Kairali Marketing And Processing vs Pullengadi Service Co-Operative

What precisely is the offence under Section 138 of the

Negotiable Instruments Act? On what date can the offence be

held to be committed? These questions arise for consideration in

these revision petitions which are directed against the

concurrent verdicts of guilty, convictions and sentences imposed

in two separate prosecutions between the same parties under

Section 138 of the Negotiable Instruments Act.

2. The complainant in both these prosecutions is a Co-

operative Society. The first accused in both cases is also a co-

operative society. The second accused is the president of the

first accused co-operative society, a named individual. The third

accused is arrayed with the description that he is the secretary of

the first accused Co-operative society. It is significant that the

complaint is not against an individual acting as the Secretary.

The third accused is shown as the Secretary of the Society. The

incumbent functioning as the Secretary is not named as the third

Crl.R.P.No.85/2006 & 86/2006 2

accused in either prosecution.

3. The prosecutions relate to four cheques for a total

amount of Rs.5,21,147/-. The complainant contended that the

cheques were issued for the due discharge of a legally enforcible

debt/liability. The same were dishonoured on the ground of

insufficiency of funds. Notice of demand was duly issued. No

payment was made. It is in these circumstances that the

complainant came to the court with two separate complaints

under Secion 138 of the N.I.Act. Three instances of dishonour

were brought in one case whereas the fourth was brought in as a

separate complaint. Separate trials were held. In the

prosecution relating to three cheques, the complainant examined

himself as PW1 and the Manager of the Collecting Bank as PW2.

Exts.P1 to P8 were marked. The accused examined Dws 1 and 2.

No documents were marked on the side of the accused in that

case.

4. In the second case relating to one cheque, the

complainant examined the Secretary of the Co-operative Society

as PW1 and the Manager of the drawee Bank as PW2. Exts.P1 to

P6 were marked. The accused examined Dws 1 and 2 and proved

Crl.R.P.No.85/2006 & 86/2006 3

Exts.D1 and D2. Both cases as well as both appeals were

disposed of by common judgments. The courts below

concurrently came to the conclusion that all ingredients of the

offence punishable under Section 138 of the N.I.Act have been

established. Accordingly, they proceeded to pass the impugned

concurrent judgments. The trial court had found that the third

accused is not guilty and had acquitted him in both cases.

Accused 1 and 2, the Co-operative Society and its President are

the petitioners before me. They were the appellants before the

appellate court.

5. Called upon to explain the nature of the challenge

which the petitioner wants to mount against the impugned

concurrent judgments, the learned counsel for the petitioners

raises the following four grounds:

(i) The then Secretary of the first accused Society had not

signed the cheque and hence the cheques were not duly executed

cheques.

(ii) The cheques were handed over to the complainant

Society only as security without the signature of the Secretary

and such cheques were misutilised by the complainant.

Crl.R.P.No.85/2006 & 86/2006 4 (iii) The prosecution of accused 1 and 2 without arraying

the then Secretary who allegedly signed the cheques along with

the second accused is at any rate, bad in law in as much as the

second and the third accused must be held to have joint and

several liability under Section 141 of the N.I.Act.

(iv) The sentence imposed is at any rate excessive.

6. All the four cheques have been marked before the

courts below. The cheques show that the second

accused/President of the Society and the then Secretary of the

first accused Society had signed the cheques. There is no

dispute that the President and the Secretary are the persons

competent to sign the cheques on behalf of the first accused. The

contention is that the cheques when they were handed over did

not contain the signature of the then Secretary. Only the second

accused had signed the cheques. In short, the first contention is

that the cheques were not duly executed by the then Secretary

on behalf of the first accused.

7. Less said about this contention the better. The

cheques were not returned by the Bank on the ground that the

signature of the Secretary does not tally with the specimen

Crl.R.P.No.85/2006 & 86/2006 5

signature available in the bank. It is too much to assume that the

complainant would have forged the signature of the then

Secretary in the four cheques and presented the same for

encashment. At any rate, absolutely no satisfactory indications

are available to probabilise, much less to establish, the said

contention. This contention raised has no legs to stand on and

must therefore fall to the ground.

