JKM GLOBAL SERVICES LLP
2023-Mar-10
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.886 OF 2022
Lyka Labs Limited & Anr. … Applicants
V/s.
The State of Maharashtra & Anr. … Respondents
WITH WRIT PETITION NO.201 OF 2022
Md. Shoaib & Anr. … Petitioners
V/s.
The State of Maharashtra & Anr. … Respondents
WITH WRIT PETITION NO.1250 OF 202
Devendra Dang … Petitioner
V/s.
The State of Maharashtra & Anr. … Respondents
WITH CRIMINAL APPLICATION NO.240 OF 2021
Venugopal N. Dhoot … Applicant
V/s.
The State of Maharashtra & Anr. … Respondents
WITH WRIT PETITION NO.4128 OF 2021
Shadab Khan … Petitioner
V/s.
The State of Maharashtra & Anr. … Respondents
WITH WRIT PETITION 2021 & connected-Final.doc
WRIT PETITION NO.2075 OF 2022
Rajiv Kantilal Gogri & Anr. … Petitioners
V/s.
Siddharth Mehta & Anr. … Respondents
WITH WRIT PETITION NO.3443 OF 2022
K. Raghavendra Rao … Petitioner
V/s.
The State of Maharashtra & Anr. … Respondents
WITH CRIMINAL APPLICATION NO.967 OF 2022
Prithviraj Sayajirao Deshmukh & Ors. … Applicants
V/s.
Shri Gurudatta Sugars Marketing Pvt. Ltd. & Anr. … Respondents
WITH CRIMINAL APPLICATION NO.1205 OF 2022
Lyka Labs Limited & Ors. … Applicants
V/s.
The State of Maharashtra & Anr. … Respondents
WITH CRIMINAL APPLICATION NO.1208 OF 202
Lyka Labs Limited … Applicant
V/s.
The State of Maharashtra & Anr. … Respondents
WITH CRIMINAL APPLICATION NO.1207 OF 2022
Lyka Labs Limited … Applicant
V/s.
The State of Maharashtra & Anr. … Respondents
wp4128-2021 & connected-Final.doc
WITH WRIT PETITION NO.2644 OF 2022
Kaluvoy Sreenivasulu Reddy … Petitioner
V/s.
The State of Maharashtra & Anr. … Respondents
WITH WRIT PETITION NO.4455 OF 2022
Tridhaatu Asset Holdings LLP & Ors. … Petitioners
V/s.
Ramkrishnan Subramanian & Anr. … Respondents
WITH WRIT PETITION NO.4576 OF 2022
Nikhil P. Thampi & Anr. … Petitioners
V/s.
The State of Maharashtra & Anr. … Respondents
Mr. Aabad Ponda, Senior Advocate with Mr. Bhomesh Bellam, Mr. Karma Vivan i/by Mr. Jugal Kanani for the applicant in APL/1205/2022, 1207/2022, 1208/2022 & 886/2022. Mr. Jatin P. Shah with Ms. Snehankita M. Munj & Ms. Shraddha Kamble for respondent no.2 in APL/1205/ 2022, 1207/2022 & APL/886/2022. Mr. Atal Bihari Dubey with Mr. Arvind Tiwari for the petitioner in WP/1250/2022. Mr. Kunal Dalal for respondent no.1 in WP/2075/2022. Mr. Niranjan Mundargi with Ms. Keral Mehta, Ms. Anisha Nair, and Mr. Khalid Kazi i/by Vis Legis Law Practice for the petitioner in WP/2644/2022. Mr. Rajesh Kanojia with Ms. Nikita Singh i/by Res Juris for respondent no.2 in WP/2644/2022. 3 wp4128-2021 & connected-Final.doc Mr. Sukrut Mhatre i/by Jyotirmai Deshmukh for the petitioner in WP/201/2022 & WP/4128/2022. Mr. Maniram R. Gaud for the petitioner in WP/2075/2022. Ms. Priya Rita i/by Disha Karambar & Associates for respondent no.2 in WP/201/2022 & WP/1250/2022. Mr. Niranjan Mundargi with Mr. veerdhawal Deshmukh i/by Mr. Naved Askari for the petitioner in WP/3443/2022. Ms. Y.N. Katpitia with Ms. R.B. Mrolia i/by Kry Legal for respondent no.2 in WP/3443/2022. Mr. Ansh Karnawat with Mr. Paras Yadav and Mr. Vivek Babar i/by Ruturaj Bankar for the applicants in APL/967/2022. Mr. Sharan Jagtiani, Senior Advocate with Mr. Gautam Ankhad, Mr. Vishal Narichania, Mr. Tushar Gujjar, Mr. Deepak Singh, and Briti Machdani i/by SL Partners for respondent no.2 in WP/4128/2022. Ms. Jaldhara Shah with M. Shrinidhi i/by Bharucha & Partners for respondent no.1 in APL/967/2022. Mr. Aabad Ponda, Senior Advocate with Mr. Pulkitesh Dutt Tiwari and Bency Ramkrishnan i/by Akash Menon for applicant in APL/240/2021. Mr. Sandeep Kumar Singh i/by SKS Juris for respondent no.2 in APL/240/2021. Ms. Mahalaxmi Ganpathy with Ms. Sayee Sawant and Ms. Savani Vaze for the petitioner in WP/4576/2022. Mr. Rishi Bhuta with Mr. Suraj Iyer, Mani Thevar, Ms. Kavita Sharma, Ms. Ankita Bamboli, Mr. Prateek Dutta, Ms. Saakshi Jha, Mr. Aashish Dubey, Mr. Ujjwal Gandhi, Mr. Anurag Ghag and Mr. K.R. Shah i/by Ganesh Co. for the petitioner in WP/4455/2022. Mr. A.R. Patil, APP for the State. 4 wp4128-2021 & connected-Final.doc
CORAM : AMIT BORKAR, J.
