N. Harihara Krishnan vs J. Thomas

CRIMINAL APPEAL NO. 1534 OF 2017 (Arising out of SLP(Crl.) No.1439 of 2017)

N. Harihara Krishnan … Appellant

Versus

J. Thomas … Respondent

JUDGMENT

Chelameswar, J.

1. Leave Granted

2. M/s. Norton Granites & Spinners (P) Ltd. (hereafter NORTON) sold

three parcels of land by three separate registered sale deeds dated

14.5.2007 to one M/s. Srivari Exports, a partnership firm (hereafter

FIRM). The appellant herein is the managing partner of the FIRM and

the respondent, it appears, is the power of attorney holder for the

managing director of NORTON. It appears from the record that the

appellant is also a director of a company known as M/s. Dakshin Signature Not Verified Digitally signed by

Granites Pvt. Ltd. (hereafter DAKSHIN).

DEEPAK MANSUKHANI Date: 2017.08.30 16:30:30 IST Reason:

3. The respondent herein filed a complaint on 08.10.2012 bearing CC

1 No. 2925 of 2012 on the file of the VII Metropolitan Magistrate, George

Town at Chennai against the appellant herein invoking Sections 138

and 142 of the Negotiable Instruments Act, 1881 (hereinafter referred to

as “THE ACT”). The substance of the complaint is that the appellant

herein drew a cheque bearing No. 064159 dated 10.8.2012 for a sum of

Rs.39 lakhs (Rs.39,00,000/-) on the Syndicate Bank, Armenian Street,

Chennai in favour of the respondent. According to the complaint, the

said amount of Rs. 39 lakhs is the amount due from the appellant

towards the balance of the sale consideration in connection with the

sale transactions referred to above.

4. The said cheque was presented for collection by the respondent

through his bank (Indian Bank, High Court Branch, Chennai) on

28.8.2012 which was dishonoured on the ground that the account on

which the cheque was drawn had been closed.

5. On 10.9.2012, the respondent issued a notice contemplated under

clause (b) of the proviso to Section 138 of THE ACT. By the said notice,

the appellant was informed that the cheque had been dishonored and

further the appellant was called upon to pay the sum of Rs.39 lakhs

within 15 days from the date of the receipt of the notice. According to

the complaint, the notice was served on the petitioner on 14.9.2012 but

2 the petitioner neither responded to the notice nor made the payment.

Hence the complaint.

6. On 19.8.2015, Crl.M.P. No. 6771 of 2015 came to be filed in the

above-mentioned CC No. 2925 of 2012 by the respondent herein

purporting to be an application under Section 319 of the Code of

Criminal Procedure, 1973 (for short “CrPC”) with prayer as follows:-

“3. In the above circumstances, it is therefore prayed that this Hon’ble Court may be pleased to implead M/s DAKSHIN GRANITES PVT. LTD., NO. 3B, EEBROS Centre, 40, Montieth Road, Chennai – 600 008 as accused A1, in C.C. No. 2925 of 2012 pending on the file of this Hon’ble Court and thus render justice.”

7. According to the said application, it came to the notice of the

respondent during the course of cross-examination of the appellant

herein at the trial of the CC No.2925 of 2012 that the cheque in

question was drawn on the account of DAKSHIN and the appellant is

only a signatory on behalf of the DAKSHIN in his capacity as a Director

of DAKSHIN. The respondent had initially failed to lodge the complaint

against DAKSHIN by inadvertence and hence the application.

8. The application was contested by the appellant. The learned

Metropolitan Magistrate by his Order dated 21.4.2016 allowed the said

application. The petitioner carried the matter in Criminal R.C. No. 774

of 2016 to the Madras High Court unsuccessfully. Hence the instant

3 SLP.

9. Xerox copies of the three sale deeds are placed before us and

according to the said documents, the sale consideration for the three

sale deeds is Rs. 2,80,000/-, Rs. 2,50,000/- and Rs. 1,20,000/-, in all

Rs. 6,50,000/-. Nonetheless, the respondent filed the complaint stating

that the cheque in question for Rs.39 lakhs was drawn towards the

balance of the sale consideration of the transactions covered by the

above-mentioned three sale deeds. Prima facie, it is very doubtful

whether the cheque was drawn for any amount which is legally due to

the respondent from the appellant.

