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Agritech Hatcheries and Food Limited and Others v. Valuable Steels India Private Limited
Summary of Judgment — K. Govindarajan, J.
Factual and Procedural Background
The respondent filed a complaint against the petitioners under section 138 of the Negotiable Instruments Act, 1881. The complaint alleged that, in settlement of a bill of exchange for Rs. 47,57,000 dated 18 December 1995, the second petitioner, on behalf of the first petitioner, issued a cheque which was dishonoured with the endorsement "account closed". The complaint was taken on file by the XIVth Metropolitan Magistrate, Egmore, Madras. The petitioners filed the present Original Petition (O.P.) seeking to quash the proceedings.
Legal Issues Presented
- Whether the complaint is barred by limitation (as contended by the petitioners).
- Whether the complaint contains the averments required by section 141 of the Negotiable Instruments Act to sustain proceedings against the third petitioner (who is alleged to be the company's vice-president).
- Whether a person can be prosecuted under section 141 merely by virtue of holding the position of vice-president, or whether specific averments showing that the person was in charge of and responsible for the conduct of the company's business at the time of the offence are necessary.
Arguments of the Parties
Petitioners' Arguments
- The complaint is barred by limitation. (This ground was raised in the petition, but counsel was unable to substantiate it when pressed.)
- There is no averment in the complaint against the third petitioner to satisfy section 141 of the Negotiable Instruments Act, and therefore the complaint cannot be maintained against the third petitioner. Counsel relied on Senthilkumar Tea Industries v. N. Rajkumar in support.
Respondent's Arguments
- The third petitioner, being the vice-president of the company, could not be said to be uninvolved and should be impleaded as a respondent and required to face trial.
- In support of this proposition, the respondent relied on Saj Flight Services (P.) Ltd. v. P. T. Gopala Raja (1997), where the learned judge held that all persons concerned including other directors or partners must be jointly and severally liable and thus added as parties.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Senthilkumar Tea Industries v. N. Rajkumar, 1994 1 LW (Crl.) 278 | Holds that in the absence of any averment to implicate an accused under section 141, the complaint cannot be sustained against such person. | The court relied on and followed the view in Senthilkumar to the effect that absence of averments under section 141 precludes sustaining a complaint against a person not shown to be in charge of and responsible for the company's business at the time of the offence. |
| Saj Flight Services (P.) Ltd. v. P. T. Gopala Raja, 1997 (88) CC 344 (Mad) | Held by N. Arumugham J. that all persons concerned including other directors or partners must be jointly and severally liable and therefore should be added as parties. | The court considered this decision relied on by the respondent but expressed disagreement with the principle that all persons must be joined merely by virtue of position; the court declined to follow that broader approach. |
| Delhi Municipality v. Ram Kishan, 1983 (1) SCC 1 (and related citations) | Authority relied upon in Senthilkumar; supports the proposition that where there is no averment to implicate a person under section 141, the complaint cannot be sustained. | The court noted that Pratap Singh J. in Senthilkumar relied on the apex court decision in Delhi Municipality to reach the conclusion about the necessity of specific averments under section 141; the present court accepted that reasoning when following Senthilkumar. |
| C. Balasundaram v. Prakash (Crl. M.P. No. 13898 of 1989, dated 27 Nov 1990) | Earlier judgment of the same court relevant to the issue (details as cited in the opinion). | The opinion records that this earlier judgment (along with Senthilkumar) was not brought to the attention of the learned judge in Saj Flight; the present court treated these earlier judgments as part of the body of authority supporting the requirement of specific averments under section 141. |
Court's Reasoning and Analysis
The court began by addressing the competing submissions and by analysing the scope of sections 138 and 141 of the Negotiable Instruments Act (both provisions were quoted in full in the opinion). The court's reasoning proceeded in the following steps, as set out in the opinion:
- Statutory reading: On a careful reading of sections 138 and 141, the court observed that section 138 penalizes the drawer of a cheque and sets out the essential elements of the offence, while section 141 addresses offences by companies and the persons who can be deemed guilty in such cases.
- Interpretation of section 141: The court emphasised that section 141(1) makes only "the person, who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company" liable to be deemed guilty. The court interpreted the phrase "such person" as pointing to the person who had drawn the cheque (i.e., the perpetrator under section 138).
- Evidence vs. penal aspect: The court stated that section 141 is "not relatable to the penal aspect, but only the evidence aspect" concerning an offence under section 138. This indicates the court's view that section 141 prescribes when and how liability of company officers may be attributed, rather than creating a new or automatic penal nexus solely from job title.