RESERVED ON : DECEMBER 16, 2022
PRONOUNCED ON : MARCH 8, 202
JUDGMENT:
1. This is a batch of matters before me wherein the same common question of law arises for decision. Accordingly, I propose (also as has been agreed to by all the learned counsel appearing for the parties) to decide only the principle question of law posed for decision and leave the individual cases to be decided accordingly. Hence, I am relieved of the need of noticing facts of individual cases. (i) Whether the signatory of the cheque, authorized by the "Company", is the “drawer" and whether such signatory could be directed to pay interim compensation in terms of section 143A of the Negotiable Instruments Act, 1881 (hereafter “NI Act”, for short) living aside the company." (ii) Whether a deposit of a minimum sum of 20% of the fine or compensation is necessary under Section 148 of NI Act in an appeal filed by persons other than "drawer" against the conviction and sentence under section 138 of the NI Act. 2. Mr. Ponda learned senior advocate on behalf of the accused made the following submissions: wp4128-2021 & connected-Final.doc (i) As per section 143A, only a ‘drawer’ of the cheque is required to pay interim compensation and no one else. To attract liability under section 138 of the NI Act, the cheque must be drawn from the account of the drawer. Under the scheme of chapter XVII of the Act, the word ‘drawer’ can never be construed to mean signatory of a cheque from whose account the cheque is not drawn. (ii) Section 143A of the act uses the word 'drawer'. In the case of an individual's cheque, the drawer is the signatory from whose account the cheque is drawn. Similar would be a case of a company being a legal person, it is a living being who can sign the cheque, but the cheque is issued from the account of the company, and, therefore, the signatory of the cheque does not become a drawer. (iii) Under sections 30 and 31 of the act, it is the drawer of a cheque who is bound to compensate the holder in case of dishonour. The responsibility and liability for honouring the cheque is that of the drawer only. Such liability arises at the first instance to ensure that the cheque is honoured on presentation. Such responsibility and obligation to honour the cheque can only be traced to the drawer company and not to an individual authorised signatory, whether he is a director or not. If the cheque bounces, the drawer is liable to pay the payee, provided a demand notice is given to him. The requirement to have sufficient funds in the account from which the cheque is issued is only with the drawer company 6 wp4128-2021 & connected-Final.doc and not the authorised signatory. (iv) As an illustration, in the case of a large public limited company authorising a salaried employee as a signatory, can such employee be made liable for payment of interim compensation under section 143A for a cheque of thousands of crores. Such a signatory employee has no personal liability concerning the money transaction with the company, which is a legal person. (v) The power to direct interim compensation under section 143A of the NI Act is of draconian nature and tantamounts to adjudication and compensation amount before adjudication of guilt in a criminal trial. Therefore, such provisions are required to be strictly construed. (vi) Relying on the judgment of the Apex Court in the case of P.J. Agro Tech Ltd v. Water Base Ltd., reported in (2010) 12 SCC 146, he submitted that a criminal or a quasi-criminal provision has to be strictly construed. Therefore, it would be unjust and unfair to foist the liability to pay interim compensation to a person not covered under the provision. (vii) Relying on section 143A(5), he submitted that the interim compensation directed under section 143A needs to be recovered as if it is a fine under section 421 of the Code of Criminal Procedure, 1973. Such amount of fine under section 421, can be recovered either by a warrant of 7 wp4128-2021 & connected-Final.doc attachment or sale of immovable property or by warrant to the Collector authorising him to realise the amount as arrears of land revenue. Moreover, section 183 of Maharashtra Land Revenue Code, 1966 confers the power of the Collector to arrest and detain a person in custody for ten (10) days in the office of the Collector or Tehsildar. (viii) He submitted that there is no concept of joint or several liability under section 143A, and in the case of the direction of interim compensation, it needs to be made only against the drawer. (ix) As per the scheme of provisions of section 138 of the Act, the role of the drawer of the cheque assumes great significance. Based on the requirement under section 30 of the Act, section 138 (b) mandates service of the legal notice on the drawer of a cheque who must ensure the such cheque is honoured as per the scheme of Sections 30 and 31 of the Act. The