O N PHADNISH Vs. RADHAKRISHNAN

JUDGEMENT

(1.) BOTH the criminal revisions are to set aside the orders passed by the learned Judicial Magistrate, Panruti, in C. M. P. No. 5098 of 1999, in C. C. No. 206 of 1998 and in C. M. P. No. 5109 of 1999 in C. C. No. 212 of 1998. Criminal Revision Case No. 272 of 2000 has arisen in this way : The petitioner herein is the accused before the trial court. The respondent herein is the complainant. The complainant is dealing in cashewnut oil. The accused purchased cashewnut oil from the complainant on several dates. He had to pay a sum of Rs. 3, 32, 379.80 to the complainant. Towards discharge of part of the debt, the accused issued a cheque for Rs. 3, 00, 000 on March 25, 1998. He had specifically requested the complainant to present the cheque on September 15, 1998. But, the cheque was returned on the same date with an endorsement "exceeds arrangements". The complainant issued statutory notice on September 19, 1998. The accused received the notice, but he did not make payment. Therefore, the complainant preferred the instant private complaint under sections 138 and 142 of the Negotiable Instruments Act before the learned Judicial Magistrate, Panruti, who took cognizance of the matter in C. C. No. 206 of 1998. Crl. R. C. No. 273 of 2000 has arisen in this way : The petitioner herein is the accused. The respondent herein is the complainant. The complainant herein also is a similar dealer in cashewnut oil. The accused purchased cashewnut oil from the petitioner on the following dates : March 27, 1998, under Bill No. 79 for Rs. 32, 200; May 5, 1998, under Bill No. 107 for Rs. 72, 657; May 27, 1998, under Bill No. 125 for Rs. 48, 916. Towards discharge of the debt, the accused issued a cheque for Rs. 32, 000 on August 10, 1998, and another cheque for Rs. 48, 918 on August 20, 1998. The cheques were presented in the Lakshmivilas Bank Ltd., Panruti, for collection on September 10, 1998. But they were returned on September 10, 1998, itself with an endorsement that payment was stopped by the drawer. The complainant issued statutory notice on September 16, 1998, which the accused received on September 19, 1998. The accused neither chose to give reply nor make payment. Therefore, the complainant preferred the instant complaint under sections 138 and 142 of the Negotiable Instruments Act, on October 5, 1998. The learned Judicial Magistrate, Panruti, took cognizance of the private complaint in C. C. No. 212 of 1998.Summonses were sent to the accused in both the cases. The accused preferred Crl. M. P. No. 5098 of 1999 in C. C. No. 206 of 1998 and Crl. M. P. No. 5109 of 1999 in C. C. No. 212 of 1998 seeking discharge on the following grounds : (i) The cheques were issued as security for prompt payment and they were not issued in discharge of the existing liability; (ii) The respective complainants have failed to implead the company as a party to the proceedings. They are prosecuting him in the individual capacity and not as the chairman or managing director of the company and, therefore, the proceedings should be quashed. The learned Judicial Magistrate dismissed both the criminal miscellaneous petitions, against which orders, the accused therein has preferred the respective criminal revision cases. Since the questions of fact and law involved in both the criminal revisions are one and the same both the matters can be disposed of by a common order. Heard both the sides. It is not in dispute that the petitioner had issued cheques to the respective respondents. His case is that the cheques were issued only as security and not in discharge of an existing liability. It has to be pointed out that prosecution under section 138 of the Negotiable Instruments Act is a statutory prosecution. The cardinal principle of the benefit of the doubt may not apply to the cases of this nature, where a presumption can be drawn in favour of execution and passing of consideration and genuineness of the document in question. There is a presumption under section 118 of the Negotiable Instruments Act that every negotiable instrument was made or drawn for consideration. Section 139 of the Negotiable Instruments Act says that unless the contrary is proved, it shall be presumed that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.It is the case of the respective respondents herein/complainants that in discharge of liabilities that existed towards purchase of cashewnut oil, the cheques were issued to them. In fact, the complainant in C. C. No. 212 of 1998 had given the dates, bill numbers and amounts regarding such purchase. When presumptions can be drawn in favour of the respondents herein/complainants regarding consideration that the purpose for which the cheques were issued is in discharge of existing liability, then the burden shifts to the petitioner herein/accused to rebut the presumption by letting in evidence that in fact, the cheques were not drawn for consideration or that they were not given to the respective respondents herein/complainants in discharge of the existing liabilities. I feel, at this stage when the trial is pending, the petitioner/accused cannot seek discharge on this ground. The next contention of the petitioner herein is that the cheques were issued by him in his capacity as chairman-cum-managing director of N. S. P. Cashew By Products (P.) Ltd. and that there is one more director to the company and that non-inclusion of the company as an accused is fatal to the prosecution. Section 141 of the Negotiable Instruments Act recites as under : "141. Offences by companies. - (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly : Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.