8. The second contention raised is that the cheques were

not issued for the due discharge of any legally enforcible

debt/liability. They were handed over to the complainant with

the signature of only the second accused (without the signature

of the then Secretary of the Society) solely for the purpose of

accounts. It was never intended or expected that the cheques

will be presented for encashment. I have already come to the

conclusion while considering the first contention that the plea

that the cheques were not signed by the then Secretary cannot

succeed. The cheques have been held to be signed by both the

authorised signatories that is the second accused, the President

and the then Secretary. Once the execution and handing over of

the cheques are proved, the presumption under Section 139 of

Crl.R.P.No.85/2006 & 86/2006 6

the N.I.Act also arises. No worthwhile attempt has been made to

dislodge the presumption under Section 139 of the N.I.Act.

Moreover, it is not disputed that an amount of Rs.1,00,000/- has

been paid in partial discharge of the liability. In these

circumstances, the contention that the cheques were not issued

for the due discharge of any legally enforcible debt /liability

cannot also succeed.

9. The learned counsel for the petitioner has trained all

his guns on the challenge on the third contention. The counsel

contends that the present Secretary, who represented the first

accused and appeared as the third accused in these prosecutions

is admittedly not the one who signed the cheques in question.

The then Secretary was not the Secretary of the Society when

the cheques were dishonoured by the bank nor was the present

third accused who represents the first accused society, the

signatory in the said cheque. The counsel therefore contends

that the one who signed the cheques as the Secretary is a

necessary party to this proceedings. In as much as the said

person - second signatory - the then Secretary has not been

arrayed as an accused, prosecution of the second

Crl.R.P.No.85/2006 & 86/2006 7

accused/President is not proper or justified. The President is also

hence entitled to the benefit or advantage arising from the

omission of the complainant to prosecute the then

Secretary/signatory. The second accused/President may also in

these circumstances be acquitted. This, in short, is the third

contention raised.

10. The offence under Section 138 of the N.I.Act without

dispute is committed only by the drawer of the cheque namely

the first accused. The second and the third accused or the

signatories to the cheques are not the drawer in respect of the

cheques. They are only persons authorised to operate the

account on behalf of the drawyer. They are not liable principally

as drawers under Section 138 of the N.I.Act. The account is not

maintained by them but it is maintained by the first accused. The

signatories to the cheques can be arrayed as accused and

prosecuted successfully only with the aid of Section 141 of the

N.I.Act. The question then is whether the signatory to the

cheques was the person in charge of and responsible for the

conduct of the business of the first accused society on the date

when the offence was committed. The next question that arises

Crl.R.P.No.85/2006 & 86/2006 8

will be whether the omission to prosecute such person also can

deliver any advantage to the accused.

11. A reference to Section 141 of the N.I.Act appears to be

crucial and vital. I extract the same below:

"Offences by companies:- (1) If the person committing an offence under Section 138 is a company, every person who, at the time the offene 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".

(emphasis supplied)

A person can be made liable under Section 141(1) of the N.I.Act

for an offence committed by the company only if "at the time the

offence was committed he was in charge of and responsible to

Crl.R.P.No.85/2006 & 86/2006 9

the company for the conduct of the business of the company".

The company as well as such persons shall then be deemed to be

guilty of the offence and can be prosecuted.

12. The person who has signed the cheques will

undoubtedly be a person in charge of and responsible to the

company for the conduct of its affairs and would consequently be

personally liable under Section 141 of the N.I.Act read with

Section 138. If there be any surviving doubts on this aspect, we

need only consider the answer to question (c) by the Supreme

Court in SMS Pharmaceuticals Ltd. vs. Neeta Bhalla[(2005)8

Supreme Court Cases 89]. In paragraph 10(c) in that decision, it

has clearly been held that a signatory to the cheque can be held

to be a person liable under Section 141.