offence under Section 138 is completed only on failure to comply with demand notice within the stipulated period. Therefore, unless notice is given to the drawer and he fails to comply with the requisition of payment under the said notice, no offence can be said to be committed by the drawer. Therefore, the drawer of the cheque is the principal offender who alone is liable for an offence. (x) Section 141 of the Act is incorporated in the statute to widen the dragnet of the offence under section 138, which 8 wp4128-2021 & connected-Final.doc has been committed by the drawer alone, to include other persons who are made vicariously liable, particularly when the principal offender is a company. The word 'drawer' is used in singular and plural; therefore, it is restricted to the principal offender only and not persons who fall within the dragnet of being vicariously liable either under section 141(1) or 141(2) of the act. There is no provision analogous to section 141 of the Act found in section 143A to rope in individuals. (xi) In the case of the company, the notice under proviso- (b) of section 138 of the NI Act has to be issued to the drawer of the cheque, i.e. company and not to the authorised signatory of a cheque as it is the company who is liable to make payment under the cheque. Section 138 of the NI Act requires a cheque to be issued on an account maintained by the drawer in his personal capacity. (xii) Learned senior advocate, after taking me through the judgment in the case of Aneeta Hada (supra), submitted that section 141 refers to section 138 of the NI Act. It makes other persons vicariously liable for compensation for an offence on the company's part. The words "as well as the company" appearing in section 141 makes it clear that when the company is prosecuted, then only persons mentioned in the other category could be vicariously liable for the offence. Therefore, it was held that for maintaining prosecution under section 141 of the Act, the arraignment of a company 9 wp4128-2021 & connected-Final.doc as an accused is imperative. If the word drawer is interpreted to mean authorised signatory, it will turn the decision in Aneeta Hada (supra) on its head. (xiii) Learned senior advocate endeavoured to rely on the judgment in the case of N. Hariharu Krishnan V. J. Thomas, reported in (2018) 13 SCC 663 to urge that every person signing the cheque drawn on behalf of the company on whose account of the cheque is drawn does not become the drawer of the cheque. Such a signatory is only a person duly authorised to sign the cheque on behalf of the company. Drawing distinction in the observations made in paragraph 20 of Aneeta Hada (supra) and para 22 of N. Hariharu Krishnan (supra), it is submitted that the observations made in paragraph 22 constitute ratio and, therefore, bind this court. The question whether the signatory of a cheque authorised by a company is the drawer is no longer res integra and has been succinctly answered by the Apex Court in the case of N. Hariharu Krishnan V. J. Thomas, reported in (2018) 13 SCC 663. The Apex Court, in the said judgment, has considered the judgment in the case of Aneeta Hada (supra), and, therefore, it is the latter judgment which would prevail. (xiv) He relied on the judgment of the Kerala High Court in the case of S. Velayudhan Pillai Vs. Chellath Franklin and Another reported in 2021 SCC OnLine Ker 2577, which has held that by merely signing a cheque on behalf of 10 wp4128-2021 & connected-Final.doc a company or a firm, the person signing does not become the drawer. (xv) He relied on the judgment in the case of Jitendra Vora V. Bhavana Y. Shah, (2015) 16 SCC 744 to urge that if the drawer of a cheque happens to a juristic person like a body corporate, it can be prosecuted for the offence under section 138 of the act. Accordingly, it is held that when the drawer of the cheque who falls within the ambit of section 138 of the Act is a human being or a body corporate or even firm, prosecution proceedings can be initiated against such drawer. (xvi)Drawing sustenance from the judgment of the Apex Court in the case of S.M.S. Pharmaceuticals Ltd. V. Neeta Bhalla, reported in (2005) 8 SCC 89, it is submitted that the liability of the signatory of the cheque or the managing directors or joint managing director would only be under section 141(2) of the NI Act which is in relation to section 138 of the NI Act, provided he has done overt the act on behalf of the company. (xvii) Relying on the judgment of the Apex in the case of Aparna A. Shah v. Sheth Developers (P) Ltd., (2013) 8 SCC 71, he submitted that the criminal liability on account of dishonour of cheque primarily falls on the drawer. If the drawer is a company, then dragnet is extended to its officers under section 141 of the NI Act. 11 wp4128-2021 & connected-Final.doc (xviii) In support of his submission, he relied