Shreya Arora Mehta, J.:— Brief facts of the case as alleged by the complainant are that the accused number company through accused number 2 Chairman cum Managing Director along with the accused number 3 its Managing Director and the accused number 4 Deputy Managing Director approached the complainant in the year 2006 to engage their services for releasing advertisement of accused company in various newspapers and publications. As per the negotiations and on assurances and undertaking by the accused persons for timely payments, the complainant took out advertisements in various print media. The complainant agreed to extend a credit period of 60 days for payment of the bills with statutory taxes and services charges/commission. The accused persons sent a release order to the complainant for advertisement in various print media. Bills were raised on monthly basis towards service provided. It is stated that till the second quarter of 2008 the complainant received most of the payment but thereafter there was default by the accused persons in making the time bound scheduled payment. The bills of the complainant were kept pending for over six months and in February, 2010 the complainant was forced to ask the Indian Newspaper Society to issue a caution notice to its members regarding the accused company. The accused company issued 84 cheques amounting to Rs. 3,17,00,000/- crores (Rupees Three Crore Seventeen Lakhs Only) on account towards part payment of the outstanding sum of Rs. 5,47,46,516/- crores (Rupees Five Crores Forty Seven Lakhs Forty Six Thousand Five Hundred Sixteen Only) with an assurance that on presentation the same would be encashed. The complainant presented 84 cheques in its bank account maintained with Standard Chartered Bank, Narain Manzil, 23 Barakhamba Road, New Delhi from time to time. The said 84 cheques were all dishonoured and returned unpaid by the complainant bank with the reasons either “funds insufficient” and/or exceeds arrangement. The details of the cheque dishonoured in the present case are as under:—
No.
Case No.
Cheque No. & Cheque Date
Amount (in Rs.)
Return Memo Date
Reasons for return
Bank on which Cheque is Drawn
Legal Notice dated
1
471/2016
019448 11.05.2010
2,50,000
07.08.2010
Funds Insufficient
HDFC Bank, Gurgaon
04.09.2010
260459 11.05.2010
2,50,000
07.08.2010
Exceeds Arrangement
Indian Overseas Bank, Connaught Place
04.09.2010
019449 12.05.2010
2,50,000
07.08.2010
Funds Insufficient
HDFC Bank, Gurgaon
04.09.2010
2. Despite service of legal notice under Section 138 of the Negotiable Instrument Act, 1881 dated 04.09.2010 for each cheque alongwith copy of the dishonoured cheque and the returning memo, the accused persons did not reply to the notice nor paid the amount within 15 days of the stipulated period. Hence, the present complaint filed under Section 138 of the Negotiable Instrument Act, 1881.
3. Cognizance was taken vide order dated 19.10.2010 and summons were issued to the accused persons. The accused number 1 is a company, the accused number 2 is its Chairman cum Director, the accused number 3 is its Managing Director and the accused number 4 is the Deputy Managing Director. Accused number 2 to 4 secured bail on appearance. Notice under Section 251 of the Criminal Procedure Code, 1973 was served upon the accused persons on 05.05.2011 to which they pleaded not guilty and claimed trial. In the plea of the defence, the accused persons submitted that there is no legal debt or liability. The post dated cheques were issued for release of advertisement in electronic media. When the complainant defaulted in releasing the said advertisements, the company took decision to stop the payment for all the impugned cheques in issue and did not provide sufficient funds in order to protect the financial of the company. After application under Section 145(2) of the Negotiable Instrument Act, 1881 was allowed the accused persons cross-examined the partner of the complainant CW1 Mr. S. Balakrishnan on 02.07.2013, 09.12.2013, 28.04.2014. On 07.07.2014 the right of the accused to further cross-examine CW1 S. Balakrishnan was closed. On 28.01.2016 the application under Section 311 Cr.P.C. praying that CW1 and CW2 be recalled and be permitted to cross-examine was dismissed.
4. The complainant further examined Supervisor, Standard Chartered Bank as CW2, Mr. K.S. Parashar, Senior Manager, Indian Overseas Bank as CW4, Sh. Varinder Pal Singh, Assistant Vice President, HDFC Bank as CW6. It is pertinent to mention that no witness has been examined as CW3 and CW5. The complainant evidence was closed on 31.05.2017. On 14.10.2015 the accused number 2 was declared absconder.
5. Thereafter, all incriminating evidence was put to the accused number 3 and 4 and their statements under Section 281 read with Section 313 of the Criminal Procedure Code, 1973 was recorded on 06.09.2017 wherein the accused number 3 stated that he signed the cheques being the authorized signatory of the accused number 1 at the instance of the accused number 2 and had no dealings with the complainant company. He further stated that he had not received any legal notice. The accused number 4 submitted that he had no dealings with the complainant company and did not receive any legal notice. The defence evidence was led and Sh. M.P. Paliwal, Post Master Incharge, Karol Bagh, Post Office was examined as DW1. The defence evidence was closed vide order dated 05.01.2019.
