Case Summary: Sarabjit Singh vs. State of NCT of Delhi and Ors.

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This post is written by Aanchal Chaurasia. She is in the 4th year of B.L.S./ LL.B. from Rizvi Law College in Mumbai University.

TITLE OF THE CASE:  Sarabjit Singh .vs. State of NCT of Delhi & Ors.

CITATION: Crl. M.C. 2856/2015.

COURT:  DELHI HIGH COURT OF INDIA.

BENCH:  HONORABLE MR. JUSTICE R. K. GAUBA.

DATE OF JUDGMENT:  October 8th, 2018.

PETITIONER: SARABJIT SINGH.

RESPONDENT: STATE OF NCT OF DELHI & ORS.

BRIEF FACTS: 

The present case is a decision by the Honorable Delhi High Court concerning the Negotiable Instrument Act in India and probably the most awaited one in light of the various difficulties being faced by the clients, appellant all over India.

The facts of the present case can be summarized as below:

  1. A writ petition was filed by the appellant of dishonor cheque aggrieved by the director being initiated by the M-Tech Developers Private Limited in a Criminal Case Petition (CC no.81/08) filed by the Sarabjit Singh.
  2. The Supreme Court after hearing the grievances of the appellant and in light of the allegations of the dishonored cheque being made against the appellant decided to take cognizance of the Petition and ordered an inquiry and based on the same issued process against the third respondent.

ISSUES:

  1. Whether the Directors of a Company are Liable for a Bounced Cheque of the Company
  2. Whether the company can challenge the order in Revisional Court by criminal revision petition, wherein the order of the Magistrate was set aside?

ANALYSIS AND OBSERVATIONS OF THE ISSUES.

CONTENTION OF THE PARTIES:

  •  It was contended on behalf of the appellant that:
  1. The dishonored cheque cannot be treated at par with the trust of the appellant and that the money should be paid by the company must be treated as the highest priority;
  2. The allegations set out in the said complaint about three cheques, they bearing no.364267  dated  11/10/2007 for Rs.3,50,000/-; no.364269 dated 13/10/2017 for Rs.3,36,875/-; and no.364268 dated 15/10/2007 for Rs.3,50,000/-, all drawn on State Bank of India.
  3. It is his case that the cheques had been issued against the account of company M-Tech Developers Pvt. Ltd. (second respondent) acting through its director (third respondent) for liability due.
  4. Its concerned presentation was returned unpaid by the bank with report “insufficient funds”, no payment having been made despite the notice of demand issued and served.
  5. So, a criminal case against the third respondent alleging offense under Section 138 of the Negotiable Instruments Act, 1881 (NI Act)[3] having been committed.
  6. The complainant had moved an application under Section 319 of the Code of Criminal Procedure, 1973 (Cr. P.C.) seeking the second respondent (company accused) also to be summoned additionally.
  7. The complainant moved another application (concerning the liberty earlier granted) seeking summoning of the company accused additionally under Section 319 Cr. P.C., now based on evidence that had come on record.
  8. This case is referred to as M/S. Bilakchand Gyanchand Co. vs A. Chinnaswami.[1]
  9. In this case, the scrutiny of the case by the revisional court for purposes of examining as to whether the Metropolitan Magistrate could have exercised the jurisdiction under Section 319 Cr. PC was misdirected. It examined the case from the perspective of its maintainability against the third respondent which was not a correct approach. It ignored the settled principle that notice to the director of the company was sufficient notice to the company”.
  10. In the present case, as already noticed, this is how both the third respondent and the second respondent understood and construed the demand notice to which reply was sent on 19.11.2007 by the second respondent.
  • It was contended on behalf of the company that:
  1.   The account of company M-Tech Developers Pvt. Ltd. (second respondent) challenged the ‘reference to the liberty’ application order in the court of Sessions by Criminal Revision Petition (no.74/14).
  2. The Revisional Court accepted the contention of the second respondent and set aside the order of the Metropolitan Magistrate by its order dated 20.02.2015.
  3. Aggrieved by the order of the Revisional court, the present petition was filed under Section 482 Cr.P.C. which has been resisted by the second respondent.
  4. It needs to be noted that in the criminal complaint, the second respondent was described (in point 1) as the accused company which had been acting through its director (i.e. third respondent), the liability represented by the three cheques being of the said company, the said cheques having been issued against its account.
  5. After the said cheques had been returned unpaid, the complainant had sent a legal notice of demand on 01.11.2007. It does appear that the said notice of demand was addressed to the third respondent.
  6. But then, it is also clear that the third respondent was not called upon by the said demand notice to be accountable for any personal liability.
  7. Reference was made to the three cheques, which concernedly had been issued against the account of the company.
  8. The notice thus was addressed to the third respondent in his capacity as the director of the company accused, calling him upon to pay against the cheques which had been returned dishonored.
  9. That the notice of demand was directed against the company is how the said notice of demand was understood not only by the third respondent but also by the second respondent.
  10. This is reflected by the fact that the reply dated 19.11.2007 to the demand notice was sent not by the third respondent but for and on behalf of the company i.e. the second accused by its authorized representative.
  • The Delhi High Court, after considering the contentions of both the parties was confirmed, stated that:
  1. The Metropolitan Magistrate held an inquiry and based on the same issued process against the third respondent.
  2. The application under Section 319 of the Code of Criminal Procedure, 1973 (Cr. PC) was, however, withdrawn and dismissed accordingly by order dated 07.07.2008 of the Metropolitan Magistrate with liberty being given for fresh application to such effect to be filed at the appropriate stage.
  3. The case against the third respondent was taken up and put to trial based on notice under Section 251 Cr. P.C.
  4. This ‘reference to the liberty’ application was allowed by the Metropolitan Magistrate by order dated 22.08.2014.
  5. The application on which the order was passed by the Metropolitan Magistrate which was set aside by the Revisional Court, was an application moved in the exercise of such liberty.

DIRECTION BY THE DELHI HIGH COURT:

Since evidence which had come on record showed the complicity of the company in the crime, the cheques in question having been issued against its account, it has received notice of demand and not having made any payment in response thereto satisfying the claim of the payee arising out of the cheques, the exercise of jurisdiction by the Magistrate under Sec 319 of Cr.P.C.[2]  could and should not have been interfered with the Revisional Court.

Therefore, the complaint along with the other accused, it having been summoned under Section 319 of Cr.P.C.

[1] M/S. Bilakchand Gyanchand Co. Vs A. Chinnaswami, (1999), AIR 5 S.C.C. 693, (India).

[2] Section 319 of Criminal Procedure Code Act, 1973.

[3] Section 138 of the Negotiable Instruments Act, 1881.

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