on the judgments in Dashrath Rupsingh Rathod v. State of Maharashtra reported in (2014) 9 SCC 129, Major General A.S. Gauraya v. S.N. Thakur reported in (1986) 2 SCC 709, Nandkishor Prallhad Vyvhare v. Mangala W/o Pratap Bansar reported in (2018) 3 MhLJ 913, Pawan Kumar Goel V. State of U.P. & Anr. reported in (2022) SCC OnLine SC 1598, S.P. Mani and Mohan Dairy v. Snehlatha Elangovan reported in (2022) SCC OnLine SC 1238, Sunita Palita v. Panchami Stone Quarry reported in 2022 SC OnLine SCC 945, K.K. Ahuja v. V.K. Vora reported in (2009) 10 SCC 48, National Small-Scale Industries Corporation v. Harmeet Singh (2010) 3 SCC 330, Pooja Ravinder Devidsani v. State of Maharashtra and another reported in (2014) 16 SCC 1, Surinder Singh Deswal and Ors. v. Virendra Gandhi reported in (2019) 11 SCC 341, CESC Ltd and Others Vs. Subhash Chandra Bose and Others reported in (1992) 1 SCC 441, Yudhistir v. Ashok Kumar reported in (1987) 1 SCC 204, Bijaya Kumar Agarwala v. State of Orissa reported in (1996) 5 SCC 1, Regina v. Cuthbertson and Ors. reported in (1980) 3 wlr 89, Steel Authority of India Limited v. National Union Waterfront Workers and Others reported in (2001) 7 SCC 1, Maruti Udyog Ltd. v. Ram Lal and Others reported in (2005) 2 SCC 638, Maharashtra Housing and Area Development 12 wp4128-2021 & connected-Final.doc Authority v. P.V. Anturkar reported in (2008) SCC OnLine Bom 648, Maharashtra v. Shri Morarao Malojirao Ghorpade reported in 2011 (5) MhLJ 112, State of Orissa v. Sudhansu reported in AIR 1968 SC 647, Sharad Kumar v. CBI reported in 2011 (126) DRJ 525, Assistant Collector of Central Excise v. Dunlop India Limited reported in (1985) 1 SCC 260, Sundeep Kumar Bafna v. State of Maharashtra and Another reported in (2014) 16 SCC 623, Rodger Shashoua and Others v. Mukesh Sharma and Ors. reported in (2017) 14 SCC 1, Dr. Shah Faesal and Ors. v. Union of India and Anr. reported in (2020) 4 SCC 1, Secretary to Government of Kerala, Irrigation Department and Ors. v. james Varghese and Others reported in (2022) 9 SCC 593, Kartar Singh v. State of Punjab reported in (1994) 3 SCC 569, State v. Nalini reported in (1999) 5 SCC 253, Wyre Forest District Council v. Secretary of State for the Environment and Another reported in (1990) 1 All ER 780, State Bank of India v. Yogendra Kumar Srivastava and Others reported in AIR (1987) SC 1399, Union of India v. Kanti Lal Chunilal and Others reported in AIR (1987) SC 1410, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another reported in (2005) SCC 89, Special Officer & Competent Authority, Urban Land Ceilings, Hyderabad and Another v. P.S. Rao reported in (2000) 2 SCC 451, Nedungadi Bank Ltd. v. K.P. 13 wp4128-2021 & connected-Final.doc Madhavankutty and Others reported in (2000) 2 SCC 455, Chowgule and Co. Pvt. Ltd. v. union of India and Others reported in (1987) 1 SCC 730 and The Vanguard Fire and General Insurance Co. Ltd. Madras v. M/s. Fraser and Ross and Another reported in AIR (1960) SCC 971. 3. Mr. Sharan Jagtiani, learned senior advocate appearing on behalf of the complainant, made the following submissions: (i) The authorised signatory of a company becomes the drawer for the purpose of sections 138 and 143A of the NI Act as he has been authorised to do so in respect of the account maintained by the company. (ii) The Apex Court, in the case of Aneeta Hada Vs. Godfather Travels & Tours Private Limited reported in 2012 5 SCC 661 has held that the authorised signatory of a company becomes drawer as contemplated by section 7 of the NI Act. The law laid down in the case of Aneeta Hada (supra) is still a good law and has been repeatedly considered and followed in subsequent judgments by the Apex Court. When the Supreme Court has rendered a particular decision, it must be followed by the High Court and the subordinate Courts unless it is distinguished, overruled, or set aside. The observations of the Apex Court, which may not be strictly called the ratio decidendi of the judgment, are still binding on the High Court as obiter 14 wp4128-2021 & connected-Final.doc dictum in the absence of direct pronouncement on such question elsewhere by the Supreme Court. The judicial propriety, dignity and decorum demand that the Apex Court being the highest court in the country, even the obiter dictum of the Supreme Court, should be followed as binding. It is impermissible for the High Court to ignore the decision of the Supreme Court on the ground that the Supreme court laid down the legal position without considering another point. The decision of the Apex Court cannot be ignored on the ground that certain aspects of the law were not considered or relevant provisions of the law were not brought to the notice of the court. He submitted that when High Court finds any conflict of views expressed between larger and smaller bench of the Supreme Court, the High Court cannot disregard the views of larger bench. High Court must follow the opinion of larger bench of the Supreme Court in preference to those smaller bench. (iii) While interpreting section 138 of the NI Act, Apex Court held that any interpretation that withdraws the provision's life and blood and makes it ineffective and dead letter should be avoided. The legislative purpose is to ensure that the cheque is not dishonoured and credibility of the transaction of business of a bank is maintained. Therefore, the text and context of section 143A must be considered keeping in mind the mischief it intends to obliterate and the fundamental intention of the legislature with respect to social welfare. 