2022 (1) TMI 54 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - vicarious liability of the accused - The complaint would not disclose as to what is the status of the Indus Hospital, whether it is a Company or a Corporation. The complaint also would not disclose as to how the accused were connected with the said hospital, whether they were Directors, Managing Directors etc. - invocation of Section 141 and 142 of the NI Act - HELD THAT - The complaint was filed under Sections 138 and 142 of NI Act. The complaint would not disclose as to what is the status of the Indus Hospital, whether it is a Company or a Corporation. The complaint also would not disclose as to how the accused were connected with the said hospital, whether they were Directors, Managing Directors etc. The Indus Hospital was not shown as an accused. The complaint would not disclose how vicarious liability could be fastened to the petitioners herein. Considering the above judgment of the Hon ble Apex Court, if Indus Hospital is considered as a Company, it has to be arrayed as an accused. Without arraying it as an accused, the persons cited as A1 and A3 cannot be held liable without even stating as to how they are connected to the hospital. A perusal of the cheque would disclose that it was issued by Sri M. Madhusudhan Reddy, who was shown as A2, on behalf of Indus Hospitals. This petition is filed by only Accused Nos.1 and 3, who are not signatories to the said cheques which are returned / dishonoured. As per Section 138 of the NI Act, the emphasis has been laid on the fact that the cheque has to be drawn by a person on the account maintained by him. He must have issued the cheque in discharge of any debt or other liability. As the petitioners are not the persons, who had drawn the cheque and they were not shown as the persons who were maintaining the account in the bank and that they had issued the subject cheques in discharge of their liability, continuation of the proceedings against them is considered as an abuse of process of law and as such liable to be quashed. Petition allowed.

Summary

Issues:
Petition to quash proceedings under Section 482 Cr.P.C. in a criminal case involving Sections 138 and 142 of the Negotiable Instruments Act.

Analysis:
The complaint was filed against the petitioners under Sections 138 and 142 of the NI Act, alleging dishonored cheques related to the purchase of medical equipment. The complainant, a supplier, accused A1 and A3, the Management of Indus Hospitals, of non-payment after issuing post-dated cheques. The petitioners argued that they were not directly involved in the transaction and were not the drawers of the cheques. They contended that the complaint did not establish their vicarious liability as there was no mention of their connection to the hospital or their role in the transaction. Citing the judgment in Aneeta Hada case, the court emphasized the necessity of arraigning the company as an accused for vicarious liability to apply. As Indus Hospital was not named as an accused, the court found the proceedings against A1 and A3 unsustainable due to lack of evidence connecting them to the alleged offense.

The court highlighted that under Section 138 of the NI Act, the drawer of a dishonored cheque must be the person maintaining the account and issuing the cheque in discharge of a liability. In this case, the cheques were issued by a different individual on behalf of Indus Hospitals, not by the petitioners. Since A1 and A3 were not signatories of the cheques and did not maintain the account, continuing the proceedings against them was deemed an abuse of legal process. Therefore, the court allowed the petition, quashing the proceedings against A1 and A3 in the criminal case before the XI Additional Chief Metropolitan Magistrate, Secunderabad.

This judgment serves as a precedent emphasizing the importance of establishing a direct link between accused individuals and the alleged offense, especially in cases involving vicarious liability. It underscores the need for clarity in complaints to avoid undue prosecution of parties not directly responsible for the actions in question. The court's decision to quash the proceedings against the petitioners highlights the significance of adhering to legal principles and ensuring due process in criminal cases involving financial transactions and liability issues under the Negotiable Instruments Act.