Ridhima Jain v. M/S Interarch Building Products Pvt. Ltd.

Delhi High Court · 03 Mar 2023 · 2023:DHC:1598

Amit Mahajan

CRL.M.C. 197/2022

2023:DHC:1598

criminal petition_allowed Significant

AI Summary

The Delhi High Court quashed the complaint against a non-signatory and non-partner petitioner under Sections 138 and 141 of the Negotiable Instruments Act for cheque dishonour, holding that mere association does not attract liability.

Full Text

Neutral Citation Number is 2023/DHC/001598

CRL.M.C. 197/2022
HIGH COURT OF DELHI

JUDGMENT

delivered on: 03.03.2023

CRL.M.C. 197/2022 & CRL.M.A. 775/2022
RIDHIMA JAIN ..... Petitioner

versus

M/S INTERARCH BUILDING PRODUCTS PVT. LTD. ..... Respondent
Advocates who appeared in this case:
For the Petitioner :Mr. Sameer Chandra and Mr. Yash Kirti
Kumar Bharti, Advs. For the Respondent : Ms. Charu Sangwan, Adv.

CORAM

HON’BLE MR. JUSTICE AMIT MAHAJAN

JUDGMENT

1. The present petition is filed seeking quashing of the order dated 31.03.2021, passed by the learned MM (NI Act, Patiala House Courts, New Delhi), in Criminal Complaint bearing number 10567/2020, titled as M/s Interarch Building Products Pvt. Ltd. v. Swift Construction Expert & Ors., taking cognizance for an offence under Section 138 of the Negotiable Instrument Act (hereinafter referred as “NI Act”).

2. The petitioner also seeks quashing of the complaint number 10567/ 2020.

3. The complaint was filed by the respondent alleging that M/s Swift Construction Expert (hereinafter referred as “accused firm”), a partnership firm had approached Respondent No. 1, in January, 2019, for design, engineering, fabrication, supply, and erection of preengineered steel building for its showroom and workshop project in Hardoi, Uttar Pradesh.

4. Pursuant to the acceptance of the proposal, the revised purchase order dated 10.05.2019 was issued and accepted after which further bills and invoices were also raised by the complainant on 18.05.2019 for a total sum of Rs.1,24,19,840/-. It is alleged that after sending numerous reminders to the accused company, on 23.05.2019, the authorised representatives of the accused company had visited the factory of the complainant in-order to check the material as prepared by the complainant and were satisfied with the work done by the complainant and the same was also mentioned in the minutes of meeting which were shared with the accused company. After numerous reminders and follow ups with the accused company, the accused no. 2 (partner), on 07.06.2019 agreed for releasing part payment for their debt and released an amount of Rs. 50,00,000/- through RTGS and towards the balance payment of Rs. 74,19,840/- the complainant was asked to present two out of the three post-dated cheques given earlier, amounting to a sum of Rs 25,00,000/- (Rupees Twenty Five Lakhs Only) bearing cheque NO. 025212 and Rs. 36,00,000/- (Rupees Thirty Six Lakhs Only) bearing cheque no. 025213, amounting to a total of Rs. 61,00,000/-(Sixty One Lakhs Only) as part payment towards their outstanding liability. Both cheques were dated 02.09.2020 were retuned by return memo dated 04.09.2020. On dishonour of the said cheques, the impugned complaint was filed before the learned Magistrate. In the complaint, it was averred that the accused firm is working through Mr. Gunjan Jain and Ms. Ridhima Jain (petitioner herein), who were shown as Accused No. 2 and 3 respectively.

5. In relation to the role of the petitioner (Accused No. 3), it is stated as under:

“24. That the Accused no. 1, Accused no.2 and Accused no.3 failed to complete its part of the promise and honour its commitments of payment of its legal and legitimate dues towards Complainant. That the Accused have issued cheques without having the intention to pay and fully knowing that it will not be honoured have devoid the Complainant of its rightful money. 25. That the Accused no. 1, Accused No. 2 and Accused no.3 were very well aware that the above mentioned cheques will not be honoured and with malafide intention and ulterior motives to defraud and cheat the Complainant issued the cheques favour of the Complainant. That the Complainant trusted all the Accused that the they will come with their promise of making payment of all its legally arising dues towards the Complainant, however, the Accused no. 1. Accused no.2 and Accused no.3 asked the Complainant to deposit the said cheques fully knowing that the said cheques would not be honoured by the bank upon presentation thereby misleading the Complainant. 26. That even after repeated reminders all the Accused herein did not pay the amount legally due to the Complainant and tactfully delayed the payment of the amount over and over again. That the Accused no. 1, Accused no.2 and Accused no.3 herein have failed to honour their commitments of payment of their legal and legitimate dues towards the Complainant. 27. That thereafter the Complainant herein was constrained to send a legal notice dated 29.09.2020 addressed to Accused no. 1, Accused no.2 and Accused no.3 respectively, herein, calling upon them to make payment of a sum of Rs. 61,00,000/- (Rupees sixty-one lakhs only) with interest @18% p.a. due and payable to the Complainant in respect of cheque bearing no. 025212 dated