15 wp4128-2021 & connected-Final.doc (iv) An authorised signatory of a cheque on behalf of the company is covered under section 141(2) of the act. Compensation, as contemplated under section 143A, is in the nature of interim relief, which is in aid of final relief as contemplated under section 141 of the NI Act. (v) The definition of the drawer has been explained as the 'act of making and preparing a cheque' and, therefore, used in the expression maker. This is the underlying rationale for the authorised signatory of cheques issued by the companies. (vi) Sections 138 and 143A of the NI Act are prospective in operation and can be invoked in cases where an offence under section 138 of the NI Act was committed after the introduction of 143A and 148 of the NI Act to adopt purposive interpretation. Whenever a statute incorporates a legal fiction, that must be carried to its logical conclusion, and the court has to ensure all the facts and circumstances that are incidentally or inevitably corollary to be given effect to the fiction. (vii) Moratorium provisions contained in section 14 of the insolvency and bankruptcy code would apply only to the corporate debtor, and natural persons mentioned in section 141 of the NI Act would continue to be statutorily liable. (viii) Mr. Jagtiani, in support of his submissions, relied on the judgments in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. reported in (2012) 5 SCC 661, N. 16 wp4128-2021 & connected-Final.doc Harihara vs J Thomas reported in (2008) 13 SCC 663, Pawan Kumar Goel v. State of U.P. and Anr. reported in (2002) SCC Online SC 1598, P. Saravana Kumar v. S.P. Vijaya Kumar reported in (2022) SCC Online Mad 1387, S.P. Mani & Mohan Dairy vs. Dr. Snehalatha Elangovan reported in (2022) SCC Online SC 1238, South Central Railway Employees Cooperative Credit Society Employees Union v. B. Yashodabai reported in (2015) 2 SCC 727, Peerless General Finance and Investment Company Limited v. Commissioner of Income Tax reported in (2020) 18 SCC 625, Oriental Insurance Co. Ltd v. Meena Variyal reported in (2007) 5 SCC 428, Municipal Committee, Amritsar v. Hazara Singh reported in (1975) 1 SCC 794, Suganthi Suresh Kumar v. Jagdeeshan reported in (2002) 2 SCC 420, Director of Settlements, AP v. MR Apparao, reported in (2002) 4 SCC 638, Pradip Chandra Parija and Ors. v. Pramod Chandra Patnaik and Ors. reported in (2002) 1 SCC 1, Central Board of Dawoodi Bohra Community and Anr. v. State of Maharashtra and Anr. reported in (2005) 2 SCC 673, Chandra Prakash and Ors v. State of U.P. and Anr. reported in (2002) 4 SCC 234, Kamleshkumar Ishwardas Patel vs. Union of India reported in 1994 MHLJ 1669, Union of India v. Subramanian reported in (1976) 3 SCC 677, The State of U.P. v. Ram Chandra Trivedi reported in (1976) 4 SCC 52, G.J. Raja vs. Tejraj Surana reported in (2019) 17 wp4128-2021 & connected-Final.doc 19 SCC 469, Surinder Singh Deswal and Ors. v. Virender Gandhi reported in (2019) 11 SCC 341, Surinder Singh Deswal and Ors. v. Virender Gandhi reported in (2020) 2 SCC 514, Industrial Supplies Pvt. Ltd. and Anr v. Union of India and Ors. reported in (1980) 4 SCC 341, P. Mohanraj and Others v. Shah Brothers Ispat Pvt. Ltd. reported in (2021) 6 SCC 258, Goaplast (P) Ltd. v. Chico Ursula D’Souza. reported in (2003) 3 SCC 232, Eerra Through Dr. Manjula Krippendorf v. State (NCT of Delhi) reported in (2017) 15 SCC 133, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla reported in (2005) 8 SCC 89, S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla reported in (2007) 4 SCC 70, K.K. Ahuja v. V.K. Vora reported in (2009) 10 SCC 48, Sunita Palita and Ors. v. Panchami Stone Quarry reported in (2022) 10 SCC 152 and Cotton Corporation of India Ltd. vs. United Industrial Bank Ltd. & Ors. reported in (1983) 4 SCC 625. 