Gujarat High Court
Rajshibhai Ranabhai Chachiya vs State Of Gujarat on 3 July, 2026
NEUTRAL CITATION
R/CR.RA/1544/2018 JUDGMENT DATED: 03/07/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL REVISION APPLICATION (AGAINST CONVICTION -
NEGOTIABLE INSTRUMENT ACT) NO. 1544 of 2018
With
R/CRIMINAL REVISION APPLICATION NO. 1545 of 2018
With
R/CRIMINAL REVISION APPLICATION NO. 1546 of 2018
With
R/CRIMINAL REVISION APPLICATION NO. 1547 of 2018
With
R/CRIMINAL REVISION APPLICATION NO. 1548 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE NISHA M. THAKORE
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Approved for Reporting Yes No
✔
==========================================================
RAJSHIBHAI RANABHAI CHACHIYA
Versus
STATE OF GUJARAT & ORS.
==========================================================
Appearance:
MS SANDHYA D NATANI(3678) for the Applicant(s) No. 1
M S PADALIYA(7406) for the Respondent(s) No. 2.1,2.2,2.3,2.4,2.5,2.6,2.7,2.8
MS. KRINA P. CALLA, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 03/07/2026
COMMON ORAL JUDGMENT
1. Present Revision applications are filed under Section 397 read
with Section 401 of the Code of Criminal Procedure, 1973 by the
applicant -original accused, challenging the judgment and order of
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conviction dated 30.12.2016 passed by the learned Judicial Magistrate
First Class, Dwarka in Criminal Case Nos.568 of 2011, 570 of 2011, 571
of 2011, 569 of 2011 and 572 of 2011 and as confirmed vide order
dated 13.12.2018 by the learned 2nd Additional Sessions Judge, Jam
Khambaliya, Devbhoomi Dwarka in Criminal Appeal Nos. 01 of 2017,
03 of 2017, 04 of 2017, 02 of 2017 and 05 of 2017 in proceedings
arising under Section 138 of the Negotiable Instruments Act, 1881.
2. Since the dispute pertains to one transaction involving the
complainant and the accused as parties, raising similar contentions
arising out of five different complaints lodged by the complainant, the
present Criminal Revision Applications are heard and decided by this
common judgment. For the sake of convenience, Criminal Revision
Application No. 1544 of 2018 is treated as the lead matter.
3. In order to appreciate the controversy involved in the matter,
appropriate would be to consider the case of the complainant, as can
be gathered from the original complaint filed before the learned
Magistrate under Section 138 of the Act of 1881 against the present
applicant-original accused. It is alleged by the complainant that he is
holding ancestral agricultural lands and is mainly occupied in
agricultural activity. His family consists of six sons, who are married
and his family jointly cultivates the agricultural lands owned by them
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at Village: Bardia, Dwarka. It is further contended that the accused
belongs to his community and owns a Petrol Pump situated at
Porbandar and is also occupied as a distributor of medicines in the
name of a firm called M/s Tulsi Pharma. It is further pleaded that
before 12 months of lodging of the complaint, the accused had
approached him and had convinced him to invest in the Petrol Pump
business viz. Vrachraj Petrol Pump by including him as a partner. He
had assured him that the life of his sons will be improved and had
convinced him for investment of a sum of Rs.30 Lakhs. It is further
contended that the complainant being illiterate and belonging to the
status of an agriculturist had accompanied the accused four to five
times to Porbandar and having noticed the widespread business of the
accused, had got lured to invest such an amount. It is further
contended that, after the accused had received the aforesaid amount
of Rs.30 Lakhs, the complainant had not been repaid any benefit from
the Vrachraj Petrol Pump business. It was stated by the accused that
he has applied for a loan and as soon as the loan is realized, he shall
repay the amount. For two months he had waited for the realization of
the amount. He had also made an attempt to contact the accused on
his contact number raising demand of the aforesaid amount. It was
stated that in lieu thereof, the accused had handed over him different
due dates five cheques of HDFC Bank, Porbandar Branch, in favour of
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the complainant. The complainant had therefore, presented the
aforesaid due dates cheques on 01.01.2011 bearing no.477076 of
amount of Rs.5 Lakhs, with the State Bank of India, Dwarka Branch.
3.1 The said cheque was submitted in the account on 12.02.2011.
However, the said cheque had been returned back by the concerned
bank with a memo of return dated 17.02.2011, thereby informing the
complainant about the return of the cheques on the ground of
insufficient funds. In such circumstances, the complainant was
constrained to issue legal notice dated 21.02.2011 through his lawyer,
which was served upon the accused by R.P.A.D. as well as by UPC.
However, the said notice was received back with an endorsement of
“refused”. In view thereof, the accused having failed to deposit the
amount of the cheque within a statutory period of 45 days from the
date of the receipt of the notice by the accused on 25.02.2011, the
cause of action arose for the complainant before the Court of learned
Magistrate for lodging a complaint under Section 138 of the N.I. Act
1881.
3.2 In view of the above, the complaint was lodged before the
Court of learned Chief Judicial Magistrate, First Class, Dwarka, on
21.03.2011, which was registered as Criminal Case No. 568 of 2011.
The learned Magistrate, upon recording the statement of the
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complainant and verifying the complaint as well as on appreciation of
the documents placed for consideration, has proceeded with issuance
of summons against the accused. The accused was duly served with
the court summons and, had refused the charge alleged against him.
The learned Magistrate had proceeded with the summary trial. The
accused had submitted a pursis at Exh. 9 praying for his discharge
from the offence alleged. At the stage of praying for discharge, the
accused had produced on record the xerox copy of the partnership
deed dated 15.02.2010 entered with the complainant. Along with the
said partnership deed, the affidavits of two witnesses viz. Rambhai
Lilabhai dated 22.11.2011 (Exh.67) and Kamabhai Alabhai Chachiya
(Exh.68) dated 22.11.2011, were produced on record. The learned
Magistrate, however, refused to entertain such application of
discharge vide order dated 28.11.2011. The matter was requested to
be adjourned at the instance of the accused. In absence of the
appearance of the accused, the learned Magistrate was constrained to
issue a non-bailable warrant against the accused. Noticing the
explanation offered with regard to the medical conditions, the same
was recalled. Later on, a pursis was filed at Exh. 19 by the parties,
whereby the accused had shown his willingness to repay the amount
of Rs.30 Lakhs in installment of Rs.50,000/- and had urged the Court to
place this matter in the Lok Adalat. However, the parties could not
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negotiate the dispute before the Lok Adalat, the matter was placed
once again before the learned Magistrate.
3.3 The plea of the accused was recorded before the learned
Magistrate. The complainant had also produced on record various
documentary evidences mainly the original disputed cheque at Exh.
33, the return memo of the disputed cheque at Exh. 34, the legal
notice along with the cover with endorsement of “refused”, along with
the postal slip has also been produced on record by the complainant.
On the other hand, the accused has examined two witnesses in
support of his case viz. Rambhai Lilabhai Khara, the Manager of M/s
Tulsi Pharma Distributors and Kamabhai Alabhai-the uncle of the
accused, who was a witness to the deal. Since the xerox copy of the
partnership deed was produced on record, the witness summons
application was moved by the accused at Exh. 70, whereby the
Competent Officer from the office of SBI was requisitioned to appear
as a witness along with the document in the nature of partnership
deed. In this regard, the witness named Purnachandrasinh Jasubha
Jadeja was examined at Exh. 73, who has brought on record the
certified copy of the partnership deed which was recovered during the
course of investigation in an FIR lodged by the Bank against the
accused and investigated by the CBI. The aforesaid document was
evidence at Exh. 74. The complainant had also moved an application
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seeking examination of the accused at Exh. 78. However, the learned
Magistrate having noted the evidence brought on record, the parties
were requested to proceed with the final arguments. The accused had
submitted written arguments at Exh. 94. It is required to be noted that
the original complainant- Ranabhai Valabhai Chachiya was reported to
have expired on 16.11.2016, and therefore, an application was moved
by the heirs and legal representatives of deceased complainant at Exh.
96, which was allowed by the learned Magistrate, in view of the death
certificate of the complainant being brought on record at Exh. 99 and
the pedigree being produced at Exh. 100. Considering the legal
position, the heirs were permitted to pursue the complaint under
Section 138 of the N.I. Act, 1881. The matter was finally heard and by
impugned judgment and order dated 30.12.2016, the learned
Magistrate was pleased to convict the present applicant-original
accused for the offence punishable under Section 138 of the N.I. Act,
1881, by imposing sentence of one year and fine of Rs.5000/-, failing
deposit of the aforesaid amount, the accused was directed to undergo
further period of three months sentence.
3.4 Being aggrieved and dissatisfied with the aforesaid judgment
and order of conviction, the original accused had approached in appeal
under Section 374 of the Code, 1973, before the Court of learned 2nd
Additional Sessions Judge, Jamkhambhaliya, which was registered as
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Criminal Appeal No. 1 of 2017. Considering the assurance given by the
accused and noticing the conduct as transpired on record, the learned
Sessions Judge was pleased to allow the application of suspension of
sentence, pending the appeal subject to condition. Before the learned
Sessions Judge, the parties were heard. The written arguments were
submitted by the accused at Exh. 15. The learned Sessions Judge,
after re-appreciating the evidence on record in light of the
submissions made by the respective parties, had dismissed the appeal
thereby upholding the impugned judgment and order of conviction
and sentence with fine by impugned order dated 13.12.2018.
3.5 Being aggrieved and dissatisfied with the aforesaid concurrent
judgments and order of conviction and sentence with fine, the
accused has approached in Revision before this Court.
4. Considering the grounds raised in the Revision Application and
the submissions made by learned advocate for the applicant, the
learned Single Judge of this Court vide order dated 27.12.2018 had
admitted the Revision and had suspended the impugned order of
sentence, pending hearing of the present application. It was further
observed that the applicant shall be admitted on bail initially for a
period of four weeks’ on his executing a bail bond and surety for sum
of Rs.10,000/- on usual terms and conditions and, the ad-interim relief
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was granted of suspension. Later on, vide order dated 17.01.2019, the
learned Single Judge had confirmed the ad-interim relief till final
disposal of the present application.
