IN THE HIMACHAL PRADESH HIGH COURT 

Mr. R. S. Cheema, Senior Advocate, with Mr. Rajeev Trikha and Mr. R. L. Sood, Advocates, for the petitioner. 

Mr. Kuldip Singh and Mr. Bipin Negi, Advocates, for the respondents. 

JUDGMENT 

R. L. KHURANA J. - This order will dispose of the above noted three petitions made under section 482 of the Criminal Procedure Code, 1973, for the quashing of the proceedings against the petitioner under section 138 of the Negotiable Instruments Act, 1881, vide Criminal Complaints Nos. 268-1 of 1997, 269-1 of 1997 and 319-1 of 1997 pending before the learned Judicial Magistrate, First Class, Manali, since common questions of law and facts are involved therein. 

Stated briefly, the facts giving rise to the present petitions are these. The respondent in September, 1996, had supplied Watches worth Rs.16,55,559 to the petitioner. A balance of Rs. 9,40,000 was due from the petitioner. The petitioner gave three cheques as under to the respondent 

All the said three cheques were drawn on Bank of Baroda, Parliament Street, New Delhi. The first two cheques were in respect of the interest amount payable by the petitioner on the outstanding amount, while the third cheque was towards part payment of the outstanding amount. All these three cheques on having been presented to the bank for encashment by the respondent through his bank were returned with the endorsement "payment stopped by the drawer". 

The respondent thereafter served notices on the petitioner calling upon him to pay the amount of the cheques within fifteen days of the receipt of such notices. Since the petitioner failed to pay the amount, three complaints came to be filed by the respondents for the prosecution of the petitioner for the offence under section 138 of the Negotiable Instruments Act, 1881 (for short "the Act"). 

The learned Chief Judicial Magistrate, Kullu, after holding the enquiry as contemplated under section 202 of the Criminal Procedure Code took cognizance of the offence and ordered the issuance of process against the petitioner for his prosecution for the offence under section 138 of the Act. 

The order of the learned Chief Judicial Magistrate, in all the three cases, issuing process to the petitioner was challenged by the petitioner by way of three petitions being Cr.M.M.O. Nos. 10 of 1998, 11 of 1998 and 13 of 1998, under section 482 of the Criminal Procedure Code. The main grounds urged therein were : 

(a) Stoppage of payment by the drawer does not constitute an offence under section 138 of the Act; and 

(b) Service of notice as contemplated under proviso (b) to section 138 of the Act, was not proved. 

All the said three petitions were dismissed by this court on March 25, 1998. The order passed by this court reads 

"Heard. 

In view of the ratio laid down by the Supreme Court in Modi Cements Limited v. Shri Kuchil Kumar Nandi [1998] 92 Comp Cas 88; [1998] 2 JT SC 198, there is no merit in the present petition and the same is accordingly rejected. It is, however, clarified that the petitioner shall be at a liberty to raise all such points as may be available to him during the trial of the case before the trial court." 

After the dismissal of the above referred petitions under section 482 of the Criminal Procedure Code, the petitioners applied to the learned Magistrate for recalling of the order issuing process to him for the offence under section 138 of the Act. Though as many as eight grounds were raised in the applications, however, the petitioner confined his case only to the following two grounds : 

(a) Since the cheques in question were issued by the petitioner in his capacity as director of Bhalla Techtran Industries Limited, to whom the supply of the watches was made, the complaints made by the respondent against the petitioner without impleading the said company, were not maintainable; and 

(b) In the absence of notice as contemplated by proviso (b) to section 138 of the Act to the company of which the petitioner is a director, the petitioner could not be proceeded against and the complaints were not maintainable. 

While the applications made by the petitioner were still pending, the three cases came to be transferred by the Chief judicial Magistrate from his files to the files of the learned Judicial Magistrate, First Class, Manali. 

The learned Magistrate vide order dated February 1, 1999, passed in all the three cases dismissed the applications made by the petitioner. 

