Case BriefsHigh Courts

Madras High Court: G. Jayachandran, J., dismissed an appeal directed against the judgment of the first Appellate Court whereby it had reversed the conviction and sentence of the respondent-accused awarded by the trial court for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheque).

As per the appellant-complainant, he had lent Rs 10 lakhs to the accused, who issued three cheques in his favour for discharging his liability. However, on presentation to the bank, the cheques were returned dishonoured with an endorsement “account closed”. Subsequent to codal formalities, a case was filed against the accused and the trial court convicted him for an offence punishable under Section 138. On appeal by the accused, the first Appellate Court acquitted him. Aggrieved thereby, the complainant filed the present appeal.

The High Court noted that the first Appellate Court found that the cheques in question were given to the complainant for payment of taxes and compensation to tenants for vacating certain premises. And a criminal complaint was also filed against the complainant for misappropriation of blank cheques and jewels. On perusing the record, the Court held that a principal-agent relationship was clearly established between the parties. It was observed, “When there is principal-agent relationship, unless and until the material evidence are placed to prove legally enforceable debt, mere issuance of cheques cannot lead to the presumption under Section 139 of the Negotiable Instruments Act.” Stating that the trial court failed to properly consider the defense exhibits, the Court held that there was no merit in the appeal and the impugned order passed by the first Appellate Court required no interference. [G. Dhanasekar v. T.A. Jayaprakash, 2019 SCC OnLine Mad 820, decided on 19-03-2019]

Case BriefsHigh Courts

Delhi High Court: Sanjeev Sachdeva, J., dismissed a petition assailing the Appellate Court’s order whereby it had set aside the judgment of conviction passed against the accused (respondent) by the trial court for an offence under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheque).

The complainant (petitioner) alleged that he gave a friendly loan of Rs 4.90 lakhs to the accused and in discharge of such liability, the accused issued a cheque. However, when the cheque was presented to the bank for encashment, it was returned unpaid with the endorsement “insufficient funds”. Subsequently, a complaint under Section 138 was filed and the matter went to trial. The trial court convicted the accused but on appeal, the Appellate Court acquitted him. Aggrieved thereby, the complainant filed the present petition.

The accused was represented by H.G.R. Khattar, Advocate. His defence was that the complainant was employed in the shop of one Subhash Aggarwal. He alleged that the subject cheque was issued in blank to Subhash Aggarwal and the same had been misused. Further, the complainant and his wife earned a monthly income of Rs 15,000 each and they could not have extended a loan of Rs 4.90 lakhs to him.

The High Court was of the view that no error could be found with the Appellate Court’s order. It was observed, “it is very surprising that a person who earns only Rs 15,000 per month would make an arrangement of Rs 4,90,000/- and give the same as a friendly loan. No date of extending the loan or rate of interest at which such loan was extended, has been mentioned. Neither there is any document executed nor the date when the loan was and of its repayment is mentioned.” In the Court’s opinion, the defence raised by the accused was probable and rightly rebutted the statutory presumption. In such view of the matter, the petition was dismissed and the impugned order was upheld. [Sanjay Verma v. Gopal Halwai, 2019 SCC OnLine Del 7572, decided on 15-03-2019]

Case BriefsHigh Courts

Calcutta High Court: Asha Arora, J., allowed a criminal revision petition filed against the order of conviction and sentence awarded to the petitioners for the offence under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheque).

To cut the matter short, the present was a cheque bounce matter. The complainants had filed under Section 138 against the petitioners alleging that Alok Bhagat (Petitioner 2), who was the authorised signatory of Adeptics, a partnership firm, issued a cheque for Rs 1.5 lakhs for receiving goods from complainant’s factory. However, when presented to the bank, the said cheque got dishonoured with the endorsement–payment stopped by the drawer. A demand notice was sent but the petitioners failed to make payment. The matter went to trial and the petitioners were convicted and sentenced. In the appeal, their conviction was maintained but the sentence was modified. Aggrieved still, the petitioners filed the present revision petition.

The petitioners were represented by Ayan Bhattacharya, Ozair Elahi and Sharequl Haque, Advocates. It was pointed out that the cheque was issued by the firm and signed by Mr Bhagat as an authorised signatory. It was argued that to fasten liability upon the partners/directors of a firm/company, impleading it as an accused is imperative. Per contra, Kajal Mukherjee, Surajit Basu and Bikash Chakraborty, Advocates appearing for the complainant opposed the present petition.

