Saturday 13 April 2013

Interest warrant is a cheque

 Advocate for the petitioner contended that interest warrant is a Bill of Exchange and every bill of exchange is not a cheque. It is difficult to accept the contention because the cheque is defined as a bill of exchange and bill of exchange is defined as aforesaid, and therefore if interest warrant is a bill of exchange, then the definition of the cheque applies to it and therefore provisions of Section 138 also apply where interest warrant is dishonoured.

Bombay High Court
Ashok Chaturvedi vs Dr. (Mrs.) Nirmala Jaywant Patil ... on 19 December, 2002
Equivalent citations: 2003 (2) ALD Cri 24, 2003 BomCR Cri

1. Heard advocate for the petitioner, respondent No. 1 in person and the learned Additional P.P. for the State.
2. Petitioner who is an accused under Section 138 of the Negotiable Instruments Act, has filed this petition for recalling the process issued by the Magistrate. The petitioner has approached the Magistrate for the said purpose, his prayer was rejected. He then moved the Sessions Court in Revision where also he failed and hence, this petition.
3. Following submissions were made by the counsel for the petitioner: Firstly, according to her the main accused in case under Section 138 of the Negotiable Instruments Act (hereinafter referred to as "the said Act") in the present case would be a Company, namely, Flex Industries Ltd. but since no notice was given to the Company as required by Section 138 of the said Act, no demand was made from the Company. The complaint is liable to be dismissed as in the absence of demand and notice and joinder of the Company, the accused could not be prosecuted. The second contention of the petitioner was that interest warrant is not a cheque as contemplated by Section 138 of the said Act and the Courts below erred in taking cognizance and ordering issue of process. Third contention was that the interest warrant could not be honoured by the bank not because of want of funds but because of misunderstanding between the said bank and its office at Delhi, that the complainant immediately offered to pay the said amount to the complainant. Two demand drafts were sent by the complainant and they were accepted and therefore no liability exists.
4. The respondent No. 1 complainant argued her own case and she contended relying upon the judgment of the Supreme Court that non-joinder of company as accused is not at all fatal, similarly not giving notice to the company is also not fatal because notice to the petitioner was given not in his individual capacity but as a Chairman and Managing Director of Flex Industries Ltd. According to her therefore this is a sufficient compliance.
5. Secondly, the respondent No. 1 - complainant contended that Section 138 of the said Act speaks of dishonour of cheque; "cheque" is defined in the said Act "as a Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise than on demand", and a "Bill of Exchange" is defined in Section 5 "as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument."
6. Thirdly, she contended that whether the Complainant had offered to pay the amount subsequent to the dishonour of the cheque is of no consequence and so-called misunderstanding between the bank to which the interest warrant was tendered for encashment and the bank at Delhi is not a defence consequence so far as liability and offence of the petitioner is concerned. Respondent No. 1 -complainant therefore contended that the petition be dismissed with costs.
7. So far as submission of the petitioner regarding non-applicability of the provisions of Section 138 of the said Act to the interest warrant is concerned, the same argument is required to be rejected outright because in Chapter XVII of the said Act regarding the penalty in case of dishonour of certain cheques is included in Section 138 and it says :
"Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid....."
8. The definition of the cheque is given in Section 6, it states that "cheque" "is a Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise than on demand", and Bill of Exchange is also defined in Section 5 as under :
"Bill of Exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument."
9. Advocate for the petitioner contended that interest warrant is a Bill of Exchange and every bill of exchange is not a cheque. It is difficult to accept the contention because the cheque is defined as a bill of exchange and bill of exchange is defined as aforesaid, and therefore if interest warrant is a bill of exchange, then the definition of the cheque applies to it and therefore provisions of Section 138 also apply where interest warrant is dishonoured.
10. It is true that Flex Industries Ltd. is not joined as accused in this complaint and notice was also not sent to the said company. However, in this regard there is clear judgment of the Supreme Court reported in 1999 (3) All MR 413, M/s Bilakchand Gyanchand Co. v. A. Chinnaswami where the original complainant approached the Supreme Court and therefore the original complainant was the appellant before the Supreme Court. Cheques were issued in favour of the appellant, they were signed by A. Chinnaswami Managing Director of Shakti Spinners Ltd. The cheques were dishonoured. Notice was sent to the said Chinnaswami. Thereafter complaint was filed. Chinnaswami applied for recalling of process. He was unsuccessful before the Magistrate. Petition was filed before the Bombay High Court. It was allowed and hence the original complainant moved the Supreme Court. Supreme Court held that:
