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Section 138 in The Companies Act, 1956
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Delhi District Court
C. C No. 1086/1/09 (Old No. ... vs Unknown on 14 March, 2012
Author: Sh. Manoj Kumar
  In the Court of Sh. Manoj Kumar : Senior Civil Judge­cum­Metropolitan 
   Magistrate of New Delhi District at Patiala House Courts, New Delhi   

C. C No. 1086/1/09 (Old No. 203/1/99)
Unique ID No. 02403R0032791999
In the matter of:
M/s Andritz Hydro Pvt. Ltd.
(Earlier known as:
M/s VA Tech Escher Wyss
Flovel Limited,)
(Earlier known as 
M/s Sulzer Flovel Hydro Ltd.)
13/1, Mathura Road, 
Faridabad­121 003, Haryana.                              ....................Complainant


                                        VERSUS


1. M/s Silical Metallurgic Limited
473­J, Ramanuj Nagar,
Uppilipalayam, Coimbatore­641015
2. Mr. C.R. Narainswamy,
Managing Director of accused No. 1,
473­J, Ramanuj Nagar,
Uppilipalayam, Coimbatore­641015
Also at:
R/o 29­D, Bharathi Colony Road,
Peelamedu, Coimbatore­641004.

C. C. No. 1086/1/09 (Old No. 203/1/99)                                     Page no. 1 of 43
 3. Smt. N. Amsamveni,
Joint Managing Director of  accused No. 1,
473­J, Ramanuj Nagar,
Uppilipalayam, Coimbatore­641015.
Also at:
R/o 29­D, Bharathi Colony Road,
Peelamedu, Coimbatore­641004.
4. Mr. M.S.R.K. Iyer,
General Manager, Hydro Projects,
473­J, Ramanuj Nagar,
Uppilipalayam, Coimbatore­641015.
5. Mr. S. Chandrasekaran,
Authorised Signatory of  accused No. 1,
473­J, Ramanuj Nagar,
Uppilipalayam, Coimbatore­641015.                                 ....................Accused 


Date of Institution :    24.04.1999
Date of Arguments:    28.02.2012
Date of Judgment  :    14.03.2012


        COMPLAINT UNDER SECTIONS 138, 141 & 142 OF THE 
            NEGOTIABLE INSTRUMENTS ACT, 1881 


JUDGMENT :

The present case was received by way of transfer as per the order no. 145­192/01/F.3(4)/MM dated 02.01.2009 passed by the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 2 of 43 learned District Judge­I and Sessions Judge, Delhi in pursuance of order no. 25/DHC/Gaz./VI.E2(a) dated 22.10.2008 passed by the Hon'ble Delhi High Court. It shall be disposed of in compliance of the said orders.

2. This is a complaint under section 138 of the Negotiable Instruments Act, 1881 (Act 26 of 1881) made by complainant Sulzer Flovel Hydro Ltd. against accused Silical Metallurgic Ltd., Mr. C.R. Narainswamy, Smt. N. Amsamveni, Mr. M.S.R.K. Iyer and Mr. S. Chandrasekaran stating that the complainant is a company registered under the Companies Act, 1956 having its registered office at A­219, Okhla Industrial Area, Phase­I, New Delhi and corporate office at 13/1, Mathura Road, Faridabad; that the complaint has been instituted through Mr. S.S. Sorot who has been duly authorised by the complainant by way of resolution dated 09.4.1999; that the accused no. 1 is a company registered under the Companies Act, 1956; that the accused no. 2 is the Managing Director of accused no. 1 and the accused no. 3 is the Joint Managing Director of the accused no. 1; that the accused no. 4 is a General Manager of the Hydro Projects of the accused no. 1 and he is also the person who had signed the contract dated 14.4.1997 entered into between the complainant and the accused no. 1; that the accused no. 5 is the authorised signatory of the accused no. 1 and has corresponded with the complainant for the subject contract dated 14.4.1997; that the accused no. 2 to 5 were/are in charge of and responsible to the accused no. 1 for the conduct of its business as also C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 3 of 43 the accused no. 1 itself at the time of dishonour of the cheques and the commission of the offence; that the subject cheques were signed by the accused no. 2 and 3 and the same were issued with the assent and knowledge of the accused; that a contract dated 14.4.1997 was entered into between the accused no. 1 and the complainant whereby the complainant had agreed to supply, supervise during erection, commissioning and performance testing of electro­mechanical small hydro electric project at Bhoothankettu in Kerala; that the total value of the subject contract was Rs. 19,21,51,900/­; that the complainant from time to time had supplied various goods and machineries under the contract and accordingly raised bills upon the accused as per the contract; that the accused no. 1 through the accused no. 4 verified for payment a sum of Rs.5,58,17,599/­ to the complainant as on 15.3.1999; that the accused no. 4 had confirmed and verified the correctness of the amounts and put his signatures on the working showing the amount payable of Rs.5,58,17,599/­; that the accused no. 1 under the signatures of the accused no. 2 and 3, therefore, issued in favour of the complainant three cheques bearing numbers 145540, 145541 and 145542 each cheque dated 19.3.1999 in the sums of Rs.99,00,000/­ Rs.99,00,000/­ and Rs.99,00,000/­ totaling Rs.2,97,00,000/­; that the said three cheques were delivered by the accused to the complainant towards the part discharge of a legally enforceable and unequivocally admitted contractual liability payable in money, arising out of payment towards the machinery C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 4 of 43 and ancillaries supplied under the subject contract dated 14.4.1997 and in the normal course of business; that the complainant within the validity period presented the aforesaid cheques for payment through its bankers M/s Deutsche Bank, 15­17, Tolstoy House, Tolstoy Marg, New Delhi branch; that the aforesaid cheques were sent by the complainant's bankers to its agent namely, M/s Vyasa Bank Ltd. who in turn presented the subject cheques to the bankers of the accused no. 1 namely, Canara Bank, HQ Road, Coimbatore and on such presentation the same returned unpaid with remarks "insufficient funds and payment stopped by the drawer"; that the complainant received this intimation of dishonour of the cheques from its bank on 30.3.1999 by its letter of the same date; that as a payee of the cheques the complainant within the statutory period of fifteen days of the receipt of the notice of the dishonour of the cheques and as per the requirement of section 138 of Act 26 of 1881 sent a notice of demand dated 01.4.1999 through its advocate by speed post AD/UPC and the said notice of demand dated 01.4.1999 was received by all the addresses as per the endorsement of receipt on the AD cards received back by the complainant; that in spite of the receipt of the notice of demand dated 01.4.1999 on 03.4.1999, all the accused had failed to make the payment of the amounts of the cheques within fifteen days of the receipt of the notice leading up to the making of the present complaint with a view to take cognizance of the offence and to summons and punish all the accused for having committed C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 5 of 43 offence punishable under section 138 of Act 26 of 1881 and to compensate the complainant under section 357 of the Code of Criminal Procedure, 1973 (Cr.P.C.).

