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2020 Supreme(P&H) 997
IN THE HIGH COURT OF PUNJAB AND HARYANA
H.S. Madaan, J.
Ashok Logani - Appellant
Versus
M/s P.c. Jain Textile Pvt. Ltd. And Another - Respondent
CRM-M-8540-2018(O&M); CRM-M-8541-2018(O&M); CRM-M-8545-2018(O&M); CRM-M-17447-2018(O&M);CRM-M-17493-2018(O&M); andCRM-M-17497-2018(O&M)
Decided On : 28-01-2020
Mr.Kamal Bahl, Advocate with Mr.Arun Luthra, Advocate for the Appellant in all petitions; Mr.C.S. Bakhshi, Advocate for the respondents in all the petitions
The main legal point established is that the signatory of the cheques, as the Managing Director, is deemed to be guilty under Section 138 of the Negotiable Instruments Act, and the sufficiency of notice to the accused company is crucial.
Headnote:
Negotiable Instruments Act - Dishonoured Cheques - Section 138 - Summary of Acts and Sections: Negotiable Instruments Act, 1881, Section 138 - The court discussed the liability of the accused under Section 138 of the Act, the necessity of notice to parties, and the responsibility of the signatory of the cheques. Key legal provisions such as Section 141 and its interpretations were crucial in influencing the court's decision.
Fact of the Case:
The complainant brought three complaints under Section 138 of the Negotiable Instruments Act against the accused company for dishonoured cheques. The accused, Ashok Logani, sought discharge from the proceedings, claiming lack of liability under Section 141 of the Act.
Finding of the Court:
The court dismissed the applications for discharge, holding that the accused, as the Managing Director and signatory of the cheques, cannot evade liability. The court emphasized the responsibility of the signatory and the sufficiency of notice to the accused company.
Issues: The issues revolved around the liability of the accused under Section 138 of the Act, the necessity of notice, and the role of the signatory in dishonoured cheques.
Ratio Decidendi: The court held that the accused, as the Managing Director and signatory, is deemed to be guilty under Section 138 of the Act. The court emphasized the responsibility of the signatory and the sufficiency of notice to the accused company.
Final Decision: The court dismissed the petitions and upheld the summoning orders, finding no legal infirmity in the complaints and summoning orders.
Based on the provided legal document, the key legal points are as follows:
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The signatory of a cheque, particularly when serving as the Managing Director of a company, is deemed to be liable under Section 138 of the Negotiable Instruments Act. The court emphasized that such signatories cannot evade liability simply by claiming lack of authority or responsibility within the company (!) (!) .
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The issuance of a legal notice regarding dishonour of cheques to the company through its authorized signatory is sufficient. It is not necessary to issue separate notices to individual directors or signatories for establishing liability under Section 138 (!) (!) .
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The liability of the Managing Director or signatory is recognized when they have signed the cheques on behalf of the company, and their responsibility is established by their role as signatory, regardless of whether specific averments about their in-charge status are made in the complaint (!) (!) .
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When the dishonoured cheques are issued during the course of day-to-day business transactions, and the individual is the signatory, they are deemed responsible and liable under the Act. The law does not require explicit mention of their role or responsibility in the complaint if they have signed the cheques (!) (!) .
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The court clarified that the mere fact that a person is not explicitly named as in-charge or responsible in the complaint does not exempt them from liability if they have signed the cheque on behalf of the company. The responsible role of the signatory, especially when they are a Managing Director or Director, is sufficient to establish liability (!) (!) .
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The legal notices issued to the company through its authorized signatory are deemed adequate to meet the requirements of notice under the Act, and there is no legal necessity to issue separate notices to individual directors or signatories (!) (!) .
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The courts have consistently held that individuals who sign cheques on behalf of a company and are in charge of the company’s day-to-day affairs can be prosecuted under Section 138, even if not explicitly averred as in-charge in the complaint, provided their role as signatory is established (!) (!) .
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The courts dismissed the petitions challenging the proceedings, affirming that the impugned orders and complaints are legally valid and properly reasoned. The powers of the High Court under the relevant procedural provisions were also recognized as not being violated in this context (!) (!) (!) (!) (!) (!) (!) .