4. In rejoinder, Mr. Ponda, learned senior advocate, submitted that the Supreme Court's observations in paragraph 20 in the case of Aneeta Hada (supra) are not ratio decidendi, but there are mere casual observations. They are not even orbiter dictum. He submitted that observation in paragraph 20 is a mere stay obesrvation which could not be read in isolation but has to be read along with paragraphs Nos.19, 39, 40 and 48 of the said judgment. No question or argument was raised regarding whether the authorised signatory was drawer or not. According to him, the 18 wp4128-2021 & connected-Final.doc facts of the case in N. Harihara Krishnan (supra) are similar to the facts of the present case. Relying on the observations made in paragraphs Nos.10, 11.1, 11.3, 19 and 20, he submitted that the Apex Court laid down a precise ratio a person does not become a drawer merely because he signs the cheque. The word "every" in paragraph 22 of the said judgment includes any person who signs the cheque, and none of these persons become the drawer. He submitted that if the submission of the respondent is accepted to hold that the authorised signatory becomes drawer, it will run counter to the judgments of the Apex Court in the case of (i)Aneeta Hada (supra) (ii) N. Hariharu Krishnan (supra) (iii)S.M.S. Pharmaceuticals Ltd. (supra). 5. Neither section 141(1) nor 141(2) confers power on the Magistrate to pass an order of interim compensation against the person covered by Section 143A. Section 148 uses the expression 'appellant', which is different from the signatory of a cheque. A conjoint reading of sections 30 and 31 of the NI Act militates against the proposition that the authorised signatory is a drawer in the case of a company. Proceedings under section 143A are criminal in nature as the amount of compensation is recovered by following procedure under section 421 of the Code of Criminal Procedure. Apart from the said fact, the proceedings under section 143 are triable by the Magistrate in the Criminal Court and are governed by the Code of Criminal Procedure. He submitted that if the respondent's interpretation is accepted, it will delay the disposal of cases, thereby frustrating the amended provision. The object of dealing with unscrupulous drawers with a heavy hand 19 wp4128-2021 & connected-Final.doc would get diluted entirely. Expansive interpretation of section 143A would result in writing down something in the statute which is not the function of the Courts but of the legislature. 6. In rejoinder, Mr. Sharan Jagtiani learned senior advocate submitted that the consequences of not including an authorised signatory in the expression 'drawer' would defeat the main intendment and purpose of insulting said provision. He submitted that sections 143A and 148 of the NI Act were introduced for the benefit of payees of dishonoured cheques. The legislature deemed it appropriate that while proceedings under section 138 of the NI Act were pending, the payee shall have the right to claim part dishonoured cheque's sum through interim compensation under section 143A. While the proceedings are in appeal, section 148 requires the appellant to deposit of part amount under section 148 of the NI Act during the pendency of the appeal. . Apprehension expressed by the petitioners of roping in salaried employees as authorised signatories has been taken care of by conferring discretion on the learned Magistrate trying offence under section 138 to pass suitable orders in relation to such employees. Relying on the judgment of the Apex Court in the case of Ms. Eera through Dr. Manjula Krippendorf Vs. State (NCT of Delhi) & Anr. reported in (2017) 15 SCC 133, he submitted that the Supreme Court has emphasised adopting purposive interpretation even to a criminal statute to achieve social welfare objectives. 7. Mr. Niranjan Mundargi, learned advocate for the petitioner 20 wp4128-2021 & connected-Final.doc in Writ Petition No.2644 of 2020, supplemented submissions of Mr. Ponda, learned senior advocate on the applicability of observations in the case of Aneeta Hada and N. Hariharu Krishnan (supra). He submitted that the expression drawer takes within its fold only a legal person. However, a natural person or individual, i.e., an authorised signatory, differs from a legal person. To fulfil ingredients of section 138 of the Act, the authorised signatory must personally maintain an account, and the dishonoured cheque is issued from such account. Section 141 of the act is not attracted in relation to the payment of compensation under section 143A of the NI Act. 8. Mr. Ansh Karnawat forensically made his submissions by submitting that the word drawer in section 143A has a clear and unambiguous meaning. The word 'drawer' has obtained a fixed and legal connotation over the years, which has been consistently held to include only principal offenders and not vicariously liable persons. He submitted that a purposive interpretation of the statute could be adopted only if a plain reading of the section creates an absurdity, contraction, and unworkable consequence. Amplifying the submissions, it was strenuously urged by relying on statements and objects of the Negotiable Instruments Act (Amendment Act, 2018), the objective was to make the drawer of the cheque pay interim compensation and was not the object to extend vicarious liability at the pre-trial stage. By referring to the opening remarks in the minutes of the Lok Sabha debates, he submitted that the liability was proposed to be created upon the "issuer" of the cheque. 