Rajendra Swami Vs State of Orissa

The Peti t ioner, namely Rajendra Swami, Dire c tor of Right Step Media Ser v ices Private Limited, has filed thi s application challenging the l e gality of the order of cognizance date d 03.09.2016 passed by the le a rned S.D.J.M.(S), Cuttack in connection with 1CC Case No. 746 of 2016, wherein the learned court took c ognizance of the offence und e r Section 138 of the N.I. Act and directed the Petitioner to app e ar and answer the accusation, initiall y by issuance of a bailable w a rrant and subsequently by issuance o f an N.B.W. vide order dated 30.08.2017.

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The bac k ground facts of the case are that the C o mplainant is the proprietor o f the firm, namely M/s. Fast Comm u nication, an INS-accredited a gency engaged in the media publi c ity business

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throughout Indi a , having its office at Markat Na g ar, C.D.A., Cuttack. The ac c used is a company in the name and style of M/s. Right Step Me d ia Services Pvt. Ltd., represented through its Director, Rajen d ra Kumar Swami, having its office near Mataji Mandir, Soorsa g ar Lake, Bikaner, Rajasthan, who is also the Director of Docoss Multimedia Private Ltd., eng a ged in the business of med i a activation and sale of mobile handsets. Pursuant to a mutual ag r eement between the parties, the sai d companies appointed the C o mplainant, i.e., M/s. Fast Communic a tion, as their authorised adv e rtisement agency for creating an d publishing advertisements o f Docoss Mobile and other media co m panies for a valid period of t wo years from the date of publicatio n of the first advertisement, i. e ., 27th April, 2016.

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Accordi n g to the complaint, one of the D i rectors, Mr. Rajendra Swa m i @ Rajendra Kumar Swami, r e quested the authorised staff, namely Mr. Manish Ahuja, of the Complainant firm to publish advertisements in different newspap e rs circulated throughout Indi a . Pursuant to the release order issue d by the said accused, the ad v ertisements were published in Dai n ik Bhaskar, Rajasthan Patrik a , Indian Express, and Dainik Bhaskar’s web portal within the stipul a ted time.

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The aforesaid advertisements were published at a cost of ₹88,50,000/- (R u pees Eighty-Eight Lakhs Fifty Th o usand only) and, in discharge of the said liability, four cheques were issued, namely:

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(i) Cheq u e No. 874240 dated 15.06.2016 for ₹56,50,000/(Rup e es Fifty-Six Lakhs Fifty Thousand on l y),

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(ii) Cheq u e No. 874239 dated 05.05.2016 for ₹11,00,000/(Rup e es Eleven Lakhs only),

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(iii) Cheq u e No. 000051 dated 10.05.2016 fo r ₹9,00,000/(Rup e es Nine Lakhs only), and

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(iv) Cheq u e No. 000052 dated 20.06.2016 for ₹12,00,000/(Rup e es Twelve Lakhs only), totalling ₹88,50,000/(Rup e es Eighty-Eight Lakhs Fifty Tho u sand only), draw n on UCO Bank, Bikaner Bran c h, Bikaner, Rajasthan, in favour of the Complainant.

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Out of t he said four cheques, two, namely Cheque No. 874239 dated 0 5 .05.2016 for ₹11,00,000/- (Rupees E leven Lakhs only) and Cheq u e No. 000051 dated 10.05.2016 fo r ₹9,00,000/(Rupees Nine L akhs only), amounting to ₹20,00,0 0 0/- (Rupees Twenty Lakhs o n ly), were presented before the Compl a inant’s bank and honoured. H owever, the remaining two cheques, i.e., Cheque No. 874240 dat e d 15.06.2016 for ₹56,50,000/- (Rup e es Fifty-Six Lakhs Fifty T h ousand only) and Cheque No. 0 0 0052 dated 20.06.2016 for ₹12,00,000/- (Rupees Twelve Lakhs o n ly), totalling ₹68,50,000/- (R u pees Sixty-Eight Lakhs Fifty Tho u sand only), when presented before the payee’s bank, i.e., IDBI Bank, CDA Branch, Sector- 9 , CDA, Cuttack, on 13.07.2016, were dishonoured for the reason “ F unds Insufficient”. The payee’s bank i ntimated the Complainant of t he dishonour vide memo dated 13.07. 2 016.