10. A xerox copy of the cheque is placed before us. The number of the

account on which the cheque was drawn is not very clear from the said

copy. But from the content of the application from out of which the

instant appeal arises and from the xerox copy of the cheque it appears

that it was drawn on the account of DAKSHIN by somebody who claims

to be a Director of DAKSHIN. It is a case of the respondent that the

cheque was signed by the appellant. There appears to be some dispute

regarding the identity of the person who signed the cheque. It can be

seen from para 2 of the complaint, the said cheque was handed over to

4 the respondent through “an unknown person at Chennai High Court

premises”.

11. Assuming for the sake of argument that an amount of Rs. 39 lakhs

was due towards the balance of the sale consideration of the

above-mentioned three sales from the FIRM of which the appellant is

said to be the Managing Partner. The cheque in question was drawn by

a private company (DAKSHIN) (a third party to the sale transactions and

such a payment is permissible under the Indian Contract Act) and

allegedly signed by the appellant in his capacity as the Director of

DAKSHIN.

12. The learned Counsel for the appellant argued;

(a) Since the cheque in question was drawn on the account

of DAKSHIN, the person primarily liable for punishment

under Section 138 of THE ACT would be DAKSHIN. The

appellant herein being the alleged signatory in his capacity as

the Director of DAKSHIN would only be vicariously liable (if at

all) for the offence committed by DAKSHIN. In view of the law

declared by this Court in Aneeta Hada1 the prosecution

1 Aneeta Hada v. Godfather Travels & Tours Private Limited, (2012) 5 SCC 661

5 against the appellant could not be successfully maintained

without prosecuting DAKSHIN. Since the complaint was

originally lodged only against the appellant, the respondent

resorted to the device of filing an application on 19.8.2015

under Section 319 CrPC to ‘implead’ (in substance summon)

DAKSHIN as an accused/ respondent to the complaint.

(b) Section 142(1)(a) of THE ACT inter alia stipulates that a

complaint regarding the commission of the offence under

Section 138 must be “made within one month of the date on which

the cause of action arises under clause (c) of the proviso to Section 138”.

The application under Section 319 of CrPC by which

DAKSHIN is sought to be impleaded (summoned) is in

substance a complaint against DAKSHIN which is filed some

three years after the expiry of the period of 15 days stipulated

under clause (c) of the proviso to Section 138. Therefore

barred by the stipulation contained in Section 141(1)(b) of

THE ACT. No valid explanation for condoning such a long

delay is offered by the respondent. Both the courts below

erred in coming to the conclusion that once the offence is

6 taken cognizance of, the question of delay does not arise.

(c) Section 1382 stipulates inter alia that (i) the payee of the

cheque must give a notice in writing to the drawer of the

cheque within 30 days from the “receipt of the information by him

from the bank regarding the return of the cheque as unpaid”; (ii) the

notice must contain a demand for the payment of the amount

due on the cheque; and (iii) upon the receipt of the notice, if

the drawer of the cheque fails to make payment within 15

days of the receipt of the notice, prosecution could be

launched within one month thereafter. The timelines

stipulated under clauses (a) to (c) of the proviso to Section

138 are mandatory.3 2 “Section 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 provisions of this Act, be punished with imprisonment for a term which may be extended to two years, 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 the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20 [within thirty 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.” 3 7

(d) The (instant) application under Section 319 CrPC came

to be filed (on 19.08.2015) some three years after the

dishonour of the cheque by the bank (on 30.8.2012). If the

respondent were to file complaint under Section 138 against

DAKSHIN on 19.8.2015, such a complaint would be clearly

not maintainable as it would have been far beyond the

permissible time within which a complaint could have been

filed under Section 138 of THE ACT. Therefore, both the

courts below erred in allowing the application.

13. On the other hand, the learned counsel for the respondent

submitted that the trial court and the High Court rightly impleaded the

appellant. The learned counsel submitted that the proviso to clause (b)

of Section 142 of THE ACT enables the Court to take cognizance of the

offence even beyond the prescribed period of limitation, if the

complainant satisfies the Court that he had sufficient cause for not

making the complaint within the period of limitation. The respondent

D. Vinod Shivappa v. Nanda Belliappa, (2006) 6 SCC 456 “14. ...There is good authority to support the proposition that once the complainant, the payee of the cheque, issues notice to the drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138 of the Act, his complaint gets barred by time.” C.C. Alavi Haji v. Palapetty Muhammed and Another, (2007) 6 SCC 555 “9. ….It was further observed that once the payee of the cheque issues notice to the drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of action arises under Clause (c) of the proviso to Section 138 of the Act, his complaint gets barred by time. …”

8 only got to know that the cheque in question was drawn on the account

of DAKSHIN only during the course of trial. Therefore, the respondent

made out a case for condonation of the delay.

