OSWAL ISPAT UDYOG Vs. SALEM STEEL SUPPLIERS

JUDGEMENT

(1.) PETITIONER No. 1 is a registered partnership firm and they are steel-rollers, fabricators, manufacturers and engineers. PETITIONERs nos. 2 to 11 are the partners. The second petitioner is in charge of the management of the firm, while petitioners Nos. 3 to 11 are also actively taking part in the running of the business of the firm. The respondent is also a partnership firm. In the course of business dealings, the first petitioner-firm owed the respondent-firm a sum of Rs. 21 lakhs and in discharge of the same, the first petitioner is said to have issued eight cheques to the respondent-firm. At the time of the issuance of the cheques, the second petitioner is stated to have represented that he had been authorised by all the partners of the firm to state that cash was available in the Central Bank of india, Raipur, to the credit of the first petitioner-firm for payment of Rs. 21 lakhs, covered by the eight cheques and requested the respondent to accept the same. Believing such representation find acting on good faith, the respondent did not insist on cash payment and accepted the cheques. When the cheques were sent for collection through the Indian Bank, Thambu Chetty Street branch, the same were returned by the Central Bank of Indi a , Raipur branch, on the ground that the first petitioner-firm had not made arrangements for payment. The second petitioner has thus deceived the respondent by making false representation and induced the respondent to accept the cheques, knowing fully well that the representations were false, and thereby committed an offence punishable under section 420 of the Indian Penal Code. The other partners, viz. , petitioners Nos. 3 to 11, are said to have actively abetted and aided the second petitioner in making false representations about the availability of cash for payment of the eight cheques, thereby committing an offence under section 420 of the Indian Penal Code. On these allegations, the respondent launched a private complaint against the petitioners and the same is now pending as C. C. No. 17220 of 1989, on the file of the C. M. M. , Madras. As respects the dishonour of the eight cheques, the respondent treating the dishonour of each cheque as a separate cause of action, preferred individual complaints for the offence under section 138 of the Negotiable Instruments Act, 1881, and they are now pending as C. C. Nos. 17221 to 17228 of 1990, on the file of the C. M. M. , Madras. The details of the face value of the cheques and the date of issue of each cheque are given in the tabulated column hereunder : S. No. C. C. No. Face value of cheque Date of issue (Rs. in lakhs) 1. 17221 of 1989 3 16-6-1989 2. 17222 of 1989 3 20-6-1989 3. 17223 of 1989 3 19-6-1989 4. 17224 of 1989 2 15-6-1989 5. 17225 of 1989 3 14-6-1989 6. 17226 of 1989 2 13-6-1989 7. 17227 of 1989 2 17-6-1989 8. 17228 of 1989 3 12-6-1989 All the cheques were presented for encashment on June 22, 1989, information as to dishonour of the cheques was received on July 14, 1989, notices were issued on July 28, 1989, and the same were received by the first petitioner-firm on August 2, 1989. After receipt of process in all these cases, the petitioners have come forward with these petitions invoking the inherent powers of this court to quash the above said criminal proceedings. Learned counsel for the petitioners would strenuously contend that the transaction is purely of a civil nature giving rise to a cause of action before the competent civil forum, that the averments in the complaint in C. C. No. 17220 of 1989, if properly scanned, would indicate the absence of the requisite elements constituting the offences under the Indian Penal Code alleged against the petitioners, that the perusal of the averments in the complaints in C. C. Nos. 17221 to 17228 of 1989, would show that they fall short of the primordial requisites of section 138 of the Negotiable Instruments Act, and that, therefore, the criminal proceedings initiated against the petitioners are liable to be quashed. Learned counsel for the respondent would repel such submissions by stating that the facts of these cases do not at all warrant the making of such submissions, and that the same will be patent if the various averments in the complaints are taken into account for determining the question as to whether they constitute the alleged offences under the Indian Penal Code as well as under the Negotiable Instruments Act. Section 420 of the Indian Penal code, reads as follows : "whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security or. . . " * Section 415 of the Indian Penal Code, which deals with the offence of cheating, reads as follows : "whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to'cheat'. " From the above extract of the definition of" cheating" * , it is seen that it contains two alternative parts and a main part applicable to both the parts. First comes the main part "whoever, by deceiving any person. . . ", words which obviously apply to the whole section. Then comes the first part, "fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property" *. Then comes the second part which is an alternative to the first part and it is, "or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit to do. . . body, mind, reputation or property ". Then come the closing words," is said to cheat ". The words" and which act or omission. . . reputation or property" * , forming a portion of the second part are not applicable to Part 1 at all. Thus cheating can be committed in either of the two ways as described in section 415 of the Indian Penal Code. Deceiving a person is common in both the ways of cheating. A person deceived may be fradulently or dishonestly induced to deliver any property or to consent to the detention of any property by any person. The person deceived may also be intentionally induced to do or omit to do anything which he would not have done, if not deceived and which act of his caused or was likely to cause damage or harm in body, mind, reputation or property. The case on hand is not