3. The complaint was made on 24.4.1999 and after taking cognizance of the offence punishable under section 138 of Act 26 of 1881 the witnesses produced on behalf of the complainant were examined under section 200 of Cr.P.C. and thereafter, on 07.9.1999 a summoning order was passed under section 204 of Cr.P.C. whereby all the accused persons were summoned to face accusation under section 138 of Act 26 of 1881 in respect of cheques numbers 145540, 145541 and 145542.

4. In pursuance of the process issued by the court, the accused no. 2 to 5 had appeared and were admitted to bail. Subsequently, on 01.12.2000 a notice of accusation under section 251 Cr.P.C. was framed against all the five accused persons whereby they were charged with the commission of offence punishable under section 138 of Act 26 of 1881 in respect of cheques bearing numbers 145540, 145541 and 145542 dated 19.3.1999. The notice of accusation was read over and explained to the accused no. 2 to 5 to which they for themselves and on behalf of the accused no. 1 did not plead guilty and claimed trial.

5. In support of its case the complainant got examined PW1 Mr. S.S. Sorot, Assistant General Manager and authorised representative of the complainant, PW2 Mr. Inderjeet Singh Kohli, Officer, Legal Section, C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 6 of 43 Canara Bank, Circle Office, Nehru Place, New Delhi, and PW3 Mr. Anil Kumar Adhlaka, Officer of Deutsche Bank. The said three witnesses during their examination tendered documents Ex. PW1/1 to Ex. PW1/29, Ex. PW2/A Ex. PW2/F, Ex. PW3/A to Ex. PW3/E. The witnesses were cross­examined on behalf of the accused and thereafter discharged and the accused were examined under section 313 of Cr.P.C.

6. During his examination under section 313 Cr.P.C. accused no. 2 C.R. Narainswamy stated that he has been falsely implicated in this case and he did not owe any amount towards the complainant. It is further stated by the accused no. 2 that the agreement with the complainant was not merely for the supply of equipment and the same was for supply, erection, energisation and giving technical training to the employees of the accused company and till such time the payment had not to become due. During his examination under section 313 of Cr.P.C. accused no. 2 further stated that it was a practice between the parties that the payments were made always by demand drafts payable at Faridabad to the complainant and not even a single penny was paid by way of cheque from Coimbatore bank even in the past. It is further stated by the accused no. 2 that whenever such cheques were given to the complainant that was with clear oral agreement that such cheques would not be tendered for encashment. During his examination the accused no. 2 further stated that all the cheques used to be taken back by the accused company and replaced by D.D. in favour of the complainant. The C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 7 of 43 accused no. 2 further stated that the cheques in question were not meant to be presented to the bank for encashment and there was an oral agreement between the parties, like in the past, not to present the cheques at all and were to be replaced by D.Ds. when the payment had to become due. The accused no. 2 further stated that the complainant had breached the said agreement and pre­maturely tendered the cheques for encashment. It is further stated by the accused no. 2 that the complainant was strictly advised by way of letter dated 17.3.1999 not to tender the cheques till it had got a confirmation from the accused. The accused no. 2 further stated that even required advance bank guarantees were not given by the complainant. The accused no. 2 further stated that the amount had not become due and payable and the complainant has been filed to put undue pressure on the accused company. During his examination under section 313 of Cr.P.C. the accused no. 2 also stated that the had received no notice from the complainant regarding dishonour of the cheques and the complaint is false.

7. During her examination under section 313 of Cr.P.C. accused no. 3 Smt. N. Amsamveni stated that she is innocent and has been falsely implicated. The accused no. 3 further stated that although at the relevant time she was the Joint Managing Director of the accused no. 1 but she was never actively involved in the affairs of the company. The accused no. 3 further stated that she was only a dormant director and was never responsible for running the affairs of the company nor she had had any say C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 8 of 43 in the day to day affairs. During her examination the accused no. 3 further stated that cheques Ex. PW3/10 to Ex. PW3/13 bear her signatures. The accused no. 3 further stated that as and when the Managing Director Mr. C.R. Narainswamy, who is her husband, used to be out of town, on his directions and instructions she had signed the aforesaid cheques. During her examination under section 313 of Cr.P.C. the accused no. 3 further stated that she had not received any notice from the complainant regarding dishonour of the cheques in question.

8. During his examination under section 313 of Cr.P.C. accused no. 4 Mr. M.S.R.K. Iyer stated that he is innocent and has been falsely implicated. The accused no. 4 further stated that he is a civil engineer and was manager of projects at the relevant time. During his examination the accused no. 4 further stated that his role was only to oversee the engineering erection and energisation of the projects by the complainant company and had no role in financial aspects of the accused company. During his examination the accused no. 4 further stated that it was not his duty to see how the liabilities of the accused company were to be cleared and he was a technical person who was not responsible for running the affairs of the company, what to say of day to day affairs. The accused no. 4 further stated that he had not signed the agreement dated 14.4.1997 as stated in the complaint. The accused no. 4 further stated that he had not received any notice from the complainant about the dishonour of the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 9 of 43 cheques. The accused no. 4 further stated that the note dated 15.3.1999 does not say that the accused had to pay to the complainant a sum of Rs. 5,58,17,599/­. The accused no. 4 further stated that he was not aware as to when the amount had to become payable by the accused company to the complainant and the same was in the sole knowledge of the accused no. 2, who had settled the terms and conditions with the complainant. The accused no. 4 also stated that his note dated 15.3.1999 was in no way to confirm the so called liability as he was not aware of accounts or the finance.

9. During his examination under section 313 of Cr.P.C. accused no. 5 Mr. S. Chandrasekaran stated that he is innocent and has been falsely implicated. The accused no. 5 denied that he is the authorised signatory of the accused no. 1 and further stated that there is no resolution passed by the Board of Directors of the accused no.1 appointing him as authorised signatory. The accused no. 5 further stated that he had no power to sign any cheque of the accused no. 1 or to deal on its behalf in the bank. The accused no. 5 further stated that he is merely a clerk in the accused company and on the directions of the accused no. 2 he had signed letter dated 17.3.1999. The accused no. 5 further stated that he was not responsible for running day to day affairs of the accused no. 1 and had no control over its finance. The accused no. 5 also stated that there was nothing within his power to ensure the payment of dishonoured cheques. C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 10 of 43 The accused denied having received any notice from the complainant regarding of the cheques.

10. In their defence the accused got examined DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran. During the examination of DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran documents mark DW1/DA, Ex. DW1/DA1, Ex. DW1/DB, Ex. DW1/DC1, Ex. DW1/DC2, Ex. DW1/DD, mark DW2/A, mark DW2/B, mark DW2/C were also tendered in evidence.

