1. Cheque dishonour — Complaint under Section 138, NI Act — Application under Section 319, CrPC to implead the company as an accused after the limitation period. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 )
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2017 Supreme(SC) 788
SUPREME COURT OF INDIA
J. Chelameswar, S. Abdul Nazeer, JJ.
N. Harihara Krishnan – Appellant
Versus
J. Thomas – Respondent
Criminal Appeal No. 1534 of 2017 (Arising out of SLP(Crl.) No. 1439 of 2017)
Decided On : 30-08-2017
Important Points
IMPORTANT POINTS
Cognizance of an offence u/s 138 cannot be taken unless complaint is filed within one month of cause of action.
Every person signing a cheque on behalf of a company does not become drawer of the cheque.
Under section 138 court needs to take cognizance of an offence accused-wise.
Cognizance of an offence u/s 138 cannot be taken unless complaint is filed within one month of cause of action.
Every person signing a cheque on behalf of a company does not become drawer of the cheque.
Under section 138 court needs to take cognizance of an offence accused-wise.
Subject
Negotiable Instruments Act - Dishonor of Cheque
Act Referred
CRIMINAL PROCEDURE CODE: S.319
NEGOTIABLE INSTRUMENTS ACT: S.138, S.142, S.141(1)(b), S.12, S.173(2)(i)(d)
NEGOTIABLE INSTRUMENTS ACT: S.138, S.142, S.141(1)(b), S.12, S.173(2)(i)(d)
Headnote
(a) Negotiable Instruments Act, 1881 – Section 142 r/w clause (c) Proviso, section 138 – Limitation – Cognizance of an offence u/s 138 – Cannot be taken unless complaint is filed within one month of cause of action. (Para 18)
(2013) 1 SCC 177 – Relied upon
(b) Negotiable Instruments Act, 1881 – Section 141 – Appellant Director of the company DAKSHIN from whose account cheque was drawn – Every person signing a cheque on behalf of a company does not become drawer of the cheque – Application for summoning DAKSHIN barred by limitation – DAKSHIN not making any grievance against summoning – Does not preclude appellant from raising such defence – DAKSHIN can raise such defence during course of trial – Appellant could not be non-suited on such ground. (Para 21)
(2012) 5 SCC 661 – Relied upon
(2006) 6 SCC 456; (2007) 6 SCC 555 – Referred
(c) Negotiable Instruments Act, 1881 – Section 138 and 141 – High Court negating need to take cognizance of an offence accused-wise – A correct law in the background of the scheme of the CrPC – Not correct in case of the Act. (Para 21, 22, 23, 24)
AIR 1967 SC 1167 – Referred
(d) Negotiable Instruments Act, 1881 – Section 142 – Limitation – Respondent not impleading DAKSHIN within period of limitation – Cheque being drawn on account of DAKSHIN and respondent issuing notice to DAKSHIN, respondent’s statement that he realised the fact during course of trial patently false – Respondent invoking section 319 CrPC only as a device to circumvent limitation. (Para 25, 26)
(2012) 5 SCC 661 – Relied upon
Facts of the case:
The appellant drew a cheque for a sum of Rs. 39 lakhs (Rs.39,00,000/-) on the Syndicate Bank, Armenian Street, Chennai in favour of the respondent.
The said cheque was dishonoured on the ground that the account on which the cheque was drawn had been closed.
The respondent issued a notice contemplated under clause (b) of the proviso to Section 138 of NI Act. As the appellant did not respond, complaint was lodged.
The respondent filed an application u/s 319, CrPC to implead M/s DAKSHIN GRANITES PVT. LTD., as the accused-appellant was a Director the company on whose account the cheque was drawn.
The Metropolitan Magistrate allowed the said application. The appellant carried the matter in to the High Court unsuccessfully.
Finding of the Court:
Impugned judgment cannot be sustained.
Result: Appeal allowed with cost.
Judgement Key Points
Based on the provided legal document, here are the key points formatted with the required reference citations:
- Limitation Period for Cognizance: Cognizance of an offence under Section 138 of the Negotiable Instruments Act cannot be taken unless the complaint is filed within one month of the cause of action arising. (!) (!) (!)
- Corporate Liability and Signatories: Every person signing a cheque on behalf of a company does not become the drawer of the cheque; the company itself is the drawer, and the signatory is only vicariously liable. (!) (!)
- Impleading the Company as Accused: For a prosecution under Section 141 to be maintained against a company, the company must be arraigned as an accused. (!)
- Barred by Limitation: An application under Section 319 CrPC to implead a company as an accused, filed years after the dishonor of the cheque, is barred by the limitation period prescribed under Section 142 of the Negotiable Instruments Act. (!) (!)
- Sufficient Cause for Delay: The respondent's claim that they realized the cheque was drawn on the company account only during the trial is patently false, as the company was already served with a demand notice. Therefore, no sufficient cause exists to condone the delay. (!)
- Nature of Cognizance under NI Act: Unlike the Code of Criminal Procedure (CrPC), the scheme of prosecution under Section 138 is person-specific; the court must take cognizance of the offence accused-wise, and the identity of the drawer is a crucial ingredient that must be known at the time of filing the complaint. (!)
- High Court's Error: The High Court erred in concluding that no separate petition for condonation of delay was required once cognizance was taken, and in dismissing the appeal solely because the company did not file a revision. (!) (!)
- Result: The appeal is allowed, the judgment of the High Court is set aside, and costs are awarded to the appellant. (!)
Legal Category Hierarchy
Advocates Appeared:
For the Appellant : Pranav Sachdeva, Adv.
