Allowed

M/s.Ge Godavari Engineering Ltd. v. The State of Telangana

Telangana HC3 Jan 2024CRLP/2161/2019

Case brief

AI extract

What is this about?

The Single Bench held that the company and directors of M/s. C.E. Godavari Engineering Ltd. are not liable for cheque dishonour under Section 138 NI Act, as the cheque was drawn from an individual account, not a company account. The criminal proceedings were quashed.

What did the court decide?

Criminal proceedings in C.C. No. 230 of 2017 against the appellant company and accused Nos. 2 and 3 are quashed.

M/s.Ge Godavari Engineering Ltd. Vs The State of… — Company and Corporate | Telangana HC (2024)

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[^32s1 ]

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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WEDNESDAY,THE THIRD DAY OF JANUARY TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SRI JUSTICE K.SURENDER

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CRIMINAL PETITIO N NO:2'161 OF 2019

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Between:

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M/s.GE Godavari Engineering Ltd, rep by its Manaqinq Direclor Mr. Balakrishna Kallappa Karande Sy.No.655, Village^piildapur S-adisivapeta Mandat, Medai District

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AND

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...PET|T|ONER/ACCUSED No.i

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1 The State of Telangana, rep. by its Public prosecutor High Court of Judicature at Hyderabad.

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2 Somani lspat Pvt Ltd, A registered Company registered under Companies Act 1956 Repres^gnted by_its Manager Mr.P. Radhakrishna S/o. p. Samba Murthy, aged 46 years Office al5-2-2831A, Plot No.9 and 10 2nd floor AN Complex, Hycierbisti, Secunderabad

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...RESPONDENTS/COMPLAINANTS

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Petition under section 482 of cr.P.c praying that in the circumstances stated in the Memorandum of Grounds of Criminal petition, the High Court may be pleased to quash the proceedings against the Petitioner in C.C No. 230 ol 2017 on the file of XVlll Addl. Chief Metropotitan Magistrate Secunderabad.

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l.A. NO: 1 OF 2019

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Petition under Section 482 of Cr.p.C praying ttnt in the circumstances stated in the Memorandum of Grounds of Criminal petition,the High Court may be pleased to grant stay of all further proceedings against the petitioner in C.C No. 23o of 2o17 on the file of XVlll Addl. chief Metropolitan Magistrate secunderabad.

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This Petition coming on for hearing,upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the argruments of Sri N Manohar, Advocate for the Petitioner and the Addl. public proseculor on behalf of the Respondent No. and of Sri K. Aroop Kumar, Advocate for Respondent No.2.

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The Court made the following: ORDER

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t I

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THE HON'BLE SRI JUSTICE K.SURENDER

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CRIMINAL PETITION No. 2151 of 2079

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ORDER:

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This Criminal Petition is filed under Section 482 of the Code of Criminal Procedure, 7973 (f.or short^'Cr.P.C.') by the petitioner'/accused No.1 to quash the proceedings in C.C.No.230 of 2017 on the file of the leamed XVIII Additional Chief Metropol. tan Magistra te, Secunderabad, registered for the offence punishable under Section 138 of Negotiable Instrument Act.

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Hee rd learned counsel for the petitioner, Ieamed Additional Public Prosecutor for the respondent No.l-State and perused ttLe record.

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The petitioner is accused No.1 in the case. In the said case, accused N,rs.2 and 3, who are directors of the petitioner Company preferred Crl.P.No.11330 of 2017. This Court by order dated 02.71..2078 quashed the proceedings against accused Nos.2 and 3 on the gr<,und that the cheque issued was in the individual capacity ol accused No.4. In the said circumstances, this Court

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found that accused Nos.2 and 3 were not^{liableand also the}

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Company, who is accused No.1.

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In view of the said findings of this Court that the cheque was issued in the individual capacity of accused No.4, the question of implica ting the Company/accused No.1 does not arise. Further, in view of the findings in the Cr1.P.No.1L330 of 2017 proceedings against the petitioner Company cannot be permitted to continue.

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Accordingly, this Criminal Petition is allowed and the proceedings against the petitioner/accused No.l in C.C.No.230 of 2Ol7 on the file of the leamed XVIII Additional Chief

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Metropolitan Magistrate are hereby quashed

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Miscellaneous applications pending, if any, in this criminal

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petition, shall stand closed.

