RULE. Service of notice of rule is waived by learned advocates appearing on behalf of the respective respondents.
1. By way of this petition filed under Section 482 of the Code of Criminal Procedure, the petitioner herein has prayed to quash and set aside the order passed in Criminal Complaint No.367 of 2018 dated 12.03.2018 together with the further proceedings thereof as also the summons issued under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the N.I. Act") pending before the Court of learned Additional Civil Judge & JMFC at Mandavi, Surat.
2. The facts in brief are as under:
On 12.03.2018 the respondent No.2 herein filed a complaint being Criminal Complaint No.367 of 2018 before the Court of learned Additional Chief Judicial Magistrate, Mandavi inter alia alleging that he is the HUF of "M/s. Mahavir Traders" and the Proprietor of "Mahavir & Co." and is engaged in the business of cheque discounting. It is averred in the complaint that the petitioner herein, original accused, is the owner of "M/s. N.P. Traders" and "Vasupujya Traders" and is engaged in the business of mining of Coal. Sometime during October - November 2011, the petitioner convinced respondent No.2 herein to make some investment in his Coal business, in return of which the respondent- complainant would either be paid profit out of the said business or interest on the amount that may be invested by the respondent- complainant. Since the petitioner and the respondent-complainant had long standing business as also family relationship, the respondent- complainant agreed to the business proposal given by the petitioner and thereby, made huge payments to the petitioner, totaling Rs.3,98,04,747/-, through Demand Draft / RTGS, during the period between December 2011 to February 2014. It is alleged in the complaint that instead of delivering the mineral so mined to different Mills / Companies, the petitioner straight-away sold the mineral in the open market without informing the respondent-complainant and derived undue benefit out of it. As the respondent-complainant felt that he had been cheated by the petitioner, he demanded his dues from the petitioner. In January 2018, the petitioner issued cheque bearing No.991455 dated 04.01.2018 drawn on Andhra Bank from the account of " M/s. N.P. Traders" for Rs.4.85 Crores in favour of the HUF of the respondent-complainant. When the respondent-complainant deposited the cheque in his account, the same was returned on 17.01.2018 with the endorsement of "Insufficient Funds". The respondent-complainant issued statutory notice to the petitioner on 12.02.2018, which was responded to by the petitioner, vide reply dated 27.02.2018. Ultimately, the impugned complaint came to be filed under Section 138 of the N.I. Act.
3. Learned advocate Mr. N. V. Gandhi appearing for the petitioner submitted that the cheque in question bearing the signature of the petitioner and stamp of "M/s. N.P. Traders" was issued from the Cheque Book issued by Andhra Bank in the year 2004 and that it was not a cheque which complied with all the relevant Guidelines of RBI that were prevailing at the time when it was presented in January 2018. The respondent-complainant ought not to have presented the cheque in question in January 2018 when he was fully aware of the fact that the negotiable instrument did not meet with the relevant Guidelines relating to cheques. The cheque in question was a "non-CTS" (Cheque Truncation System) cheque and was bearing old Account Number and of the Year 1990s.
3.1 It was further submitted that the petitioner had addressed a letter to the Bank concerned requesting to remove Mandate Signature in respect of the Current Account Number that stood in the name of "M/s. N.P. Traders", which was accepted by the Bank concerned and accordingly, the signature of the petitioner herein had been removed from the list of authorized signatory/s of said "M/s. N.P. Traders". Further, the Account No.2774 as appearing on the cheque in question had been changed to No.053811011002774. Thus, on 04.01.2018, i.e. the date on which the cheque in question was drawn, the petitioner herein was not authorized to operate the Account of "M/s. N.P. Traders" and to sign the cheque on behalf of the Company. Hence, the cognizance taken by the Court below is erroneous and contrary to the settled principles governing negotiable instruments.
3.2 Learned advocate for the petitioner further submitted that the impugned complaint is barred under the provisions of The Gujarat Money Lenders Act, 2011 since none of the Firms of the respondent- complainant is possessing any licence for lending money under the provisions of the said Act. There is no such legal entity like M/s. Mahavir Traders (HUF) and hence, no legal dues can be said to be subsisting. It is contended that when the petitioner was not an authorized signatory to the cheque in question on the date when it was issued and the respondent- complainant was not having any legal dues to claim from the petitioner, the entire process of registration of complaint and issuance of summons under Section 138 of the N.I. Act is an abuse of the process of law and hence, the same deserves to be quashed and set aside.