By virtue of the present petitions the petitioner has assailed the order dated February 1, 1999, of the learned Magistrate and as a consequence has sought the quashing of the criminal proceedings pending against him vide the three complaints referred to above. The points/grounds urged before the learned Magistrate have been urged and raised before this court. 

I have heard learned counsel for the parties and have also gone through the record of the case. 

At the very outset a preliminary objection as to the maintainability of the present petitions was raised on behalf of the respondent. It was contended that in view of the dismissal of the earlier petitions made by the petitioner under section 482 of the Criminal Procedure Code, for quashing the proceedings, the present petitions were not maintainable. It was further contended that the petitioner under the garb of invoking the inherent jurisdiction of the court, is really seeking the review of the order dated March 25, 1998, whereby the earlier petitions made under section 482 of the Criminal Procedure Code, were dismissed. The inherent powers cannot be invoked to do something which is expressly barred under the Criminal Procedure Code. In support of his contention learned counsel for the respondent placed reliance on the decision of the Supreme Court in Simrikhia v. Dolley Mukherjee and Chhabi Mukherjee [1990] 2 SCC 437. 

In the said case before the Supreme Court, a case was instituted on a private complaint by the complainant therein for the offences under sections 452 and 323 of the Indian Penal Code. The judicial Magistrate, First Class, Patna, in exercise of the powers under section 192(2) of the Criminal Procedure Code, transferred the case for enquiry under section 202 of the Criminal Procedure Code to the judicial Magistrate, Second Class. The Magistrate, Second Class, after holding the requisite enquiry, by order dated March 22, 1985, issued process to the two accused. The order of the Magistrate issuing process was challenged by the two accused under section 482 of the Criminal Procedure Code, before the High Court on the ground that the Magistrate, First Class, had transferred the case without taking cognizance of the offences and the subsequent proceedings were, therefore, illegal. The High Court, by its order dated August 20, 1998, dismissed the petition. It was found that there was no such illegality. The two accused, thereafter, again approached the High Court under section 482 of the Criminal Procedure Code, alleging, inter alia, that the record of the proceedings on close scrutiny would indicate that the case had not been taken cognizance of before the transfer. A learned single judge of the High Court accepted the case of the two accused and by order dated August 19, 1989, quashed the proceedings against the two accused. Such order of the High Court was challenged by the complainant before the Supreme Court by way of an appeal. Allowing the appeal, it was held (page 439) : 

"The inherent power under section 482 is intended to prevent the abuse of the process of the court and to secure ends of justice. Such power cannot be exercised to do something which is expressly barred under the Code. If any consideration of the facts by way of review is not permissible under the Code and is expressly barred, it is not for the court to exercise its inherent power to reconsider the matter and record a conflicting decision. If there had been change in the circumstances of the case, it would be in order for the High Court to exercise its inherent powers in the prevailing circumstances and pass appropriate orders to secure the ends of justice or to prevent the abuse of the process of the court. Where there is no such changed circumstances and the decision has to be arrived at on the facts that existed as on the date of the earlier order, the exercise of the power to reconsider the same materials to arrive at different conclusion is in effect a review, which is expressly barred under section 362." 

It was further held in paragraph 5 of the judgment (page 439) : 

"Section 362 of the Code expressly provides that no court when it has signed its judgment or final order disposing of a case, shall alter or review the same except to correct a clerical or arithmetical error save as otherwise provided by the Code. Section 482 enables the High Court to make such order as may be necessary to give effect to any order under the Code or to prevent abuse of the process of any court or otherwise to secure the ends of justice. The inherent powers, however, as such are controlled by principle and precedent as are its express powers by statute. If a matter is covered by an express letter of law, the court cannot give a go-by to the statutory provisions and instead evolve a new provision in the garb of inherent jurisdiction." 

Learned counsel for the petitioner, on the other hand contended, that the present petitions are maintainable, firstly, on account of the changed circumstances since the dismissal of the earlier petitions and in view of the fact situation prevailing at the time of filing of the present petitions. Secondly, while the earlier petitions were filed challenging the order of the learned Magistrate issuing process to the petitioner, the present petitions have been filed assailing a subsequent order dated February 1, 1999, rejecting the applications of the petitioner for the dismissal of the complaints. Thirdly, the grounds taken in the present petition are entirely different from the one taken in the earlier petitions. 