The High Court noted that the cheque does not show that it was issued by Mr Bhagat in his personal capacity. It was signed on behalf of the firm as authorised signatory. After discussing Sections 7 and 138 along with Aneeta Hada v. Godfather Travels and tours (P) Ltd., (2012) 5 SCC 661, the High Court observed, “Curiously enough, though the cheque clearly shows that it was issued on behalf of Adeptees, no notice of demand was served on the said firm and the complaint was filed only against the petitioners without the mandatory requirement of impleading the company/firm as one of the accused.” Complainants argued that no such plea was taken before the trial court or the lower appellate court. However, relying on Ajit Balse v. Ranga Karkare, (2015) 15 SCC 748, the High Court rejected the argument. Resultantly, the revision petition was allowed and the impugned judgments were set aside. [N.K.Bhagat v. Biswanath Dey, 2019 SCC OnLine Cal 326, dated 11-03-2019]

Case BriefsHigh Courts

Delhi High Court: The Bench of R.K. Gauba, J. interfered with the impugned order passed by Metropolitan Magistrate and quashed the summon issued against petitioner.

Petitioner was a Non-Executive Nominee Director of Vasan Health Care (P) Ltd. A complaint was filed against certain persons including petitioner under Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheque which was issued on the account of Vasan Health Care. In regard to the same, summoning orders were issued against the petitioner.

Sushil Bajaj and Shalin Arthwan, Advocates for the petitioner contended that proceedings against him were an abuse of the process of law as his position in the company was only that of aNon-Executive Nominee Director and he had no role to play in day-to-day affairs of the company.

The High Court served notice of the petition on the respondent but they did not file any reply and nor did they appear before the Court. As such, the Court accepted as indisputable the documents filed by the petitioner confirming his position in the company as claimed by him. Relying on Pooja Ravinder Devidasini v. State of Maharashtra, (2014) 16 SCC 1, the Court held that since at the relevant time, the petitioner could not be said to be at helm of the affairs of the company, therefore no vicarious liability could be fastened on him. As such, the summoning order issued against the petitioner was quashed. [Bhardwaj Thirvenkata Venkatavaraghavan v. PVR Ltd., 2019 SCC OnLine Del 6774, dated 29-01-2019]

Case BriefsHigh Courts

Delhi High Court: The Bench of Sunil Gaur, J. refused to invoke the inherent extraordinary jurisdiction of the High Court under Section 482 CrPC.

Petitioners, represented by Akshay Bhatia and Avinash Das Advocates, had prayed for quashing of complaints filed under Section 138 of the Negotiable Instruments Act, 1881 (for dishonour of cheque). The quashing was sought on merits.

N.K. Aggarwal and Priya Pachouri, Advocates appeared for the respondents. It was informed to the Court that notice under Section 251 CrPC had been already framed and petitioners had also given their defence.

Since petitioners had an efficacious remedy to assail the notice framed under Section 251, the High Court refrained from invoking its inherent extraordinary jurisdiction under Section 482. The petitioners were given liberty to assail the notice before the Revisional Court within a period of four weeks. The petition was disposed of accordingly without commenting on merits. [Anand and Associates v. Jugal Kishore Jain, 2019 SCC OnLine Del 6708, Order dated 15-01-2019]

Case BriefsHigh Courts

Madras High Court: The Bench of M.V. Muralidharan, J. upheld the order of respondent’s acquittal for an offence punishable under Section 138 of Negotiable Instruments Act, 1881 while holding that “the different ink, pen, and manipulation of the amount would show that the complainant had failed to demonstrate due execution of the cheque.”

The present appeal was directed against the judgment of acquittal passed by the Additional District Judge reversing the conviction of the respondent under Section 138 (for dishonour of cheque).

Appellant submitted that respondent borrowed a sum of Rs 1,50,000 from him and issued a cheque drawn on ING Vysya Bank towards his liability to repay the same. However, the cheque was dishonoured. The appellant initiated the process under Section 138 and the trial court convicted the respondent holding him guilty. The respondent appealed to the ADJ who reversed his conviction as mentioned above.

The High Court observed that presumption in favour of complainant contemplated under Sections 118 and 139 of NI Act comes to play only on the satisfaction of Court that the cheque in question was duly executed. It was explained that “execution” of the cheque does not mean the mere handing over a “blank cheque”, but it means that the cheque is given in the full form, ” the complainant cannot be justified in doing material alteration beyond the knowledge of the accused.”

It was stated, it would be certainly unlawful if a complainant is allowed to fill up details of cheque beyond the knowledge of the accused such as filling up date and amount in a blank cheque.” In the present case, figure denoting the amount was found to be written in different inks and also the handwriting in as much as digits and words were concerned also differed. In such view of the matter of the Court did not find any illegality in the impugned order. Thus, the petition was dismissed. [E. Dhanuskodi v. D. Sreedhar, 2018 SCC OnLine Mad 5124, dated 08-11-2018]

Case BriefsHigh Courts

Delhi High Court: The Bench of Sunil Gaur, J. held that the trial court did not commit any error while summoning the petitioners in relation to a complaint under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheque).