13. Section 141 makes persons other than the company

personally liable for the offence under Section 138 of the N.I.Act

only if they were in charge of and responsible for the company

for the conduct of its affairs at the time the offence was

committed. This calls for ascertainment of the date on which the

offence is committed. There is no dispute in this case that

though the said person who signed the cheques as the Secretary

Crl.R.P.No.85/2006 & 86/2006 10

was the Secretary on the date when the cheque was signed, she

had ceased to be the secretary by the time the cheques were

dishonoured by the bank. The courts below took note of the fact

that the Secretary who signed the cheques had not been arrayed

as an accused. The present Secretary arrayed by virtue of his

office as accused No.3 was also not convicted as the prosecution

of the third accused was in the name of the office of Secretary

and not any individual in his personal capacity. The third

accused represented the first accused and was again shown as

the third accused by virtue of his office. It is in these

circumstances that the third accused was not convicted. The

acquittal of the third accused has now become final without

challenge.

14. The only question is whether the omission to

prosecute the signatory/Secretary can deliver any advantage to

the petitioner. This in turn calls for a decision of the question

whether the signatory has personal liability under Section 141 if

such signatory has ceased to be a Secretary on the date when the

cheque was presented for encashment and dishonoured. Such

person/signatory will be liable only if he was in charge of and

Crl.R.P.No.85/2006 & 86/2006 11

responsible to the company for the conduct of his afffairs on the

date when the offence was committed. On what date the offence

was committed is the necessary next question. This would oblige

the court to ascertain what precisely is the offence under Section

138 of the N.I.Act.

15. I have adverted to the same question in the decision in

Bhaskaran Nair vs. Abdul Kareem [2006(4) KLT 48] in paragraph

9 of the said judgment. The question was considered and

answered in the following words.

"A fundamental question arises. What is the offence under S.138 of the N.I.Act? The plain

reading of the body of S.138 can leave behind no doubt that the offence is dishonour of the cheque issued for the discharge of liability of a specified nature on the grounds specified in the Section. That is the offence. Proviso deals only with certain formalities to be complied with before a successful prosecution can be launched. They do not make or unmake the offence. The offence is already defined in the body of the Section. Proviso only incorporates certain conditions before a valid prosecution for the offence defined is launched. The point is that the offence defined has nothing to do with the proviso. The proviso does not prescribe the ingredients of the offence. It only prescribes the procedural formalities to be satisfied before the prosecution is launched. While considering whether the mandates of the proviso have been satisfied, it cannot be lost sight of that they are not ingredients of the offence but only procedural safeguards to help an indictee to

Crl.R.P.No.85/2006 & 86/2006 12

avoid prosecution. If that be so the Court of Revision has to apply its mind to the question whether the alleged infraction of the procedure has resulted in miscarriage of justice".

16. The learned counsel for the respondent/complainant

submits that the said observations may not represent the correct

law. He submits that the same has been rendered without

reference to the decisions of the Supreme Court in K.Bhaskaran

vs. Sankaran Vaidhyan Balan [1999 SC 3762], Sadanandan

Bhadran vs. Madhavan Sunil Kumar [1998 SC 3043] and SMS

Pharmaceuticals Ltd. vs. Neeta Bhalla [(2005) 8 SCC 89]. The

counsel contends that the opinion expressed in Bhaskaran Nair

vs. Abdul Kareem [2006(4) KLT 48] that the proviso to Section

138 do not make or unmake the offence has been rendered

without reference to the above said decisions of the Supreme

Court which declared that the ingredients of the proviso are also

components/ingredients of the offence under Section 138 of the

N.I.Act. The learned counsel for the respondent hence contends

that the person who has signed the cheque is also liable under

Section 141 notwithstanding the fact that he has ceased to be the

secretary/office bearer on the date of dishonour of the cheque. Crl.R.P.No.85/2006 & 86/2006 13

17. I am unable to accept the said submission of the

learned counsel. Under Section 138 of the N.I.Act, the body of

the Section declares the offence. Under Section 138 of the

N.I.Act certain conduct or events expose the drawer to a deeming

fiction. The specified person (the drawer of the cheque) shall be

deemed to have committed the offence. Section 138 of the

N.I.Act is extracted below.

