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2009(1) Bankmann 101 (Del.)
DELHI HIGH COURT
Dr. S. Muralidhar, J.
K. Suresh —Petitioner
versus
M/s. Lloyds Finance Ltd.
and Anr. —Respondents
Criminal Misc. No. 3860 of 2005
Crl.M.A. 8065 of 2005
Decided on 7.2.2008
Important Points
For prosecuting the petitioner, who is the Managing Director of the MPSRTC having been appointed to that post in his capacity as an IAS Officer serving the State of Madhya Pradesh, prior sanction under Section 197 Cr.P.C. is mandatory before the cognizance of the offence under Section 138 NI Act can be taken by the learned MM. Therefore, the order issued by the learned M.M. summoning the petitioner is hereby set aside.
Subject
Criminal Law - Dishonour of Cheques
Act Referred
NEGOTIABLE INSTRUMENTS ACT : S.140, S.138, S.141
Headnote
Held: This Court while respectfully agreeing with the above conclusions reached by the Division Bench of the Gauhati High Court is of the view that the Managing Director of a Road Transport Corporation would be performing his official functions, on a day-to-day basis in several spheres and this might well include the issuance of cheques. In fact in the case on hand, it is not the contention of the complainant that the cheques were in fact signed by the Managing Director himself. But even if one were to stretch the principle of vicarious liability is contained in Section 141 NI Act, the Managing Director would in fact be performing only his official functions while issuing cheques for payment of instalments or repayment of loans. Therefore prior sanction for prosecution of the Managing Director in terms of Section 197 Cr.P.C. would be mandatory before the learned MM can take cognizance of the offence.
The question of prior sanction for the purposes of Section 197 Cr.P.C. does not get affected by Section 140 of the NI Act. The stage at which the complainant can invoke Section 140 NI Act to negate a defence of the accused that he had no knowledge when he issued it that the cheque be dishonoured, has not yet been reached. In other words, the defence an accused may have under the second proviso to Section 141 NI Act and the negation of such defence by the complainant by invoking Section 140 NI Act are events that would have to await the trial. On the other hand, the question of obtaining prior sanction to prosecute is at the stage of taking cognizance itself.
In that view of the matter, the petitioner is entited to succeed on the first submission. It is held that for prosecuting the petitioner, who is the Managing Director of the MPSRTC having been appointed to that post in his capacity as an IAS Officer serving the State of Madhya Pradesh, prior sanction under Section 197 Cr.P.C. is mandatory before the cognizance of the offence under Section 138 NI Act can be taken by the learned MM. Therefore, the order issued by the learned M.M. summoning the petitioner is hereby set aside. (Paras 8 to 10)
Result: Petition allowed.
For the Petitioner:Mr. Siddharth Luthra, Senior Advocate with Mr. M.A. Chinasamy, Advocate.
For the Respondent No. 1:Mr. U.A. Rana with Mr. Arvind Kumar, Advocates.
Dr. S. Muralidhar, J.—The petitioner in this petition under Section 482 of the Code of Criminal Procedure,1973 (Cr.P.C.) seeks the quashing of Criminal Complaint No. 2234 of 2001. titled Llyds Finance Ltd. v. Madhya Pradesh State Road Transport Corporation and others pending in the Court of the Metropolitan Magistrate (MM), New Delhi. The complaint was filed by the Respondent No.1 against the Madhya Pradesh State Road Transport Corporation (MPSRTC) as well as three others including the petitioner here who is its Managing Director and two others being the Chief Accounts Officer and the Accounts Officer of MPSRTC. The complaint was for offences under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (NI Act) in respect of the dishonour of eleven cheques issued on behalf of the MPSRTC in favour of the complainant company.
2. Mr. Siddharth Luthra, the learned Senior Counsel, appearing for the petitioner urged two grounds in support of the prayer for quashing of the criminal proceedings. The first was that the petitioner who is an officer of the Indian Administrative Service (IAS) was nominated by the State Government of Madhya Pradesh to serve as the Managing Director of the MPSRTC. In terms of Section 43 of the Road Transport Corporation Act, 1950 (RTC Act), the petitioner was a public servant within the meaning of Section 21 of the Indian Penal Code (IPC). Therefore, prior sanction for prosecuting the petitioner in terms of Section 197 Cr.P.C. was a mandatory requirement before the learned MM could have taken cognizance of the offences on the basis of the complaint filed by the respondent. Since the learned MM proceeded to take cognizance without such sanction having been obtained, the order taking cognizance was unsustainable in law. He relied upon the judgment of the Gauhati High Court dated 8th August, 2006 in Criminal Revision No. 174 of 2002 : K. Suresh v. Arihant Hire Purchase Co. Ltd.1, which was a case involving the petitioner in his capacity as Managing Director of the MPSRTC for a similar offence under Section 138 NI Act.
3. The second ground urged by Mr. Luthra is that the petitioner would have the benefit of the second proviso to Section 141 NI Act, which was inserted with effect from 6th February 2003. The second proviso states that a person who is nominated as a Director of a company by virtue of is being employed in the said Government shall not be liable for any prosecution under Chapter XVII NI Act (which includes Section 138 thereof). It is submitted that this being a matter of procedure the second proviso to Section 141 would be retrospective.
4. In reply, Mr. U.A. Rana, the learned Advocate appearing for the respondent No. 1 complainant submits that the issuance of the cheques which were dishonoured due to insufficient funds could not said to be the performance of any official function of the Managing Director of MPSRTC. He refers to Section 140 NI Act which categorically states that it would be no defence in a prosecution for the offence under Section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment. He sought to distinguish the judgment of the Gauhati High Court in K. Suresh on the ground that there was no discussion therein of the question whether the Managing Director was, in issuing the cheques in question, performing an official function or not. Therefore the absence of a prior sanction under Section 197 Cr.P.C. would not render the order taking cognizance bad in law.
5. As regards the second submission of Mr. Luthra concerning the second proviso to Section 141 NI Act, Mr. Rana submits that the amendment is not intended to apply to the Managing Director of a Corporation, who is obviously in-charge of the affairs of the company and responsible to it for the conduct of its business. That proviso is only intended to apply to Directors nominated by the State Governments or Central Government by virtue of a certain sh