5. The matter was notified for final hearing under special
assignment of old matters. With the able assistance of learned
advocates on record, the matters were finally heard.
6. Ms. Sandhya D. Natani, learned advocate appearing for the
applicant -original accused, has vehemently assailed the impugned
judgment and order of conviction by submitting that the trial court as
well as the Appellate Court have failed to appreciate the evidence
brought on record in its right perspective. She has submitted that, on
close appreciation of the evidence of the complainant, the defence
raised by the accused about existence of legally enforceable debt has
been challenged. According to the accused, the cheques were handed
over to the complainant as security and the complainant has misused
those cheques. In this regard, she has invited my attention to the
specific defence raised by the accused and recorded by the learned
Magistrate in para 10.3 of the impugned judgment and order passed
by the trial court. She has pointed out that, as per the case of the
complainant the cash amount of Rs.30 Lakhs on different occasions in
part was handed over to the accused on the assurance given by the
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accused that he would be introduced as partner in the Vranchraj
Petrol Pump run by the accused. However, as per the case of the
complainant, which can be gathered from his deposition, was that
within a period of one month, he had prayed for refund of such
amount and since the accused was unable to pay the amount, five
different blank cheques dated 01.01.2011 of HDFC Bank, Porbandar
Branch, were handed over to the complainant. She has further pointed
out that in the cross examination, the complainant has admitted that
the aforesaid cheques were handed over prior to a period of one
month. As against that, the accused has brought on record the
unregistered notarized partnership deed which has been admitted as
an evidence at Exh. 74, wherein the date of such deed reflected is
24.02.2010. Referring to the aforesaid dates emerging on record,
learned advocate has submitted that, the case of the complainant was
that, he was not introduced as partner and no amount has been
refunded to him, is contradicted.
6.1 Inviting my attention to the aforesaid contradiction, she has
submitted that a probable defence has emerged on record with
regard to a security cheque being misused by the complainant. She has
further invited my attention to the observations made by the learned
Magistrate while appreciating the evidence of two witnesses namely
Ramabhai Lilabhai Khara at Exh. 67 and Kamabhai Ramabahi Chachia at
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Exh. 68. According to learned advocate, the trial court ought to have
appreciated the fact that the defence has not only brought on record
the contradictions to the case put forward by the complainant of
cheque being handed over towards a legally enforceable debt, but the
witnesses have also been examined to corroborate the defence raised
by the accused. She has pointed out from the evidence of Kamabhai
Ramabahi Chachia at Exh. 68, who has categorically stated in his
deposition that the complainant was that the Petrol Pump in the name
of Vachhraj Petrol Pump in partnership was started in the year 2010
between the complainant and the accused and in this regard he has
been witnessed to the partnership deed deal which had taken place
between the parties. He has also deposed before the Magistrate that
the complainant had invested in the business of partnership and had
sought security from the accused in this regard. The said witness has
also stated in his deposition that the transaction between the parties
had taken place at his house and it is in regard to this investment of
amount that the accused had issued five blank signed cheques
towards security. At that stage, the accused had categorically stated
to the complainant that such cheques have been handed over as
security and may not be used for realization, which was agreed by the
complainant. In his cross-examination, the question was put to the
said witness as to how much investment has been made by the parties
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in said Petrol Pump, to which, the witness has shown his ignorance. He
has also shown his ignorance with regard to any amount of Rs.30
Lakhs being paid to the accused in installment to run the Petrol
Pump. He has also denied the fact that the transaction of the amount
had taken place at Village Bardia. He has refused to identify the
signature of the accused. He has admitted the fact that in the year-
2010, the accused was working at the Petrol Pump.
6.2 As regards the specific question put to the said witness as to
whether the accused had handed over five cheques towards the
borrowed amount from the complainant, the said witness has stated
that on the basis the accused had given him cheque. He has further
admitted the fact that the accused had handed over five cheques in
his presence and such cheques were given at village Chhaya.
6.3 She has further drawn my attention to the fact that the defence
with regard to non-service of legal notice was also raised before the
learned Magistrate inasmuch as, though legal notice and the postal
slips have been brought on record by the complainant; however,
admittedly it does not bear the signature of the accused. She has,
therefore, submitted that the learned Magistrate committed grave
error in holding that the complainant was duly served the legal notice
and had fulfilled the requirement of Section 138 of the N.I. Act, 1881.
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She has further submitted that the learned Judge has committed
error in observing that there is no challenge to the address on which
the statutory notice was attempted to be served by the complainant.
In this regard, she has invited my attention to the evidence of a
witness namely Ramabhai Lilabhai Khara examined at Exh. 67, who
was the Manager of M/s. Tulsi Pharma Distributors at the relevant
point of time. The said witness in his deposition has categorically
stated that the accused is no more attached with M/s. Tulsi Pharma
firm. In 2011, the accused shifted his residence to Village Chhaya. The
said witness has also deposed on oath that when the attempt was
made to serve the legal notice, he had reported to the Officer from
the Postal Department about Rajshibhai Rana (accused) having shifted
and being not available at the address. He has denied the fact of
having refused to accept the notice as endorsed by the Postal
Department. The attention of this Court was further invited to the
cross examination of the said witness to submit that no contradictions
have been brought on record with regard to the aforesaid deposition
made by the said witness.
6.4 Learned advocate has further invited my attention to the
defence of security cheque, once again, to point out that the firm was
actually constituted as evident from the document produced on
record at Exh. 74 in the name of Vrachraj Petrol Pump, wherein the
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present complainant has also signed across. Such document was
executed before the notary on 24.02.2010, whereas the cheque as
alleged to have been handed over towards the borrowed amount of
so-called Rs.30 Lakhs is concerned, bears the date of issuance as
01.01.2011, which is almost after a period of one year. She has,
therefore, submitted that the aforesaid factor can be treated as a
probable defence to believe the case of the accused that the cheques
were handed over as security cheques and were not issued towards
any amount borrowed.
6.5 In order to substantiate her arguments, learned advocate has
further invited my attention to the defence of the accused on the
ground of financial capacity of the complainant being challenged. She
has once again emphasized on the fact that the complainant, who is a
small agriculturist claims to have handed over a cash amount of Rs.30
Lakhs to the accused in different installments. In his cross
examination, a specific question was put to him of any payment of
income tax, to which, he has fairly submitted that no income tax
returns are filed by him. The bank statement has also not been
brought on record to suggest in what way the huge amount in cash
was handed over to the accused. She has further drawn my attention
to the averments made in the original complaint to point out that
there is no clarity with regard to the date, the place at which disputed
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five cheques were handed over to the complainant. She has invited my
attention to the fact that as per the case of the complainant cash
amount of Rs.30 Lakhs was handed over in different installments,
whereas, considering the five complaints lodged, the five cheques
were presented each of Rs.5 Lakhs in all Rs.25 Lakhs. There is no
explanation on record with regard to the remaining Rs.5 Lakhs amount
of the alleged Rs.30 Lakhs borrowed by the accused.
6.6 Referring to the aforesaid circumstances, learned advocate has
submitted that the learned Magistrate as well as learned Sessions
Judge failed to appreciate the aforesaid circumstances though being
brought on record, to be treated as a probable defence and has
discarded the defence of financial ability by recording that the
complainant has categorically stated before the learned Magistrate at
the time of recording of evidence that he along with his family holds
100 acres of agriculture land. She has further pointed out that except
for the aforesaid statement recorded, no evidence worth to indicate
about holding of agriculture lands by the complainant has been placed
on record. She has therefore submitted that strong circumstances are
there on record to accept the defence raised by the accused to be a
probable defence so as to shift the burden upon the complainant to
prove his case as alleged in the complaint.
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6.7 She has also touched on the aspect of legally enforceable debt,
by contending that merely because a partnership firm is not
registered, in view of Section 69 of the Partnership Act, 1932, would
not lead to complaint to be competent under the provisions of N.I.
Act, 1881. She has emphasized on the terms and conditions of the
partnership firm, more particularly, the fact that both the partners
were equally entitled to share of profit and loss, which may arise from
such business. She has, therefore, submitted that in absence of any
evidence to suggest about the cheques being issued towards such
legally enforceable debt, no offence under Section 138 of N.I. Act,
1881 has been attracted. She has, therefore, urged this Court to quash
and set aside the impugned judgment and order of conviction and to
record the acquittal of the present applicant for the offence under
Section 138 of N.I. Act, 1881.
7. On the other hand, learned advocate Mr. M. S. Padaliya,
appearing for the respondent -heirs and legal representatives of the
original complainant, has forcefully opposed the aforesaid
submissions made by the learned advocate for the applicant. At the
outset, learned advocate has invited my attention to the pursis
submitted on record at Exh. 19, wherein the original accused – present
applicant, along with the complainant, had prayed before the learned
Magistrate to place the matter in the Lok Adalat to bring out an
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amicable settlement. At that stage, the accused had admitted about
the payment of outstanding dues of Rs.30 Lakhs and, had further
shown his willingness to repay the amount in installments of
Rs.50,000/-. The aforesaid pursis was recorded and the parties were
relegated to Lok Adalat, but no amicable resolution could be brought
between them, and therefore, the matter was decided on merits.
However, the very fact that the accused had admitted to the
outstanding dues of Rs.30 Lakhs, no further evidence was required to
be brought by the complainant on record to establish the element of a
legally enforceable debt.