"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 extend 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

Crl.R.P.No.85/2006 & 86/2006 14

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".

(emphasis supplied)

18. It is evident from the language of Section 138 of the

N.I.Act that the drawer is deemed to have committed the offence

when a cheque issued by him of the variety contemplated under

Section 138 is dishonoured for the reasons contemplated in the

Section. The crucial words are "is returned by the bank unpaid".

When that happens, such person shall be deemed to have

committed the offence. With the deeming in the body of Section

138, the offence is already committed or deemed to have been

committed. A careful reading of the body of Section 138 cannot

lead to any other conclusion. Proviso to Section 138 according to

me only insists on certain conditions precedent which have to be

satisfied if the person who is deemed to have committed the

offence were to be prosecuted successfully. The offence is

already committed when the cheque is returned by the bank. But

Crl.R.P.No.85/2006 & 86/2006 15

the cause of action for prosecution will be available to the

complainant not when the offence is committed but only after the

conditions precedent enumerated in the proviso are satisfied.

After the offence is committed, only if the option given to avoid

the prosecution under the proviso is not availed of by the

offender, can the aggrieved person get a right or course of

action to prosecute the offender. The offence is already deemed

and declared but the offender can be prosecuted only when the

requirements of the proviso are satisfied. The cause of action for

prosecution will arise only when the period stipulated in the

proviso elapses without payment. Ingredients of the offence have

got to be distinguished from the conditions precedent for valid

initiation of prosecution.

19. I am totally supported in this conclusion by the

observations in paragraph 5 in Sadanandan Bhadran vs.

Madhavan Sunil Kumar [AIR 1998 SC 3043] . I extract the

relevant portion in paragraph 5 below:

" On a careful analysis of the above section it is seen that its main part creates an offence when a cheque is returned by the bank unpaid for any of the reasons mentioned therein. The significant fact, however, is that the proviso lays down three

Crl.R.P.No.85/2006 & 86/2006 16

conditions precedent to the applicability of the above Section and, for that matter, creation of such offence and the conditions are: (i) the cheque should have been presented to the bank within six months of its issue or within the period of its validity whichever is earlier; (ii) payee should have made a demand for payment by registered notice after the cheque is returned unpaid; and (iii) that the drawer should have failed to pay the amount within 15 days of the receipt of notice. It is only when all the above three conditions are satisfied that a prosecution can be launched for the offence under Section 138."

20. It is true that in paragraph 7 of Sadanandan Bhadran

vs. Madhavan Sunil Kumar as also in paragraph 2 of SMS

Pharmaceuticals Ltd. vs. Neeta Bhalla (2005)8 SCC 89 and still

earlier in K.Bhaskaran vs.Sankaran Vaidhyan Balan [AIR 1999 SC

3762] there are observations that all the five components /

ingredients must be satisfied before a valid conviction can be

entered. The following five elements have been held to be

necessary for a proper prosecution. They are:

(1)drawal of the cheque

(2)presentation of the cheque to the bank.

(3)Returning of the cheque unpaid by the bank

(4)giving notice of demand to the drawer demanding

Crl.R.P.No.85/2006 & 86/2006 17

payment of the cheque amount

(5)failure of the drawer to make the payment within

thirty days of receipt of notice.