02.09.2020 and cheque bearing no. 025213 dated 02.09.2020 along with legal cost. True Copy of the legal notice dated 29.09.2020 sent from the Complainant to all the Accused is annexed in the list of documents and marked as Exhibit CW-__.

28. That the said legal notice was duly delivered to the Accused no. 1, Accused no. 2 and Accused no.3 on 05.10.2020 and the Accused no. 1, Accused no. 2 and Accused no.3 have failed to make payment of their legal and legitimate dues even after receipt of the said legal notice. Original postal receipts along with the tracking record is annexed in the list of documents and marked as Exhibit CW- ____(Colly).

29. That the Accused no. 1, Accused no,2 and Accused no.3 herein replied to the said legal notice of the Complainant through their Counsel vide reply dated 21.10.2020. It is most respectfully stated that the Accused no. 1, Accused no.2 and Accused no.3 in its reply to the legal notice have failed to admit to their liability of Rs. 61,00,000/- for which the Accused no. 1 had issued two cheques bearing no. 025212 and 025213 in favour of the Complainant. True copy of the Reply to the Legal Notice dated 21.10.2020 is annexed in the list of documents and marked as Exhibit CW- ___.

30. That it now appears that the intention of all the Accused all throughout was dishonest and they intentionally and purposely handed over the cheques, which they never intended to honour.”

6. Learned counsel for the petitioner submits that the petitioner, Ridhima Jain, is neither the signatory of the impugned cheques in question nor is she the partner in the accused firm. The account from which cheques were issued was not a joint account. He submits that the petitioner only happens to be the wife of the Accused No. 2, who is running the accused firm. He submits that the petitioner cannot be made accused and liable for the dishonour of cheque only for the reason that she used to accompany her husband on few occasions.

7. He submits that in terms of Section 138 of the Negotiable Instrument Act, the person who is not signatory to the cheque cannot be held liable for its dishonour. He further submits that even in terms of Section 141 of the Negotiable Instrument Act, it is only the person incharge and responsible for the conduct of the business of the company who shall be deemed to be guilty of the offence and is liable to be proceeded against.

8. Learned counsel for the respondent submits that the arguments raised are matter of trial and should be addressed before the learned Trial Court. He submits that the petitioner has actively participated in the execution of the purchase/works order, communicated with the respondent company through e-mails and acted on behalf of the accused firm.

9. He further denies the fact that the petitioner is not a partner in the accused firm and in this regard relies upon the impugned order which records that, the learned Trial Court on a perusal of the record, had noted that the petitioner is a partner in the accused firm. He further submits that the petitioner, having actively participate in the execution of the purchase/work order, was also responsible for the conduct of the business of the firm. Conclusion

10. The Hon'ble Supreme Court in the case of Alka Khandu Ahvad v. Amar Syamprasad Mishra and Anr. in Criminal Appeal No. 258 of 2021 has set out preconditions for a person to be prosecuted under Section 138 of the Negotiable Instruments Act. It was held as under:

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“7. On a fair reading of Section 138 of the NI Act, before a person can be prosecuted, the following conditions are required to be satisfied:

i) that the cheque is drawn by a person and on an account maintained by him with a banker; ii) for the 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; and iii) the said cheque is returned by the bank unpaid, either because of the amount of money standing to the credit; of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account. Therefore, a person who is the Signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned By the bank unpaid, such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than aperson who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.”

11. Section 141 of the NI Act deals with offences by the companies. It provides that if an offence has been committed by a company, then every person, who at the time when the offence was committed, was In- Charge of and was responsible to the company in the conduct of the business, is liable to be proceeded against and punished accordingly. Issue with regard to holding any person to be vicariously liable for an offence under Section 138 of the NI Act, has been subject matter of numerous cases dealt by the Hon’ble Apex Court. It has been held that the complainants unnecessarily implead all the Directors of the accused company irrespective of whether they were actually involved or responsible for the commission of the alleged offence. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla: (2007) 4 SCC 70, it was observed as under:

“9. Requirements of law for proceeding against the

Directors of the Company for their purported

constructive liability came up for consideration in

this case before a Division Bench of this Court,

wherein the following questions were posed:

“(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfils the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company.

