cognizance and fixed the matter for recording of statement of the complainant on 01.06.2000. Even if we assume, though that is not the case that the words "cognizance taken" were not to be found in the order recorded by him on that date, in our view that would make no difference. The cognizance is taken of the offence and not of the offender and, therefore, once the Court on perusal of the complaint is satisfied that the complaint discloses the commission of an offence and there is no reason to reject the complaint at that stage, and proceeds further in the matter, it must be held to have taken cognizance of the offence. One should not confuse taking of cognizance with issuance of process. Cognizance is taken at the initial stage when the Magistrate peruses the complaint with a view to ascertain whether the commission of any offence is disclosed. The issuance of process is at a later stage when after considering the material placed before it, the Court decides to proceed against the offenders against whom a prima facie case is made out. It is possible that a complaint may be filed against several persons, but the Magistrate may choose to issue process only against some of the accused. It may also be that after taking cognizance and examining the complainant on oath, the Court may come to the conclusion that no case is made out for issuance of process and it may reject the complaint. It may also be that having considered the complaint, the Court may consider it appropriate to send the complaint to police for investigation under Section 156(3) of the Code of Criminal Procedure. We can conceive of many other situations in which a Magistrate may not take cognizance at all, for instance, a case where he finds that the complaint is not made by the person who in law can lodge the complaint, or that the complaint is not entertain able by that court, or that cognizance of the offence alleged to have been committed cannot be taken without the sanction of the competent authority etc. etc. These are cases where the Magistrate will refuse to take cognizance and return the complaint to the complainant. But if he does not do so and proceeds to examine the complainant and such other evidence as the complainant may produce before him then, it should be held to have taken cognizance of the offence and proceeded with the Inquiry. We are, therefore, of the opinion that in the facts and circumstances of this case, the High Court erred in holding that the Magistrate had not taken cognizance, and that being a condition precedent, issuance of process was illegal11. Counsel for the respondents submitted that the cognizance even if taken was improperly taken because the Magistrate had not applied his mind to the facts of the case. According to him, there was no case made out for issuance of process. He submitted that the debtor was the company itself and the respondent No.2 had issued the cheques on behalf of the Company. He had subsequently stopped payment of those cheques. He, therefore, submitted that the liability not being the personal liability of respondent No.2, he could not be prosecuted, and the Magistrate had erroneously issued process against him.We find no merit in the submission. At this stage, we do not wish to express any considered opinion on the argument advanced by him, but we are satisfied that so far as taking of cognizance is concerned, in the facts and circumstances of this case, it has been taken properly after application of mind. The Magistrate issued process only after considering the material placed before him. We, therefore, find that the judgment and order of the High Court is unsustainable and must be set aside. This appeal is accordingly allowed and the impugned judgment and order of the High Court is set aside. The trial court will now proceed with the complaint in accordance with law from the stage at which the respondents took the matter to the High Court