7.1 According to the learned advocate, once such admission of the
accused has transpired on record, the rebuttal goes. He has mainly
relied upon the findings and reasons assigned by the learned
Magistrate and, as upheld by the learned Sessions Judge convicting
the accused. It was submitted that there are concurrent findings on
the various issues raised by the accused and considering the scope of
revisional jurisdiction of this Court, this court may not interfere with
the aforesaid order of conviction. Learned advocate has disputed the
arguments of the learned advocate for the applicant on the issue of
service of notice by submitting that the learned Judge has mainly
followed the guiding principles laid down by the Hon’ble Supreme
Court in the cases of C.C. Alavi Haji vs Palapetty Muhammed & Anr
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reported in 2007 (6) SCC 555 and in the case of K. Bhaskaran vs.
Sankaran Vaidhyan Balan and others reported in (1999) 7 SCC 510.
He has further submitted that, on bare comparison of the address of
the accused as reflected in the cause title of the complaint and the
address at which the statutory notice was attempted to be served,
they are the same. In such circumstances, the learned Judge has
rightly invoked Section 27 of the General Clauses Act, 1897, and has
rightly arrived at a conclusion that the requirement of Section 138(b)
of the N.I. Act, 1881, has been fulfilled. He has further submitted that
though the witness Ramabhai Lilabhai has been examined at Exh. 67 in
this regard, it is required to be noted that the accused has appeared
before the learned Magistrate being served with the summons of the
Court at the same address at which the statutory notice was sent.
7.2 As regards the contention raised by the learned advocate for
the applicant- original accused on the issue of misuse of the cheque as
being handed over as a security cheque is concerned, learned
advocate has once again invited my attention to the findings and
reasons assigned by the learned Magistrate. He has pointed out that
the learned Judge has rightly placed the burden upon the accused to
prove his defence. Though, the witness named Kamabhai Alabhai
Chachia has been examined at Exh. 68, the learned Judge has noted
that he is the nephew of the accused and though, in his deposition he
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claims to be the witness of the deal of partnership having taken place
between the parties, in his cross-examination he has pleaded
ignorance about the actual transaction of Rs.30 Lakhs having taken
place. The learned Magistrate has also appreciated the partnership
deed produced on record at Exh. 74. It was submitted that the
aforesaid document was proved and admitted as evidence upon
examination of witness viz. Purnachandrasingh Jasuba Jadeja, whose
evidence has been recorded at Exh. 73. The attention of this Court was
invited to the fact that he was a Police Constable discharging his duty
with the CBI office at Gandhinagar, and his evidence suggests that the
accused was also involved in some bank fraud, whereby the CBI was
investigating the case.
7.3 It was, therefore, submitted that the aforesaid conduct of the
accused is also required to be taken into consideration before
accepting his case for revision. He has drawn my attention to the
document produced on record at Exh. 64 and pointed out that the
learned Judge has taken into consideration the fact that such
partnership deed document was executed on 24.02.2010, whereas the
disputed cheque bears the date of issuance as 01.01.2011. The very
fact that the disputed cheque has been issued almost after a period of
one year implies that if the defence of the security cheque being
issued towards security has to be accepted, then such cheque was to
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be issued at the time of execution of such agreement. However, such
facts are not emerging on record. It is in light of these events, the
learned Judge has rightly considered that mere plea of defence of a
security cheque itself was not sufficient. The learned Judge has,
therefore, rightly discarded the defence raised by the accused
regarding the security cheque.
7.4 Learned advocate has further disputed the arguments laid by
the learned advocate on the issue of financial capacity by submitting
that in the cross-examination of the complainant, at the instance of
the accused, the evidence has come on record that the complainant
holds 100 acres of agricultural land and owns a huge parcel of land at
Village Bardia. Even otherwise, right from the inception of lodging the
complaint, it is the case of the complainant that he earns his livelihood
through agricultural lands. Merely because income tax returns were
not filed, no error can be found with the approach of the Court below
in holding that both these laws operate in different fields. He has,
therefore, submitted that having appreciated the evidence of the
complainant, in absence of any contradictions being brought on
record, the learned Judge has rightly believed the complainant to be
financially sound as well as the debt being incurred by the accused and
the cheque being issued towards such legally enforceable debt.
Having been satisfied with the ingredients of the offence, no error can
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be found with the Courts below convicting the applicant for the
offence punishable under Section 138 of the N.I. Act, 1881. It may also
be noted that the two witnesses examined by the accused are related
to the accused and therefore, no evidentiary value can be attached to
their evidence.
8. Learned advocate for the complainant has submitted that on
the pursis, the applicant-accused had agreed to the dues of Rs.30
Lakhs to be paid in installment of Rs.50,000/- and urged the place this
matter before the Lok Adalat, it is required to be noted that merely
because the parties have made an attempt to resolve the issue
amicably and the accused had shown his willingness to deposit the
amount of Rs.30 Lakhs as outstanding dues to the complainant itself,
cannot be treated as a fatal to the case of the accused and would not
bind the accused or the court to decide the case on merits. Learned
advocate for the complainant has stated that, appreciating the entire
evidence on record, there is no challenge to the signature of the
accused on the disputed cheque, and therefore, the presumption
provided under Section 118 read with Section 139 of the Act, has
rightly been raised by the courts below. He has therefore urged this
Court to dismiss the present Revision Application and to uphold the
impugned judgment and order passed by the Courts below.
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9. I have heard the learned advocates appearing for the respective
parties at length. I have carefully considered their arguments in light
of the findings and reasons assigned by the Courts below. In order to
appreciate their legal contentions, I have carefully gone through the
original records and proceedings of the Courts below.
10. Considering the arguments raised by the learned advocates
appearing on record, the principal defence raised by the accused, as
can be gathered from their submissions and the impugned judgment
and order, includes: (1) the service of statutory notice, (2) the cheques
being handed over to the complainant as security and not towards any
debt; the issue of misuse of the cheque; (3) the financial capacity of
the complainant.
Having noted the aforesaid defense raised by the accused,
admittedly there is no challenge to the case of prosecution as regards
maintainability of complaint against the accused.
11. Having appreciated the findings and reasons assigned by both
the courts, unfortunately, none of the Courts have noticed that the
cheque in dispute is issued from the account of ‘R. R. Enterprise’ under
authorised signature of the accused. Also, none of the learned
advocates on record for the respective parties have made any
submissions on the aforesaid aspect. During the course of dictation of
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this order, this Court while appreciating the arguments noted that the
cheque in dispute is issued from the account of drawer ‘R.R. Enterprise
through authorised signatory’. In such circumstances, the learned
advocates for respective parties were called upon to clarify as to
whether the complaint was maintainable in absence of the said
proprietorship concern / Firm being joined as party respondent. The
learned advocates on record have failed to assist this Court on the
said issue. Having appreciated the arguments of both the sides and
having noted absence of the drawer of the cheque, namely the
proprietorship concern, being joined as accused , this Court has
proceeded to examine the revision application on merits.
12. The question which therefore arises for consideration is
whether the authorised signatory of an enterprise in his individual
capacity be treated as a drawer of the cheque to hold him liable for
offence under section 138 of the Negotiable Instrument Act, 1881 ?.
Whether both the Courts have committed error in invoking the
provisions of section 138 of the Negotiable Instrument Act, 1881, in
the facts of the case and evidence on record, by entertaining
complaint against the sole accused , without joining the actual
drawer?.
13. Before examining the aforesaid points for determination touching
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the issue of maintainability of complaint, this Court finds it
appropriate to first consider the legal position as regards the liability
of the drawer who otherwise owns no legal debt as explained by the
Hon’ble Supreme Court in the case of Bijoy Kumar Moli vs. Paresh
Manna and others, reported in (2026) 5 SCC 380. The relevant
observations are as under:
“35. Having heard the learned counsel appearing for the
parties and having gone through the materials on record, the
only question that falls for our consideration is whether the
High Court committed any error in passing the impugned
order.
(i). Section 138 of the NI Act
36.Section 138 of the NI Act is contained in the Chapter XVII
which was inserted vide Section 4 of the Banking, Public
Financial Institutions and Negotiable Instruments Laws
(Amendment) Act, 1988. Chapter XVII of the NI Act, which
consists of Sections 138 to 147, inter alia provides for
penalties in case of dishonour of certain cheques for
insufficiency of funds in the accounts. Paragraph (xi) of the
Statement of the Objects and Reasons specifies the
legislative intent behind introduction of Chapter XVII to the
NI Act in the following words:
“(xi) to enhance the acceptability of cheques in settlement of
liabilities by making the drawer liable for penalties in case of
bouncing of cheques due to insufficiency of funds in thePage 24 of 70
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accounts or for the reason that it exceeds the arrangements
made by the drawer, with adequate safeguards to prevent
harassment of honest drawers.”
37. Section 138 of the NI Act reads as under:
“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 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 thePage 25 of 70
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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; 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 of other
liability” means a legally enforceable debt or other liability.”
38. This Court in Kusum Ingots & Alloys Ltd. v. Pennar
Peterson Securities Ltd. and Others reported in (2000) 2 SCC
745 explained the ingredients which are to be satisfied for
making out a case under Section 138 of the NI Act in the
following manner:
“10. On a reading of the provisions of Section 138 of the NI
Act it is clear that the ingredients which are to be satisfied
for making out a case under the provision are:
(i) a person must have drawn a cheque on an account
maintained by him in a bank for payment of a certain amount
of money to another person from out of that account for the
discharge of any debt or other liability;
(ii) that 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;
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(iii) that cheque is returned by the bank unpaid, either
because the amount of money standing to the credit of the
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 the bank;
(iv) the payee or the holder in due course of the cheque
makes a demand for the payment of the said amount of
money by giving a notice in writing, to the drawer of the
cheque, within 15 days of the receipt of information by him
from the bank regarding the return of the cheque as unpaid;
(v) the drawer of such cheque fails to make payment of the
said amount of money to the payee or the holder in due
course of the cheque within 15 days of the receipt of the said
notice.”
39. In the case on hand, the cheque in question came to be
signed by the accused, in his capacity as the Director and
Authorised Signatory of the Company Shilabati Hospital Pvt.
Ltd., on the account maintained by the Company with the
Standard Chartered Bank. Hence, the question that falls for
our determination is whether the accused could be said to be
covered by the expression “account maintained by him” as it
appears in Section 138 of the NI Act. In other words, could it
be said that the accused was “maintaining” the bank account
upon which the dishonoured cheque had been drawn.