21. One cannot lose sight of the fact that these

observations were not made by the Supreme Court while

attempting to ascertain the precise date of commission of the

offence under Section 138 of the N.I.Act. That was not the

purpose of discussion in any of the decisions referred above. The

court wanted to ascertain in Sadanandan Bhadran vs. Madhavan

Sunil Kumar whether there can be more than one cause of action

for the complainant to prosecute the offender. In K.Bhaskaran

vs.Sankaran Vaidhyan Balan, the court had to decide which court

had territorial jurisdiction to try the offence under Section 138 of

the N.I.Act. In SMS Pharmaceuticals Ltd. vs. Neeta Bhalla the

observations were made generally while ascertaining personal

liability of individuals under Section 141 when a company is the

offender and certainly not for the purpose of ascertaining the

precise point of time when the offence was committed.

22. The precise ascertainment of the date of the offence

becomes important now for the purpose of considering the play

Crl.R.P.No.85/2006 & 86/2006 18

of Section 141 of the N.I.Act. Different persons may be in charge

of and responsible to the company for the conduct of its affairs on

these different dates namely the date of drawal of cheque, date of

presentation and dishonour of cheque, date of receipt of the

notice of demand and the date on which the period of fifteen days

would elapse. The whole crowd of persons who may be in charge

of and responsible to the company for the conduct of its affairs,

on these different dates cannot certainly be arrayed as accused

sucessfully. The precise date of commission of the offence has

got to be ascertained. It is in this context that I take note of the

specific stipulation in the body of Section 138 of the N.I.Act. The

offence under Section 138 of the N.I.Act shall be deemed to have

been committed by the drawer of the cheque when the bank

returns the same unpaid. The expression "is returned by the

bank unpaid" must convey to the court that the precise offence

can be said to be committed only on that crucial date. The

proviso according to me gives only an option to the drawer of the

cheque to avoid the prosecution. This has been stated very

clearly by the Supreme Court in Rajaneesh Aggarwal Vs. Amit

J.Bhalla [2001(1)SCC 631 paragraph 6] in the following words: Crl.R.P.No.85/2006 & 86/2006 19

"the object of issuing notice indicating the factum of dishonour of cheques is to give an opportunity to the drawyer to make the payment within fifteen days so that it will not be necessary for the payee to proceed against any criminal action, even though the bank dishonours the cheques."

23. The offence is committed when the bank returns the

cheque as unpaid. To prosecute the offender for the said offence,

certain further formalities have got to be complied with and the

complainant - payee or the holder in due course, shall get a

cause of action to prosecute the offender for the offence already

committed by him only when the requirements of the proviso are

satisfied. Proviso deals with the conditions which have to be

satisfied if the payee or the holder in due course were to get a

right/cause of action to prosecute the offender who has

committed the offence. The stipulations in the proviso must also

be proved certainly before the offender can be successfully

prosecuted. But in the strict sense they are not ingredients of

the deemed offence under the body of Section 138 of the N.I.Act,

though the said stipulations must also be proved to ensure and

claim conviction. It is in this sense that it is said that the proviso

does not make or unmake the offence under Section 138 of the

Crl.R.P.No.85/2006 & 86/2006 20

N.I.Act. That is already done by the body of the Sections. This

dispute as to whether the stipulations of the proviso are

conditions precedent or ingredients/components of the offence

under Section 138 of the N.I.Act may only be academic in most

cases. Undoubtedly the ingredients stricto sensu as also the

conditions precedent will have to be established satisfactorily in

all cases. Of course in an appropriate case it may have to be

considered whether substantial compliance of the conditions

precedent can be reckoned to be sufficient to justify a conviction.

Be that as it may, the distinction between the ingredients and

conditions precedent is certainly real and existent. That

distinction is certainly vital while ascertaining complicity of an

indictee who faces indictment in a prosecution under Section 138

with the aid of Section 141 of the N.I.Act. That is how the

question assumes such crucial significance here.

24. So reckoned, the offence under Section 138 of the

N.I.Act must be held to be committed on that date when the bank

on which the cheque is drawn returns the cheque unpaid for the

reasons referred to in Section 138. That is the specific date/time

of commission of the offence. Any interpretation which will make

Crl.R.P.No.85/2006 & 86/2006 21

the date of commission of the offence uncertain is bound to

create confusion when we attempt to work the law by

interpreting Section 138 and 141 of the N.I.Act. I therefore come

to the conclusion that the offence under Section 138 of the

N.I.Act can be held to be committed only on the date when the

cheque is returned unpaid by the bank.