- Distinction between subsections (1) and (2): The court explained that subsection (2) of section 141 operates where an offence is proved to have been committed with the consent or connivance of, or attributable to the neglect of, a director, manager, secretary, or other officer. That provision imposes liability even if the person was not in charge of the company's business generally; however, it requires proof of consent, connivance, or neglect. Consequently, not all partners or directors need to be impleaded in every complaint.
- Application to the facts: The court found that the complaint contained only the allegation that the third petitioner was the vice-president of the company and made no averment to show that he was in charge of and responsible for the company's business at the relevant time, nor any averment of consent, connivance or neglect as envisaged by subsection (2).
- Assessment of authorities: The court acknowledged the respondent's reliance on Saj Flight Services but expressly disagreed with the principle in that decision that all persons concerned must be joint and several and therefore added as parties. The court observed that earlier judgments of this court (including Senthilkumar and C. Balasundaram) and the apex court authority in Delhi Municipality v. Ram Kishan support the requirement for specific averments to implicate a person under section 141.
- Conclusion from reasoning: Because there was "no such averment whatsoever" to implicate the third petitioner under section 141, the court held that the presumption of guilt could not be inferred merely from his position as vice-president; therefore the complaint could not be sustained against him.
Holding and Implications
Core Holding: The Original Petition was allowed in part. Specifically, the proceedings in respect of the third petitioner/accused in C.C. No. 7377 of 1996 on the file of the XIVth Metropolitan Magistrate, Egmore, Chennai, were quashed. Proceedings as against the other petitioners/accused were directed to continue.
Implications:
- Direct effect on the parties: The third petitioner (alleged vice-president) was removed from the prosecution because the complaint did not contain the averments required by section 141 to implicate him. The criminal proceedings continue against the other petitioners/accused, and the learned magistrate was directed to proceed and dispose of those proceedings in accordance with law.
- Treatment of authority: The court expressed disagreement with the broader principle in Saj Flight Services that all persons concerned must be impleaded merely by virtue of their position; instead, the court followed the approach in Senthilkumar (and the apex authority relied upon therein) requiring specific averments under section 141. The opinion did not record the setting of any new binding precedent beyond the reasoning adopted in this instance.
- Procedural note: Consequent on allowing the OP in part, the court observed that no further order was necessary in Crl. M.P. No. 1789 of 1997.
This summary is confined to the facts, submissions, authorities, reasoning and orders expressly contained in the provided opinion. No additional facts, outcomes or inferences have been added.
K. GOVINDARAJAN, J.
The respondent filed a complaint against the petitioners for the alleged offence committed under section 138 of the Negotiable Instruments Act, 1881. According to the respondent, in settlement of the bill of exchange for a sum of Rs. 47, 57, 000, dated December 18, 1995, the second petitioner, on behalf of the first petitioner issued a cheque which was dishonoured for the reason "account closed". The said complaint was taken on file by the XIVth Metropolitan Magistrate, Egmore, Madras. To quash the said proceedings, the petitioners have filed the above O.P.
Learned counsel appearing for the petitioners has submitted that the complaint filed against them is barred by limitation, that there is no required averment in the complaint against the third petitioner and that, therefore, the complaint cannot be maintained against the third petitioner for want of allegation as required under section 141 of the Negotiable Instruments Act.
Learned counsel is not in a position to substantiate his contention regarding limitation, though the said ground has been raised in the petition. With respect to the second submission, learned counsel took me to section 141 of the Act. According to learned counsel, nothing has been stated in the complaint about the third petitioner. Learned counsel has relied on the decision in Senthilkumar Tea Industries v. N. Rajkumar 1994 1 LW (Crl.) 278, in support of his submission.
Learned counsel appearing for the respondents has submitted that since the third petitioner is the vice-president of the company, it cannot be said that he has not been actively participating in the company. He further submitted that since he is the vice-president of the company, he should be impleaded as respondent and has to face the trial. In support of his submission, he relied on the decision in Saj Flight Services (P.) Ltd. v. P. T. Gopala Raja 1997 (88) CC 344 (Mad).In the present case, in the complaint, except stating that the third petitioner is the vice-president of the company, nothing more is stated about his participation in the affairs of the company, at the time of commission of the offence. In the decision in Senthilkumar Tea Industries v. N. Rajkumar 1994 1 LW (Crl.) 278, referred to above, Pratap Singh J., relying on the decision of the apex court in Delhi Municipality v. Ram Kishan, 1983 AIR(SC) 67, 1983 CAR 44, 1983 (89) CrLJ 159, 1983 CrLR(SC) 9, 1982 (2) Scale 1124, 1983 (1) SCC 1, 1983 SCC(Cr) 115, 1983 (1) SCR 884, 1983 UJ 148, 1983 (203) All(CriC) 50, 1983 (20) ACC 50, 1983 SCC(L&S) 833, has held that in the absence of any averment whatsoever to implicate the accused by invoking section 141 of the Act, the complaint cannot be sustained against such person.
