1998 (4) TMI 429 - HC - Companies Law

Issues Involved:
1. Sanction to prosecute under Section 197 of the Criminal Procedure Code, 1973.
2. Validity of complaints under Section 138 of the Negotiable Instruments Act, 1881.
3. Competency of the complainant to file the complaints.
4. Nature of cheques issued as security and their presentation.
5. Non-production of the memorandum of understanding and its impact on the case.

Issue-Wise Detailed Analysis:

1. Sanction to Prosecute under Section 197 of the Criminal Procedure Code, 1973:
The court examined whether the employees of MMTC, a government-owned company, required sanction from the government to be prosecuted. The employees argued that they were public servants under Section 21 of the Indian Penal Code, 1860, and thus required sanction. It was found that accused Nos. 2 to 10 could be removed by the managing director of the company, and hence did not require government sanction. However, the director (eleventh accused) was appointed by the President of India, leading to a debate on whether he required sanction. The court concluded that the director could also be removed by an ordinary resolution of the board of directors, thus not requiring sanction under Section 197. Consequently, the order discharging the eleventh accused was set aside, and the petitions of other employees were dismissed.

2. Validity of Complaints under Section 138 of the Negotiable Instruments Act, 1881:
The court addressed whether Section 258 of the Criminal Procedure Code, 1973, which pertains to stopping proceedings in summons cases, applied to private complaints under Section 138 of the Negotiable Instruments Act. The magistrate had erroneously discharged the accused under Section 258, despite it not being applicable to private complaints. The court emphasized that the allegations in the complaints clearly constituted an offense under Section 138, and the magistrate's decision to stop proceedings was a manifest illegality.

3. Competency of the Complainant to File the Complaints:
The court examined the issue of whether Mr. Lakshman Goyal, who filed the complaints on behalf of MMTC, was authorized to do so. Evidence showed that Mr. Goyal was empowered to file the complaints, and later, Mr. Sampath Kumar was authorized to continue the prosecution. The court concluded that the complaints were validly filed by an authorized representative of MMTC, and the magistrate's finding to the contrary was incorrect.

4. Nature of Cheques Issued as Security and Their Presentation:
The court considered whether the cheques issued by MCPL were meant only as security and if their presentation for encashment was contrary to the agreement. The evidence indicated that the cheques were issued as security but were presented due to MCPL's failure to comply with the conditions of exporting the finished products within the prescribed time. The court found that the presentation of cheques was justified, and the magistrate's conclusion that Section 138 was not attracted was erroneous.

5. Non-Production of the Memorandum of Understanding:
The court addressed the magistrate's criticism of MMTC for not producing the memorandum of understanding and its addendum. The court noted that both parties had copies of these documents, and the accused could have presented them if they contradicted MMTC's claims. The court found the magistrate's criticism unfounded and held that the non-production of these documents did not undermine the prosecution's case.

Conclusion:
The court set aside the order of discharge passed by the learned VIIth Metropolitan Magistrate, George Town, Chennai, in Crl. M.Ps. Nos. 2377 to 2380 in C.C. No. 3491 to 3494 of 1995. The complaints were restored to file, and the trial court was directed to proceed with the trial in accordance with the provisions of the Code of Criminal Procedure and dispose of the cases on their merits. The court also allowed Crl. R.C. No. 450 of 1996, setting aside the discharge of the eleventh accused, and dismissed Crl. R.C. Nos. 578 and 579 of 1996. The parties were directed to appear before the trial court on June 8, 1998.

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