6. Final arguments addressed on behalf of the complainant. Despite various opportunities final arguments not addressed by the accused persons. However, written submissions placed on record by the accused number 3 and 4 which are duly considered.
7. For an offence punishable under Section 138 of the Negotiable Instrument Act, 1881, the complainant is required to prove the following essential ingredients of the said section:—
a). The accused had drawn a cheque in favour of the complainant;
b). The same was presented by the complainant with his banker within the period of its validity and the same was returned back unpaid due to insufficiency of funds or that it exceeds the amount arranged to be paid from the account of the accused;
c). The complainant gave a notice in writing to the accused within 30 days of the receipt of information by him from the bank regarding its return as unpaid;
d). The accused failed to make payment of the amount of cheque within 15 days of the receipt of the said notice;
e). The complainant institutes the complaint within 30 days from the date of expiry of the said 15 days; and
f). The cheque was issued by the accused for the discharge, in whole or in part, of any debt or other lawful liability.
8. The cheque bearing number 019448 dated 11.05.2010 Ex.CW1/3, cheque bearing number 260459 dated 11.05.2010 Ex.CW1/5 and cheque bearing number 019449 dated 12.05.2010 Ex.CW1/7 are drawn by the accused company in favour of the complainant company. The accused number 3 admitted his signatures on all the aforementioned cheques but states that same was done at the pretext of the accused number 2 who is the chairman cum director of the accused number 1. The accused number 4 submits that he has no dealings whatsoever with the complainant company.
9. Section 141 of the Negotiable Instruments Act, 1881 lays down the law as to the Offences by companies and reads as under:
“(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 : [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]
(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.”
10. Section 141 of the Negotiable Instrument Act, 1881 does not say that a Director of a company shall automatically be vicariously liable for commission of an offence on behalf of the company. It is essential that sufficient averments should be made so as to show that the person who is sought to be proceeded against on the premise of his being vicariously liable for commission of an offence by the company must be in charge of, and shall also be responsible to the company for the conduct of its business. Thus, the averments must state that the said person was both incharge of and responsible for the conduct of the business of the company. Requirements laid down in Section 141 are to be read conjointly and not disjunctively. The liability of a Director must be determined on the date on which the offence is committed. Reliance is being placed on S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2007) 4 SCC 70.
11. Thus, the complainant has to make specific averments in the complaint that the accused persons were incharge or were responsible to the company or conduct of the business of the company. And prosecution could be launched not only against the company on behalf of which the cheque issued has been dishonoured, but it could also be initiated against every person who at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company. In fact, Section 141 deems such persons to be guilty of such offence, liable to be proceeded against and punished for the offence, leaving it to the person concerned, to prove that the offence was committed by the company without his knowledge or that he exercised due diligence to prevent the commission of the offence. SubSection (2) of Section 141 also ropes in Directors, Managers, Secretaries or other officers of the company, if it is proved that the offence was committed with their consent or connivance.
12. In N. Rangachari v. Bharat Sanchar Nigam Ltd. ., (2007) 5 SCC 108 the Apex Court held as under:—
“21. A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position.”
13. It was further held:—
27. We think that, in the circumstances, the High Court has rightly come to the conclusion that it is not a fit case for exercise of jurisdiction under Section 482 of the Code of Criminal Procedure for quashing the complaint. In fact, an advertence to Sections 138 and 141 of the Negotiable Instruments Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company to show that they are not liable to be convicted. Any restriction on their power or existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial such a restriction or to show that at the relevant time they were not in charge of the affairs of the Company. Reading the complaint as a whole, we are satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion (sic commencement) of the trial.”
14. As already stated above, in the present case, specific averments have been made against the accused number 3 and 4 that they are in charge of and responsible to the accused number 1 company for conduct of the business of the company and have been looking after the business of the company and the offence under Section 138 of the Act has been committed with the knowledge, consent and connivance of the accused number 3 and 4 besides other and is attributable to neglect on their part. The accused number 3 has submitted in his plea of defence to the notice framed under Section 251 Cr.P.C. and again in his statement of defence under Section 313 Cr.P.C. read with Section 281(1) Cr.P.C. that he issued the impugned cheque at the behest of the accused number 2. However, the accused number 3 and 4 neither stepped into the witness box to depose their version on oath and prove its veracity by subjecting their testimony to the test of cross-examination nor did they confront the AR of the complainant by availing the opportunity to cross-examine him. The plea of defence to the notice framed under Section 251 Cr.P.C. and their further statement recorded under Section 313 Cr.P.C. read with Section 281(1) Cr.P.C. both not being on oath and not being subjected to the scrutiny of cross examination cannot be considered to be a substantial or even a corroborative piece of evidence and therefore cannot by itself exclude the liability of the accused number 3 and 4. Thus, the accused number 3 and 4 being managing director and deputy managing director are incharge of the accused number 1 company and responsible for running the affair of the company and its financial dealings.