21 wp4128-2021 & connected-Final.doc 9. Learned advocate invited my attention to the provisions of sections 14, 95 and 96 of the Insolvency and Bankruptcy Code, 2016 (IBC) to urge that at the time of bringing section 143A into force, the legislature was aware that there could be drawer companies who could be made to pay interim compensation in the light of moratorium imposed by section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) while undergoing corporate insolvency resolution process. In support of his submission, he relied on the judgment of the Apex Court in the case of Keshavji Ravji & Co. Etc. Etc vs Commissioner Of Income Tax reported in (1990) 2 SCC 231, Sri Ram Saha v. State Of West Bengal & Ors reported in (2004) 11 SCC 497 and State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. reported in MANU/SC/0152/1958. He submitted that the word 'drawer' has been used in the singular sense and cannot be interpreted to mean in the plural sense. He submitted that the concept of interim relief being in furtherance of final relief is a concept predominantly in civil laws where the law contemplates proceeding ex-parte, whereas, on a plain reading of section 143A, the question of having interim relief in furtherance of final relief does not arise. 10. Learned advocate for the petitioner in Writ Petition No.4455 of 2022 adopted submissions of Mr. Ponda and submitted that section 141(2) comes into place only after the offence under section 138 is proved.
11. Mr. Niranjan Mundargi, learned advocate for the petitioner 22 wp4128-2021 & connected-Final.doc in Writ Petition No.3443 OF 2022, submitted that in relation to the applicability of section 148 of the NI Act, said section would apply to only those appeals filed by the drawer and would not apply to the appeals filed by the person other than the drawer.
12. Per contra, Ms. Y.N. Katpitia for respondent No.2 in Writ Petition No. 3443 OF 2022 submitted that the petitioner had been held guilty under section 138 of the NI Act read with section 141(1)(2). According to her, the term drawer used in section 148 includes all persons responsible for drawing the dishonoured cheque and includes each and every person held guilty who, at the time of the offence committed, was in charge and was responsible to the company for the conduct of its business. It also includes every person who is proved to have consented to or connived for the offence or to whom the offence is attributable. Absolving the authorised signatory of a company from the purview of section 148 of the NI Act will completely defeat the purpose of section 148. Placing reliance on the judgment of the Apex Court in the case of Surinder Singh Deswal @ Col. S. S. vs. Virender Gandhi reported in Criminal Appeal Nos.1936-1963 of 2019, she submitted that the Apex Court had directed the accused to deposit a minimum of 20% amount of fine and compensation awarded by the Trial Court. She submitted that if the petitioner's interpretation of section 148 is accepted, it would amply that in no case of dishonoured cheque, suspension of sentence of imprisonment can be ordered by the Appellate Court on condition of deposit and every order of suspension of a sentence need to be passed without deposit of any amount. According to her, section 148 applies to all 23 wp4128-2021 & connected-Final.doc appellants filing an appeal against conviction under section 138 of the Act. She emphasised on word 'appellant' in sub section (1) of section 148 to urge that if the legislature intended to restrict the ambit of section 148 of the NI Act to only the drawer against the conviction, the legislature would have provided so in the section instead of using the word 'appellant'.
13. She submitted that in the facts of the case, there are only two directors: the petitioner and his wife. In the crossexamination, the petitioner admitted that he was in charge of the company's affairs and that his wife did not participate in any company activity. He also admitted his signature on the cheque; therefore, the learned Sessions Judge rightly directed the petitioner to deposit an amount of 20%. She submitted that, in the facts of the case, the petitioner accepted the liability on behalf of the company and admitted that he had issued a cheque in question which showed that the petitioner was playing an active role in dayto-day business. In conclusion, she submitted that the legislature's intention behind enacting section 148 of the NI Act is to curb dilatory tactics of unscrupulous drawers of dishonoured cheques which would be frustrating if the interpretation made by the petitioner is accepted.