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Upon re c eipt of such intimation, the Compl a inant issued two legal notices on 15.07.2016, one to Docoss Mu l timedia Pvt. Ltd. at Jaipur, R a jasthan, and another to Right Step M e dia Services Pvt. Ltd. at Bik a ner, Rajasthan, in accordance with S e ction 138(b)

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of the N.I. Act , calling upon the accused compan i es and their Directors to pay t he dishonoured cheque amounts. Ho w ever, neither the companies n or the Directors replied to the lega l notices nor made payment o f the dishonoured cheque amounts, fo r which the Complainant fil e d a complaint before the learned cour t , whereupon cognizance was t aken and process was issued against t h e Petitioner.

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Mr. S.S. Das, learned Senior Advocate appe a ring for the Petitioner, assail e d the impugned order primarily on th e ground that the order dated 0 3.09.2016 is erroneous both in fact a nd in law. It was contended t hat the complaint, while arraying t h e Petitioner under Section 1 4 1 of the N.I. Act, did not implead th e company as an accused and, in the absence of the company, n o vicarious liability could b e fastened on the Petitioner. Cons e quently, the Director could n ot have been held liable for the o f fence under Section 138 rea d with Section 141 of the N.I. Act. I t was further contended that in the case of a private limited c o mpany, the Director has o n ly limited liability and acts on b e half of the company, and t h erefore, in the absence of the compa n y as a party, the entire proceeding stood vitiated and was liable to b e quashed in view of the dec i sion in D.J. Rastogi v. State of U.P. & Another reported in 2014 (1) Civil Law Journal 462 . The im p ugned order was further ass a iled on the ground that, as per the case of the Opposite Party N o. 2, the cheque was issued in Bika n er, the entire transaction took place in Jaipur and Bikaner, the ag r eement was executed in Bik a ner, Docoss Company was situated i n Jaipur, and Right Step Co m pany was in Bikaner. Consequently, a complaint was already file d before the learned ACMM, Jaipur. T herefore, in

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view of the af o resaid complaint before the ACM M , Jaipur, the complaint befor e the S.D.J.M.(S), Cuttack lacked j u risdiction to entertain the m a tter. It was also contended that t h e complaint petition was not specific as to when the transaction to o k place so as to confer territ o rial jurisdiction upon the court for the alleged complaint. The i m pugned order was also challenged on the ground that the author i sed signatory of the Opposite Pa r ties, having colluded with t he Opposite Parties, had already instituted a complaint case i n connection with Siprapath P.S. Cas e No. 466 of 2016 on the ve r y same facts but under a different statute, and therefore, the p r esent complaint was not maintainable. Mr. Das, learned Senior A dvocate, also argued that the Petitioner was neither a Director of D ocoss Mobile at the relevant time nor was he involved at the t i me of publication and placing of the o rder or even at the time of f i ling of the complaint on 10.08.201 6 . Hence, the liability of Docoss Mobile at the relevant time could n ot attract the offence, and the Petitioner, who at no point of time lo o ked after the affairs of Docos s Mobile Company, could not be made liable for the offence under the N.I. Act. It was further submitted t h at there was no averment in t h e complaint indicating that the Petiti o ner, being a Director, was re s ponsible for the day-to-day affairs of t he company. In the absence of such an averment, no liability coul d be fastened upon him for th e alleged dishonour of the cheque. Ac c ordingly, the cognizance of o ffences implicating the Petitioner was beyond jurisdiction and, b eing illegal, was liable to be quashed