40. Section 6 of the NI Act inter alia defines a “cheque” as a
bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand. Section
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7 defines the “drawer” as the maker of a bill of exchange or
cheque and “drawee” as the person thereby directed to pay.
Sections 30 and 31 of the NI Act respectively define the
liability of the drawer and the drawee of a cheque as follows:
“30. Liability of drawer.–The drawer of a bill of exchange or
cheque is bound, in case of dishonour by the drawee or
acceptor thereof, to compensate the holder, provided due
notice of dishonour has been given to, or received by, the
drawer as hereinafter provided.
31. Liability of drawee of cheque.–The drawee of a cheque
having sufficient funds of the drawer in his hands properly
applicable to the payment of such cheque must pay the
cheque when duly required so to do, and , in default of such
payment, must compensate the drawer for any loss or
damage caused by such default.”
41. The proviso (b) to Section 138 provides that the payee or
the holder of the cheque which has been dishonoured must
give a written notice to the drawer of the cheque within 30
days of the receipt of information from the bank that the
cheque has been returned as unpaid. Further proviso (c)
provides that if the drawer of the cheque makes the payment
of the amount mentioned in the cheque within 15 days of
receiving the notice mentioned in proviso (b), then he cannot
be held liable under Section 138.
42. What invariably follows from a perusal of the aforesaid
provisions is that it is only the drawer of the cheque who can
be held liable under Section 138. Section 141 is an exception
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to this scheme of the NI Act and provides for vicarious
liability of persons other than the drawer of the cheque in
cases where the drawer of the cheque under Section 138 is a
corporate person.
43. The question as to whether a person who was not the
drawer of the cheque upon an account maintained by him
could be held to be liable for an offence under Section 138 of
the NI Act fell for the consideration of this Court in the case
of P.J. Agro Tech Ltd. and Others v. Water Base Ltd. reported
in (2010) 12 SCC 146. The Court construed the provision
strictly and answered the question in the negative. The
relevant observations are reproduced hereinbelow:
“11. From the submissions made on behalf of the respective
parties, it is quite apparent that the short point for decision
in this appeal is whether a complaint under Section 138 of
the 1881 Act would be maintainable against a person who
was not the drawer of the cheque from an account
maintained by him, which ultimately came to be dishonoured
on presentation.
* * *
13. From a reading of the said section, it is very clear that in
order to attract the provisions thereof a cheque which is
dishonoured will have to be drawn by a person on an account
maintained by him with the 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. It is only such a cheque which is dishonouredPage 29 of 70
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which would attract the provisions of Section 138 of the
above Act against the drawer of the cheque.
14. In the instant case, the cheque which had been
dishonoured may have been issued by Respondent 11 for
discharging the dues of Appellant 1 Company and its
Directors to Respondent 1 Company and the respondent
Company may have a good case against Appellant 1 Company
for recovery of its dues before other fora, but it would not be
sufficient to attract the provisions of Section 138 of the 1881
Act. The appellant Company and its Directors cannot be
made liable under Section 138 of the 1881 Act for a default
committed by Respondent 11. An action in respect of a
criminal or a quasi-criminal provision has to be strictly
construed in keeping with the provisions alleged to have
been violated. The proceedings in such matters are in
personam and cannot be used to foist an offence on some
other person, who under the statute was not liable for the
commission of such offence.” (Emphasis supplied)
44. In Jugesh Sehgal v. Shamsher Singh Gogi reported in
(2009) 14 SCC 683, this Court emphasised on the importance
of the dishonoured cheque having been drawn by the
accused person on an account held in his name for the
offence to be made out and held thus:
“22. As already noted hereinbefore, in Para 3 of the
complaint, there is a clear averment that the cheque in
question was issued from an account which was non- existent
on the day it was issued or that the account from where thePage 30 of 70
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cheque was issued “pertained to someone else”. As per the
complainant’s own pleadings, the bank account from where
the cheque had been issued, was not held in the name of the
appellant and therefore, one of the requisite ingredients of
Section 138 of the Act was not satisfied. Under the
circumstances, continuance of further proceedings in the
complaint under Section 138 of the Act against the appellant
would be an abuse of the process of the court. In our
judgment, therefore, the decision of the High Court cannot
be sustained.” (Emphasis supplied)
45. The aforesaid discussion makes it clear that as per the
legislative scheme it is only the drawer of the cheque who is
sought to be made liable for the offence punishable under
Section 138 of the NI Act. Thus, the next question that
requires consideration is whether a Director of a company,
who is also the authorised signatory, to sign and issue
cheques on its behalf could be said to be the drawer of a
cheque drawn upon the bank account held in the name of the
company. In other words, whether such an authorised
signatory could be said to “maintain” the bank account upon
which the dishonoured cheque has been drawn for the
reason that such a person has the authority to enter into
transactions using the bank account of the company and also
look after the day-to-day functioning of the bank account of
the company.
(ii) Whether authorized signatory of a company falls within
the ambit of the expression “drawer”?
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46. This Court in one of its recent decisions in the case of Shri
Gurudatta Sugars Marketing (P) Ltd. v. Prithviraj Sayajirao
Deshmukh and Others reported in 2024 SCC OnLine SC 1800
had the occasion to consider the issue of whether the
authorised signatory of a company who had signed a cheque
drawn on the bank account of the company and which got
dishonoured subsequently could be held to be liable for the
payment of interim compensation under Section 143A of the
NI Act. This Court while answering the issue in the negative,
applied the doctrine of separate corporate personality and
held that it is only the drawer of the cheque who could be
held to be liable for the payment of interim compensation
under Section 143A of the NI Act and the authorised
signatory of a company cannot be said to be the drawer of
the cheque.
47. The relevant observations made by the Court are
reproduced hereinbelow:
“12. The appellant has challenged the judgment and order of
the High Court dated March 29, 2023 as well as the relied
upon judgment and order dated March 8, 2023. The present
appeal is filed assailing the correctness of these orders vis-a-
vis the larger question of law, as framed by the High Court:
“1. ………..(i) Whether the signatory of the cheque, authorised
by the ‘company’, is the ‘drawer’ and whether such signatory
could be directed to pay interim compensation in terms of
section 143A of the Negotiable Instruments Act, 1881 leaving
aside the company?”
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* * *
39. The High Court’s interpretation of section 7 of the
Negotiable Instruments Act, 1881 accurately identified the
“drawer” as the individual who issues the cheque. This
interpretation is fundamental to understanding the
obligations and liabilities under section 138 of the
Negotiable Instruments Act, 1881, which makes it clear that
the drawer must ensure sufficient funds in their account at
the time the cheque is presented. The appellants’ argument
that directors or other individuals should also be liable under
section 143A misinterprets the statutory language and intent.
The primary liability, as correctly observed by the High Court,
rests on the drawer, emphasizing the drawer’s responsibility for
maintaining sufficient funds.
40. The general rule against vicarious liability in criminal law
underscores that individuals are not typically held criminally
liable for acts committed by others unless specific statutory
provisions extend such liability. Section 141 of the Negotiable
Instruments Act, 1881 is one such provision, extending liability
to the company’s officers for the dishonour of a cheque. The
appellants’ attempt to extend this principle to section 143A, to
hold directors or other individuals personally liable for interim
compensation, is unfounded. The High Court rightly emphasised
that liability under section 141 arises from the conduct or
omission of the individual involved, not merely their position
within the company.
41. The distinction between legal entities and individuals
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acting as authorized signatories is crucial. Authorised
signatories act on behalf of the company but do not assume
the company’s legal identity. This principle, fundamental to
corporate law, ensures that while authorised signatories can
bind the company through their actions, they do not merge
their legal status with that of the company. This distinction
supports the High Court’s interpretation that the drawer
under section 143A refers specifically to the issuer of the
cheque, not the authorised signatories.
42. The principle of statutory interpretation, particularly in
relation to sections 143A and 148, was also correctly applied
by the High Court. The court emphasised that when statutory
language is clear and unambiguous, it should be given its
natural and ordinary meaning. The legislative intent, as
discerned from the plain language of the statute, aims to
hold the drawer accountable. The appellants’ argument for a
broader interpretation to include authorised signatories
under section 143A contradicts this principle and would lead
to an unjust extension of liability not supported by the
statutory text.” (emphasis supplied)
48. In yet one another decision of this Court in the case of N.
Harihara Krishnan v. J. Thomas reported in (2018) 13 SCC
663, while dealing with the issue of commission of an offence
under Section 138 of the NI Act by a company, the Court
observed that Section 138 only contemplates the drawer of
the cheque to be responsible for the commission of the
offence. It is only by virtue of Section 141 that certain
persons other than the drawer of the cheque can be made
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liable for the offence in cases where the offence under
Section 138 is committed by a company and not an individual
person. The Court, in the facts of the case before it, further
held that the identity of the drawer of the cheque was
apparent from the cheque itself and thus it was not open to
the payee/complainant to seek impleadment of the
company, that is, the drawer of the cheque, at a belated
stage by filing an impleadment application when it had
instituted the complaint only against the authorised
signatory who had signed the cheque on behalf of the
company. The Court also held that the offence under Section
138 is person specific and in the absence of applicability of
the principles of the Code of Criminal Procedure, 1973, the
magistrate cannot take cognizance of the complaint unless it
is made against the drawer of the cheque, as it is only the
drawer who can be an accused under Section 138.
49. The relevant observations are reproduced hereinbelow:
“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. […]* * *
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22. 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. 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
[Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5
SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] 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 defence that the
initiation of prosecution against it is barred by limitation.
Dakshin need not necessarily challenge the summoning
order. It can raise such a defence in the course of trial.