14. It is rather difficult to understand the decision of the trial court.

We are given to understand that the order is made in vernacular and

only a translated copy4 of the same is placed before us. Be that as it

may, the ‘relevant’ portion of the translated copies reads as follows:-

“Hence whether cheque was drawn by company trial on the complaint can be possible only if company is impleaded in complaint. Hence as far as this case on hand, without impleading Dakshin Granite (P) Ltd trial can not be conducted for impleading the company and conditions as per Section 138 should be fulfilled. As per Section 138 Notice has been sent to Dakshin Granites – hence conditions fulfilled.

It is prayed by complainant that he should be permitted to implead company and also condone the delay.

As per Section 142, complaint is to be filed with one month which has been done. Hence as per Section 142(b) no separate petition is required after cognizance of offence.

The offenders of crime can be decided. To take conginsance it is not required to take cognizance in the case of each accused. In view of the above the petition is allowed and I order for impleading the company and summons to be served.”

15. While examining the legality of the trial court’s order, the High

Court took note of the fact that two applications were filed by the

respondent, one to condone the delay (of 1211 days) and other to

implead (summon?) DAKSHIN invoking Section 319 of the CrPC. The

High Court recorded an interesting finding:-

4

We are not informed whether it is an official translation by either of the courts below or any one of the learned counsel who appeared in the case or by the parties.

9 “In this case, the present revision is preferred only against the order passed in Crl.M.P. No. 6771 of 2015 in C.C. No. 2925 of 2012, which was filed to implead M/s. Dakshin Granites Private Ltd., as an accused in the private complaint and no appeal or revision was preferred against the order passed in Crl.M.P. No. 1257 of 2016 by either side.”

16. We say it is an interesting finding because from the translation of

the trial court’s order placed before us, the trial court is silent about the

application for condonation of the delay. On the other hand, the trial

court observed “Hence as per Section 142(b) no separate petition is required after

cognizance of offence.”

After recording such a finding, the High Court proceeded to say;

“…The Trial Court, after considering the arguments of both sides, came to a conclusion that since the case was already taken on file and cognizance of the offence was taken, in this case, separate petition to condone the delay of 1211 days is not necessary and M/s. Dakshin Granites Private Ltd. was impleaded as an accused. Admittedly, statutory notice under Section 138(b) of the Negotiable Instruments Act was issued to M/s. Dakshin Granites Private Ltd., and M/s. Dakshin Granites Private Ltd., has not preferred any revision before this Court. Hence, the present petitioner is only the signatory. Even according to the present petitioner, who is an individual person and who signed the cheque represents the company.”

The High Court, concluded that as no revision is filed by DAKSHIN

the “revision preferred by the petitioner is not maintainable. No merits in the

petition.”

17. We are of the opinion that it is difficult to understand the

conclusions recorded by both the courts below. They are wholly

illogical, to use a very mild expression.

18. Section 142 of THE ACT inter alia stipulates that no court shall

10 take cognizance of any offence punishable under Section 138 unless a

complaint is made within one month of the date on which the cause of

action arises under clause (c) of the proviso to Section 138. The

relevant portion of Section 142 reads as follows:-

“142 Cognizance of offences. —Notwithstanding anything contained in the Code of Criminal Procedure, 1973—

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138:

Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.”

19. The preliminary facts constituting an offence 5 under Section 138 of

the Act are; (i) that a cheque is drawn, and (ii) that cheque is dishonored

by the Bank when presented by the payee. Under the scheme of Section

138 both the drawer of the cheque and the bank upon which the cheque

5 However, this Court in MSR Leathers v. S. Palaniappan and Another, (2013) 1 SCC 177 held;

10. Proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that the cheque ought to have 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. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The third condition is that the drawer of such a cheque should have failed to make 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. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque.

11 is drawn are parties against whom the payee of the cheque can have

various legal rights, which may have either civil or criminal

consequences or perhaps both depending upon the facts of a given case.

Section 138 prescribes only one of the consequences, i.e. the

prosecution and punishment of only the drawer of the cheque. It is

possible in a given case that a bank may without any valid justification

decline to honor a cheque drawn on it. For which act of the bank, the

drawer of the cheque may in no way be responsible either in fact or in

law. In such a fact situation, the payee of the cheque may have legal

rights and remedies for the redressal of the injury (if any) caused by the

Bank in addition to his rights against the drawer of the cheque.

