2019 (10) TMI 361 - HC - Indian Laws

Dishonor of Cheques - offence punishable under Section 138 of the said Act - bailable warrant against the applicant - applicant has signed the cheques and he is working in the capacity of managing director - liability against the company - HELD THAT - In the present case, the applicant tried to place reliance on the ratio laid down by the Delhi High Court in the case of DSC Ltd. (supra) however, in that case the company was arraigned as party Respondent and Managing Director was not made separate party. In the fact of that case the Delhi High Court held that, on said technical defect complaint cannot be quashed. It is true that in the present case the subject cheque is signed by the applicant, however in the capacity of a Managing Director of the NHA Investment Consultancy Pvt. Ltd. Therefore, it is imperative on the part of the complainant to implead the Company as party Respondent. T Once the company is held to be essential party, and that arraigning of a company as an accused is imperative for prosecution under Section 141 of the NI Act. Unless the company is arraigned as an accused the order of issuance of process against the applicant cannot legally sustain in view of the requirement of Section 138 of the NI Act. Considering that by allowing the present application, this Court is quashing the process issued against the present applicant for not joining the company, the interests of justice require that liberty be given to the first Respondent to move before the Court of competent jurisdiction for appropriate relief with a application under Section 14 of the Limitation Act seeking exclusion of the period during which he was prosecuting this case - Application allowed.

Issues Involved:
1. Quashing of the order of issuance of process.
2. Quashing of the order of bailable warrant.
3. Compliance with Section 138 of the Negotiable Instruments Act, 1881.
4. Vicarious liability under Section 141 of the Negotiable Instruments Act, 1881.
5. Service of summons.

Detailed Analysis:

1. Quashing of the Order of Issuance of Process:
The applicant sought to quash the order dated 15/2/2018 issued by the learned Metropolitan Magistrate, 33rd Court, Ballard Pier, Mumbai, under Section 138 of the Negotiable Instruments Act, 1881. The applicant argued that the demand notice for the dishonored cheques was not issued to the drawer, NHA Investment Consultancy Pvt. Ltd., and thus the order of issuance of process was bad in law. The court held that the prosecution launched against the applicant without joining the company as an accused is not maintainable. The court relied on the precedent set in Aneeta Hada v. Godfather Travels and Trous (Pvt.) Ltd., stating that for maintaining the prosecution under Section 141 of the NI Act, arraigning the company as an accused is imperative.

2. Quashing of the Order of Bailable Warrant:
The applicant also sought to quash the bailable warrant issued on 06.04.2018. The court noted that the applicant had appeared before the Magistrate on the scheduled date through his advocate and filed applications for adjournment and exemption. The court found that the issuance of the bailable warrant was unwarranted since the applicant had appeared and sought adjournment due to non-receipt of the complaint copy with the summons.

3. Compliance with Section 138 of the Negotiable Instruments Act, 1881:
The applicant contended that the complaint did not satisfy the basic provisions of Section 138 of the NI Act, as the company, which was the drawer of the cheques, was not made a party to the complaint. The court reiterated that Section 138 fastens primary responsibility on the drawer of the cheque, and unless the drawer is arraigned as an accused, others cannot be prosecuted under this section. The court emphasized that the prosecution against the applicant would fail on this ground alone.

4. Vicarious Liability under Section 141 of the Negotiable Instruments Act, 1881:
The court discussed the concept of vicarious liability under Section 141 of the NI Act, which deals with the liability of directors and partners. It was held that the commission of an offense by a company is a condition precedent to attract vicarious liability of others. The court cited the judgment in Philip J. v. Ashapura Minechem Ltd. and Ors., which followed the ruling in Aneeta Hada, asserting that arraigning the company as an accused is mandatory for prosecuting its directors or partners.

5. Service of Summons:
The applicant claimed that the summons received did not include a copy of the complaint, which is required by law. The court acknowledged this procedural lapse and noted that the applicant had appeared before the court on the first date of hearing and filed applications highlighting this issue. The court found that the issuance of a bailable warrant in such circumstances was not justified.

Conclusion:
The court allowed the Criminal Application, quashing the process issued against the applicant by the order dated 15.02.2018, as well as the bailable warrant dated 06.04.2018. The court granted liberty to the first Respondent to move before the competent court for appropriate relief, with an application under Section 14 of the Limitation Act to exclude the period during which this case was prosecuted. The rule was made absolute on these terms, and the Criminal Application was disposed of accordingly.

← Previous Next →