11. During the pendency of the case in the wake of the change of the name of the complainant and an application made in this regard, by order dated 21.10.2000 M/s V.A. Tech Escher Wyss Flover Ltd. was substituted in place of the original complainant and subsequently, again due to change of the name of the complainant and in view of an application made in this regard on 14.9.2009 the name of the complainant was changed from M/s V.A. Tech Escher Wyss Flover Ltd. to M/s Andritz Hydro Pvt. Ltd.

12. I have heard counsel for the parties and gone through the material on record carefully. I have also gone through the written arguments filed on behalf of the parties.

13. Having drawn my attention on Magnum Aviation (Pvt.) Ltd. v. State & Others, 172(2010) DLT 91, Punj Star Industries Pvt. Ltd. v. Atna Engineering Pvt. Ltd. & Ors., 2010 (120) DRJ 183, K.N. Beena v. C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 11 of 43 Muniyappan and another, (2001) 8 SCC 458, Maruti Udyog Ltd. v. Narender and others, (1999) 1 SCC 113, Topline Buildtech Pvt. Ltd. & Anr. v. State & Anr., 2010 LE(Del) 53, Kolkata Metropolitan Development Authority v. Gobinda Chandra Makal and another, VII (2011) SLT 14, Patiala Casting P. Ltd. and others v. Bhushan Steels Ltd., 172 (2010) DLT 6, Religare Finvest Ltd. v. State and Anr., 173 (2010) DLT 185, G.E. Capital Transportation Financial Services Ltd. v. Lakhmanbhai Govindbhai Karmur Creative Construction & Ors., 2011 (2) JCC(NI) 105, K. Bhaskaran v. Sankaran Vaidhyan Balan and another, (1999) 7 SCC 510, G.E. Capital Transportation Financial Services Ltd. v. Rahisuddin Khan, 182 (2011) DLT 385, Ex. PW1/1 to Ex. PW1/29, Ex. PW2/A to Ex. PW2/F and Ex. PW3/A to Ex. PW3/E, Ex. DW1/DA, Ex. DW1/DA1, Ex. DW1/DB, Ex. DW1/DC1, Ex. DW1/DC2, Ex. DW1/DD, Ex. DW1/DC2, Ex. DW1/DC3, Ex. DW1/DC4, Ex. DW1/P1, Mark DW2/A, Mark DW2/B mark DW2/C it is submitted by counsel for the complainant that to discharge its liability towards the complainant the accused no. 1 through accused no. 2 and 3 had drawn cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 in favour of the complainant and when the said three cheques were presented by the complainant for encashment the same returned unpaid along with memo Ex. PW1/13 and letter Ex. PW1/14 as the payment against the three cheques was got stopped by the accused no. 1 and there were insufficient funds in its bank account. It is further submitted by counsel for the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 12 of 43 complainant that after return of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 as dishonoured a demand notice Ex. PW1/18 dated 01.4.1999 was sent by the complainant to all the five accused persons whereby they were called upon to make payment against the three cheques within fifteen days of the receipt of the notice and the said notice was received by the accused persons by way of acknowledgment cards Ex. PW1/25, Ex. PW1/26, Ex. PW1/27, Ex. PW1/28 and Ex. PW1/29 but despite receipt of the notice the accused did not make payment of the cheque amount within fifteen days and thus the accused no. 1 has committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12. It is also submitted by counsel for the complainant that at the time of the commission of offence by the accused no. 1 in respect of cheques Ex. PW1/10 to Ex. PW1/12, accused no. 2 Mr. C.R. Narainswamy and accused no. 3 Smt. N. Amsamven were the Managing Director and Joint Managing Director respectively of the accused no. 1 and therefore, in view of the provisions of section 141 of Act 26 of 1881 he is also liable for commission of offence punishable under section 138 of Act 26 of 1881. It is further submitted by counsel for the complainant that cheque Ex. PW1/10 has been signed by the accused no. 3 who at the time of the commission of offence in respect of the said cheque was joint managing director of the accused no. 1 and cheques Ex. PW1/11 and Ex. PW1/12 have been signed by the accused no. 2 being Managing Director of the accused no. 1, C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 13 of 43 therefore, in view of the provision of section 141 of Act 26 of 1881 they are also liable and punishable for having committed the offence punishable under section 138 of Act 26 of 1881 in respect of the three cheques. It is further submitted by counsel for the complainant that from the evidence on record it has also been established that the accused no. 4, who was the project manager of Hydro Power Projects of the accused company at Bhoothankettu in Kerala had physically verified the site and was in charge of the said project and was looking after the day to day affairs of the accused no. 1 and therefore, in view of the provisions of section 141 of Act 26 of 1881 accused no. 4 is liable and punishable for having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12. It is further submitted by counsel for the complainant that on the recommendation and site report of accused no. 4 the accused no. 5 as an authorised signatory of the accused no. 1 had issued the three cheques in favour of the complainant alongwith covering letter dated 17.3.1999 and the accused no. 5 had been communicating with the complainant in capacity of the Manager(Taxation) and authorised signatory of the accused no. 1 and was actively managing the affairs of the accused no. 1 and therefore, the accused no. 5 is liable and punishable for having committed offence punishable under section 138 of Act 26 of 1881 in respect of the three cheques. It is further submitted by counsel for the complainant that the defence taken by the accused is C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 14 of 43 frivolous and they have failed to rebut the presumptions under sections 118(a) and 139 of Act 26 of 1881 and therefore, all the accused be convicted and punished for having committed offence punishable under section 138 of Act 26 of 1881 in respect of the three cheques. It is further submitted by counsel for the complainant that the court at New Delhi has jurisdiction to entertain and try the present case and to punish the accused persons.

14. Having drawn my attention on Harman Electronics Private Limited and another v. National Panasonic India Private Limited, (2009) 1 SCC 729, Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd., (2001) 3 SCC 609, K.K. Ahuja v. V.K. Vora and another, (2009) 10 SCC 48,, testimonies of the witnesses produced on behalf of the complainant, statements of accused persons as well as the testimonies of DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran it is submitted by counsel for the accused that the accused have been falsely implicated in this case and they deserve to be acquitted. It is further submitted by counsel for the accused that in view of the law laid down by the Hon'ble Supreme Court in Harman Electronics's case (supra) and Shri Ishar Alloy Steels Ltd.'s case (supra) this court has no jurisdiction to entertain and proceed with the complaint and therefore, the complaint be returned. It is further submitted by counsel for the complainant that notice of accusation framed under section 251 of Cr.P.C. against the accused on 01.12.2000 is defective on the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 15 of 43 basis of which the accused cannot be held guilty. It is further submitted by counsel for the accused that the cheques in question were never drawn to discharge and legally enforceable debt or liability and the same have been presented by the complainant without any authority from the accused no. 1 and therefore, no offence punishable under section 138 of Act 26 of 1881 is made out against the accused persons. It is also submitted by counsel for the accused that it was an accepted practice between the complainant and the accused no. 1 that all local cheques of Coimbatore issued by the accused no. 1 were to be latter replaced by demand drafts and, as in the present case, the complainant has failed to explain why it never presented the cheques issued in its favour on earlier occasion and instead preferred to accept the demand draft, therefore, it leads to only one plausible inference that replacement of local cheques of Coimbatore with demand draft was the accepted mode of payment. It is further submitted by counsel for the accused that no notice was served by the complainant upon the accused before making the present complaint and therefore, no offence is made out against either of the accused. It is also submitted on behalf of the accused that the accused no. 4 and 5 have no role to play in the day to day affairs of the accused no. 1 and the offence has not been committed with their consent, connivance or negligence and therefore, they deserve to be acquitted.