Reliance was placed by learned counsel for the petitioner on the decision of the Supreme Court in Superintendent and Remembrancer of Legal Affairs, W. B. v. Mohan Singh [1975] Crl. LJ 812; AIR 1975 SC 1002, wherein it was held that section 561A of the old Criminal Procedure Code (corresponding to section 482 of the Criminal Procedure Code, 1973), preserves the inherent power of the High Court to make such orders as it deems fit to prevent the abuse of the process of the court or to secure the ends of justice and the High Court must exercise its inherent powers having regard to the situation prevailing at the particular point of time when its inherent jurisdiction is sought to be invoked. 

In the abovesaid case, one Mohan Singh was impleaded as an accused along with two others even though his name did not figure in the first information report. He filed an application in the form of criminal revision before the High Court of Calcutta, for quashing the proceedings on the ground that it constituted an abuse of the process of the court and in any event quashing would secure the ends of justice. A Division Bench of the High Court rejected the application by an order dated December 12, 1968. The only ground on which the application was rejected was that "the points raised ... depend on certain questions of fact, which have to be ascertained on evidence by the court of facts". Though this order rejecting the application was made on December 12, 1968, no progress at all was made in the criminal case till March, 1970. The said Mohan Singh and one of his co-accused, therefore, once again moved the High Court for quashing of the proceedings. By order dated April 7, 1970, a Division Bench allowed the application and quashed the proceedings on the ground that no prima facie case was at all made out and the continuation of the proceedings was, therefore, an abuse of the process of court. The State was of the view that once the High Court had rejected an application for quashing the proceedings by its order dated December 12, 1968, it was not competent for the High Court to entertain another application for the same purpose as that would amount to the High Court reversing its own earlier order which the High Court had no jurisdiction to do. In appeal, the Supreme Court held that the fact that a similar petition for quashing the proceedings on a former occasion was rejected by the High Court on the ground that questions involved were purely questions of fact which were for the court of fact to decide, is no bar to the quashing of the proceedings at the later stage. Such quashing would not amount to revision or review of the High Court's earlier order. Orders in exercise of inherent powers should be passed in view of the circumstances existing at the time when the order is passed. 

In the present case as well the dismissal of the earlier petitions made by the petitioner for quashing of the proceedings against him would not be a bar to the present petitions. By virtue of the present petitions the order dated February 1, 1999, of the learned Magistrate is being assailed and as a consequence thereof the criminal proceedings are sought to be quashed. The grounds involved are also different. Therefore, the preliminary objection raised on behalf of the respondent as to the maintainability of the present petitions is not tenable and the same is rejected. 

In these petitions, as stated above, two grounds have been raised, which were raised by the petitioner before the learned Magistrate. Firstly, since the cheques in question were issued by the petitioner in his capacity of being the director of the company, Bhalla Techtran Industries Limited, to whom the watches were supplied, the complaints made by the respondent against the petitioner for the offence under section 138 of the Act without impleading the company as an accused are not maintainable, and, secondly, in the absence of notice as contemplated by clause (b) of the proviso to section 138 of the Act having been given to the company, the petitioner cannot be proceeded against and the complaints are not maintainable. 

Contention No. 1 : 

This contention need not detain this court for long. Even if it be taken that watches were supplied to the company Bhalla Techtran Industries Limited and the cheques were issued by the petitioner in his capacity of being a director of the said company, the complaints against the petitioner in his capacity of being the director of the company, for the offence under section 138 of the Act without impleading the company as a co-accused are maintainable. It has been held to the above effect by this court in Satinder Kapur v. V. K. Sehgal (Cr.M.M.O. No. 966 of 1997, decided on June 23, 19981 [1998] 2 Crimes 194; [2000] 99 Comp Cas 1 (HP)). 