* * *
27. 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
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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 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, Parliament declared under Section 142 that the
provisions dealing with taking cognizance contained in the
Cr.PC 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.
iii. Meaning of the expression “on an account maintained by
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him” used in Section 138 of the NI Act
50. It is of vital importance to understand the import of the
expression “on an account maintained by him with a banker”
used in Section 138 of the NI Act. The expression, in our
considered opinion, describes the relationship between the
account holder and the banker. This relationship is
fundamental to the application of Section 138. The act of
maintaining an account is exclusively tied to the account
holder and does not extend to any third party whom the
account holder may authorize to manage the account on its
behalf. Therefore, any delegation of authority to manage the
account does not alter the intrinsic relationship existing
between the account holder and the banker as envisaged
under the NI Act. Corporate persons like companies, which
are mere legal entities and have no soul, mind or limb to
work physically, discharge their functions through some
human agency recognised under the law to work. Therefore,
if some function is discharged by such human agency for and
on behalf of the company it would be an act of the company
and not attributable to such human agent. One such instance
of discharge of functions could be the authority to manage
the bank accounts of the company, issue and sign cheques on
its behalf, etc. which may be delegated to an authorised
signatory. However, such authorisation would not render the
authorised signatory as the maker of those cheques. It is the
company alone which would continue to be the maker of
these cheques, and thus also the drawer within the meaning
of Section 7 of the NI Act.
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51. The authorised signatory is merely the physical limb that
signs and makes the cheque on behalf of the company’s
incorporeal personality. The company, for all purposes,
continues to remain the drawer of the cheques. If the
interpretation as being canvassed by the complainant is
accepted then even an employee of the Company, who on
account of his being an authorized signatory signs a cheque
issued by the Company towards discharge of the debt or
other liability of the Company, would be liable to prosecution
and conviction under Section 138 of NI Act even after he
resigns from the company and is no more in its employment.
This certainly could not have been the intention of the
legislature. Even the vicarious liability created under Section
138 of NI Act would not be attracted in respect of a Director
or an employee of the Company who resigns and severs his
connections with the company, unless the complainant is
able to bring his case within the purview of sub-Section 2 of
Section 141, by proving that the offence had been
committed with his consent or connivance or was otherwise
attributable to any neglect on his part.
52. We would hasten to add that the above interpretation
should not in any manner be misconstrued to affix liability
upon the joint account holder of an account unless the
cheque is shown to have been made/drawn jointly by such
joint account holder. A company vis-Ã -vis its authorised
signatory stands on a completely different footing as
compared to account holders of a joint account. In the
former, it is only the company which holds an account with
the banker, whereas in the latter, each joint account holder
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can be said to hold an account with the banker. Thus, while in
the case of a cheque drawn on the account of the company
the authorised signatory cannot be held to be the drawer, in
the case of a cheque drawn upon a joint account, each
account holder affixing his signature to the cheque may be
said to have drawn such a cheque.
53. The position of law on this issue has been settled by this
Court in the case of Aparna A. Shah v. Sheth Developers (P)
Ltd. reported in (2013) 8 SCC 71, wherein it was observed
thus:
“28. We also hold that under Section 138 of the NI Act, in case
of issuance of cheque from joint accounts, a joint account-
holder cannot be prosecuted unless the cheque has been
signed by each and every person who is a joint account-
holder. The said principle is an exception to Section 141 of
the NI Act which would have no application in the case on
hand. The proceedings filed under Section 138 cannot be
used as arm-twisting tactics to recover the amount allegedly
due from the appellant. It cannot be said that the
complainant has no remedy against the appellant but
certainly not under Section 138. The culpability attached to
the dishonour of a cheque can, in no case “except in case of
Section 141 of the NI Act” be extended to those on whose
behalf the cheque is issued. This Court reiterates that it is
only the drawer of the cheque who can be made an accused
in any proceeding under Section 138 of the Act. […]”
(Emphasis supplied)
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54. The expression “on an account maintained by him” has
been construed by a learned Single Judge of the Kerala High
Court in the case of P.N. Salim v. P.J. Thomas & Another
reported in 2004 SCC Online Ker 269 to also include those
cases where the cheque was issued by the drawer after the
closure of the account maintained by him with the bank. The
High Court said so having regard to the underlying object
behind the enactment of Section 138. A similar view was
taken by the Gujarat High Court in the case of Hashmikant M.
Seth v. State of Gujarat & Anr. reported in 2004 SCC Online
Guj 300. We are in agreement with both the High Courts on
the understanding of the expression “on an account
maintained by him”.
55. We are in seisin of the fact that in the case at hand, the
accused had allegedly borrowed the amount from the
complainant on the pretext that he was in need of financial
help regarding some infrastructure development project he
was undertaking. Nothing was brought on record during the
course of the trial which would suggest that there was some
sort of an understanding between the complainant and the
accused that the debt of the accused would be discharged by
the Shilabati Hospital Pvt. Ltd. A perusal of the notice issued
by the complainant to the accused as well as a reading of the
complaint filed by the complainant before the magistrate
clearly brings out that the complainant was under the
impression that the cheque was drawn by the accused in
personal capacity upon a bank account maintained by him
with the Standard Chartered Bank. Further, the defence that
the bank account upon which the cheque was drawn was held
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in the name of Shilabati Hospital and not in the name of the
accused was taken for the first time in the appeal filed by the
accused before the Sessions Court. Although it can be
understood that the complainant had no occasion to believe
that the cheque was drawn upon the bank account of
Shilabati Hospital as the debt was one which was taken by
the accused in his personal capacity, yet a bare perusal of the
cheque shows that the cheque was signed by the accused in
the capacity of the Director of the Shilabati Hospital Pvt. Ltd.
as the same bears both the stamp of the director as well as
the hospital.
56. A catena of decisions of this Court have settled the
position of law that in case of a cheque issued on behalf of a
company by its authorised signatory, prosecution cannot
proceed against the such authorised signatory or other post-
holders of the company as described under Section 141 of
the NI Act, unless the company who is the drawer of the
cheque is arraigned as an accused in the complaint case filed
before the magistrate. Further, vicarious liability can only be
affixed against the directors, authorised signatories, etc. of
the company after the company is held liable for the
commission of offence under Section 138.
57. It is not the case of the complainant that the cheque in
question was drawn by the accused on a bank account
maintained by him, rather the case is that the cheque was
issued in discharge of the personal liability of the accused
towards the complainant, and hence there was no occasion
for it to implead the company as an accused.
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(iv.) Scope of the expression “any debt or other liability”
appearing in Section 138 of the NI Act
58. Section 138 of the NI Act does not envisage that only
those cases where a cheque issued towards the discharge of
the personal liability of the drawer towards the payee gets
dishonoured would come within the ambit of the provision.
The expression “of any debt or other liability” appearing in
Section 138 when read with the Explanation to the provision
is wide enough to bring any debt or liability which is legally
enforceable within its fold. Thus, the requirement under the
provision is that the debt or any other liability has to be
legally enforceable and the emphasis is not on the existence
of such debt or other liability between the drawer and the
payee. A number of decisions of this Court have clarified that
even those cases where a person assumes the responsibility
of discharging the debt of some other person, and in
furtherance thereof draws a cheque on an account
maintained by him, which subsequently gets dishonoured
upon being presented before the drawee, would be covered
by Section 138 if the payee is able to establish that there was
some sort of an arrangement by way of which the debt was
assumed by the drawer.
59. This Court in the case of Anil Sachar and Another v. Shree
Nath Spinners Private Limited and Others reported in (2011)
13 SCC 148 observed thus:
“15. Upon perusal of the record, we find that the
complainants had established before the trial court thatPage 43 of 70
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there was an understanding among the complainants and the
accused that in consideration of supply of goods to M/s
Shree Nath Spinners (P) Ltd., M/s AT Overseas Ltd. was to
make the payment. The aforestated understanding was on
account of the fact that Directors in both the aforestated
companies were common and the aforestated companies
were sister concerns. In the circumstances, it can be very well
said and it has been proved that in consideration of supply of
goods to M/s Shree Nath Spinners (P) Ltd., M/s AT Overseas
Ltd. had made the payment. In view of the above fact, in our
opinion, the trial court was not right when it came to the
conclusion that there was no reason for M/s AT Overseas Ltd.
to give the cheques to the complainants.
* * *
17. The trial court materially erred while coming to a
conclusion that in criminal law no presumption can be raised
with regard to consideration as no goods had been supplied
by the complainants to M/s AT Overseas Ltd. The trial court
ought to have considered the provisions of Section 139 of
the Act, which reads as under:
“139.Presumption in favour of holder.–It shall be presumed,
unless the contrary is proved, 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.”
18. According to the provisions of the aforestated section,
there is a presumption with regard to consideration when a
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cheque has been paid by the drawer of the cheque. In the
instant case, M/s AT Overseas Ltd. paid the cheque which had
been duly signed by one of its Directors, namely, Munish Jain.
Munish Jain is also a Director in M/s Shree Nath Spinners (P)
Ltd. As stated hereinabove, both are sister concerns having
common Directors. Extracts of books of accounts had been
produced before the trial court so as to show that both the
companies were having several transactions and the
companies used to pay on behalf of each other to other
parties or their creditors. The above fact strengthens the
presumption to the effect that M/s AT Overseas Ltd. had
paid the cheques to the complainants, which had been signed
by Munish Jain, in consideration of goods supplies to M/s
Shree Nath Spinners (P) Ltd. Of course, the presumption
referred to in Section 139 is rebuttable. In the instant case,
no effort was made by Munish Jain or any of the Directors of
M/s AT Overseas Ltd. for rebuttal of the aforestated
presumption and, therefore, the presumption must go in
favour of the holder of the cheques. Unfortunately, the trial
court did not consider the above facts and came to the
conclusion that there was no consideration for the cheques
which had been given by M/s AT Overseas Ltd. to the
complainants.” (Emphasis supplied)
60. In another judgment delivered by this Court in ICDS Ltd.
v. Beena Shabeer and Another reported in (2002) 6 SCC 426,
reference was made to the nature of liability which is
incurred by the one who is a drawer of the cheque and
observed that if the cheque is given towards any liability or
debt which might have been incurred even by someone else,
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the person who is the drawer of the cheque can be made
liable under Section 138 of the Act. The relevant
observations made therein are reproduced hereinbelow:
“10. The language, however, has been rather specific as
regards the intent of the legislature. The commencement of
the section stands with the words “Where any cheque”. The
abovenoted three words are of extreme significance, in
particular, by reason of the user of the word “any” — the first
three words suggest that in fact for whatever reason if a
cheque is drawn on an account maintained by him with a
banker in favour of another person for the discharge of any
debt or other liability, the highlighted words if read with the
first three words at the commencement of Section 138, leave
no manner of doubt that for whatever reason it may be, the
liability under this provision cannot be avoided in the event
the same stands returned by the banker unpaid. The
legislature has been careful enough to record not only
discharge in whole or in part of any debt but the same
includes other liability as well. This aspect of the matter has
not been appreciated by the High Court, neither been dealt
with or even referred to in the impugned judgment.
