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2005(2) Bankmann 88
CALCUTTA HIGH COURT
P.N. Sinha, J.
Fateh Chand Bhansali
& Ors. — Petitioner
versus
Hindusthan Development Corporation Limited — Opposite Party
C.R.R. Nos. 1001, 107 & 1103 of 1999
Decided on 23-3-2005
For the petitioner:Sudipta Moitra, Jyotirmoy Adhikary, Sanjay Bose, Advocates.
For the Opposite Party:Biplab Mitra, Debabrata Acharyya, S.B. Sinha Roy, Advocates.
IMPORTANT POINTS
(1)Mode of service of notice is to be proved at trial.
(2)Winding up proceedings would not same company and its Directors from penal provisions of Negotiable Instruments Act.
Headnote:(a) Negotiable Instruments Act, 1881—Section 138(b)—Notice—Mode of service whether by registered post, or by hand or by courier is a matter to be considered at trial—Complaint cannot be rejected at initial stage—Burden lies on complainant to prove service of demand notice.
Held: Service of notice of demand in clause (b) of proviso to Section 138 is a condition precedent for filing a complaint under Section 138 of the NI Act. Whether the notice was served or not and how it was served and which service was effected on the accused persons namely, whether by registered post, or by hand, or by courier, is a matter which can be considered during trial as the scheme of the Act unmistakably imposes burden on the complainant to show service of demand notice upon the accused persons. It is a matter, which is to be considered at the time of trial on the basis of facts of each case. This cannot be a ground to reject the complaint at the very initial stage or at threshold. In the trial the burden would be on complainant to prove service of demand notice upon the accused persons and this cannot be a ground for quashing the complaint at the very early stage where appearance of all accused persons are not yet complete and question of recording evidence is far cry. (Para 8)
(b) Negotiable Instruments Act, 1881—Section 138—Suppression of material facts—Accounts of company frozen by order of Reserve Bank—Continuation of criminal proceedings bad in law and liable to be dismissed.
Held: The Reserve Bank of India under its powers in view of provisions of Section 45 MB(2) of the Reserve Bank of India Act passed an order restraining the accused No. 1 company from selling, alienating, creating charge or mortgaging or dealing in any manner with the property or assets of the company without prior permission of the Reserve Bank of India for a period of six months from the date of the said order. Thereafter Reserve Bank of India directed freezing of the accounts of the company in all Nationalised Banks. As the Delhi High Court stayed all the criminal proceedings initiated under Section 138 of the NI Act and the Reserve Bank of India freezed the accounts of accused No. 1 company, the continuation of the criminal proceeding against the petitioners are bad in law. The complainant in spite of knowing of the stay order granted by the Delhi High Court and the order of Reserve Bank of India freezing all accounts of accused No. 1 company, did not mention the said facts in the petition of complaint and suppressed material fact before the Court and obtained order of issue of process against the petitioner. Learned Magistrate would not have issued process if he was not kept in the dark by the complainant due to such suppression. As the petitioners suppressed material fact the criminal proceeding is liable to be quashed. (Para 9)
(c) Negotiable Instruments Act, 1881—Section 138—Winding up—Application for winding up does not save company and its Directors from penal liability under Section 138 of the Act.
Held: In Anil Hada (supra) the Supreme Court pronounced that when a company, which committed the offence under Section 138 eludes from being prosecuted thereof, on account of complaint against it being dropped because of winding up proceeding ordered by Court, the Directors of that company can be prosecuted for that offence. The same view was reiterated by the Supreme Court in Pankaj Mehra (supra) where it went further and observed that merely because petition for winding up of the company has been presented prior to the company being called upon by a notice to pay the amount of the cheque, the company cannot escape from penal liability under Section 138 of the Negotiable Instruments Act. Therefore, application filed for winding up of the company cannot save the company and its Directors from penal liability under Section 138 of the Negotiable Instruments Act. The learned Magistrate would definitely consider about order of the Delhi High Court regarding stay of the criminal proceeding against the company. The present petitioners were the Directors and were the persons responsible for the day-to-day account of the company and as such they cannot escape from penal liability under Section 138 of the NI Act. (Para 12)
(d) Negotiable Instruments Act, 1881—Sections 138/141—Offences by company—Person incharge of company responsible for day-to-day affairs can be fastened with criminal liability—Sleeping partners not taking part in discharge of business cannot be prosecuted.