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Mr. Ash o k Mohanty, learned Senior Advocate appearing on behalf of the Op p osite Parties, countered the submissi o ns advanced

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by the learned c o unsel for the Petitioner. Drawing th e attention of this Court to the factual position, he submitted that the plea of nonservice of notice on the Petitioner is wholly false. He c o ntended that the Petitioner, h aving duly received the notice, ap p roached the Hon’ble Supreme Court in S.L.P. No. 3020/2018, seeking transfer of the case from the jurisdiction of the Court at Cuttac k to Bikaner. The Hon’ble S u preme Court, having declined the said prayer, directed the P e titioner to deposit the entire che q ue amount. Therefore, the a r gument advanced on behalf of the Petitioner that no notice was s e rved either on the companies or on t he Directors stands nullified. Mr. Mohanty further submitted that t h e Petitioner, being a Director of the companies, was responsible for their day-today affairs and w as also the signatory to the cheques, making him liable for the off e nce. The submission that no specific a verment was made in the com p laint regarding his responsibility in t h e day-to-day affairs of the co m pany, according to him, was made o nly to evade liability. He als o drew the attention of this Court t o the transfer petition filed be f ore the Hon’ble Supreme Court by t h e Petitioner, wherein he had not only corresponded as Director of Right Step Media Services P vt. Ltd. but had also received comm u nications on behalf of the said company relating to the business transactions. The legal notice issued to the Petitioner clearly revea l ed his name as Director of R ight Step Media Services Pvt. Ltd. a s well as of Docoss Multime d ia Pvt. Ltd. The averments made by t he Petitioner in the transfer p e tition further depicted his position a s Director of M/s. Right Ste p Media Services Pvt. Ltd. and M /s. Docoss Multimedia Pvt. Ltd., as well as his authority to eng a ge M/s. Fast

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Communication for publishing advertisements i n different newspapers circ u lated throughout India.

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Having regard to the contentions of the partie s as raised in course of the he a ring, the Petitioner has challenged th e order dated 03.09.2016 pri m arily on the grounds that the prose c ution is not maintainable un d er Sections 138 and 141 of the N.I. Act without arraying the co m pany as an accused; that the compla i nt lacks any averment show i ng that the Petitioner was in ch a rge of and responsible for the conduct of the company’s busi n ess; that no statutory notice u nder Section 138 of the N.I. Act was s erved on the company; and that there was no legally enforceable de b t or liability either against th e Petitioner personally or against the c ompany, the Board of Directors having never authorised him t o issue the cheques in quest i on

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On cons i deration of the pleadings and submi s sions of the parties, the chal l enge to the order of cognizance date d 03.09.2016 essentially gives rise to three issues for determination, n amely:

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(i) whether t h e prosecution under Sections 138 and 141 of the N.I. Act i s not maintainable for want of implea d ment of the company a s an accused;

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(ii) whether t h e complaint lacks necessary averm e nts showing that the P e titioner was in charge of and respo n sible for the conduct o f the company’s business and whethe r no statutory notice wa s served as required under Section 138(b) of the N.I. Act; a nd

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(iii) whether t h ere was no legally enforceable debt or liability either ag a inst the Petitioner personally or against the company, it being contended that the Board of D irectors had never authorised him to issue the cheques in que s tion.

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These issues are examined hereinafter.

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For Issu e (i), the Petitioner contends that the p rosecution is not maintainabl e as the company, Right Step Media S ervices Pvt. Ltd., has not bee n arrayed as an accused, and therefore, no vicarious liability can be f astened upon him under Section 14 1 of the N.I. Act. However, the record reveals that the Opposi t e Party has impleaded all th e Directors as parties to the complaint and has also taken steps to i m plead the company itself. Even assum i ng there was any initial omi s sion, the law recognises that such omission is curable and th a t the complainant may take step s even at a subsequent stag e to bring the company on record, s o long as the cognizance of t h e offence itself is based on legall y sustainable grounds. In fac t , the Opposite Party has stated to h ave already moved to includ e the company as an accused, and not h ing prevents the complainant from amending the cause title even a t this stage to cure the defect, i f any.