11. The issue as regards the coextensive liability of the
guarantor and the principal debtor, in our view, is totally out
of the purview of Section 138 of the Act, neither the same
calls for any discussion therein. The language of the statute
depicts the intent of the law-makers to the effect that
wherever there is a default on the part of one in favour of
another and in the event a cheque is issued in discharge ofPage 46 of 70
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any debt or other liability there cannot be any restriction or
embargo in the matter of application of the provisions of
Section 138 of the Act. “Any cheque” and “other liability” are
the two key expressions which stand as clarifying the
legislative intent so as to bring the factual context within the
ambit of the provisions of the statute. Any contra-
interpretation would defeat the intent of the legislature. The
High Court, it seems, got carried away by the issue of
guarantee and guarantor’s liability and thus has overlooked
the true intent and purport of Section 138 of the Act. The
judgments recorded in the order of the High Court do not
have any relevance in the contextual facts and the same thus
do not lend any assistance to the contentions raised by the
respondents.” (Emphasis supplied)
61. A perusal of the above two decisions indicates that even
if the cheque might have been issued for the discharge of
personal liability of the accused towards the complainant,
had the company Shilabati Hospital Pvt. Ltd. been arraigned
as an accused in the complaint case before the Trial Court, it
would have remained open to the complainant to establish
with the aid of the presumption under Section 139 that the
cheque issued by the company was in discharge of a legally
enforceable debt. However, in the absence of the drawer of
the cheque having been arraigned as an accused, it was
rightly held by the High Court that no prosecution could have
proceeded against the accused in his personal capacity. The
only way by which the accused could be held liable was under
Section 141 of the NI Act, however the same could not have
been done in the absence of the company being arraigned asPage 47 of 70
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an accused. This position of law has been explained by a
number of decisions of this Court.
62. A three-Judge Bench of this Court in Aneeta Hada v.
Godfather Travels and Tours Private Limited reported in
(2012) 5 SCC 661 observed thus:
“17. The gravamen of the controversy is whether any person
who has been mentioned in Sections 141(1) and 141(2) of the
Act can be prosecuted without the company being impleaded
as an accused. To appreciate the controversy, certain
provisions need to be referred to.
* * *
58. Applying the doctrine of strict construction, we are of the
considered opinion that commission of offence by the
company is an express condition precedent to attract the
vicarious liability of others. Thus, the words “as well as the
company” appearing in the section make it absolutely
unmistakably 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. One
cannot be oblivious of the fact that the company is a juristic
person and it has its own respectability. If a finding is
recorded against it, it would create a concavity in its
reputation. There can be situations when the corporate
reputation is affected when a Director is indicted.
59. In view of our aforesaid analysis, we arrive at the
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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. We say so on the basis of the ratio laid down
in C.V. Parekh [(1970) 3 SCC 491 : 1971 SCC (Cri) 97] which is a
three-Judge Bench decision. Thus, the view expressed in
Sheoratan Agarwal [(1984) 4 SCC 352 : 1984 SCC (Cri) 620]
does not correctly lay down the law and, accordingly, is
hereby overruled. The decision in Anil Hada [(2000) 1 SCC 1 :
2001 SCC (Cri) 174] is overruled with the qualifier as stated in
para 51. The decision in Modi Distillery [(1987) 3 SCC 684 :
1987 SCC (Cri) 632] has to be treated to be restricted to its
own facts as has been explained by us hereinabove.
63. As specified in paragraph 59 of the aforesaid decision,
the only exception to the general rule as laid above is
embodied in the doctrine of lex non cogit ad impossibilia
which means that the law doesn’t compel the impossible.
Thus, it is only in those cases where the impleadment of the
company is not possible due to some legal impediment that
this general rule can be exempted. In the facts on hand, it
cannot be said that there was any legal difficulty in
impleading Shilabati Hospital Pvt. Ltd. as an accused in the
complaint case filed by the complainant. Thus, even the
benefit of the exception cannot be extended to the
complainant in the present case.
64. In Himanshu v. B. Shivamurthy (supra), the Court was
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examining the legality and validity of the order quashing a
complaint passed by the High Court in exercise of its
inherent powers under Section 482 of the CrPC in a case
where the Director of the company was arraigned as the sole
accused for the dishonour of a cheque drawn upon the bank
account held in the name of the company. Reiterating the
principles laid down in Aneeta Hada (supra), this Court
upheld the decision of the High Court in quashing the
complaint case.
65. In yet another decision of this Court in Mainuddin Abdul
Sattar Shaikh v. Vijay D. Salvi reported in (2015) 9 SCC 622,
the facts interestingly were virtually opposite to the facts of
the case on hand. In the said case, the accused, who was the
Managing Director of a company had issued a cheque drawn
on his personal account in discharge of the liability of the
company. The cheque later came to be dishonoured and a
private complaint was lodged against the accused under
Section 138 of the NI Act. Both the trial court and the High
Court acquitted the accused on the ground that the company
was not made a party to the proceedings. However, this
Court set aside the order of acquittal and held the accused
liable for the offence under Section 138. It was observed by
this Court that as the cheque was drawn by the accused on
an account maintained by him, the Company or any of its
directors could not be made liable for the offence, even if
the cheque was issued by the accused towards the discharge
of the debt of the company.
66. The relevant observations made by the Court are
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reproduced hereinbelow:
10. In the present case, it is an admitted fact that the drawer
of the cheque was the respondent, who had drawn the
cheque, bearing No. 075073 for Rs 74,200 on a bank account
maintained by him towards the refund of the booking
amount. Therefore, he was the drawer of the cheque. The
case of the appellant, apart from being supported by the
provision of Section 138 of the NI Act, also gets buttressed
by the judgment in P.J. Agro Tech Ltd. v. Water Base Ltd.
[(2010) 12 SCC 146 : (2010) 4 SCC (Civ) 588 : (2011) 2 SCC (Cri)
164] , where this Court has dealt with the scope of Section
138 and held that : (SCC p. 150, para 13)
“13. … it is very clear that in order to attract the provisions
thereof a cheque which is dishonoured will have to be drawn
by a person on an account maintained by him with the 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. It is only such a cheque which is
dishonoured which would attract the provisions of Section
138 of the above Act against the drawer of the cheque.”
11. About the liability under Section 138 of the NI Act, where
the cheque drawn by the employee of the appellant
Company on his personal account, even if it be for
discharging dues of the appellant Company and its Directors,
the appellant Company and its Directors cannot be made
liable under Section 138. Thus, we observe that in the
abovementioned case, the personal liability was upheld and
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the Company and its Directors were absolved of the liability.
The logic applied was that the section itself makes the
drawer liable and no other person. […]” (Emphasis supplied)
v.
(v)Section 141 of the NI Act
67. In Aneeta Hada (supra), this Court fortified the view that
criminal liability on account of dishonor of cheque primarily
falls on the drawer company and then extends to its officers
only when the conditions incorporated in Section 141 of the
NI Act are satisfied. While explaining the import of the words
“as well as the company” occurring in the provision, the Court
observed that the commission of an offence by the company
is an express condition precedent and only when the
prosecution is maintainable against the Company that the
persons mentioned in the other categories under Section 141
can be vicariously made liable for the offence committed
under Section 138 of the NI Act. The relevant observations
are reproduced hereinbelow:
“53. It is to be borne in mind that 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. As has been stated by us earlier,
the vicarious liability gets attracted when the condition
precedent laid down in Section 141 of the Act stands
satisfied. There can be no dispute that as the liability is penal
in nature, a strict construction of the provision would be
necessitous and, in a way, the warrant.
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58. Applying the doctrine of strict construction, we are of the
considered opinion that commission of offence by the
company is an express condition precedent to attract the
vicarious liability of others. Thus, the words “as well as the
company” appearing in the section make it absolutely
unmistakably 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. One
cannot be oblivious of the fact that the company is a juristic
person and it has its own respectability. If a finding is
recorded against it, it would create a concavity in its
reputation. There can be situations when the corporate
reputation is affected when a Director is indicted.”
(Emphasis supplied)
68. Following the rationale in Aneeta Hada (supra), this Court
in Anil Gupta v. Star India Private Limited and Another
reported in (2014) 10 SCC 373 held that the guilt for the
offence under Section 138 is only deemed upon the other
persons who are connected with the Company as a
consequence of Section 141 of the NI Act. Herein, since the
complaint against the respondent Company was not
maintainable, the High Court had quashed the summons
issued by the trial court against the respondent Company.
This Court opined that since the Company was not a party to
the proceedings under Section 138 read with Section 141 of
the Act, the proceedings against the appellant Managing
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Director also could not be continued with. The relevant
observations are reproduced hereinbelow:
“13. In the present case, the High Court by the impugned
judgment dated 13-8-2007 [Visionaries Media Network v.