3.3 Learned advocate Mr. Gandhi lastly submitted that the company - "M/s. N.P. Traders" has not been joined as an accused in the impugned complaint. Under the circumstances, the petitioner could not be solely held liable for the criminal act in view of the provisions of Section 141 of the N.I. Act. He submitted that the commission of offence by a Company is an express condition precedent to attract the vicarious liability of its Directors and / or other officers. Hence, on this ground also, the impugned complaint deserves to be quashed and set aside.
4. In support of his submissions, learned advocate Mr. Gandhi placed reliance upon the following decisions:
(a) In Aneeta Hada v. M/s. Godfather Travels and Tours Pvt. Ltd. and others, AIR 2012 SC 2795, it has been held as under:
"Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. The vicarious liability gets attracted when the condition precedent under Section 141 namely, offence by company stands satisfied. The power of punishment is vested in the legislature and that is absolute in S. 141 which clearly speaks of commission of offence by the company. The liability created is penal and thus warrants strict construction. It cannot therefore be said that the expression "as well as" in S. 141 brings in the company as well as the Director and/or other officers who are responsible for the acts of the company within its tentacles and, therefore, a prosecution against the Directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context.
Applying the doctrine of strict construction, it is clear that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, it is absolutely clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. It necessarily follows that for maintaining the prosecution under S. 141 of the Act, arraigning of a company as an accused is imperative only then the other categories of offenders can be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself."
(b) In Pooja Ravinder Devidasani v. State of Maharashtra and Anr., AIR 2015 SC 675, the Apex Court observed in para-27 as under:
"27. Unfortunately, the High Court did not deal the issue in a proper perspective and committed error in dismissing the writ petitions by holding that in the Complaints filed by the Respondent No. 2, specific averments were made against the appellant. But on the contrary, taking the complaint as a whole, it can be inferred that in the entire complaint, no specific role is attributed to the appellant in the commission of offence. It is settled law that to attract a case under Section 141 of the N.I. Act a specific role must have been played by a Director of the Company for fastening vicarious liability. But in this case, the appellant was neither a Director of the accused Company nor in charge of or involved in the day to day affairs of the Company at the time of commission of the alleged offence. There is not even a whisper or shred of evidence on record to show that there is any act committed by the appellant from which a reasonable inference can be drawn that the appellant could be vicariously held liable for the offence with which she is charged.
(c) In Ashoke Mal Bafna v. M/s. Upper India Steel Mfg. And Engg. Co. Ltd., AIR 2017 SC 2854, it has been observed as under:
"12. Turning to the case on hand, admittedly the cheques dated 28-12-2004 were issued while the appellant was Director of the Company with validity for a period of six months but during that period they were not presented for realization at the bank. The appellant has resigned as Director w.e.f. 2-1-2006 and the fact of his resignation has been furnished by Form 32 to the Registrar of Companies on 24-03-2006 in conformity with the rules. Thereafter, the appellant had played no role in the activities of the default Company. This fact remains substantiated with the Statement filed by the default Company on 20-02-2006 with the Registrar of Companies that in an advertisement of the Company seeking deposits (Annexure P3), only the names of three Directors of the Company were shown as involved in the working of the Company and the name of appellant was not therein. Indisputably, therefore, the cheques bounced on 24-08-2006 due to insufficient funds were neither issued by the appellant nor the appellant was involved in the day to day affairs of the Company."
5. Learned Senior Advocate Mr. Anshin Desai appearing with learned advocate Mr. Y.V. Vaghela for respondent No.2 submitted that the respondent-complainant had made all payments to the petitioner either by way of Demand Drafts or through RTGS and therefore, no issue arises as to whether the dues are legally enforceable at the ends of the respondent-complainant or not. He submitted that the parties were known to each other for several years and that out of trust and good faith, the respondent-complainant had invested capital with the Gujarat Mineral Development Corporation Ltd. (GMDCL) for supplying Coal to the concerned Mills. However, the petitioner committed fraud with the respondent-complainant by selling the mineral in the outside market, without the knowledge of the respondent-company. Therefore, the respondent-company demanded his dues, which he had invested in the form of capital in the mining business. In his reply dated 27.02.2018 given by the petitioner to the statutory notice dated 12.02.2018, the respondent No.2 admitted the factum of business relations between the parties and also that the legal debts were due and payable by him to the respondent-complainant. It was, therefore, prayed that the present petition may be rejected.
