Hardesh Kumar Singh and Another vs Kamal Auto Body Industries

J.P. Singh, J.—Hardesh Kumar Singh, Deputy Commissioner, Jammu, and functioning additionally as Chairman, Board of Administrators,

Jammu Co-operative Limited, Jammu, a Society registered under the Cooperative Societies Act, and Kapil Sharma, Deputy Registrar,

Agriculture, functioning additionally as General Manager, of the Society, facing prosecution u/s 138 of the Negotiable Instruments Act, 1881, have

approached this Court seeking quashing of criminal proceedings initiated on a complaint of M/s Kamal Auto Body Industries, Digiana, pending

before learned Sub-Registrar (Judicial Magistrate First Class), Jammu.

M/s Kamal Auto Body Industries, Digiana, Industrial Estate, Jammu, the complainant, filed a complaint u/s 138 of Negotiable Instruments Act,

1881, against the petitioners and one Ram Pal Sharma, Ex-General Manager of Jammu Co-operative Wholesale Limited, Jammu. It was alleged in

the complaint that there was no Board of Administrators of the Society and because of this, the Society was being controlled and managed by

Hardesh Kumar Singh, petitioner-1, who was responsible for each and every act of the management and for the conduct of the business of the

Society. Kapil Sharma, petitioner-2, is also stated to be equally responsible for the act done on behalf of the Society. With this prelude, the

complaint proceeds to say that Ram Pal Sharma, the ex-Ex-Manager of the Society, Incharge of and responsible to the Society for the conduct of

its business, issued a payees cheque bearing No. 1961476 dated 24-06-2004 for an amount of Rs. 1,87,000/- in favour of the complainant firm

for the amount stated to have been due to the complainant from the Society. This cheque, when deposited with the complainant's bankers, UCO

Bank, Digiana, was reported by the Society's bankers with the remarks ""funds insufficient"". This information of dishonour of the cheque was sent

through registered post, which was replied by the petitioners. No payment having been made within 15 days, the complainant alleges, amounted to

commission of an offence u/s 138 of the Negotiable Instruments Act, 1881.

Learned Sub-Registrar, Judicial Magistrate First Class, Jammu, recorded the statement of one Kamal Sagar Jain on 10-02-2005. He states in

his deposition that there was no Board of Administrators of the Society and the business of the Society was being transacted by petitioner-1 as

Chairman, and petitioner-2 as General Manager, and both these persons were equally responsible for the business of the Society:

On the basis of the statement of the complainant, learned Magistrate proceeded to record the following order on 10-02-2005:

The present complaint was transferred to this Court by learned CJM, Jammu, for disposal under law. Perused the office report. Let it be entered in

the relevant Register. In pursuance thereof, preliminary statement of the applicant was recorded be made part of the file. Perusal of the contents of

the complaint, documents annexed with the same, perusal of memo issued by the Bank reveals that cheque in question has been dishonoured for

the reason ""insufficient ""funds"". Complainant has commenced the proceedings u/s 138 of Negotiable Instruments Act on that basis. From the

contents of complaint, documents annexed with it prima facie commission of offence u/s 138 RPC is disclosed. Issue summons to the

respondents/accused persons to appear in the Court and answer the complaint. Let the summons be served through Incharge/SHOs, Police

Posts/Police Stations concerned.

Sd/-

Judicial Magistrate Sub Registrar,

Jammu.

Shri Abhinav Sharma, learned Counsel for the petitioners, besides urging that requisite averments had not been made by the complainant in the

complaint to justify issuance of process against the petitioners, raised a short submission based on second proviso appended to Section 141 of the

Negotiable Instruments Act, 1881. Shri Sharma adds that petitioner-1, an Indian Administrative Services Officer, while functioning as Deputy

Commissioner, Jammu, was given additional responsibility of the Chairman of Board of Administrators of Jammu Co-operative Wholesale Limited,

Super Bazar, Purani Mandi, Jammu, and petitioner-2, a State Government employee, functioning as Joint Registrar, Agriculture, had been given

additional responsibility of functioning as General Manager of the Society, and were holding their offices as such and were in the employment of

Central Government and State Government respectively, and in that view of the matter, were not liable for prosecution u/s 138 of the Negotiable

Instruments Act, 1881, as provided in Section 141 of the Act.