Star India (P) Ltd., Criminal Misc. Case No. 2380 of 2004,
decided on 13-8-2007 (Del)] held that the complaint against
Respondent 2 Company was not maintainable and quashed
the summons issued by the trial court against Respondent 2
Company. Thereby, the Company being not a party to the
proceedings under Section 138 read with Section 141 of the
Act and in view of the fact that part of the judgment referred
to by the High Court in Anil Hada [Anil Hada v. Indian Acrylic
Ltd., (2000) 1 SCC 1 : 2001 SCC (Cri) 174] has been overruled
by a three-Judge Bench of this Court in Aneeta Hada [Aneeta
Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC
661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] , we have
no other option but to set aside the rest part of the
impugned judgment [Visionaries Media Network v. Star India
(P) Ltd., Criminal Misc. Case No. 2380 of 2004, decided on 13-
8-2007 (Del)] whereby the High Court held that the
proceedings against the appellant can be continued even in
absence of the Company. We, accordingly, set aside that part
of the impugned judgment dated 13-8-2007 [Visionaries
Media Network v. Star India (P) Ltd., Criminal Misc. Case No.
2380 of 2004, decided on 13-8-2007 (Del)] passed by the High
Court so far as it relates to the appellant and quash the
summons and proceeding pursuant to Complaint Case No.
698 of 2001 qua the appellant.” (Emphasis supplied)
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69. This Court’s decision in Ashok Shewakramani and Others
v. State of Andhra Pradesh and Another reported in (2023) 8
SCC 473 acknowledged the normal rule that there cannot be
any vicarious liability under a penal provision but however,
held that Section 141 of the NI Act is an exception to this
rule. It further stated that vicarious liability would only be
fastened when the person who is sought to be held
vicariously liable was “in charge of” and “responsible to the
Company” for the conduct of the business of the Company at
the time when the offence under Section 138 was
committed. In circumstances where such persons are indeed
found vicariously liable, those persons as well as the
Company shall be deemed to be guilty of the offence under
Section 138 of the NI Act.
70. The relevant observations made by the Court are
reproduced hereinbelow:
“21. Section 141 is an exception to the normal rule that there
cannot be any vicarious liability when it comes to a penal
provision. The vicarious liability is attracted when the
ingredients of sub-section (1) of Section 141 are satisfied.
The section provides that every person who at the time the
offence was committed was in charge of, and was
responsible to the Company for the conduct of business of
the Company, as well as the Company shall be deemed to be
guilty of the offence under Section 138 of the NI Act.”
(Emphasis supplied)
71. It follows from a conspectus of the aforesaid decisions
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that it is the drawer Company which must be first held to be
the principal offender under Section 138 of the NI Act before
culpability can be extended, through a deeming fiction, to
the other Directors or persons in-charge of and responsible
to the Company for the conduct of its business. In the
absence of the liability of the drawer Company, there would
naturally be no requirement to hold the other persons
vicariously liable for the offence committed under Section
138 of the NI Act.
72. Before we part with the matter, we deem it necessary to
address the argument advanced by the counsel appearing for
the accused that the object of Section 138 of the NI Act
would be defeated if cases like the present one are held to
be excluded from the ambit of the provision. The counsel
placed reliance on a decision rendered by a learned Single
Judge of the Madras High Court in the case of P. Sarvana
Kumar v. S.P. Vijaya Kumar reported in 2022 SCC Online Mad
1387. The said decision was rendered in a petition filed under
Section 482 of the Cr.P.C. for quashing of the private
complaint filed against the petitioner therein for the offence
under Section 138 of the NI Act. The petitioner therein, who
was arraigned as the second accused in the complaint, had
filed the petition seeking quashing of the complaint qua him
on the ground that the cheque, which came to be
dishonoured, was signed by him in his capacity as an
authorized signatory acting on behalf of the owner of a
proprietorix concern, and thus he could not be said to have
drawn the cheque on an account maintained by him, and the
liability under Section 138 could only be affixed on the owner
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of the proprietorix concern. It was also contended by the
petitioner therein that the provisions of Section 141 of the NI
Act would have no applicability to a case involving a
proprietorship concern as the same is not owned by a
collection of individuals but a single person.
73. The High Court while rejecting the contention of the
petitioner therein, adverted to the object of Section 138 of
the NI Act to hold that the authorized signatory could be said
to be the drawer of the cheque as he was “maintaining” the
account held in the name of the proprietorix concern and
thus could be held liable under Section 138 of the NI Act.
74. We find it difficult to subscribe to the view taken by the
High Court in the aforesaid decision. The High Court referred
to an extract from the 11th Edition of the commentary on
the NI Act by Bhashyam and Adiga wherein the liability of the
principal for the acts of the agents has been discussed and
erroneously relied upon it to attribute liability to the
petitioner therein, who was the agent acting on behalf of the
proprietorix concern.
75. The position of law as has been settled by this Court and
reiterated in a legion of decisions is that it is only the drawer
of the cheque who can be held liable for an offence under
Section 138 of the NI Act. Further, this Court has also
declared through several pronouncements on the subject
that an authorised signatory acting on behalf of the principal
cannot be said to be the “drawer” of the cheque “on an
account maintained by him with a banker” under Section
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138.
76. It is also pertinent to note that the High Court in the
aforesaid decision also referred to the decision of this Court
in Raghu Lakshminarayanan v. Fine Tubes reported in (2007)
5 SCC 103 wherein it was categorically held by this Court that
Section 141 of the NI Act will have no application to
proprietorship concerns as they are owned by individuals and
do not have a separate corporate identity. However, the High
Court distinguished the said decision by holding that
although the signatory of a cheque issued on behalf of a
proprietorship concern cannot be said to be vicariously liable
under Section 141 yet he could be held liable in his capacity
as the drawer of the cheque under Section 138 of the NI Act.
77. We find it difficult to approve the line of reasoning
adopted by the High Court in relying upon the object behind
the enactment of Section 138 of the Act to liberally interpret
the language of Section 138 of the NI Act so as to include
even an authorized signatory within its ambit. Section 138 of
the NI Act being penal in nature has to be strictly construed
and advertence to the object behind its enactment can only
be made to supplement the language employed in the text
of the statute and not to supplant it or render it overly broad
and susceptible to misuse.
78. This Court in P.J. Agro Tech (supra) noted as under:
14. … An action in respect of a criminal or a quasi- criminal
provision has to be strictly construed in keeping with the
provisions alleged to have been violated. The proceedings inPage 58 of 70
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such matters are in personam and cannot be used to foist an
offence on some other person, who under the statute was
not liable for the commission of such offence.”
E.Conclusion
79. As discussed above, in the case on hand, the accused was
prosecuted in his individual capacity and not in his capacity of
being the Director of the Shilabati Hospital Pvt. Ltd.
Although it is undisputed that the accused signed the cheque
in question, yet as the cheque was drawn not on an account
maintained by him with a Banker but was issued on an
account maintained by the hospital, the requirement of
Section 138 of the Act cannot be said to have been complied
with.
80. It would have been altogether a different situation if the
accused was prosecuted in his capacity as a Director of the
Shilabati Hospital. In such a scenario, the cheque drawn by
him on an account maintained by the Company would have
satisfied the requirement of Section 138 of the Act but as the
accused has been proceeded against for an offence under
Section 138 of the Act in his individual capacity and inasmuch
as the cheque dishonoured for insufficiency of funds was
drawn on the account maintained by the Company, namely,
Shilabati Hospital Pvt. Ltd., and not by the accused herein, no
offence could be said to have been committed under Section
138 of the Act. The High Court rightly held that in the
absence of the principal offender having been arraigned as
an accused, prosecution for the commission of an offence
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under Section 138 of the NI Act could not have proceeded
against the accused.
81. As is evident from the discussion in the preceding parts
of this judgment, the requirement of Section 138 of the NI
Act is that for fastening criminal liability on the accused, the
cheque which was dishonoured for insufficiency of funds etc.,
must have been drawn on an account maintained by the
accused. The mere fact that the cheque signed by the
accused in his capacity as a “Director” of the Company would
in the normal course be honoured by the Bank to which it
was presented does not satisfy the statutory requirement of
Section 138 of the Act.
82. Section 138 of the Act exposes the person who has
drawn the cheque and which has been returned for
insufficiency of funds to criminal liability. The provision,
therefore, must be construed strictly. However, such a strict
construction should not result in defeating the very purpose
for which the provision has been enacted as held by this
Court in the case of NEPC Micon Limited and Others v.
Magma Leasing Limited reported in (1999) 4 SCC 253. At the
same time, the statutory provisions creating penal liability
cannot be stretched too far to embrace the persons and
situations patently excluded from its purview as discernible
from clear and unequivocal language used in the provision.
83. Section 138 of the NI Act clearly postulates that the
cheque returned for insufficiency of funds should have been
drawn by a person on an account maintained by him. It will
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amount to doing violence to the language of the statute if
Section 138 of the Act is interpreted to mean that even if a
person draws a cheque on an account not maintained by him,
he shall be liable if the cheque is returned for insufficiency of
funds. Such an interpretation will lead to absurd and wholly
unintended results.
84. However, the peculiar factual situation of the present
case and the plight of the complainant is not lost upon us.
We are conscious of the fact that the option of bringing civil
action against the accused or the hospital will be of no avail
to the complainant as the claims are hopelessly time barred.
Further, it is also not open for the complainant to initiate
proceedings under Section 138 of the NI Act afresh by
impleading Shilabati Hospital Pvt. Ltd. as an accused as the
time period prescribed for issuance of statutory notice under
Section 138 has long expired.
85. It is trite law that an act may constitute an offence under
more than one statute. The encashment of the cheque for an
amount of Rs 7,00,000/- issued by the complainant in favour
of the accused stood proved during the course of the trial.
Further, the conduct of the accused in not replying to the
statutory notice of dishonour of cheque issued by the lawyer
for the complainant and in not taking the plea of the cheque
having been drawn on the account of the company in his
capacity as a Director during the course of trial undoubtedly
raises questions as regards his dishonest intention in not
repaying the amount borrowed by him from the
complainant.