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The obje c t of Section 141 is to fasten liabilit y upon those who were in c h arge of and responsible for the co n duct of the company’s busi n ess when the offence was committe d , apart from the company it s elf. The materials on record indi c ate that the cheques were is s ued and signed by the Petitioner in h i s capacity as Director, and th e transaction itself was initiated by hi m on behalf of the company. In such circumstances, the omission to mention the

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company’s nam e in the initial cause title, when steps have already been taken to co r rect it, cannot be a ground to hold th e prosecution itself as not m aintainable. Accordingly, the conte n tion of the Petitioner that t h e prosecution is vitiated for non-im p leadment of the company do e s not merit acceptance.

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For Issu e (ii), it is argued by the Petitioner tha t no statutory notice, as requir e d under Section 138(b) of the N.I. Ac t , was served either upon the c ompany or upon the Petitioner person a lly, and that the complaint does not contain specific averments as t o how he was in charge of and responsible for the conduct of the b u siness of the company at the r e levant time.

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These su b missions, however, do not hold goo d on the facts of the present c a se. The complaint attributes to the P etitioner the initiation of the agreement with the complainant an d issuance of cheques in his c apacity as Director. The record re v eals that on 19.04.2016, the P etitioner, in his capacity as Director, initiated the business arrang e ment with the complainant for th e purpose of media advertise m ents and issued cheques towards dis c harge of the agreed liability, including cheque no. 874240 dated 15.06.2016. These cheques w ere dishonoured on 13.07.2016 for in s ufficiency of funds. Though t h e Petitioner has placed reliance on h i s resignation from the Dire c torship of Docoss Multimedia P v t. Ltd. on 06.07.2016, suc h resignation came after he had already executed the agreement and i s sued the cheques on behalf of the c o mpany. The cause of action, t herefore, flows from acts undertaken b y him while holding office a s Director, and he cannot be absolve d of liability merely by subse q uently resigning.

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More i mp ortantly, in the transfer petition fil e d before the Hon’ble Supre m e Court seeking transfer of the pres e nt complaint from Cuttack to Bikaner, the Petitioner himself admit t ed his status as Director an d acknowledged receipt of statutor y notices. In paragraph (v) of the said petition, the Petitioner categorically stated as follows:

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“The Re s pondent after return of the cheques, through his advo c ate, issued two legal notices by re g istered post to o n e M/s Docoss Multimedia Pvt. Ltd. a t Jaipur, Rajastha n and another to M/s Right Step Media Services P vt. Ltd. office situated at Bikaner, Ra j asthan, in accor d ance with the provision under Sectio n 138(b) of Negot i able Instruments Act, 1881 with rega r d to the above m e ntioned dishonour of the cheques. T h e legal notices i s sued by the Respondent were receive d by the Petitione r herein. True copy of legal notic e s dated 14.07.20 1 6, which was filed is annexed here w ith and marked as Annexure – P5 (pages 18 to 19).”

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Thus, th e plea that no statutory notice under S e ction 138(b) of the N.I. Act w as served upon either the company or t he Petitioner personally stand s answered by the Petitioner’s own a dmission on oath before the H on’ble Supreme Court.

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Under S e ction 58 of the Indian Evidence Ac t , 1872, facts admitted need not be proved . The admissions m ade by the Petitioner in th e transfer petition were voluntary, s upported by affidavit, and m a de on oath before a competent court of law. Such admissions dispense with the need for further pr o of and can legitimately be r elied upon by this Court while co n sidering the legality of the or d er of cognizance. An accused who, i n proceedings before a compet e nt court, acknowledges his status in relation to a

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company and h i s knowledge of a complaint filed against him, cannot subseque n tly plead ignorance of notice or den y such status in a proceedin g arising out of the same transa c tion. These admissions, hav i ng been made consciously and o n oath, carry significant evid e ntiary value and must be accepte d as binding against the ma k er unless shown to be erroneous o r withdrawn, which is not the c ase here.