5.1 Learned Senior Advocate Mr. Desai further submitted that in fact the petitioner had defrauded the respondent-complainant by issuing the "Non-CTS" cheque knowing fully well that "Non-CTS" cheque had become out-dated and that the RBI had introduced guidelines for new type of cheque. He submitted that a "Non-CTS" cheque may not be in vogue at the relevant point of time, but that would not mean that it ceases to be a valid negotiable instrument unless and until it is so declared by the RBI. It was submitted that no such declaration had been made by RBI at the relevant point of time and therefore, the said contention raised by learned advocate for the petitioner is not legal and valid.
5.2 It is further submitted on behalf of respondent No.2 that the petitioner has not disputed the signature on the cheque in question and that the said cheque had been issued by the petitioner in the capacity of Proprietor / Manager of M/s. N.P. Traders. The communication dated 21.02.2017 on which reliance has been placed by the petitioner to show that on the said date, the petitioner had requested the Bank concerned to remove the Mandate Signature in respect of the Current Account in question, was made by one "Pinal J. Shah" for and on behalf of N.P. Traders and not by the petitioner herein. By the said communication, a request was made for activation of Online Banking service in respect of the said Current Account. It was pointed out that in pursuance of the said communication dated 21.02.2017, the Bank concerned addressed communication dated 04.08.2018 informing that the request has been acceded to. It was, accordingly, urged that on the date when the cheque in question was issued, i.e. on 04.01.2018, the petitioner herein was very much authorized to issue such cheque. The present petition is nothing but, an attempt to evade the legal dues that are payable by respondent No.2 to the petitioner. It was, accordingly, prayed that the present petition may be dismissed.
6. In support of his submissions, learned Senior Advocate Mr. Desai placed reliance upon the following judgments:
(a) In Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458, the issue was whether the cheque represents discharge of existing enforceable debt or liability or whether it represents advance payment without there being any subsisting liability. It was held that once the loan amount was disbursed and as per agreement, installments had fallen due on date of issuance of cheque, the dishonor of such cheque would fall under Section 138 of the N.I. Act and such issuance of cheque undoubtedly represents outstanding liability. It was further held that whether cheque was given as security or there existed outstanding liability or not is question of fact and that the High Court cannot entertain disputed questions of fact under Section 482 of Cr.P.C.
(b) In S. Krishnamoorthy v. Chellammal, (2015) 14 SCC 559, the Apex Court observed as under in paras - 5 & 7 :
"5. The above defence of the respondent (accused) before the High Court, in the petition filed under Section 482 of the Code, is nothing but absolutely factual in nature, which is neither admitted by the complainant, nor apparent on the face of the record. Such type of disputed factual defences could have been appreciated only by the trial court, after the parties led their evidence. In our opinion, the High Court committed grave error of law in examining the allegations and counter allegations which are disputed and factual in nature in a proceeding under Section 482 of the Code.
7. In view of the above position of law, we have no option but to set aside the order passed by the High Court as it has entered into highly disputed questions of fact and concluded that the material before it was sufficient to cause reasonable suspicion in the case of the complainant. That is not the ground on which powers under Section 482 of the Code can be exercised by the High Court."
(c) In HMT Watches Limited v. M.A. Abida and another, (2015) 11 SCC 776, the Apex Court observed as under :
"10. Having heard learned counsel for the parties, we are of the view that the accused (respondent no.1) challenged the proceedings of criminal complaint cases before the High Court, taking factual defences. Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of N.I. Act stood uncomplied, even though the respondent no.1 (accused) had admitted that he replied the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorized by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.
13. In view of the law laid down by this Court as above, in the present case High Court exceeded its jurisdiction by giving its opinion on disputed questions of fact, before the trial court.
15. For the reasons as discussed above, we find that the High Court has committed grave error of law in quashing the criminal complaints filed by the appellant in respect of offence punishable under Section 138 of the N.I. Act, in exercise of powers under Section 482 of the Code of Criminal Procedure by accepting factual defences of the accused which were disputed ones. Such defences, if taken before trial court, after recording of the evidence, can be better appreciated."
7. Learned APP Ms. Bhatt adopted the submissions advanced by learned Senior Advocate Mr. Desai and submitted that the petitioner is liable to pay the legally enforceable dues of respondent No.2-complainant and that this is not a fit case where discretion could be exercised in favour of the petitioner. She, accordingly, requested to reject the petition.