15. I have given my thoughtful consideration to the submissions made on behalf of the parties.

C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 16 of 43

16. Before deciding the question whether the accusation against the accused persons have been proved or not it is necessary to decide two preliminary points raised by counsel for the accused, namely, the question regarding jurisdiction of this court to entertain the present case and correctness of the notice under section 251 of Cr.P.C. framed against the accused persons.

17. It is submitted by counsel for the accused that this court has no jurisdiction to proceed with the matter in view of the law laid down by the Hon'ble Supreme Court in Harman Electronics Pvt. Ltd.'s case and Shri Ishar Alloy Steels Ltd.'s case (supra) it is also submitted by the learned counsel for the accused that no part of the transaction has taken place in Delhi and the banker of the accused no. 1 is situated at Coimbatore outside the jurisdiction of this court. On the other hand in the light of the law laid down by the Hon'ble Delhi High Court in Magnum Aviation (Pvt.) Ltd.'s case (supra), Patiala Casting Pvt. Ltd.'s case (supra), Religare Finvest Ltd.'s case (supra), G.E. Capital Transportation Financial Services' case [2011 (2) JCC (NI) 105] (supra), K. Bhaskaran's case (supra) and G.E. Capital Transportation Financial Services Ltd.'s case [182 (2011) DLT 385] (supra) it is contended on behalf of the complainant that court at Delhi have jurisdiction to decide the matter. It is further submitted by learned counsel for the complainant that in G.E. Capital Transportation Financial Services Ltd.'s case [182 (2011) DLT 385] (supra) the Hon'ble Delhi High Court has C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 17 of 43 declared the law laid down by the Hon'ble Supreme Court in Harman Electronics's case (supra) as per incurium and has held that the law laid down by the Hon'ble Supreme Court in K. Bhaskaran's case (supra) must prevail on the law laid down in Harman Electronics's case (supra).

18. In the present case from the testimony of PW1 Mr. S.S. Sorot it has been proved that the registered office of the complainant company is situated at Delhi and the cheques in question were sent for collection from Delhi. From the testimony of PW1 Mr. S.S. Sorot it has also been proved that the demand notice against the accused persons was issued by the lawyer of the complainant from Delhi.

19. In Harman Electronics's case (supra) the Hon'ble Supreme Court has held that the jurisdiction cannot be assumed by a court in a matter pertaining to offence punishable under section 138 of Act 26 of 1881 solely on the ground that the demand notice in question was sent from a place situated within its territorial jurisdiction.

20. In Shri Ishar Alloys Steels's case (supra) the Hon'ble Supreme Court having discussed the provisions of section 138 of Act 26 of 1881 held that the expression "the bank" used in section 138 of Act 26 of 1881 means the banker of the drawer of the cheque and not the bank where the cheque is presented for collection.

21. The Hon'ble Supreme Court in K. Bhaskaran's case (supra) having discussed the provisions of section 138 of Act 26 of 1881 held that a C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 18 of 43 complaint under section 138 of Act 26 of 1881 can be made at a place, inter alia, from where a demand notice was sent to the drawer of cheque under the proviso of section 138 of Act 26 of 1881.

22. The Hon'ble Delhi High Court in G.E. Capital Transportation Financial Services Ltd.'s case [182 (2011) DLT 385] (supra) having discussed and analysed the law laid down by the Hon'ble Supreme Court in K. Bhaskaran's case (supra), Shri Ishar Alloy Steels Ltd.'s case (supra) and Harman Electronics's case (supra) declared the law laid down by the Hon'ble Supreme Court in Harman Electronics's case (supra) as per incurium and further held that the judgment of Supreme Court in K. Bhaskaran's case (supra) ought to be followed regardless of the contrary pronouncements of the benches of the Hon'ble High Court.

23. In the light of the law laid down by the Hon'ble Delhi High Court in G.E. Capital Transportation Financial Services Ltd.'s case [182 (2011) DLT 385] (supra) and by the Supreme Court in K. Bhaskaran's case (supra) and keeping in view the fact that the demand notice in question in the present case was sent from Delhi I do not see any force in the contention of the learned counsel for the accused that the court in Delhi has no jurisdiction to entertain the present case and the complaint should be returned. As the complainant is having its registered office in Delhi and the cheque in question was also presented for collection in Delhi, therefore, in the light of the law laid down by the Hon'ble High Court in Patiala Casting C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 19 of 43 Pvt. Ltd.'s case (supra), Religare Finvest Ltd.'s case (supra) and G.E. Capital Transportation Financial Services' case [2011 (2) JCC (NI) 105] (supra) I hold that this court has jurisdiction to proceed with the matter. The objection raised on behalf of the accused in this regard is declined.

24. The other objection raised on behalf of the accused is that the notice dated 01.12.2000 framed against the accused persons substantiates the fact that the case of the complainant was that towards the discharge of liability in respect of contract dated 14.4.1997 the cheques in question were issued. According to the accused only cognizance of offence punishable under section 138 of Act 26 of 1881 was taken against the accused persons and no cognizance under section 141 of Act 26 of 1881 has been taken and therefore, the notice of accusation framed against the accused no. 2 to 5 is invalid and they are liable to be acquitted. In the considered opinion of the court the argument raised on behalf of the accused is misconceived and cannot be accepted.

25. Chapter XVII in Act 26 of 1881 was inserted by Act 66 of 1988 and the same creates only one offence, namely, the offence punishable under section 138 of Act 26 of 1881. Chapter XVII of Act 26 of 1881 does not contain any other offence. Section 141 of Act 26 of 1881 also renders certain persons specified therein liable for the offence punishable under section 138 of Act 26 of 1881 in case where the offence is committed by a company. Section 141 only holds the persons, other than a company, C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 20 of 43 vicarious liable for the commission of offence punishable under section 138 of Act 26 of 1881 instead of creating a new offence.