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Accordingly, these undisputed admissions, w h en read with the complaint’s specific reference to the Petitioner’s role in initiating the agr e ement and issuing the cheques, prim a facie satisfy the statutory req u irement under Section 141 of the N. I . Act that he was a person in charge of and responsible for the c o nduct of the business of the c o mpany in relation to the transaction i n question.

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For Issu e (iii), the Petitioner contends that t h ere was no legally enforcea b le debt or liability and that the c h eques were issued merely as security, without any authority from the Board of Directors to bin d the company. It is further urged that a civil dispute between the pa r ties is already pending, which, acc o rding to the Petitioner, rende r s the criminal prosecution unsustaina b le.

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These ar g uments are primarily matters of d e fence which raise disputed q u estions of fact, requiring appreciation of evidence. The complaint s p ecifically alleges that the cheques were issued in discharge of lia b ility arising from the business transa c tion initiated by the Petitione r himself on behalf of the company. T h e allegation that the cheques were issued only as security is not b o rne out from the complaint o r the admitted documents but is a def e nce that can only be adjudi c ated at trial. Similarly, whether t h e Board of

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Directors autho r ised the Petitioner or whether the cheques were issued beyond h is authority are also issues of evi d ence, which cannot be concl u sively determined at this stage.

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Even ass u ming that a civil dispute is pending between the parties, it is well settled that the existence of a civil re m edy does not bar prosecution u nder Section 138 of the N.I. Act, w h ich creates a distinct statutor y offence for dishonour of cheques. T he criminal liability under S e ction 138 is independent of civil pro c eedings and is intended to en h ance the credibility of commercial tra n sactions.

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Therefor e , these contentions cannot be grounds for quashing the order of co g nizance in exercise of jurisdiction u nder Section 482 Cr.P.C. and must be left to be determined in the course of trial on the basis of e v idence adduced by the parties.

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The Pet i tioner also seeks to question the validity of cognizance on t h e ground that no statutory notice u n der Section 138(b) of the N.I. Act was served upon either the co m pany or the Petitioner perso n ally. This plea also stands answ e red by the Petitioner’s ow n conduct in approaching the Hon’ b le Supreme Court seeking t r ansfer of the complaint from Cuttac k to Bikaner, which unequivo c ally demonstrates his knowledge of t h e complaint and the transac t ion giving rise to it. Once actual k nowledge is established, the t echnical objection regarding notice l o ses its force, particularly wh e n the Petitioner, instead of disputi n g receipt of intimation, activ e ly sought transfer of the case itself.

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To sum m arise, the plea of non-impleadment of the company is not tenable in view of the steps already taken by the complainant and the curable n ature of such omission. The contenti o ns regarding

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absence of aver m ents and want of statutory notice st a nd answered by the Petition e r’s own admissions made on oat h before the Hon’ble Supre m e Court, which, under Section 58 o f the Indian Evidence Act, dispense with the need for further proo f . The plea of absence of legal l y enforceable liability or of issuance o f cheques as security, as we l l as the pendency of civil proceed i ngs, are all matters of defen c e raising disputed questions of fact w hich cannot be gone into at t h is stage and must be left to be determi n ed at trial.

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In view o f the foregoing discussion on all thr e e issues, this Court finds no illegality, impropriety or perversity in the order dated 03.09.201 6 taking cognizance of the offence u nder Section 138 of the Negotiable Instruments Act against the Petit i oner.

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For the r easons as above, this Court is not c onvinced to interfere with t h e order of cognizance in exercise o f jurisdiction under Section 482 Cr.P.C.

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