8. Heard learned advocates on both the sides. It appears that the petitioner had approached the respondent-complainant some where during October - November 2011 to make investments in the business of Coal mining, which was agreed to by the respondent-complainant. As a part of the said business, the petitioner had requested the respondent- complainant to deposit different amounts with the GMDCL, which was agreed upon by the respondent-complainant and accordingly, on different dates between December 2011 to February 2014, the respondent- complainant deposited different amounts by way of Demand Drafts and RTGS totalling Rs.1,03,51,872/- and Rs.3,98,04,747/- respectively with the GMDCL.
9. Section 139 of the NI Act draws a presumption in favour of the holder of cheque that the same had been issued for discharge of any debt or other liability. A contention has been raised on behalf of the petitioner that the cheque in question dated 04.01.2018 was issued from a Cheque Book belonging to Andhra Bank of the year 2004 and therefore, it was not a valid negotiable instrument when it was presented in 2018. The cheque in question also bears the old Account Number, which was allotted in 1990. It is pertinent to note that neither in his reply to the statutory notice nor before this Court the petitioner has denied his signature over the cheque in question. Therefore, the issues as to whether the cheque represents discharge of existing enforceable debt is a question of fact, which could be determined only by the trial Court concerned after recording evidence of the parties.
10. Another contention that has been raised by the petitioner is that the respondent-complainant was not holding any licence under the provisions of The Gujarat Money-Lenders Act, 2011 for carrying out the business of money lending. Whether the respondent-complainant was doing the business of money-lending or of cheque discounting is also a question of fact, which could be determined only by the trial Court concerned on the basis of the evidence on record.
11. The petitioner has also raised the defence that since the mode of operation of the Current Account of M/s. N.P. Traders bearing No.053811011002774 had been modified from Mandate Holder to Proprietor on 21.02.2017, he was not authorized to operate the said Current Account and therefore, the cheque in question issued by the petitioner is not a valid cheque. It may be noted that the communication produced on record of Andhra Bank is dated 04.08.2018 and is addressed to M/s. N.P. Traders, through its Proprietor Mr. Pinal Jitendrakumar Shah. For ready reference, the said communication is reproduced hereunder:
"Lr.No.0538/55/135 Date : 04/08/2018
M/s. N.P. Traders
Prop. Mr. Pinal Jitendrakumar Shah
3/A, Siddhgiri Apartment
Timaliyawad, Surat - 39
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5 001 Dear Sir, Sub : Current A/c. No.053811011002774 - Information - reg. Ref : Your letter dated 03/08/2018. Referring to your letter cited above this is to inform you that, as per our records subsequent to your letter and application for online banking facility the bank had modified the mode of operation of your current account bearing No. 053811011002774 from mandate holder to proprietor on 21.02.2017. Hence, with effect from 21.02.2017 the mandate holder Mr. Chintal J. Shah is not authorized to operate the account. This is for your kind information. With thanking Regards, sd/- [SEAL OF ANDHRA BANK] (Mihir Ranjan Das) Chief Manager" 12. It is evident from the aforesaid communication that the same was sent in connection with the letter dated 03.08.2018 sent by M/s. N.P. Traders, through its Proprietor. The cheque in question was presented on 04.01.2018, which came to be dishonored on the ground of insufficiency of funds on 17.01.2018. This Court finds substance in the submission raised on behalf of the respondent-complainant that the letter dated 03.08.2018 addressed by M/s. N.P. Traders, through its Proprietor - Mr. Pinal Jitendrakumar Shah, to Andhra Bank is nothing, but an after- thought and an attempt on the part of the petitioner to avoid payment of the legal dues by changing mandate holder of the Firm with the Bank. The said communication dated 04.08.2018 of the Bank shows that in response to the letter dated 03.08.2018, the operation of Current Account No. 053811011002774 has been modified retrospectively with effect from 21.02.2017. What would be the effect of change of mode of operation of the Current Account of the Firm is a question of fact to be proved before the trial Court by leading evidence, as the respondent- complainant has disputed the communication itself. 13. As discussed herein above, the matter involves disputed questions of fact, which could be adjudicated upon only by the trial Court on the basis of evidence that may be led by the parties and hence, this Court does not find this to be a fit case wherein powers under Section 482 of Cr.P.C. could be exercised in favour of the petitioner. 14. Hence, the petition is dismissed. Rule is discharged.