In summary, the legal framework establishes that a signatory, especially when serving as a Managing Director or Director and signing on behalf of the company, is liable under Section 138 of the Negotiable Instruments Act. Proper legal notices to the company suffice, and there is no requirement for separate notices to individual signatories. The courts uphold the liability of such signatories when they have signed the dishonoured cheques, and the proceedings and orders passed in such cases are legally sound.
JUDGMENT
H.S. Madaan, J. - By this order, I shall dispose of six petitions i.e. CRM-M-8540-2018(O&M), CRM-M-8541-2018(O&M), CRM-M-8545-2018(0&M), CRM-M-17447-2018(0&M), CRM-M-17493-2018(O&M) and CRM-M-17497-2018(O&M) filed by petitioner -Ashok Logani.
2. Briefly stated, facts of the case are that the complainant M/s P.C. Jain Textiles Pvt. Ltd., Gurugram through its authorised person Sh. Rakesh Yadav had brought three complaints under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the Act) i.e. Complaint No.5996 of 2016, Complaint No.5995 of 2016 and Complaint No.6993 of 2016 against M/s In style Exports Pvt. Ltd., Gurugram through its Proprietor/Authorised Signatory Mr.Ashok Logani, almost on the similar allegations, which discussed in brief are that complainant company is engaged in manufacturing and export of ribbons, laces, tapes, fringes, embroidery, fabric, cords etc.; the accused had approached the complainant company for purchase of goods, which were accordingly dispatched to the accused - concern company; the complainant company had been raising its respective invoices in the amount for the goods supplied to the accused and used to maintain a running account of the accused. As per the statement of account, a sum of Rs.23,40,132 was outstanding against him.
3. As per the averments made in Complaint No.5996 of 2016, to discharge the said liability, the accused issued following cheques in favour of the complainant:
(a) Cheque No.013034 drawn on Allahabad Bank Ltd., Dated 30.1.2016 for Rs.4,00,000(Four Lakh Rupees only).
(b) Cheque No.013035 Drawn on Allahabad Bank Ltd., Dated 27.1.2016 for Rs.4,00,000/-(Four lakh Rupees only).
(c) Cheque No.013036 Allahabad Bank Ltd., Dated 5.2.2016 for Rs. 1,52,005/- (One Lakh Fifty Two Thousand Five Rupees only).
4. At the time of issuance of cheques, the accused had given an assurance to the complainant that on presentation, the cheques would be encashed. Accordingly, the complainant had presented the cheques for encashment but those were returned uncashed by banker of the accused with remarks "Exceeds Arrangement" on 19.2.2016. The complainant immediately brought such situation to the notice of the accused and the accused requested the complainant to present the cheques again. The complainant did so but the same situation was there and cheques were dishonoured by the banker of the accused and returned to the complainant vide returning memo dated 10.3.2016 and 11.3.2016 (Cheque No.013035) with remarks "Exceeds Arrangement". The complainant served a legal notice dated 28.3.2016 dispatched on 31.3.2016 through registered/speed post/courier at the last given address calling upon the accused to pay the cheques amount within 15 days of receipt of notice but accused failed to do so, giving rise to a cause of action to the complainant to bring complaint under the Act against the accused.
5. In terms of assertions made in Complaint No.5995 of 2016, to discharge the said liability, the accused issued following cheques in favour of the complainant:
(a) Cheque No.012908 Drawn on Allahabad Bank Ltd., Dated 28.1.2016 for Rs.4,33,547(Four Lakhs Thirty Three Thousand Five Hundred Forty Seven Rupees only).
(b) Cheque No.012909 Drawn on Allahabad Bank Ltd., Dated 2.2.2016 for Rs.l,51,125/-(One Lakh Fifty One Thousand One Hundred Twenty Five only).
(c) Cheque No.013033 Drawn on Allahabad Bank Ltd., Dated 3.2.2016 for Rs.4,00,000/- (Four Lakh Rupees only).
6. At the time of issuance of cheques, the accused had given an assurance to the complainant that on presentation, the cheques would be encashed. Accordingly, the complainant had presented the cheques for encashment but those were returned uncashed by banker of the accused with remarks "Exceeds Arrangement" on 19.2.2016. The complainant immediately brought such situation to the notice of the accused and accused requested the complainant to present the cheques again. The complainant did so but the same situation was ther