"The High Court, erred in quashing the complaint. It is evident that proceedings were initiated by the appellant against A. Chinnaswami who happened to be the Managing Director of Shakti Spinners Ltd. The cheques in question which were dishonoured were signed by him. The process was issued by the judicial Magistrate in his name. We see no infirmity in the notice issued under Section 138 addressed to A. Chinnaswami, who was a signatory of the said cheques. The High Court, in our opinion, clearly fell in error in quashing the complaint."
The order of the High Court reported in 1997 ALL MR (Cri) 1309 was set aside and the complaint was restored to file. In the instant case the petitioner is the Chairman and Managing Director of Flex Industries Ltd. and there is no denial of that position. Interest Warrant was signed by him, notice was sent to him, interest warrant was presented to the bank and it came to be dishonoured. Therefore, following the observations of the judgment of the Supreme Court, it has to be held that there is no infirmity in the complaint in that regard.
11. The complainant also relied upon the judgment of the Supreme Court , Anil Hada v. Indian Acrylic Ltd. wherein
Supreme Court has held that even if it is held that:
"When a company, which committed the offence under Section 138 eludes from being prosecuted thereof, on account of complaint against it being dropped because of winding up proceedings ordered by Court, the Directors of that company can be prosecuted for that offence." The Supreme Court further held that:
"Provisions of Section 141 do not contain a condition that a prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the Company is sine qua non for convicting those persons. But if a Company is not prosecuted due to any legal snag or otherwise, the other prosecuted persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141."
12. Advocate for the petitioner relied upon the judgment of this Court reported in 2000(3) Mh.LJ. 372 = 2000(1) ALL MR 460, The Blind Relief Association and Ors. v. The State of Maharashtra and Ors. That case does not directly deal with the question raised by the petitioner i.e. non-joinder of company in a case under Section 138 of the said Act. The said judgment arises out of a consent terms filed. Its interpretation and consequences follow with reference to provisions of Civil Procedure Code Order 23, Rule 3. Therefore that judgment is of no help and particularly in view of the aforesaid two Supreme Court Judgment, it is also of no help.
13. Advocate for the petitioner also relied upon the judgment of Supreme Court , Sheoratan Agarwal and Anr.
v. State of Madhya Pradesh. In that case complaint was filed by the inspector of Food Supplies against the two petitioners who were Managing Director and Production Manager under the Essential Commodities Act and the other orders issued by the Government of Madhya Pradesh. The petitioners moved the Madhya Pradesh High Court for quashing the proceedings on the ground that they could not be prosecuted unless the company was prosecuted. High Court overruled the contention thereof. The petitioners went to the Supreme Court and thereafter dealt with the provisions of Sections of Essential Commodities Act and particularly Section 10. However, in that judgment also the Supreme Court has observed after considering the provisions of Section 10 :
"Any one or more or all of them (including in Sub-sections 1, 2 and 3) may be prosecuted and punished. The Company alone may be prosecuted. The person-in-charge only may be prosecuted. The conniving officer may individually be prosecuted. One, some or all may be prosecuted. There is no statutory compulsion that the person-in-charge or an officer of the Company may not be prosecuted unless he is ranged alongside the Company itself."
Then the Supreme Court has again further said that Section 10 does not lay down any condition that the person-in-charge or an officer of the company may not be separately prosecuted if the company itself is not prosecuted. However,, it is held that before the person in charge or officer of the company is held guilty in that capacity it must be established that there has been a contravention of the order by the Company.
14. It appears that the attention of the Supreme Court was drawn to the Judgment , State of Madras v. C. V.
Parekh. In that case there was no finding either by the Magistrate or a High Court that the company has contravened Clause 5 of the Iron and Steel (Control) Order. Nor there is any evidence and finding in that regard. However, thereafter also the Supreme Court observed that "The sentences underscored by us clearly show that what was sought to be emphasised was that there should be a finding that the contravention was by the Company before the accused could be convicted and not that the Company itself should have been prosecuted along with the accused. The Supreme Court therefore held that prosecutions against the two officers of the company were maintainable and nothing in Section 10 of the Essential Commodities Act bar such prosecution. This case clearly rules the contention raised by the advocate for the petitioner that this petition is maintainable.
15. The third contention of the petitioner was that they had offered money to the complainant and sent two demand drafts or that cheque came to be dishonoured not for want of sufficient funds but for want of proper instructions from Delhi branch, are also of no consequences, for all these reasons the following order is passed :
ORDER
Petition is dismissed with costs of Rs. 1,000/-.
Prayer for continuation of interim stay is rejected. If petitioner applies for exemption, the court will pass appropriate orders looking to the fact that petitioner is coming from Delhi. Certified copy expedited.
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