Petitioners were independent directors of the accused company. MIC Electronics Ltd. They challenged the complaint filed under Section 138 and the consequent summoning order against them the ground that they were not in charge of the day-to-day business of MIC Electronics.

Vikas Gupta and Vipin Kalra, Advocates representing the petitioners submitted that they cannot be summoned in the complaints in question. Per contra, Satinder Singh Mathur, Advocate for the complainant submitted that there was an allegation that petitioners responsible for the day-to-day functioning of MIC Electronics.

The High Court referred to Standard Chartered Bank v. State of Maharashtra, (2016) 6 SCC 62 wherein the Supreme Court had permitted summoning of directors of the accused company. In the present case, since there were allegations against the petitioners as mentioned above, therefore the Court found no case to quash the complaint and summoning order. The petitions were disposed of by giving liberty to the petitioners to appear through their attorneys and counsels. [Somendra Khosla v. State, 2019 SCC OnLine Del 6585, Order dated 09-01-2019]

Supreme Court

Supreme Court: In the present appeal, under special leave, against the decision of the Bombay High Court which rejected the petition of the appellant for quashing complaints, filed against her under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 accruing vicarious liability for the dishonored cheques granted in the name of company of which she was a director, was allowed.

The counsel for the appellant argued that the appellant was a mere house-wife and had no active role in the working of the company or decisions of the board as a non-executive director. Moreover on the time of issuing of cheques the appellant had resigned from the functions of company, and new directors were appointed in her place, all the more her resignation was approved by the board of directors and she was arbitrarily dragged into criminal proceedings despite the knowledge of the said fact.

The respondent argued that the resignation of the appellant was a disputed. The respondents had made loans made to the company based on her personal guarantee as director of the company, cheques in lieu of payment of which were dishonored.

The bench headed by Sudhansu Jyoti Mukhopadhyay and N.V. Ramana,JJ., held that to pose vicarious liability on appellant it was necessary to object specific averments towards her. Liability does not arise only because of the reason that the person is director of the said company if the person was not active in everyday working of the company and decisions of the board as laid down by the Court vide its decision in National Small Industries Corporation v. Harmeet Singh Paintal, (2010) 3 SCC 330.  Moreover, from the evidence it was quite clear that the appellant had not been a director when the cheques were issued from the fact that they did not had sign of the appellant. Further the respondents included names of new directors in the complaint but did not excluded the name of the appellant which signifies the intentional abuse of the process of law. It rapped the High Court and Trial Court for allowing the criminal proceedings and said that criminal proceedings cannot be instituted as a matter of course and the trial and appellate judge had to consider the allegations made and evidence cautiously before calling on such proceedings. Pooja Ravinder Devidasani v. State of Maharashtra2014 SCC OnLine SC 1020, decided on 17.12.2014

Supreme Court

Supreme Court: While deciding as to whether mere “bald assertion” under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 that the directors were at the time when the offence was committed in charge of and responsible for the conduct and day-to-day business of the company is sufficient to maintain the said complaint, a bench of Ranjana P. Desai and N.V. Ramana, JJ ruled that company’s directors are personally liable to be prosecuted for a bounced cheque unless they furnish “incontrovertible evidence” that they had no role in issuing it.

In the instant case, on the default of repayment of the amount due by the accused company, the appellants filed a complaint in the Court of Chief Metropolitan Magistrate against the directors of the said company. Aggrieved with the order of the magistrate, the respondents moved to the High Court of Calcutta, which held that apart from making mere “bald assertion”, the complainant has as state as to what part was played by the directors and how they were responsible for the finances of the Company, issuance of cheques, and whether they has control over the funds of the company.

Gurukrishna Kumar, the counsel for the appellant, contended that High Court erred in quashing the proceeding as it is not incumbent upon the complainant to elaborate the role played by each of the directors in the complaint. The Court stated that if any director wants the process to be quashed by filing a petition under Section 482 of the CrPC on the ground that only a “bald assertion” is made in the complaint and that he or she is not concerned with the issuance of the cheque, he or she must furnish “sterling incontrovertible material” or “acceptable circumstances” to substantiate the contention and would have to make out a case that making him stand trial would be an abuse of the process of court. The Court upheld the appeal and remitted the matter to the High Court to hear the parties and consider the matter afresh. Gunmala Sales Pvt. Ltd. v. Anu Mehta, 2014 SCC OnLine SC 848, decided on October 17, 2014.