Learned counsel appearing for the respondent has relied on the decision in Saj Flight Services (P.) Ltd. v. P. T. Gopala Raja 1997 (88) CC 344 (Mad), referred to above, wherein, N. Arumugham J. has held that all the persons concerned inclusive of the other directors or the partners must be jointly and severally liable, for which every one had to be added as party. With great respect to the learned judge, I cannot agree with the said principle set out in the judgment. The earlier judgments of this court in Senthilkumar. Tea Industries v. N. Rajkumar 1994 1 LW (Crl.) 278, referred to above, and C. Balasundaram v. Prakash (Crl. M.P. No. 13898 of 1989, dated 27th November, 1990) were not brought to the notice of the learned judge. In the judgment delivered by Pratap Singh J. in Senthilkumar Tea Industries v. N. Rajkumar 1994 1 LW (Crl.) 278, referred to above, the learned judge relying on the decision of the apex court in Delhi Municipality v. Ram Kishan, 1983 AIR(SC) 67, 1983 CAR 44, 1983 (89) CrLJ 159, 1983 CrLR(SC) 9, 1982 (2) Scale 1124, 1983 (1) SCC 1, 1983 SCC(Cr) 115, 1983 (1) SCR 884, 1983 UJ 148, 1983 (203) All(CriC) 50, 1983 (20) ACC 50, 1983 SCC(L&S) 833, referred to above, took that view.
To appreciate the rival submissions on both sides, we have to appreciate the scope of sections 138 and 141 of the Act, which read as follows :
"138. Dishonour of cheque for insufficiency, etc., of funds in the account. - Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank. Such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extent to twice the amount of the cheque, or with both :
Provided that nothing contained in this section shall apply unless -
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation. - For the purposes of this section, 'debt or other liability' means a legally enforceable debt or other liability."
" 141. Offences by companies. - (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary, or other officer of the company, such director, manager, secretary, or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation. - For the purposes of this section -
(a) 'company' means any body corporate and includes a firm or other association of individuals; and
(b) 'director' in relation to a firm, means a partner in the firm." *
On a reading of the above provisions, it would be clear that only the person who was in charge of and was responsible to the company for the conduct of the business of the company at the time of the commission of the offence should be deemed guilty of the offence and liable to be proceeded against and punished for such offence. The use of the words "such person" in section 13@ of the Act would clearly indicate that the person who had drawn the cheque is the person to commit the offence. Section 141 of the Act is not relatable to the penal aspect, but only the evidence aspect relating to the offence committed under section 138 of the Act.
A reading of section 141(1) of the Act will clearly establish that only the, person, who, at the time of offence, was in charge of and was responsible to the conduct of the business of the company alone can be deemed to be guilty of the offence. By introduction of section 141 of the Act, we have to take it that the person who had not participated in the conduct of the business or was not in charge of the same, on the date of commission of offence, cannot be prosecuted for the offence under section 138 of the Act. In view of the specific provision, we cannot proceed on the assumption that the third petitioner as the vice-president should have effective participation in the business on the date of commission of offence. Otherwise the purpose of incorporating section 141 in the Act will become futile.Even appreciating the difference between the provisions adumbrated under sub-section (1) and sub-section (2) of section 141 of the Act it will be clear that all the partners or directors need not be included in the complaint. According to sub-section (2), even the directors or partners or other persons who are not in charge of and responsible to the company for the conduct of its business and are directly responsible for the offence, cannot escape from the liability if it is proved that the offence was committed with the consent, connivance or was attributed to any neglect on their part. This clearly will indicate that all the partners or directors need not be impleaded in the complaint.
Admittedly, in this case no such averment whatsoever is made to implicate the third, petitioner as required under section 141 of the Act. The presumption of his being guilty cannot at all be inferred by virtue of his position in the company. So, in view of the above, this O.P. is allowed in part. The proceedings in so far as the third petitioner/accused in C.C. No. 7377 of 1996, on the file of the XIVth Metropolitan Magistrate, Egmore, Chennai, are concerned are quashed and the proceedings as against the other petitioners/accused shall continue, and the learned magistrate shall dispose of the same with respect to the other petitioners/accused, in accordance with law, consequently, no further order is necessary in Crl. M.P. No. 1789 of 1997.
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