For the Respondent: R. Sathish, Adv.
For the Appellant : Pranav Sachdeva, Adv.
For the Respondent: R. Sathish, Adv.
Table of Contents
2. Whether a company can be impleaded as an accused under Section 319, CrPC after the limitation period prescribed under Section 142, NI Act has expired. (Para 12 , 13 )
3. The offence under Section 138, NI Act is person-specific; impleading the drawer company via Section 319, CrPC cannot bypass the mandatory limitation period under Section 142. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 )
4. Prosecution of a company under Section 138, NI Act must comply with the limitation period under Section 142; Section 319, CrPC cannot be used to circumvent this. (Para 20 , 21 , 24 , 25 )
5. Appeal allowed — Judgment set aside — Costs awarded. (Para 27 )
6. Can an authorized signatory of a company be prosecuted under Section 138 of the NI Act without the company being arraigned as an accused?
No. For maintaining prosecution under Section 141 of the Act, arraigning the company as an accused is imperative. The signatory's liability is vicarious and depends on the company's primary liability. (Para 20 , 21 )
7. Does the general criminal law principle that a court takes cognizance of the offence and not the offender apply to Section 138 of the NI Act?
No. The offence under Section 138 is person-specific, requiring specific documentary ingredients. Section 142 contains a non-obstante clause that overrides the general CrPC procedure regarding the taking of cognizance. (Para 21 , 23 , 24 )
8. Can Section 319 of the CrPC be used to implead a company as an accused if the statutory period for filing a complaint under the NI Act has lapsed?
No. Using Section 319, CrPC to implead a company after the limitation period is a device to initiate a time-barred prosecution. The mandatory timelines under Section 138 and 142 must be strictly adhered to. (Para 12 , 24 , 25 )
JUDGMENT
Chelameswar, J.
Leave Granted.
2. M/s. Norton Granites & Spinners (P) Ltd. (hereafter NORTON) sold three parcels of land by three separate registered sale deeds dated 14.5.2007 to one M/s. Srivari Exports, a partnership firm (hereafter FIRM). The appellant herein is the managing partner of the FIRM and the respondent, it appears, is the power of attorney holder for the managing director of NORTON. It appears from the record that the appellant is also a director of a company known as M/s. Dakshin Granites Pvt. Ltd. (hereafter DAKSHIN).
3. The respondent herein filed a complaint on 08.10.2012 bearing CC No. 2925 of 2012 on the file of the VII Metropolitan Magistrate, George Town at Chennai against the appellant herein invoking Sections 138 and 142 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "THE ACT"). The substance of the complaint is that the appellant herein drew a cheque bearing No. 064159 dated 10.8.2012 for a sum of Rs. 39 lakhs (Rs.39,00,000/-) on the Syndicate Bank, Armenian Street, Chennai in favour of the respondent. According to the complaint, the said amount of Rs. 39 lakhs is the amount due from the appellant towards the balance of the sale consideration in connection with the sale transactions referred to above.
4. The said cheque was presented for collection by the respondent through his bank (Indian Bank, High Court Branch, Chennai) on 28.8.2012 which was dishonoured on the ground that the account on which the cheque was drawn had been closed.
5. On 10.9.2012, the respondent issued a notice contemplated under clause (b) of the proviso to Section 138 of THE ACT. By the said notice, the appellant was informed that the cheque had been dishonored and further the appellant was called upon to pay the sum of Rs. 39 lakhs within 15 days from the date of the receipt of the notice. According to the complaint, the notice was served on the petitioner on 14.9.2012 but the petitioner neither responded to the notice nor made the payment. Hence the complaint.
6. On 19.8.2015, Crl.M.P. No. 6771 of 2015 came to be filed in the above-mentioned CC No. 2925 of 2012 by the respondent herein purporting to be an application under Section 319 of the Code of Criminal Procedure, 1973 (for short "CrPC") with prayer as follows:-
"3. In the above circumstances, it is therefore prayed that this Hon'ble Court may be pleased to implead M/s DAKSHIN GRANITES PVT. LTD., NO. 3B, EEBROS Centre, 40, Montieth Road, Chennai - 600 008 as accused A1, in C.C. No. 2925 of 2012 pending on the file of this Hon'ble Court and thus render justice."
7. According to the said application, it came to the notice of the respondent during the course of cross-examination of the appellant herein at the trial of the CC No.2925 of 2012 that the cheque in question was drawn on the account of DAKSHIN and the appellant is only a signatory on behalf of the DAKSHIN in his capacity as a Director of DAKSHIN. The respondent had initially failed to lodge the complaint against DAKSHIN by inadvertence and hence the application.
8. The application was contested by the appellant. The learned Metropolitan Magistrate by his Order dated 21.4.2016 allowed the said application. The petitioner carried the matter in Criminal R.C. No. 774 of 2016 to the Madras High Court unsuccessfully. Hence the instant SLP.
9. Xerox copies of the three sale deeds are placed before us and according to the said documents, the sale consideration for the three sale deeds is Rs. 2,80,000/-, Rs. 2,50,000/- and Rs. 1,20,000/-, in all Rs. 6,50,000/-. Nonetheless, the respondent filed the complaint stating that the cheque in question for Rs. 39 lakhs was drawn towards the balance of the sale consideration of the transactions covered by the above-mentioned three sale deeds. Prima facie, it is very doubtful whether the cheque was drawn for any amount which is legally due to the respondent from the appellant.
10. A xerox copy of the cheque is placed before us. The number of the account on which the
