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2002 Supreme(Cal) 15
HIGH COURT OF CALCUTTA
Pradip Kumar Biswas, J.
Karnataka Agro. Chemicals & Ors.
vs.
Sateyendra Nath Biswas
Crl. Rev. No. 1153 of 1994
Decided On: January 17, 2002
Ashim Kumar Roy for the petitioners.
A person other than the company can be proceeded against under Section 138 of the Negotiable Instruments Act only if that person was in charge of and responsible to the company for the conduct of its business.
Headnote:
NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 138 - PARTNER'S LIABILITY - MAINTAINABILITY OF PROCEEDINGS - AUTHORITY TO INSTITUTE LEGAL PROCEEDINGS - STOP-PAYMENT INSTRUCTION - INTERPRETATION OF SECTION 139 - REBUTTABLE PRESUMPTION - SUFFICIENCY OF FUNDS - VALID CAUSES FOR STOP-PAYMENT.
Fact of the Case:
Karnataka Agro Chemicals, a partnership firm, and five partners filed a revisional application under Sections 401 and 482 of the Code of Criminal Procedure to quash a proceeding initiated against them under Section 138 of the Negotiable Instruments Act. The complainant, Paul Biswas & Co. Pvt. Ltd., alleged that the accused failed to pay a post-dated cheque issued in settlement of commission due to the complainant. The petitioners contended that no offense under Section 138 was committed since they had instructed the bank to stop payment on the cheque and that the partners other than the Chief Marketing Manager were not responsible for the offense.
Finding of the Court:
The court held that the proceeding against the partners, except the Chief Marketing Manager, could not be maintained as there was no specific allegation that they were in charge of or responsible for the conduct of the company's business at the time of the offense. However, the court found sufficient material to proceed against the Chief Marketing Manager. Regarding the authority to institute legal proceedings, the court held that the issue of whether the complainant had the appropriate authority could be decided during the trial. The court also held that the issuance of a stop-payment instruction did not automatically negate the offense under Section 138, as the presumption under Section 139 could be rebutted by showing that the instruction was issued due to valid causes, including the absence of any debt or liability.
Issues: 1. Whether the proceeding under Section 138 of the Negotiable Instruments Act could be maintained against the partners of the company, except the Chief Marketing Manager, based on the allegations in the complaint? 2. Whether the complainant had the authority to institute legal proceedings on behalf of the company? 3. Whether the issuance of a stop-payment instruction negated the offense under Section 138 of the Negotiable Instruments Act?
Ratio Decidendi: 1. The court relied on the Supreme Court decision in K. P. G. Nair vs. M/s. Jindal Menthol India Ltd., which held that a person other than the company could be proceeded against under Section 138 of the Negotiable Instruments Act only if that person was in charge of and responsible to the company for the conduct of its business. Since there were no specific allegations against the partners, except the Chief Marketing Manager, that they were in charge of or responsible for the conduct of the company's business at the time of the offense, the proceeding against them could not be maintained. 2. The court held that the issue of whether the complainant had the appropriate authority to institute legal proceedings could be decided during the trial, as there was no proper material to connect whether the complainant was duly authorized by the company at that stage. 3. The court referred to the Supreme Court decision in Modi Cements Ltd. vs. Kuchil Kumar Nandi, which held that even though cheques were dishonored by reason of stop-payment instruction, an offense under Section 138 could still be made out. The presumption under Section 139 that the cheque was received for the discharge of a debt or liability could be rebutted by showing that the stop-payment instructions were issued because of valid causes, including the absence of any debt or liability.
Final Decision: The court quashed the proceeding against the partners, except the Chief Marketing Manager, and allowed the proceeding against the company and the Chief Marketing Manager to continue.
Pradip Kumar Biswas, J.: Learned counsel for the petitioners is present. None appears, however, on behalf of the opposite party. However, the matter is taken up for consideration on its merit. Heard the learned counsel for the petitioners at length.
2. This is an application under section 401 read with section 482 of the Code of Criminal Procedure filed by Karnataka Agro Chemicals, a partnership firm along with five others against the opposite party seeking to quash the proceeding under section 138 of the Negotiable Instruments Act in Case No. C/137 of 1994 now pending before the Metropolitan Magistrate, 4th Court, Calcutta. The short facts leading to this revisional application may be summerised as follows:-
3. On April 8, 1994, the opposite party made a written complaint to the learned Chief Metropolitan Magistrate, Calcutta against the present petitioners alleging, inter alia, that the complainant is a Director of Paul Biswas & Company Private Limited and the accused No.6 Mr. K.V.S. Rao, i.e. the petitioner No.6 is the Chief Marketing Manager of Mis. Karnatak Agro Chemicals, i.e. the petitioner No.1 herein and he is the person in charge of the company and responsible officer in respect of Management, Administration of the company. It has also been alleged that accused Nos. 2 to 5, i.e. the petitioner Nos. 2 to 5 herein are the partners of the aforesaid company. Further it has been alleged that on August 3, 1993 the accused No.2, on behalf of the other accused persons settled the complaint's commission amounting to Rs. 2,46,043/- and arranged to make payment of Rs. 2,00,000/- keeping an outstanding balance of Rs. 46,043/-. The complainant, however, continued business with the aforesaid company but insisted upon for full payment of commission as agreed upon. Subsequently, by a letter No. KAC/PB/1036/93 dated 30.9.93/6.10.93 the accused terminated C & F agency of the complainant company. The complainant acknowledged the receipt of the said letter and repeatedly requested the accused persons to settle the accounts. When accused No.2 by his letter No. KAC/PB/1332/93 dated November 17, 1993 intimated the complainant that the accused No.6 has been duly authorised to settle the accounts and he would visit the complainant's office for the said purpose. The accused No.6 visited the complainant's office on 19.11.93 and 20.11.93 and after proper verification of the accounts by both the parties, the accounts were settled. The settlement was arrived at in the manner that the' complainant's company would get Rs.2,45,813/- and for paying the aforesaid amount, the aforesaid company would issue post dated 20.11.93 acknowledged and accepted the said settlement of accounts and issued 5 post dated cheques in payment thereof. Out of the 5 post dated cheques, the last cheque bearing No. 515574 dated 26.2.94 for Rs. 70,813/- drawn on Vijay Bank, Rabindra Sarani Branch, Calcutta was presented for encashment on due date but the said cheque was dishonoured by the accused's banker with a remarks "effect not cleared" vide the Bank's memo dated 28.2.94. Again the aforesaid cheque was presented for encashment but the cheque was again dishonoured by the accused's banker. The complainant thereafter issued demand notice through his learned Advocate dated 8.3.94 sent under Registered Post and the said letters were received by the accused on 11.3.94 and 13.3.94 and his Advocate received the acknowledgment card on 21.3.94. Inspite of demand notice, the accused failed and neglected to pay the said cheque amount. It has further been alleged that the accused Nos. 2 to 5 are all the partners of the aforesaid company and consequently, all of them are aware of the facts and circumstances of the Case and as such all of them are liable and responsible for the offence complained of and accused No.6 is the Chief Marketing Manager and he is a responsible officer and person-in-charge of the firm. With these allegations the complaint was filed.
4. On receipt of the af