20. The offence under Section 138 of THE ACT is capable of being

committed only by the drawer of the cheque. The logic of the High Court

that since the offence is already taken cognizance of, there is no need to

take cognizance of the offence against DAKSHIN is flawed. Section 141

stipulates the liability for the offence punishable under Section 138 of

THE ACT when the person committing such an offence happens to be a

company - in other words when the drawer of the cheque happens to be

a company. Relevant portion of Section 141 reads as follows:-

“Section 141. Offences by companies.—

12 (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:”

21. This Court in Aneeta Hada, had an occasion to examine the

question “whether an authorised signatory of a company would be liable for

prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for brevity

“the Act”) without the company being arraigned as an accused” and held as

follows:-

“59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. …”

Yet the High Court reached a conclusion that the revision filed by

the petitioner is not maintainable because DAKSHIN did not choose to

challenge the trial court’s order.

The High Court failed to appreciate that the liability of the

appellant (if any in the context of the facts of the present case) is only

statutory because of his legal status as the DIRECTOR of DAKSHIN.

Every person signing a cheque on behalf of a company on whose

account a cheque is drawn does not become the drawer of the cheque.

13 Such a signatory is only a person duly authorised to sign the cheque on

behalf of the company/drawer of the cheque. If DAKSHIN/drawer of

the cheque is sought to be summoned for being tried for an offence

under Section 138 of THE ACT beyond the period of limitation

prescribed under THE ACT, the appellant cannot be told in view of the

law declared by this Court in Aneeta Hada that he can make no

grievance of that fact on the ground that DAKSHIN did not make any

grievance of such summoning. It is always open to DAKSHIN to raise

the defense that the initiation of prosecution against it is barred by

limitation. DAKSHIN need not necessarily challenge the summoning

order. It can raise such a defense in the course of trial.

Coming to the view of the High Court that only the offence is taken

cognizance of and there is no need to take cognizance of an offence

accused-wise is an erroneous view in the context of a prosecution under

THE ACT. Most probably the High Court recorded such conclusion

(though not expressly stated) on the basis of the judgment of this Court

in Raghubans Dubey v. State of Bihar, AIR 1967 SC 1167, where it

was stated:

“Para 9. … In our opinion, once cognizance has been taken by the Magistrate, he takes cognizance of an offence and not the offenders; once he takes cognizance of an offence it is his duty to find out who the offenders really are and once he comes to the conclusion that apart from

14 the persons sent up by the police some other persons are involved, it is his duty to proceed against those persons. …”

Such a statement of law was made by this Court in the background of

the scheme of the CrPC.

22. The CrPC is an enactment which is designed to regulate the

procedures governing the investigation of crimes in order to get the

perpetrators of the crime punished. A crime is an act or omission

prohibited by law attracting certain legal consequences like

imprisonment, fine etc. Obviously, acts or omissions constituting

offences/crimes are capable of being committed only by persons either

natural or juridical.

The CrPC imposes a duty on the investigating agencies to gather

evidence necessary to establish the occurrence of a crime and to trace

out the perpetrators of the crime in order to get them punished.

Punishment can be inflicted only by a competent Court but not by the

investigating agency. Courts are authorised to inflict punishment if only

they are satisfied that the evidence gathered by the investigating agency

is sufficient to establish that (1) a crime had been committed; and (2)

the persons charged with the offence (accused) and brought before the

Court by the investigating agency for trial are the perpetrators of the

15 crime.

Under the Scheme of the CrPC, any investigating agency (normally

the police) is bound to investigate by following the procedure prescribed

therein once it receives either information regarding the commission of a

cognizable offence or an order from a Magistrate to investigate into the

allegation of the occurrence of a non-cognizable offence and submit a

report under Section 173. Section 173(2)(i)(d) inter alia stipulates that

the report should contain a statement:

“Whether any offence appears to have been committed and if so by whom?”

The conclusions reached by the police after investigation into the above

two questions are required to be scrutinized by a competent Court. It is

only after the Court is satisfied that the evidence collected by the

investigating agency is sufficient in law to punish the accused, such

accused can be punished. Taking cognizance of an offence by the Court

is one of the initial steps in the process. Thereafter, the investigating

agency is required to collect evidence (investigate) and place the same

before the Court under Section 173 CrPC.

