Dismissed

Balwinder Singh v. Nachhatar Singh

Punjab & Haryana HC17 Nov 2012CRM-M/1934/2012

Case brief

AI extract

What is this about?

Navigating the issue of prosecuting an individual accused under the Negotiable Instruments Act without impleading the issuing firm. The court held that impleading the firm is not mandatory for prosecution when the cheques were issued in an individual's name from their account.

What did the court decide?

The short orders against the petitioner were dismissed on the grounds that the firm need not be impleaded as there was no requirement to issue notice to the firm.

Balwinder Singh Vs Nachhatar Singh — Cheque Dishonour | Punjab & Haryana HC (2012)

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

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In the High Court of Punjab and Haryana at Chandigarh.

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

Balwinder Singh

Petitioner.

Versus

Nachhatar Singh Respondent.

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Crl.Misc.Nos.M- 1946 of 2012 (O&M).

Balwinder Singh

Petitioner.

Versus

Nachhatar Singh Respondent.

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Date of Decision:- November 22 , 2012

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CORAM : HON’BLE MR.JUSTICE NARESH KUMAR SANGHI.

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Present: - Mr.Parveen K. Kataria, Advocate, for the petitioner.

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NARESH KUMAR SANGHI,J.

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This common order shall dispose of Criminal Miscellaneous Nos. M-1934 and M-1946 of 2012, both

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Crl.Misc.Nos.M- 1934 of 2012 (O&M). 2

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titled as “Balwinder Singh Versus Nachhatar Singh” since in both the petitions, the parties are same and the issue involved is also the same.

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Brief facts of the case are that respondentcomplainant Nachhatar Singh filed two complaints under Section 138 of the Negotiable Instruments Act, 1881, ( in short, “the Act”) before learned Judicial Magistrate Ist Class, Moga, with the averments that the petitioner-accused borrowed a loan from him as per his requirement and he (petitioner-accused) promised to repay the same at a later stage as and when demanded by the respondentcomplainant. In order to discharge his liability, the petitioner-accused issued two cheques bearing Nos. 395840 dated 03.07.2009 and 395843 dated 10.07.2009, for a sum of 2,00,000/- and 2,60,290/- respectively from his account No. 29116, drawn on Union Bank of India, Branch Moga, in favour of respondent-complainant. The above said cheques bounced and after completing the formalities, complaint Nos. 115-2 and 118-2 of 08.08.09/20.09.11 (Annexure P-1 in both the petitions) were presented.

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Vide two different orders dated 03.11.2009 (Annexure P-2 in both the above said petitions), the petitioner was ordered to the summoned for commission of

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Crl.Misc.Nos.M- 1934 of 2012 (O&M). 3

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the offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

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The petitioner-accused has filed the above said two petitions mainly on the ground that the cheques issued by the petitioner-accused were of the firm M/s. Sky Lark Financier, Moga, therefore, without impleading the said firm as a party, the petitioner could not be prosecuted. In support of the contention, learned counsel for the petitioner has relied upon Mahesh Kumar Versus Taxi Drivers Cooperative Society Ltd., 2011, (1) R.C.R. (Civil) 311. Heard.

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In Mahesh Kumar's case (supra), the Hon’ble

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Kerala High Court held that when no notice under Section 138 (b) of the Act, was issued to a society, the society could not be prosecuted and convicted under Section 138 of the Act, and since the society was not liable, its President and Secretary also could not be made liable. The ratio of the judgment of the Hon’ble Kerala High Court is not applicable to the facts and circumstances of the present case as in that case the society was impleaded as an accused but no notice as envisaged under Section 138 (b) of the Act, was issued to it, therefore, the learned trial court acquitted the society. In the case in hand, the position is

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

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altogether different. The firm, M/s. Sky Lark Financier, was not impleaded as respondent-accused, therefore, there was no question for the respondent-complainant to issue notice in terms of Section 138(b) of the Act.

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As per the averments in the complaint, the petitioner-accused had borrowed an amount from the respondent-complainant and to discharge his legal liability, he issued the cheques, as mentioned herein above, thus, how the respondent-complainant would come to know that the cheques had been issued from the account of a firm. The factum of issuance of the cheques under the signatures of the petitioners-accused has not been denied. Even the Bank had not returned the cheques on the premise that the signatory of the cheques was not the account holder, therefore, the argument raised by the petitioner that he could not be prosecuted without impleading the firm from whose account, the impugned cheques were issued, is untenable.