15. The cheques Ex.CW1/3, Ex.CW1/5 and Ex.CW1/7 were drawn upon the account of the accused. The same were presented to the bank within its validity period and were returned dishonour for reasons “funds insufficient” and “exceeds arrangements” as established vide returning memo Ex.CW1/4, Ex.CW1/6 and Ex.CW1/8.
16. Legal notices Ex.CW1/9, Ex.CW1/12 and Ex.CW1/15 demanding the cheque amount was dispatched within the statutory period as established by the receipts Ex.CW1/10A to Ex.CW1/10D, Ex.CW1/11A to Ex.CW1/11D, Ex.CW1/13A to Ex.CW1/13D, Ex.CW1/14A to Ex.CW1/14D, Ex.CW1/16A to Ex.CW1/16D, Ex.CW1/17A to Ex.CW1/17D and Ex.CW1/18 (Colly). The accused number 3 and 4 have denied receipt of any legal demand notice Ex.CW1/9, Ex.CW1/12 and Ex.CW1/15. The accused persons have not denied association with the address of the company where legal notices were delivered. Since the association with the address so mentioned by the complainant of the accused number 1 company is not denied, it cannot be said that the complainant sent the legal demand notice to some random address. The proof of service and delivery of legal notices on all the accused persons is exhibited as Ex. CW1/18 (colly).
17. The Apex Court in C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555 held that bare denial cannot be treated as a defence as it is settled that non-receipt of legal demand notice cannot be the only defence. Section 27 of the General Clauses Act, 1897 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. It is further held that a person who does not pay even after the receipt of court summons cannot contend that there was no proper service of notice as required under Section 138 of the Negotiable Instrument Act, 1881 by ignoring the statutory presumption under Section 27 of the General Clauses Act, 1897.
18. Thus, service of legal demand notice to the last known address of the accused in knowledge of the complainant is sufficient compliance.
19. It is further contended on behalf of the accused number 3 and 4 that the cheques in question were given sometime way back in the year 2006 while the complaints are filed in the year 2016. The cheques Ex.CW1/3, Ex.CW1/5 and Ex.CW1/7 are dated 11.05.2010, 11.05.2010 and 12.05.2010, respectively. The legal notices Ex.CW1/9, Ex.CW1/12 and Ex.CW1/15 are dated 04.09.2010 and present case is filed on 19.10.2010. The aforesaid contention is accordingly without any basis and the present complaint is not time barred.
20. Further, under Section 139 of the Negotiable Instrument Act, 1881 there is a presumption in favour of the complainant that the cheques in question were issued by the accused in discharge of his lawful liability. It is mandatory for the court to draw a presumption against the drawer/accused. However, the said presumption is rebuttable. The accused can rebut the same by proving the contrary. The onus upon the accused of countering the said rebuttable presumption is not as onerous as proving it beyond any reasonable doubt. The standard of proof for rebutting the said presumption is that of “preponderance of probabilities”. In the event the accused is able to raise a probable defence which creates doubt with regard to the existence of debt or liability, the presumption may fail. The accused may discharge the said onus by leading positive evidence to dispel the said presumption or by impeaching the credibility of the complainant witness through his cross-examination or by creating holes in the version of the complainant to render it improbable.
21. Adverting to the facts of the present case, the argument raised on behalf of accused persons is that no work order, release order or publication bill placed on record nor the complainant produced the details of the newspapers etc. To substantiate the same, the accused person has failed to prove on record any admissible and reliable evidence to discharge their onus of rebutting the initial presumption in favour of the complainant as enshrined under Section 139 of the Negotiable Instrument Act, 1881. No evidence has been led by the accused persons to prove the same. Therefore, in the absence of any documentary evidence or oral evidence substantiating the said fact, the said plea of the accused is devoid of any merit.
22. In view of the aforesaid, the essentials of Section 138 of the Negotiable Instrument Act, 1881 stand duly established and the accused persons have failed to rebut the same. Thus, the accused number 1, 3 and 4 are hereby held guilty and convicted for the offence punishable under Section 138 the Negotiable Instrument Act, 1881. Accused number 2 is proclaimed offender.
23. Put up on 29.03.2022 for arguments on the quantum of sentence qua accused number 1, 3 and 4.