Back
Andhra Pradesh High Court
CAUVERY IRON AND STEEL PRIVATE LIMITED - Appellant
Versus
PRAKASH EQUIPMENTS PRIVATE LIMITED - RESPONDENT
Decided On: 12-13-01
The main legal point established is that liability under Section 138 of the Negotiable Instruments Act is contingent on being in charge of and responsible for the conduct of the business of the company that committed the offence.
Headnote:
Negotiable Instruments Act - Liability of Different Company - Section 138, Section 141 - Summary of Acts and Sections
Fact of the Case:
The petitioner, A4, filed a criminal petition to quash proceedings in a case where a complaint was filed under sections 138 and 142 of the Negotiable Instruments Act against four accused persons, including A4, for cheque bounce.
Finding of the Court:
The court found that A4, being a different company, was not liable under Section 138 of the Act as it was not in charge of and responsible for the conduct of the business of the company that issued the cheques.
Issues: The main issue was whether the petitioner (A4) was liable to be prosecuted under Section 138 of the Negotiable Instruments Act.
Ratio Decidendi: The court held that under Section 141(1) of the Act, a person is liable if they were in charge of and responsible for the conduct of the business of the company that committed the offence. It also emphasized that the proviso to Section 141(1) provides a defense if the offence was committed without the person's knowledge and they had exercised due diligence to prevent it.
Final Decision: The court quashed the proceedings in the case insofar as the petitioner (A4) was concerned, holding that the prosecution of A4 was an abuse of process of law.
( 1 ) THE petitioner herein, who is A4 in CC No. 21 of 1999 on the file of the xxiii Metropolitan Magistrate, Hyderabad, filed this criminal petitioner under section 482 Cr. PC to quash the proceedings in the said CC.
( 2 ) THE 1 st respondent herein, a private limited company, filed the complaint under sections 138 and 142 of the Negotiable instruments Act (for short the Act ) against four accused persons. A1 is also a Company. A2 is the Managing Director and A3 is the joint Managing Director of Al Company. A4 is a different company.
( 3 ) IT is stated in the complaint that A1 Company has borrowed money under bill Discounting Facility for a sum of Rs. 10 lakhs from the complainant; and A1 has requested the complainant for discounting bills of A4 Company for a period of 90 days, which have fallen due for payment; and A1 Company has executed a promissory note; and the complainant paid the amount at the request of A1 Company to A4 company.
( 4 ) A1 Company issued cheques to the complainant towards repayment of the amount borrowed under the Bill Discounting facility; and the said cheques were presented by the complainant in his bank, which were returned with a memorandum with remarks "funds Insufficient. "
( 5 ) IT is alleged that A2 to A4 convicted with each other and got issued the above cheques; and therefore, not only A1 to A3 but also A4 is liable for the offence under section 138 of the Act. Accordingly, the complainant issued statutory notice of 15 days to pay the cheque amounts. As the amounts have not been paid, the complaint has been filed.
( 6 ) THE 4th accused, which is a different company from that of Al to A3, filed this criminal petition to quash the said proceedings contending that under section 138 of the Act, a person, who has drawn a cheque 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, is alone liable, if the cheque is returned unpaid for whatever reason.
( 7 ) UNDER Section 138 (b) of the Act, the payee or the holder in due course of the cheque shall issue a notice in writing to the drawer of the cheque within 15 days of the receipt of the information by him from his bank regarding the return of the cheque; and if the drawer of the cheque fails to make the payment of the said amount under section 138 (c) of the Act, then the holder in due course of the cheque is entitled to file a complaint under Section 142 of the Act within one month after expiry of 15 days notice under Section 138 (c) of the Act.
( 8 ) THE question that arises for consideration in this criminal petition is even if the contents of the complaint are admitted to be true in their entirety, whether the petitioner (A4) is liable to be prosecuted?
( 9 ) ADMITTEDLY, A1 is Company, A2 is the Managing Director and A3 is the Joint managing Director of Al Company. A4 is a different Company. The cheque has been issued by A1 Company alone and not by A4 company.
( 10 ) UNDER Section 141 (1) of the Act, if the person committing the offence under section 138 of the Act 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.
( 11 ) UNDER proviso to Section 141 (1) of the Act, if any person liable to punishment proves that the offence was committed without his knowledge, or that he had exercised all due diliegence to prevent the commission of such offence, he is not liable for the punishment.
( 12 ) UNDER Section 141 (1) of the Act, all persons, who were in charge of and were responsible to the company for the conduct of the business of the company are liable for committing the offence under Section 138 of the Act.
( 13 ) THE question that arises for consideration is whether A4 Company can be said to