26. In the present case the cognizance of only one offence namely, offence punishable under section 138 could have been taken and the same has been done by my learned predecessor. In the present case there was no necessity of taking cognizance of offence under section 141 of Act 26 of 1881 for the simple reason that section 141 does not create any independent offence.

27. As per section 251 of Cr.P.C. after appearance of the accused he is required to be stated the particulars of the offence of which he is accused and nothing more.

28. In the present case a perusal of the record shows that after appearance of the accused persons notice of accusation was framed on 01.12.2008 whereby it was stated to the accused that they were charged with the commission of offence punishable under section 138 of Act 26 of 1881. By way of notice of accusation dated 01.12.2000 each of the accused was also informed as to why they were being put on trial for commission of offence punishable under section 138 of Act 26 of 1881. Besides that before framing of notice of accusation on 01.12.2000 each of the accused was supplied with a copy of complaint as well as the documents which made it clear to them as to why they were summoned for commission of offence charged against them. The court is satisfied that notice of C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 21 of 43 accusation has been framed correctly against each of the accused and by non­mentioning of section 141 of Act 26 of 1881 in the said notice they have not been prejudiced by the same.

29. The accusation against the accused persons is that the accused no. 1 has committed offence punishable under section 138 of Act 26 of 1881 and the accused no. 2 to 5 are also liable for the commission of the said offence punishable under section 138 of Act 26 of 1881 as they were in charge of and were responsible to the accused no. 1 for its day to day affairs.

30. Section 138 of Act 26 of 1881 which pertains to dishonour of cheque for insufficiency, etc. of funds reads as follows :

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 provisions 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 the said amount of C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 22 of 43 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 or other liability" means a legally enforceable debt or other liability.

31. Further section 141 of Act 26 of 1881 pertains to commission of offence by companies and reads as follows : ­

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 sub­section 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:

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.

(2) Notwithstanding anything contained in sub­section (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. C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 23 of 43

32. During his examination in chief PW1 Mr. S.S. Sorot has deposed that in pursuance of agreement dated 14.4.1997 the complainant had supplied goods to the accused no. 1 and to discharge its liability the accused had drawn cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 out of which Ex. PW1/10 was signed by the accused no. 3 in capacity of being Joint Managing Director of the accused no. 1 whereas cheques Ex. PW1/11 and Ex. PW1/12 were signed by the accused no. 2 being Managing Director of the accused no. 1. The factum of issuance of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 has not been disputed by the accused persons and instead the accused no. 3 during her examination under section 313 of Cr.P.C. has admitted signing of cheque Ex. PW1/10. The accused no. 5 as DW2 during his examination has accepted issuance of letter Ex. PW1/7 whereby the three cheques were sent to the complainant by the accused no.

1.

33. During his examination PW1 Mr. S.S. Sorot also deposed that the three cheques were presented by the complainant for encashment but the same returned unpaid alongwith memo Ex. PW1/13, Ex. PW1/14, Ex. PW1/15, Ex. PW1/16 and Ex. PW1/17. To prove the factum of the dishonour of the cheques the complainant also got examined PW2 Mr. Inderjeet Singh Kohli and PW3 Mr. Anil Kumar Adlakha. During the cross­examination of PW1 S.S. Sorot it has nowhere been suggested that the cheques in question were never presented for encashment and the same C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 24 of 43 did not return unpaid due to insufficient funds and stop payment of the money against the said cheques. Thus, in the light of the testimonies of PW1 Mr. S.S. Sorot, PW2 Mr. Inderjeet Singh Kohli and PW3 Mr. Anil Kumar Adlakaha and documents Ex. PW1/13, Ex. PW1/14, Ex. PW1/15, Ex. PW1/16 and Ex. PW1/17 I hold that the complainant has succeeded in proving the fact that the three cheques were presented by the complainant for encashment and on such presentation the same returned unpaid on 25.3.1999 due to insufficient funds in the accounts of the complainant and due to stopping of payment by the complainant.

34. During his examination it has also been deposed by PW1 Mr. S.S. Sorot that after return of the three cheques as dishonoured a demand notice dated 01.4.1999, a copy of which is Ex. PW1/18, was sent by the complainant to the accused by way of registered post with AD and UPC and the same were received by the accused persons by way of acknowledgment card Ex. PW1/25 to Ex. PW1/29. During their respective examination under section 313 of Cr.P.C. all the accused have denied having received any notice.

35. A perusal of documents Ex. PW1/18 to Ex. PW1/29 reveals that the notice was addressed and sent to all the five accused persons at their address 473­J, Ramanuj Nagar, Uppilipalayam, Post Coimbatore. During their cross­examination DW1 Mr. M.S.R.K. Iyer and DW2 S. Chandrasekaran have admitted that at least till 2002 the address of the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 25 of 43 accused was 473­J, Ramanuj Nagar, Uppilipalayam, Post Coimbatore.

36. Since it is admitted by the accused no. 4 and 5 in capacity of DW1 and DW2 respectively that the accused were having their address at 473­J, Ramanuj Nagar, Uppilipalayam, Post Coimbatore and as per the tenor of Ex. PW1/18, Ex. PW1/24 and Ex. PW1/25 to Ex. PW1/29 the notice was sent on the same address, therefore, I do not believe the version of the accused persons that no notice dated 01.4.1999 was sent by the complainant to them and no such notice was received by them. In the light of the testimonies of PW1 Mr. S.S. Sorot, DW1 Mr. M.S.R.K. Iyer, DW3 Mr. S. Chandrasekaran and documents Ex. PW1/18 to Ex. PW1/29 I hold that after dishonour of the three cheques a demand notice dated 01.4.1999, a copy of which is Ex. PW1/18, was sent by the complainant to all the five accused persons whereby they were called upon to make payment against the three cheques within fifteen days of the receipt of the notice.

37. From the testimony of PW1 Mr. S.S. Sorot it has also been proved that despite receipt of the notice dated 01.4.1999, a copy of which is Ex. PW1/18, the accused persons failed to make payment of the cheque amount within fifteen days of the receipt of the notice.

38. The only point, insofar as commission of offence by accused no. 1, remains to be determined is whether cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 were drawn to discharge any legally enforceable debt or liability or not?

C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 26 of 43

39. It is the contention of the complainant that in pursuance of the agreement dated 14.4.1997, the complainant had supplied goods and material to the accused no. 1 and to discharge its part liability the three cheques were issued by the accused no. 1 in its favour; whereas the contention of the accused is that the three cheques, although were issued by the accused no. 1 in favour of the complainant, but the same were not meant to be presented by the complainant for encashment. It is also the contention of the accused no. 1 that the three cheques were not drawn to discharge any legally enforceable debt or liability and the same were issued at the request of the complainant only to satisfy the foreign collaborators of the complainant. It is also the defence of the accused no. 1 that there was an established practice between the complainant and the accused that at the request of the complainant the accused used to issue cheque in favour of the complainant upon the understanding that the same would not be presented for encashment and to be replaced by a bank draft which was to be encashed. In the light of the testimony of DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran and the documents Ex. DW1/DA, Ex. DW1/DA1, Ex. DW1/DB, Ex. DW1/DC1, Ex. DW1/DD it is vehemently argued by the learned counsel for the accused that from the testimonies of DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran and the documents proved by them it has been proved that there was practice between the parties in the past that the cheques drawn on the banker of the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 27 of 43 accused no. 1 at Coimbatore were not to be encashed.