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SD/. P.PADMANABHA^REDDY ASSISTANT^REGISTRAR //TRUE^COPY//

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SECTION^OFFICER

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To,

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The XVlll Addl^{Chief Metropolitan Magistrate Secunderabad'}

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2.ThestationHouseOfficer,MahankaliPolicestation,secunderabad'(Alongwitha copy of order da led^{2-11-2O1Ain Crl P 1 1330/2017)'}

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One CC^{to Sri N. Manohar,Advocate[OPUC]}

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4.TwoCCstoPublicProsecutor,HighCourtforthestateofTelangana(oUT)

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Two CD Copies

oAc BJLB NS

HIGH,:OURT

DATED:03101t2024

ORDER

CRLP.No.,t161 of 2019

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CRIMINAI. PETITION IS ALLOWED

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IS(-vl*

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HON'BLE Dr. JUSTICE B. SlvA SANIC{R.r{^RAO

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CRIMINAL PETI'I'tON No.l1330 of²⁰¹⁷

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ORDER

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The petitioners to the quash petilion^are A.2^and A.3^among four accused in C.C.No.3454 ol20l6 initially on^{the file of the XI} Additional Chiel Metropolitan^{Magistrate,Secunderabad,} re-numbered as C.C.No-230 o[²⁰ l7^{pending on the file of the XVIII} Additionat Chief Metropolitan Magistrate, Secunderabad. It^{is a} private complaint case lronl the complaint of the^{2ndrespondenG} complainant entity for the ollcnce under Section^{138 of the} Negotiable Instruments Act, l8lJ I^{(tbrshort, 'the NI Act')issued by} A.4 in his individual capacity^{thoughhe wasarrayedin the private} complaint case as by name and rcllrred^{as Managing Directorof A.l} M/s.C.E. Godavari Engineering Limited^{(M/s.GEGEL)by showing} A.l as IWs.GEGEL, representcd by its^{Managing Director-} Balakrishna Kallappa Karandc and A.2 and^{A.3/BommiReddy} Vidyanath Reddy and Mr.Visanathan Srinivasan both^referredas directors of IWs.CEGEL. In^the complaint,^{it is averred thatthere} were business dealings with A. I company by the^{complainant entity} and A. I is represented by its MLrnaging^{Director/A.4,A.2 andA.3 are} the Directors of A.l company and it^{is on creditbasis the material at} their request supplied for which l'allen due by^05.12.2015 Rs.33,05,806/- and for the^{outstanilinglbr the dembnds, Managing} Director/A.4 of A. t company^{approached lhe complainantalong with} A.2 and A.3/Directors and issued his^{personal chequebearing}

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DT.SSRA, J Crl.P.1\o.I1330 of 201 7

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No.000066 dated 07. 10.201(r. fbr Rs.13,04,814/- drawn on HDFC belorrgs to A.4 towards pall payrnclt ot'thc said outstanding and it is at the request of the accuscd pclsons. Thc complainant when presented for collection on 07. I0.2016 sarne was retumed dishonoured on 10. 10.20 I 6 as pcr irrrinration of funds insufficient and for th3 statutory notice issucd with rcctilication notice in corrr:ction of the wrongly mentioned earlier. accused received and failed to pay, therety claimed liabte.

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The Ieamed Magistra(c has taken cognizance. Now the impugnment is even taken on lace valuc, A. t company is not a drawer of the cheque much less, rcprcscutcd by A.4 to make A.2 and A.3 liable, leave about no specific allcgations to make every director respontible in the absencc of'plcading required o[ responsible for dayto-day affairs a.s per the lettcr and sl)irit of Section l4l of the Nl Act and the reby the proceedings arc liahlc to bc quashcd.

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\Vhereas, learned counscl tirr. the 2'"i^{.respondent-complainant} supported the cognizancc order saying if at all there is anything, it is left opt:n for raising any defence lirr the Court to try and having waited I through from the cognizancc taken in the year 2016, the quash p:tition frled in 201 7 is liablc to be dismissed.

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H eard and peruscd the ntaterial on record.

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Stption 14l of the N[ Acl reads as follows:

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l4l Offenccs by cornpanics.