Shri R.K. Jain, learned Counsel for the complainant, referred to S.V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and Anr. reported

as 2005 (3) SC 486; Smt. Pritama Reddy and G.S. Shirish Vs. Charminar Co-operative Urban Bank Ltd. and Another, ; Sunil Sareen v. Govt. of

N.C.T. of Delhi and Anr. reported as 2000 Cri. L.J.; Prudential Engineers/Builders and Developers and Others Vs. Kuskoor Bharath Ram, ;

Rohit Chunubhai Mehta Vs. Gujarat State Fertilizer Co. Ltd., ; and Mohd. Isaq Gulsani Vs. J. Rajamouli and another, , to urge that the petitioners

were Incharge of the affairs of the Society and cannot escape the liability u/s 138 of the Negotiable Instruments Act, 1881.

I have considered the submissions of learned Counsel for the parties and gone through the provisions of Section 141 of the Negotiable

Instruments Act, 1881.

Before dealing with the plea raised by Shri Abhinav Sharma, projecting second proviso to Section 141 of the Act, barring the prosecution of the

petitioners, perusal of Section 141 becomes necessary. Section 141 reads thus:

Offences by companies. - (I) If the person committing an offence u/s 138 is a company, every person who, at the time the offence was

committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall

be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this Sub-section shall render any person liable to punishment if he proves that the offence was committed

without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. Provided further that where a person

is nominated as a Director of a Company by virtue of his holding any office or employment in the Central Government or State Government or a

financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for

prosecution under this Chapter.

(2) Notwithstanding anything contained in Sub-section (1), where any offence under this Act has been committed by a company and it is proved

that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager,

secretary or other officer of the company, such director, manager, secretary or other officer, shall also be deemed to be guilty of that offence and

shall be liable to be proceeded against and punished accordingly.

Explanation. - For the purposes of this section,-

(a) ""company"" means any body corporate and includes a firm or other association of individuals; and

(b) ""director"", in relation to a firm, means a partner in the firm.

A bare reading of the second proviso to Section 141 leaves no manner of doubt that prosecution of those, who are nominated as Directors of

the Companies by virtue of their holding any office or employment in the Central Government or State Government or a Financial Corporation,

owned or controlled by the Central Government or State Government, as the case may be, is prohibited.

Learned Counsel for the respondent/complainant had no material to dispute the plea of the petitioners that by virtue of their holding office and

being in the employment of Central Government and State Government respectively, petitioners-1 and 2 had been asked to hold the office of

Jammu Co-operative Wholesale Limited. Reply sent by the petitioners to the notice of the complainant, which forms part of the complaint,

specifically refers to the status and capacity of the petitioners as the nominees of the Government, and that they were not liable to prosecution.

Thus, in view of the admitted position as to the status and capacity of the petitioners as the nominees of the Government to the Jammu Co-

operative Wholesale Limited, no prosecution u/s 138 of the Negotiable Instruments Act, 1881, was permissible in view of the specific prohibition

for such prosecution contained in the second proviso appended to Section 141 of the Negotiable Instruments Act, 1881.

It comes out from the records that the learned Magistrate had just performed a ritual of issuing process against the petitioners, little realizing

that the initiation of proceedings under the criminal law would curtail the liberty of the citizens, which course was permissible only, if a prima facie

case was made out against those against whom such process was permissible under law. Prima facie case for initiation of criminal proceedings

would necessarily require disclosure of reasons justifying initiation of such proceedings. Disclosure of reasons would mean opening of mind and

spelling out of reasons, for mind may not be disclosed unless reasons were spelt out.

The order of the learned Magistrate does not meet these requirements. Merely saying that a prima facie case was made out would not satisfy

the requirements of law. Plea taken by the petitioners in their reply notice, which was part of the file of the learned Magistrate, had not been noted,

much less addressed to, by the learned Magistrate, while directing issuance of process against the petitioners. Had the learned Magistrate cared to

go through the file, the petitioners would have been saved from unnecessary harassment, which has occasioned to them because of the non-

application of mind and omission of learned Magistrate to refer to the provisions of Section 141 of the Negotiable Instruments Act, 1881,

protection whereof had been specifically claimed by the petitioners in their reply notice. The order of the learned Magistrate directing issuance of

process against the petitioners, thus, becomes unsustainable.

In view of what has been held by me in this petition, reference to other pleas raised by learned Counsel for the parties and to the judgments in

support thereof, may not be necessary.

The upshot of the above discussion is that prosecution against the petitioners was barred under second proviso to Section 141 of the

Negotiable Instruments Act, 1881, because of their being nominated functionaries of the Government to the Jammu Co-operative Wholesale

Limited, Super Bazar, Jammu.

This petition, therefore, succeeds and is, accordingly, allowed by quashing the proceedings launched by M/s Kamal Auto Body Industries,

Digiana, Jammu, against Hardesh Kumar Singh and Kapil Sharma.