14. Mr. Jatin P. Shah, learned advocate for respondent No.2 in Writ Petition No.886 of 2022, invited my attention to the provisions in chapter 17 of the NI Act. He took me through the development of law in relation to the interpretation of section 138, which initially was restricted to only two categories referred to in 24 wp4128-2021 & connected-Final.doc section 138, namely (i) Funds insufficient and (ii) Exceed arrangement. He submitted that thereafter the Supreme Court, by adopting liberal interpretation, made provisions of section 138 applicable to all contingencies of dishonour of cheque. He submitted that if the petitioner's interpretation is accepted, it will give an advantage to unscrupulous drawers who would not sign on the cheque to avoid liability under section 143A of the NI Act. He submitted that the conjoint effect of section 143A, read with section 141, makes the authorised signatory of the cheque as regards the account maintained by the company liable for payment of interim compensation. To bolster his submissions, he relied on the following judgments: NEPC Micon Ltd Vs Magma Leasing Ltd reported in 1999 (1) SCC (Cri) 524, Laxmi Dye Chem Vs State of Gujrat reported in 2012 (13) SCC 375, Union of India Vs Filip Tiago De Gama reported in 1990 (1) SCC 277, Ballarpur Industries Limited Vs Union of India reported in 1997 AIR (Del) 1, Dilip S. Dhanukar Vs Kotak Mahindra Ltd. Reported in 2007 (6) SCC 528, Surinder Deswal V/s. Virender Gandhi (1st) reported AIR 2019 SC 2956 and G.J. Raja Vs Tejraj Surana reported in AIR 2019 SC 3817.
15. The rest of the advocates appearing in respective matters adopted submissions by Mr. Ponda and Mr. Jagtiani respectively.
16. I have given my anxious consideration to the rival submissions. 25 wp4128-2021 & connected-Final.doc
17. As the controversy revolves around the construction of the provisions contained in sections 7, 30, 31, 138, 143A and 148 of the NI Act, the relevant provisions deserve extraction as under : “7. “Drawer” “Drawee”.—The maker of a bill of exchange or cheque is called the “drawer”; the person thereby directed to pay is called the “drawee”. 30. Liability of drawer.—The drawer of a bill of exchange or cheque is bound in case of dishonour by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been given to, or received by, the drawer as hereinafter provided. 31. Liability of drawee of cheque.—The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default. 138. Dishonour of cheque for insufficiency, etc., of funds in the account.—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, 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 by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless— (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, 26 wp4128-2021 & connected-Final.doc as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability. S.141 Offences by companies— (1) If the person committing an offence under Section 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 27 wp4128-2021 & connected-Final.doc 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. 143A. Power to direct interim compensation.— (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, (2 of 1974), the court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant— (a) in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and (b) in any other case, upon framing of charge. (2) The interim compensation under sub-section (1) shall not exceed twenty per cent of the amount of the cheque. (3) The interim compensation shall be paid within sixty days from the date of the order under sub-section (1), or within such further period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the drawer of the cheque. (4) If the drawer of the cheque is acquitted, the court shall direct the complainant to repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial years, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the complainant. (5) The interim compensation payable under this section may be recovered as if it were a fine under section 421 of the Code of Criminal Procedure, 1973, (2 of 1974). (6) The amount of fine imposed under section 138 or the 28 wp4128-2021 & connected-Final.doc amount of compensation awarded under section 357 of the Code of Criminal Procedure, 1973, (2 of 1974) shall be reduced by the amount paid or recovered as interim compensation under this section. S. 148. Power of Appellate Court to order payment pending appeal against conviction (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction under Section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial Court: Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under Section 143-A. (2) The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the appellant. (3) The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal: Provided that if the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the Court on sufficient cause being shown by the complainant.]”
18. As per Section 7 of the NI Act the maker of a bill of exchange or cheque is called the “drawer;” the person thereby directed to pay is called the “drawee.” Drawer is a person who draws an instrument in writing. He is a person who draws a bill of 29 wp4128-2021 & connected-Final.doc exchange or cheque. Sections 138, 143A and 148 fall under chapter XVII of the Act, entitled "all penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts". In the context of the question involved, a plain reading of section 138 of the NI Act makes it evident that the said section is controlled by the expression "where in a cheque drawn by a person on an account maintained by him". To attract liability under section 138, it is one of the preconditions that a cheque must be drawn on an account maintained by the drawer. The person contemplated in the section can be an individual or legal entity. The principal liability is imposed on the drawer. On a conjoint reading of sections 30, 31 and 138, it is evident that the obligation to honour the cheque is on the drawer. Reading section 138 of the NI Act makes it clear that the duty to maintain sufficient funds on the date of presentation of the cheque is cast on the drawer. On receipt of demand notice, section 31 creates the right to receive compensation from the drawee bank if the drawer has sufficient funds in the account maintained by him and the drawee bank fails to honour the cheque. Such compensation needs to be paid only to the drawer. Unless demand notice is served on the drawer, the offence under section 138 of the said Act is not complete. It is evident that the drawer of the cheque is the principal offender who alone is liable for the offence under section 138 of the NI Act. The drawer of the cheque
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