23. The scheme of the prosecution in punishing under Section 138 of

THE ACT is different from the scheme of the CrPC. Section 138 creates

16 an offence and prescribes punishment. No procedure for the

investigation of the offence is contemplated. The prosecution is

initiated on the basis of a written complaint made by the payee of a

cheque. Obviously such complaints must contain the factual allegations

constituting each of the ingredients of the offence under Section 138.

Those ingredients are: (1) that a person drew a cheque on an account

maintained by him with the banker; (2) that such a cheque when

presented to the bank is returned by the bank unpaid; (3) that such a

cheque was presented to the bank within a period of six months from

the date it was drawn or within the period of its validity whichever is

earlier; (4) that the payee demanded in writing from the drawer of the

cheque the payment of the amount of money due under the cheque to

payee; and (5) such a notice of payment is made within a period of 30

days from the date of the receipt of the information by the payee from

the bank regarding the return of the cheque as unpaid. It is obvious

from the scheme of Section 138 that each one of the ingredients flows

from a document which evidences the existence of such an ingredient.

The only other ingredient which is required to be proved to establish the

commission of an offence under Section 138 is that inspite of the

demand notice referred to above, the drawer of the cheque failed to

17 make the payment within a period of 15 days from the date of the

receipt of the demand. A fact which the complainant can only assert

but not prove, the burden would essentially be on the drawer of the

cheque to prove that he had in fact made the payment pursuant to the

demand.

24. By the nature of the offence under Section 138 of THE ACT, the

first ingredient constituting the offence is the fact that a person drew a

cheque. The identity of the drawer of the cheque is necessarily required

to be known to the complainant (payee) and needs investigation and

would not normally be in dispute unless the person who is alleged to

have drawn a cheque disputes that very fact. The other facts required to

be proved for securing the punishment of the person who drew a cheque

that eventually got dishonoured is that the payee of the cheque did in

fact comply with each one of the steps contemplated under Section 138

of THE ACT before initiating prosecution. Because it is already held by

this Court that failure to comply with any one of the steps contemplated

under Section 138 would not provide “ cause of action for prosecution”.

Therefore, in the context of a prosecution under Section 138, the

concept of taking cognizance of the offence but not the offender is not

appropriate. Unless the complaint contains all the necessary factual

18 allegations constituting each of the ingredients of the offence under

Section 138, the Court cannot take cognizance of the offence.

Disclosure of the name of the person drawing the cheque is one of the

factual allegations which a complaint is required to contain. Otherwise

in the absence of any authority of law to investigate the offence under

Section 138, there would be no person against whom a Court can

proceed. There cannot be a prosecution without an accused. The

offence under Section 138 is person specific. Therefore, the Parliament

declared under Section 142 that the provisions dealing with taking

cognizance contained in the CrPC should give way to the procedure

prescribed under Section 142. Hence the opening of non-obstante clause

under Section 142. It must also be remembered that Section 142 does

not either contemplate a report to the police or authorise the Court

taking cognizance to direct the police to investigate into the complaint.

25. The question whether the respondent had sufficient cause for not

filing the complaint against DAKSHIN within the period prescribed

under THE ACT is not examined by either of the courts below. As

rightly pointed out, the application, which is the subject matter of the

instant appeal purportedly filed invoking Section 319 CrPC, is only a

device by which the respondent seeks to initiate prosecution against

19 DAKSHIN beyond the period of limitation stipulated under the Act.

26. No doubt Section 142 authorises the Court to condone the delay in

appropriate cases. We find no reason to condone the delay. The

justification advanced by the respondent that it is during the course of

the trial, the respondent realized that the cheque in question was drawn

on the account of DAKSHIN is a manifestly false statement. On the face

of the cheque, it is clear that it was drawn on account of DAKSHIN.

Admittedly the respondent issued a notice contemplated under clause

(b) of the proviso to Section 138 to DAKSHIN. The fact is recorded by

the High Court. The relevant portion is already extracted in para 16.

27. The judgment under appeal is contrary to the language of THE ACT

as expounded by this Court in Aneeta Hada (supra) and, therefore,

cannot be sustained. The judgment is, accordingly, set aside. The appeal

is allowed. In the circumstances, the costs is quantified at Rs.

1,00,000/- (Rupees One Lakh Only).

…..................................... J.

(J. CHELAMESWAR)

……. ………….....................J. (S. ABDUL NAZEER) New Delhi August 30, 2017

20