(b) Whether a Director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary.

(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and/or the Managing Directors or Joint Managing Director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against. 16. Section 141 of the Act does not say that a Director of a company shall automatically be vicariously liable for commission of an offence on behalf of the Company. What is necessary is that sufficient averments should be made to show that the person who is sought to be proceeded against on the premise of his being vicariously liable for commission of an offence by the Company must be in charge and shall also be responsible to the Company for the conduct of its business.”

12. It is, thus, settled that the complainant has to make specific averments as are required under the law in order to hold the accused vicariously responsible for the offence.

13. This Court in the case of Sudeep Jain v. ECE Industries Ltd.: 2013 SCC OnLine Del 1804, with a view to ensure that the provision is not misused, has also laid down certain guidelines for the Magistrates dealing with the complaints under Section 138, read with Section 141 of the NI Act. It was held as under:

“10. With a view to ensure that the Metropolitan

Magistrates dealing with the complaint cases filed

under Section 138 r/w Section 141 of the Negotiable

Instruments Act have a clear and complete picture of

the persons arrayed by the complainant so as to hold

them vicariously liable for the commission of the

offence by the accused company, I am inclined to

direct that the Magistrates must seek copies of Form-

32 from the complainant to prima facie satisfy the

Court as to who were the directors of the accused

company at the time of commission of the alleged

offence and on the date of filing of the complaint case.

In addition to the above, the Magistrates must also

seek information as given in the following table

which is to be annexed by the Complainant on a

separate sheet accompanying the complaint:-

a. Name of the accused Company;

b. Particulars of the dishonoured cheque/cheques; • Person/Company in whose favour the cheque/cheques were issued • Drawer of the cheque/cheques • Date of issuance of cheque/cheques • Name of the drawer bank, its location • Name of the drawee bank, its location

• Cheque No./Nos. • Signatory of the cheque/cheques c. Reasons due to which the cheque/cheques were dishonoured; d. Name and Designation of the persons sought to be vicariously liable for the commission of the offence by the accused Company and their exact role as to how and in what manner they were responsible for the commission of the alleged offence; e. Particulars of the legal notice and status of its service; f. Particulars of reply to the legal notice, if any.”

14. Therefore, in order to make a person vicariously liable for an offence committed by company under Section 138 of the NI Act, the first and foremost pre-condition is that the said person should either be a signatory of the cheque or should be holding a position in the company and should also be responsible for the conduct of the business of the company while holding such designation. The complainant also has to plead the exact role and the manner by which the said person is alleged to be responsible for the commission of the alleged offence.

15. The petitioner, along with the present petition, has filed the Deed of Admission and Retirement dated 17.05.2017 as well as the registration certificate of M/s Swift Construction Expert (partnership), which clearly reflect that the partnership was formed with Mr. Gunjan Jain and Mrs. Saroj Jain. The said documents have not been denied by the respondent in reply filed before this Court. Therefore, this Court has no reason to doubt the veracity of the said document which clearly show that the petitioner is not a partner in the said firm.

16. The cheques were admittedly issued by M/s Swift Construction Expert and are signed by the authorised signatory. It is not disputed that the Petitioner is not an authorised signatory. The cheques were also stated to have been handed over by Mr. Gunjan Jain. The only allegation levelled against the petitioner is that she had participated in the negotiations along with Mr. Gunjan Jain and was also responsible for conduct of the business.

17. The only averment in the complaint is that the accused company was working through the petitioner (Ridhima Jain). It is, however, not mentioned that in what capacity, the petitioner was working in the said company (partnership). As noted above, the petitioner is neither the partner nor is alleged to be an employee of the partnership responsible for the conduct of the business of the said partnership firm.

18. The petitioner is, admittedly, the wife of Mr. Gunjan Jain, who is the partner in the accused firm, M/s Swift Construction Expert. There is, however, no manner of doubt that on the date when the alleged offence was committed by the company, the petitioner was not a partner and had nothing to do with the affairs of the partnership firm.

19. The Hon’ble Apex Court, in somewhat similar circumstances, where the petition was filed by the wife of the signatory of the dishonoured cheque, in Alka Khandu Avhad v. Amar Syamprasad Mishra: (2021) 4 SCC 675 has held as under:

“8. We have heard the learned counsel appearing on behalf of the respective parties at length, considered material on record and also considered

the averments and allegations in the complaint. It emerges from the record that the dishonoured cheque was issued by original Accused 1 - husband of the appellant. It was drawn from the bank account of original accused 1. The dishonoured cheque was signed by original accused 1. Therefore, the dishonoured cheque was signed by original accused 1 and it was drawn on the bank account of original accused 1. The appellant herein-original accused 2 is neither the signatory to the cheque nor the dishonoured cheque was drawn from her bank account. That the account in question was not a joint account. In the light of the aforesaid facts, it is required to be considered whether the appellant herein-original accused 2 can be prosecuted for the offence punishable under Section 138 read with Section 141 of the NI Act?