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86. In such circumstances, although it is not possible to hold
the accused liable for the offence under Section 138 of the
NI Act, yet the possibility of him having committed the
offence of cheating cannot be ruled out. Prima facie, the
mens rea (guilty mind) of the accused speaks for itself.
87. We leave it open to the complainant to approach the
jurisdictional police station and lodge an appropriate FIR
against the accused. If the complainant lodges an FIR, the
concerned police officer in-charge of the police station shall
investigate the same in accordance with law.”
14. Thus the Hon’ble Supreme Court has considered the term
‘drawer’ as defined under section 7 of the Act as maker of the b ill of
exchange or cheque and drawee as the person thereby directed to pay
ZTe Court has also considered section 30 and section 31 of the Act,
defining the liability of the drawer and the drawee of the cheque. The
Court has followed the ratio laid down in the case of Kusum In gots
( supra), P.J. Agro (supra) and Jugesh Sehgal (supra) and has held that
considering provision of section 138 , the persons who have drawn
cheque are exposed to criminal liability. Therefore the said statutory
provisions cannot be stretched too far to embrace persons and
situations patently excluded from its purview as discernible from clear
and unequivocal language. The Court has also further considered the
expression ‘ on an account maintained by him with a banker’ and has
held that in case of an authorised signatory acting on behalf of the
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Company cannot be said to be a drawer of the cheque ‘on account
maintained by him with a banker’ under section 138 of the Act. The
Court has also considered section 141 of the Act and the well settled
principles as laid down in the case of Aneeta Handa (supra) and has
observed that a cheque issued by its authorised signatory, prosecution
cannot be proceeded against such authorized signatory or other post
holders of the company unless the company who is drawer of the
cheque is arraigned as an accused in complaint filed before the
Magistrate. It is required to be noted that the facts of the case in the
case of Bijoy kumar ( supra) suggest that the debt was incurred by the
accused in his personal capacity whereas the cheque was signed by the
accused in the capacity of the Director of the company. In this peculiar
facts of the case, the Court has further considered the scope of
section 138 of the Act and has held that the said provision does not
envisage that only those cases where cheque issued towards the
discharge of the personal liability of the drawer towards the discharge
of the personal liability of the payee gets dishonored would come with
the ab it of the provision. However, the Court has also considered the
expression ‘of any debt or other liability’ and has ruled that it has to
be established by the complainant that the drawer had assumed the
responsibility of discharging the debt of some other person, and in
furtherance thereof has drawn cheque on an account maintained by
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him, which subsequently got dishonoured. Thus, the burden is on the
complainant to plead and establish on record to establish that there
was some sort of arrangement by which the debt was assumed by the
drawer.
15. Applying the aforesaid broad principles in the facts of the present
case, it is required to be noted that the complainant at the stage of
lodging of complaint has made an averment that the amount of Rs.30
Lakhs was handed over in cash to the accused on different dates , who
had lured him to invest by offering him to be introduced as partner in
the partnership firm in the business of Vachraj Petrol Pump. It is
further contended that the amount though being handed over to the
accused no share was given to the complainant from such business. On
the other hand, the accused had produced on record the partnership
deed at Exh.74 which suggests that the parties have mutually agreed
to constitute a firm under the name of Vachraj Petrol Pump to run the
Petrol Pump business at Porbandar. Such document is an unregistered
document executed before the Notary on 24.02.2010. The terms and
conditions of the partnership firm suggest that the investment
towards the capital of the firm was to be made as per mutual
understanding. The profit which may be accrued on such investment
was to be realized annually with interest at the rate of 12%. It was
further agreed between the parties that the audit of the account shall
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be conducted at the end of the year and payments of profit/loss were
to be examined as per their share in the partnership firm.
16. It is required to be noted that the property of the firm belonged
to the firm and was not treated to be any individual partner; it was
agreed between the parties that the parties were bound by the
provisions of the Indian Partnership Act, 1932, and were bound to act
accordingly. In Clause 10, it has been agreed between the parties that
at the end of the year, after undertaking the auditing of the accounts
and after payment of amounts towards any interest and wages, the
share of profit and loss was to be settled between the respective
parties in equal proportion.
17. At this juncture, in order to appreciate the core element of
legally enforceable debt, which is required to be established so as to
attract the offence under Section 138 of the N.I. Act, gathering the
surrounding circumstances appearing on record in light of the
admission of the complainant about the deal of him being introduced
as a partner in the Vajraj Petrol Pump partnership business, and the
deed of 2010 being also brought on record by the accused at Exh. 74,
dated 24th February 2010, it is an admitted fact that the parties have
entered into a valid contract, whereby the complainant had been
inducted as a partner and therefore, the investment was made by him
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towards such business. In view of the provisions of Section 14 of the
Partnership Act, once the amount was contributed to the partnership
firm, it had become the assets of the firm. The question arises as to
whether the claim of share in the said partnership could be brought
within purview of ‘legally enforceable debt’ so as to attract offense
under section 138. It is required to be noted that the claim was against
the Vachraj petrol pump firm in which the accused was one of the
partners. The cause title does not mention about him being joined as a
partner of such a firm. Again, as agreed between the parties, at the
end of the year, the partners were at the most entitled to seek profits
and losses in equal share. Merely by the fact that the firm was not
registered, the validity of such contract cannot be doubted in absence
of any challenge being made. But at the same time, so far as lodging
of the criminal complaint is concerned, the same is not a bar on the
ground that the firm was not registered. The courts have consistently
held that a penal provision which intends to punish in the case of
financial fraud so as to maintain the trust of the people in banking and
is, therefore, not required to be treated as a simple civil suit for
recovery. The courts have, therefore, accepted that even in cases of an
unregistered firm, the issue as to whether the debt was illegal or
unenforceable under criminal law does not arise. In this regard, it
would be appropriate to refer to the judgment of the Hon’ble
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Supreme Court in the case of BSI limited and another vs Gift holding
private limited, reported in (2000) 2 SCC 737. However, the fact
remains that the specific case put forward by the complainant for
enforcement of debt is against the accused and not against the Firm.
In view of section 25 of the Partnership Act, the partner in his
individual capacity shall be answerable to the obligations of the firm
towards outgoing partners.rred while the
18. Having noted the aforesaid facts, the question arises as to
whether the complainant had satisfied the basic requirements of
Section 138 of the Act, 1881. It is required to be noted that the
cheque produced on record at Exh.33 clearly suggests that the cheque
was issued from the account of ‘R.R. Enterprise’ through its authorized
signatory. This Court has closely appreciated the cause title of the
original complaint, and it clearly transpires that the complaint has
been lodged against ‘Rajshibhai Ranabhai Chachiya’ in his individual
capacity. The complainant has, for the reasons best known to him,
failed to join “R.R. Enterprises” as the accused in the complaint. This
Court had called upon the learned advocate for the complainant to
explain the aforesaid aspect; however, in absence of any arguments
being raised by either of the parties before the courts below, learned
advocate was unable to dispute the aforesaid fact.
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19. In view thereof, in my view, the learned Judge committed
grave error in arriving at a conclusion that the basic ingredients under
Section 138 of the N.I. Act, 1881, that the cheque was drawn by a
person on an account maintained by him with a banker for payment of
any amount of money to the complainant from out of that account for
the discharge of any debt or liability, have been fulfilled. Having
appreciated the case of the complainant as emerging from the original
complaint, there is no averment being made with regard to any
transaction being entered into with “R.R. Enterprises” or having
assured the responsibility to discharge the debt. What is pleaded
before the court is the transaction being entered with Rajshibhai
Ranabhai Chachiya with whom he had agreed to invest in the
partnership business under the name of Vrachraj Petrol Pump.
20. Considering surrounding circumstances, a probable defence can
be said to have been brought on record by the accused with regard to
misuse of cheques, as being alleged on the ground that the cheques
were furnished towards security. It appears that the accused namely
Rajshibhai Ranabhai Chachiya, in his name was also running a firm
under the name of R.R. Enterprises, and from the account of R.R.
Enterprises, he being the authorized signatory, had drawn the
cheques, which were handed over to the complainant for security
purposes. However, this is merely on presumption as no such facts or
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any averments in this regard has been made by the complainant in the
original complaint. It is also required to be noted that as per
complainant, the amount of Rs. 30 Lakhs was borrowed by the accused
on assurance to introduce him as partner, however, the fact of
partnership deed being already executed has not been stated by
complainant and the said fact has been disclosed for the first time by
the accused by placing on record the partnership deed on record. It is
also required to be noted that the cheque in question though signed
by the accused however, the same has been drawn from the account
of ‘R.R. enterprise’, with whom there is no case of the complainant
having any legally enforceable dues to be recovered. In the absence
of the necessary averments in the complaint as regards liability of the
drawer of the cheque and also being not joined as a party to the
proceedings, the requirements of Section 138 are not fulfilled and
therefore the complaint itself is not found maintainable.
21. For the reasons assigned, this Court finds that the courts below
have committed palpable error in passing the impugned judgment
and order of conviction in absence of the basic ingredients of the
offence under Section 138, being fulfilled. Since the complaint itself is
not found maintainable , the grounds raised by learned advocates on
various issues is not examined.
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22. In view thereof, the impugned judgment and order dated
30.12.2016 passed by the learned Judicial Magistrate First Class,
Dwarka in Criminal Case Nos.568 of 2011, 570 of 2011, 571 of 2011,
569 of 2011 and 572 of 2011 and as confirmed vide order dated
13.12.2018 by the learned 2nd Additional Sessions Judge, Jam
Khambaliya, Devbhoomi Dwarka in Criminal Appeal Nos. 01 of 2017,
03 of 2017, 04 of 2017, 02 of 2017 and 05 of 2017, are quashed and
set aside. The applicant is acquitted from the offence alleged to have
been committed under Section 138 of the N.I. Act.
23. With these observations, the captioned Revision Applications
stands allowed. Records and proceedings are directed to be sent back
to the concerned courts.
(NISHA M. THAKORE,J)
SUYASH SRIVASTAVA
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