Held: Penal provision under section 138 of the NI Act would arise only when after demand made by the complainant or holder of the cheque for payment of the dishonoured cheque, the accused or drawer of the cheque fails to make payment within the time of fifteen days. It is also equally well-established that all partners of a company are not responsible for the alleged offence under Sections 138 and 141 of the NI Act. Only the persons or the officers of the company who were in charge of the company and responsible to the firm can be fastened with criminal liability. It is also well-settled that the sleeping partners particularly, the lady accused persons, who do not take any part in the day-to-day account or discharge of business of the firm or company cannot be prosecuted. (Para 16)
Result: Revision application dismissed.
P.N. Sinha, J.—As the factual aspects and points of law involved in these revisional applications are identical I intend to dispose of these three revisional applications by this common Judgment and Order.
2. Before I enter into merits of the revisional applications, it would be fruitful to mention the facts of the case as disclosed in the petition of complaint filed by the opposite party M/s. Hindusthan Development Corporation Limited in the Court of the learned Chief Metropolitan Magistrate (CMM), Calcutta which was transferred to the Court of the learned Metropolitan Magistrate, 17th Court, Calcutta. In the petition of complaint the complainant arrayed nine accused persons out of which accused No. 1 is the company namely CRB Capital Markets Limited. Mr. Shubh Karan Jain was arrayed as accused No.3 and Mr. Fateh Chand Bhansali was arrayed as accused No.4 and Mrs. Manjula Bhansali was arrayed as accused No.5 and the last three above named accused persons as petitioners have preferred the present revisional applications bearing Nos. 1071/99, 1001/99 and 1103/99 respectively for quashing of the criminal proceeding against them.
3. The factual matrix as disclosed in the petition of complaint, in short, is that accused No.1 is a limited company and Rajib Mankuria is the Manager – Accountant and Administration and constituted attorney of complainant company. Complainant company had given short term loan to accused No.1 company for a total sum of Rs. 10 crores by way of demand draft of Rs. 5 crores on 14-7-1995, further sum of Rs. 3 crores by way of demand draft on 25-7-1995, further sum of Rs. 2 crores by demand draft on 2-8-1995 on mutually agreed condition to repay Rs. 5 crores on 12-7-1996 and balance sum of Rs. 5 crores on 18.7.96 and the said loan would carry interest @ 20% p.a. on quarterly rests. When the offence was committed the accused Nos. 2 and 3 were the Chairman and Vice-Chairman respectively of accused No. 1 and both were in charge of day-to-day conduct of business affairs, the administration and running of accused No. 1 company. Accused No. 4 is the father of accused No.2 and father-in-law of accused No.5 and was in charge of the day-to-day conduct of business affairs, administration and running of accused No. 1 and was responsible to accused No.1 for the day-to-day conduct of the business. Accused Nos. 5 to 9 were all Directors of the said accused No.1 company and at all material times when the offence was committed they were also in charge of the day-to-day conduct of the business affairs of accused No.1 and were responsible to accused No.1 for the day-to-day conduct of business of accused No. 1. As per agreed terms accused No.1 had issued to the complainant two demand promissory notes dated 3rd July, 1995 and 19th July, 1995 for Rs. 5 crores each which were duly signed by accused No. 2 and accused No. 5 while they acted for and on behalf of accused No.1. Accused No.1 also issued and handed over 33 account payee cheques to the complainant at its registered office at Calcutta drawn on Canara Bank, Sarat Bose Road, Calcutta in due discharge of the liabilities for payment of principal amount along with interest. Accused No.1 also approached by letter dated 13-7-1996 signed by accused No.2 addressed to the complainant for extension of time of payment of said loan which were due namely Rs. 5 crores for a further period of six months to be due on 12th January, 1997 and balance Rs. 5 crores for a further period of three months to be due on 18-10-1996. Once again accused No.1 issued two demand promissory notes dated 18-7-1996 and 19-7-1996 signed by accused No.2 and accused No. 5 on behalf of accused No.1 promising to pay said sum of Rs. 10 crores on demand with agreed interest. The accused No.1 issued and handed over eight account payee cheques to complainant at its registered office at Calcutta drawn on Canara Bank, Sarat Bose Road in discharge of liability. On 31-3-1997 accused No. 1 also issued and handed