25. If that be so, the person who has signed the cheque as

the Secretary who was admittedly not the Secretary on the date

on which the cheque was returned unpaid by the bank cannot be

held to be in charge of and responsible to the company for the

conduct of its affairs on the date when the offence was

committed. Therefore the signatory / the then Secretary cannot

be prosecuted under Section 138 read with Section 141 of the

N.I.Act. The petitioners herein can hence claim no benefit or

advantage on account of the conduct of the complainant not

prosecuting the then Secretary / signatory of the cheque. The

challenge raised on this ground must hence fail.

26. If the signatory/then Secretary is not the person in

charge of and responsible to the company for the conduct of its

affairs on the date of the offence (that is the date on which the

Crl.R.P.No.85/2006 & 86/2006 22

cheque was returned unpaid by the bank), the Secretary on the

date of such commission of the offence can theoretically be

prosecuted successfully. The complainant herein did choose to

prosecute the said Secretary though the Secretary was not

arrayed as the third accused in his personal name. The acquittal

of the said accused has already become final without challenge

also. At any rate, the complainant cannot be found fault with for

not prosecuting the person/incumbent Secretary and the attempt

to claim any advantage on that basis by the petitioners cannot

obviously succeed.

27. Moreover, the decision in Anil Hada vs. Indian Acrylic

Ltd.[2000(1) SCC 1] makes the position crystal clear that the

omission to prosecute the co-accused in a prosecution under

Section 138 of the N.I.Act cannot deliver any advantage to the

indictee facing prosecution. That was a case where the company

was not prosecuted. The signatory of the cheque alone was

prosecuted under Section 141 of the N.I.Act. The Supreme Court

had considered the question and come to the conclusion that

even when the company is not prosecuted, the prosecution of the

person responsible to the company under Section 141 is not

Crl.R.P.No.85/2006 & 86/2006 23

barred. If that be so, certainly the omission to prosecute another

person though not a signatory who was in charge of and

responsible to the company for the conduct of its affairs on the

date of dishonour cannot also deliver any advantage to the

petitioners herein. Prosecution of the company alone (i.e without

prosecuting any person with the aid of Section 141) or

prosecution of the person in charge under Section 141 or one of

such persons only (i.e without prosecuting the company or other

such persons including a co-signatory) cannot be held to be vital

defects which would vitiate such prosecutions, in the absence of

any special circumstances indicating prejudice against the

accused.

28. I have been taken through the decision of a learned

single Judge in Shaji vs. Kerala State Co-operative Marketing

Federation Ltd [2006(2) KLT 289]. That decision, as the facts in

that case reveal, can only be authority for the proposition that the

prosecution of a person under Section 141 can continue and is

not affected by his subsequent change in status vis a vis the

company. That decision does not take into consideration the

change in status between the date of drawal of the cheque and

Crl.R.P.No.85/2006 & 86/2006 24

the date on which the cause of action arises on the lapse of thirty

days from the date of receipt of the notice. The challenge raised

on this third ground must also hence fail.

28. I now come to the fourth ground of challenge. The

first petitioner Society has been sentenced to pay a fine of

Rs.5,000/- in both cases. The second accused president/signatory

has been sentenced in both cases to undergo S.I for a period of

six months. He has been sentenced to pay a fine of Rs.5,000/- in

the first case - relating to one cheque only. Default sentence has

also been prescribed. In the second case, the second accused

has further been directed to pay the balance cheque amount of

Rs.4,71,147/- as compensation. There is no default sentence

imposed. Counsel prays that leniency may be shown on the

question of sentence.