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In the case of Anil Hada Versus Indian Acrylic Ltd., AIR 2000 Supreme Court 145, the Hon’ble Supreme Court held as under:-

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“When a company, which committed the offence under S.138 eludes from being prosecuted

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

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thereof, on account of complaint against it being dropped because of winding up proceedings ordered by Court, the Directors of that company can be prosecuted for that offence. The effect of reading S.141 is that when the company is the drawer of the cheque such company is the principal offender under Section 138 of the Act and the remaining persons i.e. viz. every one who was in-charge of and was responsible for the business of the company and any other person who is Director or a Manager or a Secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence who are persons falling within categories second and third of Section 141 (1) and (2) 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 aforesaid two categories of persons can also become liable for the offence. If the offence is 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 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

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Crl.Misc.Nos.M- 1934 of 2012 (O&M). 6

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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 a 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 penal liability created through the legal fiction envisaged in Section 141 of the Act. Even if the prosecution proceeding against the company were not taken or could not be continued, it is no bar for proceeding against the other persons viz Director, in instant case, falling within the purview of sub-sections (1) and (2) of Section 141 of the Act.”

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The Hon’ble Allahabad High Court in the matter of Jagmohan and etc. Versus State of U.P. and another, 2005 CRL. L.J. 1361, held as under:-

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“ The second contention raised by learned counsel for the applicants was that in this case, the company had not been impleaded as an

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

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accused and the applicants were only the Directors of the registered company namely Messrs. Bhagyodya Steels (P) Ltd. It has clearly been held by the Apex Court in the case of Anil Hada Versus Indian Acrylic Ltd., reported in 2001 SCC(Cri) 174; (AIR 2000 SC 145: 2000 Crl LJ 373) that simply because the company is not prosecuted as a result of some legal impediment, the accused persons cannot escape penal liability. So far as the applicant-Jagmohan was concerned, he was clearly the signatory of the disputed cheque and hence, and he is directly liable for issuance of the cheque. So far as the other applicant-Smt. Kamlesh Singhal is concerned the allegations were that when the complainant tried to get the cheque of Rs.3,00,000/- encashed on 18-2-1997 both the applicants met her, and dissuaded her from encashing the cheque immediately as both of them claimed to lack funds at that time, leading to the presentation of the cheque subsequently when it was dishonoured in the circumstances abovementioned. In the objections filed by the applicants to the summoning order, it was also not stated anywhere that the role of applicantSmt. Kamlesh was different or that she could not be saddled with any liability for the offence. In this view of the matter, on this ground, the prosecution under Section 138 of the Negotiable Instruments Act cannot be quashed at this

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

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stage. Of course it will be open for the applicant to lead any evidence at the trial of the case showing that there was no existent liability on the applicant for making payment of the cheque in dispute. The case of the single Judge of Punjab and Haryana High Court in Raj Kumar Mangla Versus M/S. Indo-Lowenbrau Breweries Ltd., reported in 1998 Crl.L.J. 332 is clearly distinguishable as in that case, the allegations were against the party concerned and there were no specific allegations against the accused. Whereas, in the present case, there are specific allegations against both the applicants for not discharging the liability on the presented cheque and the circumstances of its presentation.”

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In the matter of Bimal Kumar Nopani Versus

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State of U.P. and Anr. 2006 CRl. L.J. 2611 the Allahabad High Court again held as under:-

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“ The next submission of the applicant counsel that the company has not been made an accused and, therefore, the applicant can not be prosecuted is also devoid of substance and deserves to be rejected. This question is no longer res integra. It has been answered by

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Crl.Misc.Nos.M- 1934 of 2012 (O&M). 9 the Apex Court in the case of Anil Hada. Supreme Court in that case Anil Hada Vs. India Acrilic Ltd.2000 (1) SCC 1; (AIR 2000 SC 145) has held:-

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“ If the offence was committed by a company it can be punished if company is prosecuted. But instead of prosecuting the company if the payee opts to prosecute only the persons falling within the second or third category the payee can succeed in 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 the prosecution of the company is sine qua non for prosecution of the other person

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Crl.Misc.Nos.M- 1934 of 2012 (O&M).

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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 penal liability created through the legal fiction envisaged in Section 141 of the Act. ”

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Thus it is clear that the person responsible for the conduct and in charge of the business of the company can be prosecuted without prosecution of the company itself. It is the choice of the complainant against whom he wants to proceed. In the judgment Ambesh Balwapuri Versus M/S. Continental Carbon India Ltd., 2006(1) ALJ 396, the judgment of the Apex Court rendered in S.M.S. Pharmaceutical Ltd Versus Neeta Bhalla and others, (2005)8 SCC 89: (AIR 2005 SC 3512) is quoted with approval and in

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Crl.Misc.Nos.M- 1934 of 2012 (O&M). 11

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para 9 thereof, the aforesaid judgment of the Apex Court is quoted as “ (c) the answer to question (c) has to be affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in-charge of and responsible for the conduct of the business of the company. Therefore they get covered under Section 141.”

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In view of the above explained position, both the petitions sans merits and dismissed as such.

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(NARESH KUMAR SANGHI) JUDGE

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November 22 , 2012 Anoop

Balwinder Singh v. Nachhatar Singh

Case brief

What is this about?

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Balwinder Singh v. Nachhatar Singh

Case brief

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What did the court decide?

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