40. Since in the present case it has been proved that cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 have been issued by the accused no. 1 in favour of the complainant, therefore, there are presumptions in favour of the complainant and against the accused no. 1 under sections 118(a) and 139 of Act 26 of 1881 to the effect that the three cheques were drawn by the complainant through the accused no. 2 and 3 to discharge its legally enforceable debt or liability towards the complainant unless and until the accused no. 1 proves to the contrary.

41. From the testimony of DW2 Mr. S. Chandrasekaran it has been proved that he had written letter Ex. PW1/7 to the complainant on behalf of the accused no. 1 whereby cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 were forwarded to the complainant. As per the contents of Ex. PW1/7 the six cheques, including Ex. PW1/10 to Ex. PW1/12 were issued towards release of payments subject to condition that all the related advance bank guarantees were to be furnished to the accused no. 1 before presenting the said cheques with the banker of the accused no. 1. DW1 Mr. M.S.R.K. Iyer during his cross­examination has proved that in compliance of the terms of letter Ex. PW1/7 the complainant had issued a letter Ex. PW1/9 along with original bank guarantees and the same was received by him. Thus, from the testimony of DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran and documents Ex. PW1/7 and Ex. PW1/9 it has been C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 28 of 43 proved that the three cheques were issued by the the accused no. 1 in favour of the complainant to discharge its liability and the presentation of the same was subject to condition that the related advance bank guarantees were to be furnished and the same were actually furnished by the complainant in favour of the accused.

42. It is deposed by DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S. Chandrasekaran that the cheques were not drawn to discharge any liability and like the practice in the past the same were issued to satisfy the foreign collaborators of the complainant and were to be returned to the accused no. 1 without presentation. In proof of the fact that there was an established practice to the effect that the cheques issued by the accused no. 1 in favour of the complainant were subsequently to be substituted by a draft, the accused persons have produced documents Ex. DW1/DA, Ex. DW1/DA1, Ex. DW1/DB, Ex. DW1/DC1 and Ex. DW1/DD. The combined effects of the said documents is that on one occasion a cheque bearing number 145534 Ex. DW1/DA1 was sent by the accused no. 1 to the complainant along with letter dated Ex. DW1/DA which was received by the complainant by way of receipt Ex. DW1/DB and subsequently, by way of Ex. DW1/DC1 and Ex. DW1/DD cheque Ex. DW1/DA1 was returned by the complainant to the accused no. 1 as the payment against Ex. DW1/DA1 was made by way of a bank draft. The accused have not brought to the notice of the court any other instance when a cheque was issued by the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 29 of 43 accused no. 1 in favour of the complainant which was subsequently substituted by a bank draft and ultimately returned to the complainant. On the contrary from the perusal of documents Ex. DW1/DC3, Ex. DW1/DC4 and mark DW2/C it has been established that on other occasions also (three instances have been mentioned in document mark DW2/C) the payments had been made by the accused no. 1 to the complainant by way of cheques which were got encashed by the complainant. In these circumstances the court does not believe the version of the accused persons that cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 were not drawn to discharge any legally enforceable debt or liability. This court also does not believe the defence of the accused that there was an established practice between the complainant and the accused no. 1 whereunder the three cheques were given on mutual understanding between the complainant and the accused no. 1 that the same would not be presented for encashment and eventually would be returned by the complainant to the accused no. 1 after substitution of the same by bank draft. In the face of the contents of document Ex. PW1/7, this court has no doubt that the three cheques were issued towards release of payment by the accused no. 1 to the complainant. In the light of the evidence led by the parties I am of the considered view that the accused have failed to rebut the presumptions under sections 118 (a) and 139 of Act 26 of 1881.

43. In this regard there are other events which occurred during the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 30 of 43 trial and therefore, cannot be discounted. As per record on 16.7.2001 statement was made before the court regarding a compromise between the parties and at that moment the accused, in the present case as well as in connected case bearing C.C. no. 1087/1/2009 (old no. 204/1/99), admitted their liability to pay Rs.4,73,17,599/­ to the complainant by 30.01.2002. Although the said statement was signed by the accused persons "without prejudice" but since the present proceedings are criminal in nature, therefore, the bar created under section 23 of the Indian Evidence Act, 1872 (Act 1 of 1872) is not applicable and consequently, the admission of their liability made by the accused is relevant. Further in pursuance of the statement made on 16.7.2001 some payments were also made by the accused no. 1 and other accused to the complainant. The conduct of the accused in making statement on 16.7.2001 and subsequent payments is also relevant under section 8 of Act 1 of 1872 and leads to only one inference that the cheque were drawn by the accused no. 1 to discharge its legally enforceable liability.

44. From the above discussion it has been proved that to discharge its liability towards the complainant the accused no. 1 under the signatures of the accused no. 2 had drawn cheques Ex. PW1/11 and Ex. PW1/2 in favour of the complainant. It has also been proved to discharge its liability towards the complainant the accused no. 1 under the signature of the accused no. 3 had drawn cheque Ex. PW1/10, in favour of the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 31 of 43 complainant and when the said cheques were presented by the complainant for encashment the same returned unpaid due to insufficient funds in the account of the accused no. 1 and due to the reason that the payment against the same was stopped by the accused no. 1. From the material on record it has also been proved that after dishonour of the cheques a demand notice dated 01.4.1999, a copy of which is Ex. PW1/18, was sent by the complainant to the accused within fifteen days of the receipt of information regarding dishonour of the cheque whereby the accused were called upon to make payment against the three cheques and the said notice was received by the accused persons by way of acknowledgment cards Ex. PW1/25 to Ex. PW1/29. From the evidence led by the parties it has also been proved that despite receipt of notice dated 01.4.1999 the accused did not make payment against the three cheques. The accused have failed to prove their defence by leading cogent evidence or by bringing notice of the court any material led during the evidence of the complainant. In these circumstances this court finds that the complainant has succeeded in proving all the ingredients of offence punishable under section 138 of Act 26 of 1881 and the conditions precedent for making a complaint against the accused in respect of the said offence regarding all the three cheques. Hence, accused no. 1 Silcal Metallurgic Ltd. is found guilty of having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 bearing numbers 145543, 145544 C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 32 of 43 and 145545. Accused no. 1 Silcal Metallurgic Ltd. is convicted for having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12.