Therefore, following the ratio laid down in Satinder Kapur v. V. K. Sehgal [1998] 2 Crimes 194; [2000] 99 Comp Cas 1 (HP) it is held that the petitioner can be prosecuted for the offence under section 138 of the Act without impleading the company, of which he is the director, as a co-accused. 

Contention No. 2. 

Annexure PC in all the three cases is the copy of the complaint made by the respondent for the prosecution of the petitioner for the offence under section 138 of the Act. In paragraph 1 of such complaint, the respondent has averred in the following terms : 

"That the complainant has supplied certain watches to the accused and against the part payment of consideration of these watches, the accused has issued various post-dated cheques drawn at Bank of Baroda, Parliament Street, New Delhi, to the complainant." 

The respondent, during the course of enquiry under section 202 of the Criminal Procedure Code, also while appearing as his own witness as C.W.-1 has stated that he had sold watches to the petitioner who had made part payments by virtue of cheques, which on presentation to the bank were dishonoured on the ground that payment was stopped by the drawer. 

Thus, on the face of it, the petitioner is being proceeded against under section 138 of the Act in his individual capacity and not in the capacity of being the director of the company Bhalla Techtran Industries Limited. 

Annexure P-1 is the copy of the cheque alleged to have been given by the petitioner to the respondent towards part payment of the cost of watches and which on presentation was dishonoured. The original cheques are on the record of the learned trial court and exhibited in evidence as P.W.-1/A. 

A bare perusal of the cheques shows that these have been issued by the company Bhalla Techtran Industries Limited and signed by the petitioner as director thereof. These cheques were never issued by the petitioner in his individual capacity. 

Annexure PB in all the three cases, is a copy of another complaint dated March 23, 1998, made by the respondent against Bhalla Techtran Industries Limited and four others, including the present petitioner for the offence under section 138 of the Act. The averments in paragraph 2 of such complaint read : 

"The complainant had delivered in September, 1996, consignment of 4,860 watches. Three invoices were raised as under : 

Invoice No. 1, dated October 7, 1996, for Rs. 11,97,900; 

Invoice No. 2, dated October 8, 1996, for Rs. 2,57,400; 

Totalling Rs. 16,55,559." 

In paragraph 4 of the complaint, annexure PB, it has further been averred as under : 

"The balance payment due against the above transactions was a sum of Rs. 9,00,000 and due to shortage of funds, credit was given and the following seven cheques were given pertaining to principal amount of Rs. 9 lakhs, along with interest payment cheques in proper chronological order/dates in discharge of above debit/liability. - 

Cheque No. 0441809 dated November 15, 1996, for Rs. 16,300. 

Cheque No. 044181, dated December 15, 1996, for Rs. 16,300. 

Cheque No. 044182, dated January 15, 1997, for Rs. 16,300. 

Cheque No. 044183, dated February 15, 1997, for Rs. 16,300. 

Cheque No. 044184, dated March 15, 1997, for Rs. 16,300. 

Cheque No. 044174, dated April 15, 1997, for Rs. 2,00,000. 

Cheque No. 044179, dated April 31, 1997 (sic) for Rs. 7,00,000. 

Above cheques Nos. 044180, 044181, 044182, 044183, 044184 are interest payments at the rate of 21.75 per cent. as agreed on the principal amount of Rs. 9 lakhs due. 

Cheque No. 044180 and 044182 were paid. Cheque No. 044182 was tampered with after presentation (FIR to this effect was lodged). Copy attached. 

Cheques Nos. 044183, 044184, 044174 were returned dishonoured stating stop payment. The above three cheques are currently at the trial stage under section 138 of the Negotiable Instruments Act which are pending disposal before the learned Chief Judicial Magistrate, Kullu." 

The above averments undoubtedly show that the supply of watches was made by the respondent to the company Bhalla Techtran Industries Limited and the cheques involved in the present three cases were also issued by the said company through its director, that is, the petitioner. 

In view of such admitted facts, the petitioner cannot be proceeded against for the offence under section 138 of the Act in his individual capacity. 