that for the discharge of the debt due by the petitioners, cheques have been issued simpliciter, so as to constitute breach of promise the moment these cheques when presented were dishonoured. The factual position is altogether, however, different and this will be evident, as rightly contended by learned counsel for the respondent, if a careful perusal of the averments in the complaint is made, and they read as under : "the second accused represented that he has been authorised by all the other partners of the firm to state that cash was available in the Central Bank of India, Raipur, to the credit of the first accused firm for the payment of Rs. 21, 00, 000 (rupees twenty-one lakhs only)covered by eight cheques and requested the complainant to accept the cheques. Believing the said representations made by the second accused on behalf of the partners of the first accused firm to be true, and acting on good faith, on the assurance given by the second accused on behalf of the partners of the firm, the complainant did not insist upon cash payment and agreed to accept the cheques paid towards the payment of a sum of Rs. 21, 00, 000 (rupees twenty-one lakhs only ). It is submitted that the second accused has deceived the complainant by making false representations and induced the complain ant to accept the cheques knowing them to be false and thereby committed an offence under section 420 of the Indian Penal Code. The other partners of the firm accused Nos. 3 to 11 have actively abetted and aided the second accused, one of the partners of the firm in making the false representations about the availability of cash for the payment of the cheques amounting to Rs. 21, 00, 000 thereby committed the offence punishable under section 420 read with 109 of the Indian Penal code. " * From the above extract of the averments, it is crystal clear that but for the representations made by the second petitioner for and on behalf of the other partners of the firm, the respondent would not have accepted the cheques towards the balance due and he would have definitely insisted on outright cash payment. Such intentional inducement of the second petitioner alone made the respondent accept the cheques. In such a situation for the petitioners to contend that the offence of cheating as defined in section 415 of the Indian Penal Code, is not at all attracted, is rather a vain attempt, and the averments made in the complaint prima facie attract the second part of the section, punishable under section 417 of the Indian Penal Code, though not under section 420 of the Indian Penal Code, the aggravated form of cheating. Regarding the culpability of the other partners of the firm, it cannot be stated that there are no averments as respects their active abetment and aid rendered to the second petitioner in making the false representations about the availability of cash for payment of the balance due, and the averments prima facie constitute an offence under section 417 read with section 109 of the indian Penal Code, though not under section 420 of the Indian Penal Code, read with section 109 of the Indian Penal Code. Reverting our attention to section 138 of the Negotiable instruments Act, learned counsel for the petitioners would state that though there are averments in the complaint regarding issuance of notices to all the petitioners, yet there are no materials therein to indicate the actual receipt of the notices by all the petitioners, except the first petitioner firm which received the same on August 2, 1989. On the premise of such a factual foundation what he would contend is that the initiation of criminal proceedings for violation of section 138 of the Negotiable Instruments Act is possible only in respect of the first petitioner-firm, and not in respect of the other partners, viz. , petitioners Nos. 2 to 11, in as much as the mandatory provision contemplated under clauses (b) and (c) of the proviso to section 138 had not been complied with as against them. This submission will fall to the ground if those clauses are carefully scrutinised in the light of the provision contained in section 141 of the Act. The issuance of notice is contemplated under clause (b) within fifteen days of the receipt of information regarding dishonour to the drawer of the cheque, and clause (c) prescribes that the drawer of the cheque has to comply with the demand in the sense of making the payment 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. In the case on hand, one should not lose sight of the fact that the drawer of the cheque is the first petitioner-firm of which petitioners Nos. 2 to 11 are partners, and, therefore, the question of issuance and receipt of notice as per the above provisions to all the individual partners will not arise for consideration. Admittedly, the averments do indicate as adverted to earlier, the receipt of notices by the first petitioner firm on August 2, 1989. It is to be seen that the first petitioner firm is admittedly a "company" within the meaning of Explanation (a)to section 141 of the Act. According to it, "company" means any body corporate and includes a firm or other association of individuals. Sub-clause (1) of section 141 provides that if the person committing an offence under section 138 is a company, every person who, at the time of the offence, 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. Learned counsel for the petitioners would contend that the second petitioner alone being in charge of the management of the firm, he alone can be considered to be in charge of the conduct of the business of the firm and the other partners, viz. , petitioners Nos. 3 to 11 by virtue of their being mere partners cannot at all be held liable. This submission is absolutely untenable as it is shorn of reality of the situation, especially when there is a specific averment in the complaint that petitioners Nos. 3 to 11 are actively taking part in running the business of the firm. In view of what has been stated above, it goes without saying that all the petitions deserve to be dismissed and, accordingly, they are dismissed.