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DT.SSRB,J Crl.P.No.l l3l0 of20l7

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(l) Ifthe person comurillttrg^{an ollence undersection 138 is} a cotnpany,^{everyperson rvho,at tlte tilne the offence v/as} committed,^was in^{cltargeot, artdwas rcqlonstble to the company} for the conduct ol^{rltebusincssol tlre cornpany, as wellas the} company, shall^{be deerledto bc guilty of tlre offence and shall be} liable to be Proceeded^{agarnstand punishedaccordingly:}

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Provided that^{notlting contairtcd in this sub-sectionshall} render any^{person liableto pttnishlnent ifhe provesthat the} offence was comtnitted^{rvithoLrthis knowledge,or thathe had} exercised all^{duediligencelr) prevent tlre commissionof such} offence:

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[Provided^{lunher tltat wltete a personis nominated asa} Director of a cotnpany^{by virtuc of his holding anyoffice or} employment io^{the Central C()vclnlnent or Sta(eGovemment or a} financial corporation owncd^{orc()ntrolledby the Central} Govemment or^{theState Covcrnlnent,asthe casemay be, he} shall not be liable^{lor prosecutiorrundcr thisChapter']}

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(2) Notwithstanding anylhing^{c()rrtainedin sub-section (l),} where any offence^{under this Actltas been committed.bya} company and it is^{proved thar the oUence has beencommitted} with the consent or connivancc^{ol, or is- attributableto, any} neglect on the^part of,^{anytlirector,manager, secretaryor other} officer of the company,^{such rlitector, tttanager, secretary or other} officer shall^{also be deemed to tre guiltyof that offence and shall} be liable to be^{proceeded against and punishedaccordingly.}

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Explanation.-^{For thepurposes of this section,-} - (a) "company"^{means arry body corporateand includesa} firm or other association^{ol individuals;and}

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(b) "director", in relation^{to a firttr,meansa partnerin the} tirm.]

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-l

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D..SSRB. J Crl.P.l\o.l l-r-r0 of 201 7

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Section 138 olthe Nl Acl particularly llS(b) reads as follows

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138 Dishonour of chc<1uc lirt insullicicncy, ctc., of funds in tlre account. -Wherc any ohcque drarvn by a porson on an account maintained by hirn with a hankcr lirr' payncnt of any amount of moncy to another pclsou lhrur out of llrat account for thc discharge, in whole or in parl. of any debt or other liabrlity, is retumed by tlre bank urrpaid. cithcr becausc of the amount of mon€y standing to the crcdit ()l lltat account is insufficient t<r honour the cheque or tltat it cxccc(ls tllc atnount arranged to bc :aid from that account hy arr aqrcerrrcnt nrade with that bank, ;uch person shall be dccruc<l to havc conrnittcd an offence and ;hall, without prejudicc to any othcr provisions of this Act, be punished with imprisonrncnt ftrr' [a tcrm which rnay be extended lo two years], or with finc which rray cxtend to twice the amount of the cheque, or with botlr:

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Provided that nothing contained in this section shall apply unless

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(, the cheque has heen prcsented to the bank within a period of six months lronr the dalc on whiclr it is drawn or within dre period of its validity, whichcvcl is earlier;

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(1, the Davee or the holdcr it due course of the cheque, as rt be tna denraud for tlr n of thc 4^nount of^monev by sivrne a noticc in writinc. to the drawer of th e cheq ue.^2o [*i thin thirty davsl ol't he rcceipt of information by hi m fiom the bank resarding thc rcturn of (he cheoue as unoaid: ard

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(:, the drawer of such chcrluc fails to rnake the payment of th: said amount ofrnoney to thc paycc or, as the case may be, to thr: holder in due course ol thc clrcquc. within fifteen days of the receipt of tlre said noticc.

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Explanatron- - tor thc purposes of tlris section,^,,debt or other liabiliry" rneans a lcgallv cnforceablc debt or other lia )ility.l

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)

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DT.SSRB, J Crl,P.No.l l.l.l0 ot 2017

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Coming to the facts, a pcrusal ol the clieque in^question from the account stands in the individual natnc of A.4 Balakrishna^Kallappa Karande. Merely because A.4 is Managing Director of A.l^company, it cannot be said that the cheque was issued by the company^{from his} signature when the cheque issucd tiom his individual account and not in the company account. Once the cheque is not^issued in^the company account by any of the Dirc'ctors or Managing Director, as the case may be, the company cannol be thc drawer. Once the company cannot be drawer, the queslion ol^vicarious liability of its directors, particularly A.2 and A.3, leave about without even specific allegation as to they are responsible fbr day-lo-day aflairs of the company to^be made vicariously liable the array o[ thenr by lastening liability^forthe offence under Section 138 NI Act does not arise.^{That is also the} law laid down by the Apex Court in Aparna S.Shah v. Sheth Developers Private Limited and anothert, particularly from^{the paras 15} to^lE for more clarity reproduced hereunder:

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l5) Mr. Mukul Rohtagi, learned senior counsel^for respondent No.l, by drawing our attention to^{thedefinition} of "person" in Section 3(42) ol^{the General ClausesAct, 1897} submitted that in view of^various circurrstances^{mentioned,the} appellant herein being wi t'e, is liable^{fbl criminal prosecution. He} also submitted that in view ol the explanation in Section l4l(2) of the N.I. Act, thc appellart^wif'e is^{beingprosecutedas' an} association ofindividual. In^{our view,} all^{the above,contentions} are unacceptable since it^{wasncvertltc case} of^{respondentNo.1} in the complaint filed before lealned Magistrate that^{tlre appellant}

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'(2orl)riscc7r

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t r.SSRR. J Crl.P.No. I l-ll0 of20l7

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wrfe is being prosecuted as an assocration of rndividuals and. therefore, on this ground aloue. tlrc above subnrission is liablc to bc rejected. Since, tlris cxprcssiorr has not becn dcfined, tlre sanre has to be interprcted ejusdenr gcncris having regard to tlre purpose of the principlc rrf vicarious liability incorporated in Section l4l. The terlls "complai t". "persons"^{..association} o[ persons" "cornpany" and "direcrors- have been explained by this Court in Raghu lakshminarayan ts. Fine-l'ubcs. (2007) 5 SCC 103.

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Thc abovc discussion wrrh rcl-erence ro Section I38 and rhe materials culled out frorn thc statutory notice, reply, copy of lhe complaint, order, issuancc ol-proccss etc., clearly show that only the drawer of thc chcque bcirrg responsible for the same.

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l'7) In addition to our conclusron, it is useful to refer sonre of t re decisions rendered by various l{igh Courts on this issue.

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l8) lrarned Single .ludge o1' the Madras High Court in frevendra Pundir vs. Rajcndra Prasad Maurya, proprietor, Satyamev Exports S/o. Sri Rama Shankar Maurya,200g Crirninal Law Journal 777, following dccisions of this Court, has concluded thus:

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"7. This Court is of thc consi<lcrcd view rhat the above proposition of law laid down lry the l{bn'ble Apex Court in the decision citcd supra rs squarely applicable to the facts of the instant casc. Evcn in this case, as already pointed out, the first accuscd is admittedly the sol€ proprietrix of (hc conccrn namely,^.,Kamakshi Enterprises" and as suoh, lhc questioo of the second accused to be vicariously held liable for tlre offence said to have been comrnittcd by tltc lirst accused under Section 138 of the Negotiablc Instrunrcnts Act not at all arise... After saying so, learncd Srrrglc Judge, quashed thc proceedings initiatcd against the petitioncr rherein and

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DT.SSRA, J Crl.P.No.l ll-10 ot:017

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permitted lhe Judicial Maqisrrate^{l() proceed andexpedite} the trial in respect of otltcrs.

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Having regard to the 2$1rt'c.^{it is dlawer of thechequc A.4 in his} individuat capacity liable lor^{whathc issued lbr the amounts dueby} A.l compaay even undertaken^{t() bcar Lhe liabilityby him individually} and even any allegations of^{the credittransactionswith companyor} for the demands of A.l to A.4. A.4^{issued the chequetiomhis account} and the cheque^presented altcr^{intimationto A.2 to A.4, wiltnot make} A.2 and A.3 liable along^{with A.4.nruchless of thc company,as any} civil liability for the credit^{purchasesby the company and their} Directors including A.l to A.4^{lbr that civil liability is different from} the criminal liability for^{the dislronourof the cheque as the cheque} was drawn only by A.4 in his^{individualcapacity and not by the} company, much less^{from thc companyaccount.}

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Having regard to the^{above the criminal petitionis allowed,} quashing the proceedings against tht:^{petitioners/A.2 and A.3in} C.C.No.230 of 2017 on the^lite ol^{the XVIII AdditionalChief} Metropolitan Magistrate, Secunderabad.^{The bailbonds of the} petitioners/A.2 and A.3 shall stand^cancelled.

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' Miscellaneous^{petitions pcnding,} il^{any, shall stand closed.}

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Dr. B. SIVA SANKARA RAO'^J

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2d November 201 8

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mar

M/s.Ge Godavari Engineering Ltd. v. The State of Telangana

Case brief

What is this about?

What did the court decide?

M/s.Ge Godavari Engineering Ltd. v. The State of Telangana

Case brief

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What did the court decide?

What the court decided

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