The question then which next arises is whether the three complaints filed against the petitioner by the respondents in respect of cheques Nos. 044185, 044184, and 044174, respectively dated February 15, 1997, March 15, 1997, and April 15, 1997, could be treated as having been filed against the petitioner as director of the company Bhalla Techtran Industries Limited. 

Section 141 of the Act, which deals with offences by companies, reads : 

"141. Offences by companies. - (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly : 

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. 

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 

Explanation. - For the purposes of this section, - 

(a) 'company' means any body corporate and includes a firm or other association of individuals; and 

(b) 'director', in relation to a firm, means a partner in the firm." 

The words "if the person committing an offence under section 138 is a company" appearing in sub-section (1) of section 141 of the Act are very material. Before any director, manager, secretary or any other officer of the company can be held liable and proceeded against, the offence has to be shown to have been committed by the company. In other words, if no offence is shown to have been committed by the company, its directors, managers, secretaries or any other officer cannot be proceeded against save and except for the offence(s) committed by them in their individual capacity. 

At this stage, it may not be out of place to reproduce section 138 of the Act. It reads : 

"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 extend to one year, or with fine which may extend to twice the amount of the cheque, or with both : 

Provided that nothing contained in this section shall apply unless, - 

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; 

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and 

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. 

Explanation. - For the purposes of this section, 'debt or other liability' means a legally enforceable debt or other liability." 

A reading of the above provisions shows that dishonour of a cheque by itself is not an offence under section 138 of the Act. Mere issuance of cheque and dishonour would not create a cause of action warranting prosecution of the drawer. The non-payment of the cheque amount despite the receipt of statutory notice, as stipulated in clause (b) of the proviso to section 138 of the Act, alone would give rise to the cause of action, which would be the subject-matter of the prosecution. That is, before an offence under section 138 of the Act can be said to have been made out, it has to be shown that - 

(a) The cheque was presented to the bank for encashment 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 holder in due course of the cheque makes demand for the payment of the amount of money under the cheque by giving a notice in writing to the drawer of the cheque within fifteen days of information received by him from the bank regarding dishonour of the cheque; 

(c) The drawer of the cheque fails to make payment of the amount of money within fifteen days of the receipt of notice. 

As noticed above, in the present case, the three cheques were issued by the petitioner as director for and on behalf of the company Bhalla Techtran Industries Limited. Such cheques were issued on an account maintained by the said company with Bank of Baroda, Parliament Street Branch 'New Delhi. Therefore, the said company was the drawer of the cheques. 

Before the company, Bhalla Techtran Industries Limited, the drawer of the three cheques, can be said to have committed the offence under section 138 of the Act, it has to be shown that a notice as contemplated by clause (b) of the proviso to
section 138 of the Act was given to the said company by the respondent within fifteen days of the receipt of information by him from the bank regarding the return of the cheques as unpaid making a demand for the payment of the amount of the cheques, and that in spite of such notice the said company has failed to make the payment of such amount to him within fifteen days of the receipt of the said notice. 

Annexure PA in all the three cases is the copy of the notice allege to have been given by the respondent in terms, of clause (b) of the proviso to section 138 of the Act. This notice has been addressed to the petitioner and not to the company Bhalla Techtran Industries Limited. It is addressee as under : 

"Shri Amit J. Bhalla, Bhalla Techtran Industries Ltd., 116, Jor Bagh, New Delhi-110 003." 

In Bilakchand Gyanchand Co. v. A. Chinnaswami [1999] 98 Comp Cas 573 (SC); [1999] 2 Scale 250, the appellant-company had supplied cotton bales to Shakti Spinners Ltd., of which one A. Chinnaswami (respondent) was the managing director. Cheques towards the consideration of such bales were issued by the respondent as the managing director of Shakti Spinners Ltd. Such cheques on having been presented to the bank were dishonoured. Thereafter notices were issued by the appellant-company to the respondent by name as the managing director of the said Shakti Spinners Ltd., at his official address. Since the amount of the cheque was not paid, two separate complaints were filed by the appellant-company against the respondent, A. Chinnaswami, for the offence under section 158 of the Act. The respondent approached the High Court under section 482 of the Criminal Procedure Code for quashing of the proceedings. One of the grounds raised was that notice sent to the respondent A. Chinnaswami, was not notice to the company of which he was the managing director. Therefore, the proceedings under section 138 of the Act were bad. Allowing the petition, the High Court of Bombay on June 26, 1997, vide its judgment reported as A. Chinnaswami v. Bilakchand Gyanchand Co. [1998] 4 RCR 215, held that under clause (b) of the proviso to section 138 of the Act, notice was required to be given to the drawer of the cheques, namely, Shakti Spinners Ltd., and that notice to the respondent by name, even though on office address, was not a notice to the drawer. The criminal proceedings against the respondent were as such quashed. 