29. I have already adverted to the principles governing

imposition of sentence in a prosecution under Section 138 of the

N.I.Act in the decision reported in Anilkumar vs.Shammi [2002

(3)KLT 852]. In the facts and circumstances of the case, I find no

compelling reasons which can persuade this court to insist on

imposition of any deterrant substantive sentence of imprisonment

Crl.R.P.No.85/2006 & 86/2006 25

on the second accused/petitioner. Leniency can certainly be

shown to the second accused / petitioner. In both cases, he can

be sentenced to undergo imprisonment till rising of court and to

pay an amount of Rs.5,000/- (Rupees five thousand only) each as

fine and in default to undergo S.I for a period of fifteen days

each.

30. So far as the first accused is concerned, I am satisfied

that the sentence imposed in the second case relating to the

three cheques can be modified. A direction to pay the entire

balance amount outstanding - Rs.4,71,147/- (Rupees four lakhs

seventy one thousand one hundred and forty seven only) as

compensation against the first accused shall meet the ends of

justice ideally. No default sentence can be imposed. I am

satisfied that it is not necessary to mulct the second accused with

any personal liability to pay the outstanding amount as

compensation or impose any default sentence on him.

31. Technically, the powers under Section 357(3) can be

invoked only when the courts choose to impose a sentence of

which fine does not form a part. The first accused is a company

and therefore no substantive sentence of imprisonment can be

Crl.R.P.No.85/2006 & 86/2006 26

imposed on the Company. But following the rationale in

Standard Chartered Bank vs.Directorate of Enforcement [2005(4)

SCC 530] the mandate of Section 357(3) can certainly be read

down as no sentence of imprisonement can ever be imposed on a

company--a non natural fictional person. What is possible alone

can be imposed on the company under Section 357(3) Cr.P.C.

The powers under Section 357(3) can hence be invoked against a

non natural person even when imposition of a substantive

sentence of imprisonment is impossible. In these circumstances,

I am satisfied that powers under Section 357(3) can be invoked

against the first accused to direct payment of compensation

under Section 357(3). The same can be recovered under Secion

421 read with Section 431 Cr.P.C. The challenge raised in this

revision petition can hence succeed only to the above limited

extent.

32. In the result,

(a) these revision petitions are allowed in part.

(b) the impugned verdicts of guilty and conviction of

accused 1 and 2 are upheld.

(c) But the sentence imposed is modified and reduced.

Crl.R.P.No.85/2006 & 86/2006 27

The second accused/president is sentenced in each case to

undergo imprisonment till rising of court and to pay a fine of

Rs.5,000/- (Rupees five thousand only) each. In default of

payment of fine, he shall undergo S.I for a period of fifteen days

each. If realised, the entire amount of fine shall be released to

the complainant and the same shall be credited to the expenses

incurred in prosecuting this three tier criminal litigation.

33. The sentence imposed on the first accused society in

C.C.No.722/1998 (Crl.R.P.No.85/06) is upheld. The sentence

imposed in C.C.No.723/1998 (Crl.R.P.No.86/06) is set aside. No

substantive sentence of fine is imposed. The first

accused/petitioner is directed to pay an amount of Rs.4,71,147/-

(Rupees four lakhs seventy one thousand one hundred and forty

seven only) along with interest at the rate of 6% per annum from

22/07/1998 as compensation under Section 357(3) Cr.P.C which

shall be recovered by resort to Section 421 read with Section 431

Cr.P.C. I have already held in Crl.R.P.No.3394 of 2006 that such

a direction for payment of interest is permissible in view of

Section 80 of the N.I.Act.

34. The second petitioner shall appear before the learned

Crl.R.P.No.85/2006 & 86/2006 28

Magistrate on 30/11/2006 to serve the modified sentence hereby

imposed. The learned Magistrate shall take immediate steps for

recovery of the amounts due from the first accused if payment is

not effected on or before 30/11/2006.

(R.BASANT, JUDGE)

jsr

Crl.R.P.No.85/2006 & 86/2006 29

R.BASANT, J

C.R.R.P.No.

ORDER

21ST DAY OF JULY 2006