45. The next point which falls for the determination of this court is: whether the accused no. 2 to 5 are also liable for the commission of offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 or not?

46. As I have already observed under the provisions of section 141 of Act 26 of 1881 if an offence punishable under section 138 of Act 26 of 1881 is committed by a company then other persons who falls within the ambit of section 141 may also be held liable for the commission of offence punishable under section 138 of Act 26 of 1881 and can be punished under the said section.

47. The Hon'ble Supreme Court in K.K. Ahuja's case (supra) having discussed the provisions of sections 138 and 141 of Act 26 of 1881 and the provisions of other laws held as follows :

18. Sub­section (2) of Section 141 provides that a Director, manager, secretary or other officer, though not in charge of the conduct of the business of the company will be liable if the offence had been committed with his consent or connivance or if the offence was a result of any negligence on his part. The liability of persons mentioned in sub­section (2) is not on account of any legal fiction but on account of the specific part played--consent and connivance or negligence. If a person is to be made liable under sub­section (2) of Section 141, then it is necessary to aver consent and connivance, or negligence on his part.

19. This takes us to the next question under sub­section (1) of Section 141, as to: (i) who are the persons who are responsible to the company for the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 33 of 43 conduct of the business of the company, and (ii) who could be said to be in charge of and was responsible to the company for the conduct of the business of the company. The words "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" occur not only in Section 141 (1) of the Act but in several enactments dealing with offences by companies, to mention a few--Section 278­B of the Income Tax Act, 1961; Section 22­C of the Minimum Wages Act, 1948; Section 86­A of the Employees' State Insurance Act, 1948; Section 14­A of the Employees' Provident Funds and miscellaneous Provisions Act, 1952; Section 29 of the Payment of Bonus Act, 1965; Section 40 of the Air (Prevention and Control of Pollution) Act, 1981 and Section 47 of the Water (Prevention and Control of Pollution) Act, 1974. But neither Section 141 (1) of the Act, nor the pari materia provisions in other enactments give any indication as to who are the persons responsible to the company, for the conduct of the business of the company. Therefore, we will have to fall back upon the provisions of the Companies Act, 1956 which is the law relating to and regulating companies.

20. Section 291 of the Companies Act, 1956 provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other Directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business.

21. A combined reading of Sections 5 and 291 of the Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company:

(a) the Managing Director(s);
(b) the whole­time Director(s);
(c) the manager;
(d) the secretary;

(e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act;

(f) any person charged by the Board with the responsibility of complying with that provision (and who has given his consent in that behalf C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 34 of 43 to the Board); and

(g) where any company does not have any of the officers specified in clauses (a) to (c), any Director or Directors who may be specified by the Board in this behalf or where no Director is so specified, all the Directors. It follows that other employees of the company, cannot be said to be persons who are responsible to the company, for the conduct of the business of the company.

22. Section 141 uses the words "was in charge of, and was responsible to the company for the conduct of the business of the company". (emphasis supplied) It is evident that a person who can be made vicariously liable under sub­section (1) of Section 141 is a person who is responsible to the company for the conduct of the business of the company and in addition is also in charge of the business of the company. There may be many Directors and secretaries who are not in charge of the business of the company at all. The meaning of the words "person in charge of the business of the company" was considered by this Court in Girdhari Lal Gupta v. D.H. Mehta followed in State of Karnataka v. Pratap Chand and Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd. This Court held that the words refer to a person who is in overall control of the day­to­day business of the company. This Court pointed out that a person may be a Director and thus belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in charge of only some part of the business.

23*. Therefore, if a person does not meet the first requirement, that is, being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under sub­section (1) of Section 141 arises. To put in differently, to be vicariously liable under sub­section (1) of Section 141, a person should fulfil the "legal requirement" of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfil the "factual requirement" of being a person in charge of the business of the company.

48. Further in paragraph no. 27 of the judgment rendered in K.K. Ahuja's case (supra) the Hon'ble Supreme Court summarised the position C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 35 of 43 under section 141 of Act 26 of 1881 in the following words, namely,

27. The position under Section 141 of the Act can be summarised thus:

(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix "Managing" to the word "Director" makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.

(ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub­section (2) of Section 141.

(iii) In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141 (2) by making necessary averments relating to consent and connivance or negligence, in the compliant, to bring the matter under that sub­section.

(iv) Other officers of a company cannot be made liable under sub­ section (1) of Section 141. Other officers of a company can be made liable only under sub­section (2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence.

49. In the present case the liability of the accused no. 2 to 5 is to be ascertained and fixed in the light of the law laid down by the Hon'ble Supreme Court and the evidence led by the complainant and the accused C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 36 of 43 persons.

50. From the testimonies of PW1 Mr. S.S. Sorot, DW1 Mr. M.S.R.K. Iyer and DW2 Mr. S.Chandrasekaran it has been proved that at the time of the commission of offence by accused no. 1 in respect of cheques Ex. PW1/10 to Ex. PW1/12 accused no. 2 Mr. C.R. Narainswamy was holding the post of Managing Director of the accused no. 1. From the testimony of PW1 Mr. S.S. Sorot and cheques Ex. PW1/11 and Ex. PW1/12, it has also been proved that cheques Ex. PW1/11 and Ex. PW1/12 were signed and drawn by the accused no. 2 on the account maintained in the name of the accused no. 1. Thus, in the light of the law laid down by the Hon'ble Supreme Court in K.K. Ahuja's case (supra) the accused no. 2 Mr. C.R. Narainswamy being Managing Director of the accused no. 1 is to be treated as person in charge of and responsible to the accused no. 1 for the conduct of the business of the accused no. 1. As the accused no. 1 has been found guilty of having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12, therefore, accused no. 2 Mr. C.R. Narainswamy is also found guilty of having committed the offence charged against him and the accused no. 2. In the light of the provisions of section 141 of Act 26 of 1881 accused no. 2 C.R. Narainswamy is also convicted for having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12.

C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 37 of 43

51. From the evidence led by the parties and from the statement of accused no. 3 Smt. N. Amsamveni it has been proved that at the time of commission of offence punishable under section 138 of Act 26 of 1881 by the accused no. 1 in respect of the three cheques, accused no. 3 Smt. N. Amsamveni was occupying the post of Joint Managing Director in accused no. 1. From the testimony of PW1 Mr. S.S. Sorot and cheque Ex. PW1/10, it has also been proved that cheque Ex. PW1/10 was signed and drawn by the accused no. 3 on the account maintained in the name of the accused no.