Feeling aggrieved the appellant-company preferred an appeal before the Supreme Court assailing the order dated June 26, 1997, of the High Court. The Supreme Court allowed the appeal and, after setting aside the order of the High Court, restored the criminal proceedings against the respondent. It was held (page 574) : 

"In our opinion, the High Court erred in quashing the complaint. It is evident that proceedings were initiated by the appellant against A. Chinnaswami who happened to be the managing director of Shakti Spinners Ltd. The cheques in question which were dishonoured were signed by him. The process was issued by the judicial Magistrate in his name. We see no infirmity in the notice issued under section 138 addressed to A. Chinnaswami, who was a signatory of the said cheques. The High Court, in our opinion, clearly fell in error in allowing the petition under section 482 of the Criminal Procedure Code and in quashing the complaint and setting aside the proceedings pending before the Judicial Magistrate." 

The above ratio is not applicable to the facts of the present case, which are different from the facts in the case before the Supreme Court. As stated above, the notice under section 138 of the Act was given to the petitioner at the address mentioned as 116, Jor Bagh, New Delhi. Be it stated, that this is the residential address of the petitioner. A perusal of the record of the learned trial court shows that the entire correspondence was being addressed by the respondent to Bhalla Techtran Industries Limited on the address mentioned as D-24, Sector XI, Noida. Secondly, it is the admitted case of the respondent that notice under
section 138 of the Act was given to the petitioner in his individual personal capacity and that the complaint against him for the offence under section 138 of the Act has also been filed in his individual personal capacity and not as director of Bhalla Techtran Industries Limited. 

Since the notice as contemplated by clause (b) of the proviso to section 138 of the Act was given to the petitioner in his individual capacity and not as director of Bhalla Techtran Industries Limited, such notice cannot be said to have been sent to the drawer of the cheques, namely, Bhalla Techtran Industries Limited. Therefore, in the absence of the requisite notice to the drawer of the cheque, no offence can be said to have been committed by the company Bhalla Techtran Industries Limited so as to make the petitioner liable within the meaning of section 141 of the Act. 

A contention was raised on behalf of the respondent, that the petitioner being the maker of the cheque would be the drawer thereof within the meaning of section 7 of the Act and as such notice issued to the petitioner was sufficient. 

It is significant to note that a company has a legal entity. It has no soul, mind or limb to work physically. It has to discharge its 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. As such the signing of the cheques by the petitioner for and on behalf of the company Bhalla Techtran Industries Limited as its director will not make him the drawer of the cheques. The company for all purposes would be the drawer of the cheques. Admittedly, the cheques were not drawn on the personal account of the petitioner. These were drawn on the account maintained by the company with the Bank of Baroda, Parliament Street Branch, New Delhi. 