(2) Notwithstanding anything contained in sub-section (1) where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. - For the purposes of this section : (a) 'company' means any body corporate and includes a firm or other association of individuals; and (b) 'director', in relation to a firm, means a partner in the firm." It would be useful to refer to certain decisions : (i) In Sheoratan Agarwal v. State of Madhya Pradesh, while considering a case under section 10 of the Essential Commodities Act, 1955 (ii) In U.P. Pollution Control Board v. Modi Distillery, the apex court had to consider similar points while dealing with section 47 of the Water (Prevention and Control of Pollution) Act (6 of 1974), which is identical to section 141 of the Negotiable Instruments Act. The apex court held that unless there was prosecution of the company there can be no prosecution of the managing director. To be more specific, while considering identical provisions under two different acts, namely, the Essential Commodities Act, and Water (Prevention and Control of Pollution) Act, two different views were expressed by the apex court.(iii) The decision reported in U.P. Pollution Control Board v. Modi Distillery was followed by Padmini Jesudurai J. in Krishan Bai v. Arti Press 1991 LW Crl. 513; wherein the learned judge held that unless the company was made an accused, the person in charge of and responsible to the company for the conduct and business of the company cannot be made an accused. This view was followed by Pratap Singh J. in the decision in S. Krishnamoorthy v. B. S. Kesavan 1994 1 LW Crl. 135. That was a case where when a cheque was issued by a firm, the partner only was prosecuted. Pratap Singh J. had held that inasmuch as the offence was committed by the firm, without the firm being arrayed as accused, the petitioner (partner) alone cannot be arrayed as an accused and be proceeded with. (iv) In A. Jafferullah v. T. Stanes and Co. Ltd. 1994 1 LW Crl. 262, Pratap Singh J. confirmed the earlier view expressed in S. Krishnamoorthy's case cited supra. The learned judge held that of the two decisions rendered by the apex court, i.e., Sheoratan Agarwal's case and U.P. Pollution Control Board's case cited supra, the latter decision should be followed. (v) In Suryanarayanan v. Anchor Marine Service 1995 1 LW Crl. 132, when a similar question arose, Rengasamy J. has expressed the view that the company shall also be prosecuted and the partner alone cannot be prosecuted. (vi) But, the view expressed by the apex court in Sheoratan Agarwal's case cited supra was followed in Alex v. Vijayan, wherein the Kerala High Court held that proceedings can be instituted under section 138 of the Negotiable Instruments Act against the directors without impleading the company.(vii) The same view was expressed by the same court in the decision in M. O. H. Iqbal v. M. Uthaman. It was held by that court that when the offence is committed by a company either the company alone or the persons-in-charge of the business of the company alone or both of them together can be prosecuted for the offences under section 138 of the Negotiable Instruments Act. (viii) In the decisions reported in Doraisamy v. Archana Enterprises, M. S. Janarthanam J. has followed the view expressed by the apex court in Sheoratan Agarwal's case cited supra and held that the managing director can be prosecuted even without including the company as co-accused. M. S. Janarthanam J. has also pointed out that earlier decisions rendered by this court on this point had not correctly laid down the law in the light of the decision rendered by the apex court reported in Sheoratan Agarwal's case cited supra. (ix) In the latest decision reported in Anil Hada v. Indian Acrylic Ltd. 2000 1 LW Crl. 422, a question was posed by the apex court that when a company, which committed offence under section 138 of the Negotiable Instruments Act, eludes from being prosecuted thereof, can the directors of that company be prosecuted for that offence. The apex court has pointed out that the offender under section 138 of the Negotiable Instruments Act is the drawer of the cheque but by virtue of the fiction envisaged in section 141 of the Negotiable Instruments Act, three categories of the persons can be discerned within the purview of penal liability. They are, (1) the company which committed the offence; (2) everyone who was in charge of and responsible for the business of the company; (3) any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence. Their Lordships of the apex court have stated as under in paragraph 12 (page 40 of 99 Comp Cas) :