1. Thus, in the light of the law laid down by the Hon'ble Supreme Court in K.K. Ahuja's case (supra) the accused no. 3 Smt. N. Amsamveni being Joint Managing Director of the accused no. 1 is to be treated as person in charge of and responsible to the accused no. 1 for the conduct of the business of the accused no. 1. As the accused no. 1 has been found guilty of having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12, therefore, accused no. 3 Smt. N. Amsamveni being Joint Managing Director of the accused no. 1 and the signatory of cheque Ex. PW1/10 is also found guilty of having committed the offence charged against her and the accused no. 1. In the light of the provisions of section 141 of Act 26 of 1881 accused no. 3 Smt. N. Amsamveni is also convicted for having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12.

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52. Insofar as liability of accused no. 4 Mr. M.S.R.K. Iyer is concerned, in the complaint Ex. PW1/30 his designation has been mentioned as General Manager, Hydro Projects whereas the designation of the accused no. 2 and 3 have been mentioned as Managing Director of accused no. 1 and Joint Managing Director of accused no. 1 respectively. In paragraph no. 1 of the complaint also it has been stated that the accused no. 4 has been mentioned as General Manager of the Hydro Projects of the accused no. 1 whereas the accused no. 2 and the accused no. 3 have been mentioned as Managing Director of the accused no. 1 and the Joint Managing Director of the accused no. 1 respectively. From the testimony of DW1 Mr. M.S.R.K. Iyer it has been proved that accused no. 4 Mr. M.S.R.K. Iyer was not the General Manager of the accused no. 1 and instead he was only the Project Manager for the Hydro Electric Project of the accused no. 1. As per the law laid down by the Hon'ble Supreme Court in K.K. Ahuja's case (supra) a Manager of a company can be considered to be a person who is responsible to the company for the conduct of the business. However, for rendering a Manager liable for the commission of offence punishable under section 138 of Act 26 of 1881 it is necessary that such Manager should be the Manager of the company and not a particular unit of the same. In the present case from the evidence led by the parties it has emerged that the accused no. 1 company wanted to establish Hydro Projects in the State of Kerala. Obviously, for erection and maintenance of C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 39 of 43 such projects the accused no.1 had to require the help of technical persons, and it appears that for such purpose the services of Mr. M.S.R.K. Iyer was availed of and he was put in place as a Project Manager. In the considered opinion of the court being Manager of only a specialised unit of the accused no. 1 cannot be treated being a person in charge of and responsible to the conduct of the business of the accused no. 1. Thus, the accused no. 4 cannot be covered under clause (1) of section 141 of Act 26 of 1881. Further, in the facts and circumstances of the case as the accused no. 4 had no role in drawing of the cheque and its dishonour, therefore, it cannot be held that the offence punishable under section 138 of Act 26 of 1881 in respect of the three cheques or either of them has been committed with the consent or connivance of the accused no. 4 or is attributable to any neglect on his part. Thus, in the face of the evidence led by the parties and the law laid down by the Hon'ble Supreme Court in K.K. Ahuja's case (supra) accused no. 4 M.S.R.K. Iyer is not liable under section 141 of Act 26 of 1881 in respect of the three cheques or any of them. Accused no. 4 M.S.R.K. Iyer is not found guilty of having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 and he is acquitted.

53. Accused no. 5 Mr. S. Chandrasekaran has been mentioned as authorised signatory of accused no. 1 in the complaint. It is nowhere mentioned in the complaint that at the time of the commission of the C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 40 of 43 offence he was holding post of Managing Director, Joint Managing Director, Director, Manager, Secretary or any person in accordance with whose directions or instructions the Board of Directors of the accused no. 1 was accustomed to act. In the affidavit of PW1 Mr. S.S. Sorot tendered during his examination in chief, the accused no. 5 besides being mentioned as authorised signatory of the accused no. 1 has also been mentioned as Manager (Taxation) of the accused no. 1. However, no corroborative material has been placed on record to suggest that at the time of the commission of offence by the accused no. 1, the accused no. 5 was holding post of Manager (Taxation) in the accused no. 1.

54. During his examination as DW2 it has been deposed by the accused no. 5 that he was posted as a clerk in the accounts department of the accused no. 1. During his cross­examination DW2 Mr. S. Chandrasekaran has deposed that in the year 2001 he had resigned from the services of the accused no. 1 and at that time he had been working as an Assistant in the Finance Account Department of the accused no. 1. Nothing has come on the record to suggest that the accused no. 5 was holding any managerial position in the accused no. 1 and was in charge of and was responsible to the accused no. 1 for the conduct of its business. Thus, the accused no. 5 is not covered by clause (1) of section 141 of Act 26 of 1881.

55. Having drawn the attention of the court on Ex. PW1/5, Ex. PW1/6 and Ex. PW1/7 it is vehemently argued by the learned counsel for C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 41 of 43 the complainant that the accused no. 5 being authorised signatory of the accused no. 1 was in charge of and responsible to the accused no. 1 and the offence punishable under section 138 of Act 26 of 1881 in respect of three cheques has been committed by his connivance, consent and neglect. After going through the evidence on record, particularly documents Ex. PW1/5, Ex. PW1/6 and Ex. PW1/7, I am unable to agree with the contention of the learned counsel for the complainant. As I have already found the accused no. 5 was not holding any managerial position in the accused no. 1 and in the documents addressed by him to the complainant he had never claimed himself holding such position. In respect of the three cheques involved in this case in respect of which the offence has been committed the only role played by the accused no. 5 appears to be that alongwith the three cheques he had sent letter Ex. PW1/7 to the complainant wherein it was mentioned that the three cheques were being sent towards payment. Nothing has come on record to show that the accused no. 5 was in control of the finances of the accused no. 1 and the operation of bank account whereupon the three cheques were drawn. In the considered opinion of the court having sent letter Ex. PW1/7 the accused no. 5 cannot be held to be in connivance or a consenting party in the commission of offence by the accused no. 1. Since the accused no. 5 is not proved to having control over the finance of the accused no. 1, therefore, it cannot be held that the commission of offence by the accused no. 1 in respect of the three cheques or any of them is C. C. No. 1086/1/09 (Old No. 203/1/99) Page no. 42 of 43 attributable to him. In these circumstances in the light of the evidence led by the parties and the law declared by the Hon'ble Supreme Court in K.K. Ahuja's case (supra) the accused no. 5 cannot be held guilty for having committed offence punishable under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12 with the aid of section 141 of Act 26 of 1881. Accused no. 5 Mr. S. Chandrasekaran is also acquitted of accusation under section 138 of Act 26 of 1881 in respect of cheques Ex. PW1/10, Ex. PW1/11 and Ex. PW1/12.

Put up for hearing the accused no. 1, 2 and 3 on the question of sentence on 02.04.2012. 

Announced in the open court                                        (Manoj Kumar) 
on this 14th  day of March, 2012                              Senior Civil Judge­cum­
                                                              Metropolitan Magistrate
                                                              New Delhi: 14.03.2012




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