9. On a fair reading of Section 138 of the NI Act, before a person can be prosecuted, the following conditions are required to be satisfied:

9.1. That the cheque is drawn by a person and on an account maintained by him with a banker.

9.2. For the 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; and

9.3. The said cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account.

10. Therefore, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.

11. Now, so far as the case on behalf of the original complainant that the appellant hereinoriginal accused 2 can be convicted with the aid of Section 141 of the NI Act is concerned, the aforesaid has no substance.

12. Section 141 of the NI Act is relating to the offence by companies and it cannot be made applicable to the individuals. The learned counsel appearing on behalf of the original complainant has submitted that “company” means any body corporate and includes, a firm or other association of individuals and therefore in case of a joint liability of two or more persons it will fall within “other association of individuals” and therefore with the aid of Section 141 of the NI Act, the appellant who is jointly liable to pay the debt, can be prosecuted. The aforesaid cannot be accepted. Two private individuals cannot be said to be “other association of individuals”. Therefore, there is no question of invoking Section 141 of the NI Act against the appellant, as the liability is the individual liability (may be a joint liabilities), but cannot be said to be the offence committed by a company or by it corporate or firm or other associations of individuals. The appellant herein is neither a Director nor a partner in any firm who has issued the cheque. Therefore, even the appellant cannot be convicted with the aid of Section 141 of the NI Act. Therefore, the High Court has committed a grave error in not quashing the complaint against the appellant for the offence punishable under Section 138 read with Section 141 of the NI Act. The criminal complaint filed against the appellant for the offence punishable under Section 138 read with Section 141 of the NI Act, therefore, can be said to be abuse of process of law and therefore the same is required to be quashed and set aside.

13. In view of the above and for the reasons stated above, the present appeal succeeds. The impugned judgment and order dated 21-8-2019 passed by the High Court in Alka Khandu Avhad v. Amar Syamprasad Mishra [Alka Khandu Avhad v. Amar Syamprasad Mishra, 2019 SCC OnLine Bom 1630] refusing to quash the criminal complaint against the appellant for the offence punishable under Section 138 read with Section 141 of the NI Act is hereby quashed and set aside. The complaint case pending in the Court of the learned Metropolitan Magistrate filed by Respondent 1-original complainant being CC No. 2802/SS/2016 is hereby quashed and set aside. The appeal is allowed accordingly.”

20. This Court is conscious of the fact that the High Court is not to conduct a mini trial by considering the defence of the accused or holding an inquiry into the merits of the matter at hand. However, if, on the face of the documents which are beyond suspicion or doubt, the accusations against the petitioner are found to be frivolous, in order to prevent the injustice and abuse of the process of law, it is incumbent that appropriate relief is granted by exercising power under Section 482 of the Cr.P.C.

21. From the record, it is evident that:

(I) no allegation has been made against the petitioner that the petitioner is the person responsible for the conduct of the business of the accused company. Mere Participation in the business is not to be construed as responsible for the conduct of the business.

(II) Petitioner is the wife of the partner of the accused company.

(III) A mere association of a person with the accused will not make the person vicariously liable for any act of the accused.

(IV) It is not denied that the petitioner is neither the partner in the accused company nor is the signatory of cheque.

22. It is a settled law that the powers of quashing should be used sparingly, and where the factual matrix in a complaint are laid down clearly and not in a routine manner where bald and unspecified averments are made against the accused persons, the complaint ought not to be quashed. However, where ingredients of an offence are lacking against an accused, it is the duty of the Court to discharge such accused. Holding a Trial against the petitioner under Section 138 read with Section 141, is utmost abuse of the process of law and the Learned Trial Court has passed the summoning order without any application of mind. There was no material on record or any averment made in the complaint for the Ld. Magistrate to record the following: “Perusal of the record shows that accused no.1 is a partnership firm and accused no. 2 and 3 are the partners of accused NO. 1….”

23. In view of the above, the present petition is allowed and the impugned order dated 31.03.2021 in so far as it relates to petitioner is set aside and complaint number 10567/2020, in relation to the petitioner is quashed. AMIT MAHAJAN, J MARCH 3, 2023 “SS” / RS

Ridhima Jain v. M/S Interarch Building Products Pvt. Ltd.

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