A similar question arose before a Division Bench of the Calcutta High Court in Dilip Kitmar Jaiswal v. Debapriya Banerjee [1992] 73 Comp Cas 434; [1992] 1 Crimes 1233. In this case a cheque was issued by Dilip Kumar Jaiswal as director of Hisco Steel (P.) Ltd. On the cheque having been dishonoured, a complaint was made against such director under section 138 of the Act. A question arose as to who was the drawer of the cheque ? It was held (page 440) : 

"Now, the question to be decided is who is the maker of the cheque in this particular case. The liability to make the payment to the present opposite party was that of Hisco Steel Pvt. Ltd. The cheque that was signed by the petitioner was issued by him for Hisco Steel Pvt. Ltd., as director. Therefore, the liability to make the payment being that of the limited company, it was the limited company who was the drawer of the cheque and not the petitioner who is one of its directors. The petitioner was at the time of the issuing of the cheque acting for and on behalf of the limited company. Therefore, it was a cheque for and on behalf of the limited company. Therefore, it was a cheque issued by the limited company and as a limited company has to act through its instrumentally (sic) such as a director or a secretary or any other financial officer. The petitioner as director signed that cheque. But that would not make him the maker of the cheque and the limited company in question must be held to be the maker of the cheque ..." 

In the present case, admittedly, no notice was given to the drawer of the cheques, namely, the company Bhalla Techtran Industries Limited. The Supreme Court in Sadanandan Bhadran v. Madhavan Sunil Kumar [1998] 94 Comp Cas 812; [1998] 6 SCC 514, on analysing the provisions contained in section 138 of the Act, has held (page 816) : 

"On a careful analysis of the above section, it is seen that its main part creates an offence when a cheque is returned by the bank unpaid for any of the reasons mentioned therein. The. significant fact, however, is that the proviso lays down three conditions precedent to the applicability of the above section and, for that matter, creation of such offence and the conditions are :

(i) the cheque should have been presented to the bank within six months of its issue or within the period of its validity, whichever is earlier;

(ii) the payee should have made a demand for payment by registered notice after the cheque is returned unpaid; and

(iii) that the drawer should have failed to pay the amount within fifteen days of the receipt of the notice. It is only when all the above three conditions are satisfied that a prosecution can be launched for the offence under section 138 ...." 

Therefore, when the drawer of the cheque has not received the notice as contemplated by clause (b) of the proviso to
section 138 of the Act, there has been no opportunity to the drawer to comply with the condition of making the payment of the amount of the cheques within the stipulated period of fifteen days from the date of receipt of notice. In the absence of such an opportunity having been given to the drawer, no offence under section 138 of the Act can be said to have been committed by the drawer, namely, Bhalla Techtran Industries Limited, and as such the petitioner cannot be prosecuted as a director thereof by taking resort to section 141 of the Act. 

A plain reading of section 141 of the Act makes it clear that when the offence is committed by the company, the company as well as the person(s) who was/were in charge of the affairs of the company can be prosecuted as per the provisions contained in sub-section (1) of the said section. And as per the provisions contained in sub-section (2) thereof, every director, manager, secretary or other officer of the company also can be prosecuted and held guilty if it is proved that the offence was committed with the consent or connivance or neglect on the part of such person. 

A provision similar to section 141 of the Act exists in section 10 of the Essential Commodities Act, 1955. While considering the provisions contained in section 10 of the Essential Commodities Act, 1955, it was held by the Supreme Court in State of Madras v. C. V. Parekh, AIR 1971 SC 447, that the liability of the persons in charge of the company only arises when the contravention is by the company itself. In this case, since there was nothing to show that there was any contravention of clause (5) of the Iron and Steel (Control) Order by the company, the two respondents therein, who were the director and managing director respectively were accordingly acquitted. 

The above ratio was followed in Sheoratan Agarwal v. State of Madhya Pradesh, AIR 1984 SC 1824. 

Thus, notice which was issued by the respondent on account of dishonour of the cheques having been issued to the petitioner in his individual capacity and not having been issued to the drawer thereof, no offence can be said to have been committed by the company Bhalla Techtran Industries Limited and, therefore, the petitioner cannot be proceeded against in his capacity of being the director of the said company by taking recourse to section 141 of the Act. 

Resultantly, all the three petitions are allowed. The impugned orders dated February 1, 1999, of the learned magistrate in all the three cases are set aside and as a consequence thereof the criminal proceedings filed by the respondent, vide Criminal Complaints Nos. 268-1 of 1997, 269-1 of 1997 and 319-1 of 1997, presently pending before the learned Judicial Magistrate, First Class, Manali, are quashed.