Bijoy Kumar Moni vs Paresh Manna & Anr.

2.1. It is the case of the complainant that the cheque was issued in discharge of the personal liability of the accused towards the complainant, and hence there was no occasion for it to implead the company as an accused – However, even if the cheque might have been issued for the discharge of personal liability of the accused towards the complainant, had the company Shilabati Hospital Pvt. Ltd. been arraigned as an accused in the complaint case before the Trial Court, it would have remained open to the complainant to establish with the aid of the presumption under Section 139 that the cheque issued by the company was in discharge of a legally enforceable debt – However, in the absence of the drawer of the cheque having been arraigned as an accused, it was rightly held by the High Court that no prosecution could have proceeded against the accused in his personal capacity – The only way by which the accused could be held liable was under Section 141 of the NI Act, however the same could not have been done in the absence of the company being arraigned as an accused. [Paras 51, 55]

2.2. As specified in a three-Judge Bench decision in Aneeta Hada, the only exception to the above general rule is embodied in the doctrine of lex non cogit ad impossibilia which means that the law doesn’t compel the impossible – Thus, it is only in those cases where the impleadment of the company is not possible due to some legal impediment that this general rule can be exempted – In the facts on hand, it cannot be said that there was any legal difficulty in impleading Shilabati Hospital Pvt. Ltd. as an accused in the complaint case filed by the complainant – Thus, even the benefit of the exception cannot be extended to the complainant in the present case. [Para 56]

3. It is the drawer Company which must be first held to be the principal offender under Section 138 of the NI Act before culpability can be extended, through a deeming fiction, to the other Directors or persons in-charge of and responsible to the Company for the conduct of its business – In the absence of the liability of the drawer Company, there would naturally be no requirement to hold the other persons vicariously liable for the offence committed under Section

138 of the NI Act – It is only the drawer of the cheque who can be held liable for an offence under Section 138 of the NI Act – An authorised signatory acting on behalf of the principal cannot be said to be the “drawer” of the cheque “on an account maintained by him with a banker” under Section 138. [Paras 62, 66]

4.1. In the case on hand, the accused was prosecuted in his individual capacity and not in his capacity of being the Director of the Shilabati Hospital Pvt. Ltd. Although it is undisputed that the accused signed the cheque in question, yet as the cheque was drawn not on an account maintained by him with a Banker but was issued on an account maintained by the hospital, the requirement of Section 138 of the Act cannot be said to have been complied with. [Para 69]

4.2. It would have been altogether a different situation if the accused was prosecuted in his capacity as a Director of the Shilabati Hospital – In such a scenario, the cheque drawn by him on an account maintained by the Company would have satisfied the requirement of Section 138 of the Act but as the accused has been proceeded against for an offence under Section 138 of the Act in his individual capacity and inasmuch as the cheque dishonoured for insufficiency of funds was drawn on the account maintained by the Company, namely, Shilabati Hospital Pvt. Ltd., and not by the accused herein, no offence could be said to have been committed under Section 138 of the Act – The High Court rightly held that in the absence of the principal offender having been arraigned as an accused, prosecution for the commission of an offence under Section 138 of the NI Act could not have proceeded against the accused. [Para 70]

5.1. The requirement of Section 138 of the NI Act is that for fastening criminal liability on the accused, the cheque which was dishonoured for insufficiency of funds etc., must have been drawn on an account maintained by the accused – The mere fact that the cheque signed by the accused in his capacity as a “Director” of the Company would in the normal course be honoured by the Bank to which it was presented does not satisfy the statutory requirement of Section 138 of the Act. [Para 71]

5.2. Section 138 of the Act exposes the person who has drawn the cheque and which has been returned for insufficiency of funds to criminal liability – The provision, therefore, must be construed strictly – However, such a strict construction should not result in defeating the very purpose for which the provision has been enacted – At the same time, the statutory provisions creating penal liability cannot be stretched too far to embrace the persons and situations patently excluded from its purview as discernible from clear and unequivocal language used in the provision. [Para 72]

5.3. Section 138 of the NI Act clearly postulates that the cheque returned for insufficiency of funds should have been drawn by a person on an account maintained by him – It will amount to doing violence to the language of the statute if Section 138 of the Act is interpreted to mean that even if a person draws a cheque on an account not maintained by him, he shall be liable if the cheque is returned for insufficiency of funds – Such an interpretation will lead to absurd and wholly unintended results. [Para 73]

5.4. However, the peculiar factual situation of the present case and the plight of the complainant is not lost upon us – The option of bringing civil action against the accused or the hospital will be of no avail to the complainant as the claims are hopelessly time barred – Further, it is also not open for the complainant to initiate proceedings under Section 138 of the NI Act afresh by impleading Shilabati Hospital Pvt. Ltd. as an accused as the time period prescribed for issuance of statutory notice under Section 138 has long expired. [Para 74]

5.5. It is trite law that an act may constitute an offence under more than one statute – The encashment of the cheque for an amount of Rs 7,00,000/- issued by the complainant in favour of the accused [i.e. amount borrowed by him from the complainant] stood proved during the course of the trial – Further, the conduct of the accused in not replying to the statutory notice of dishonour of cheque issued by the lawyer for the complainant and in not taking the plea of the cheque having been drawn on the account of the company in his capacity as a Director during the course of trial undoubtedly raises questions as regards his dishonest intention in not repaying the amount borrowed by him from the complainant. [Para 75]

5.6. In such circumstances, although it is not possible to hold the accused liable for the offence under Section 138 of the NI Act, yet the possibility of him having committed the offence of cheating cannot be ruled out – Prima facie, the mens rea (guilty mind) of the accused speaks for itself – It is left open to the complainant to approach the jurisdictional police station and lodge an appropriate FIR against the accused – If the complainant lodges an FIR, the concerned police officer in-charge of the police station shall investigate the same in accordance with law. [Paras 76, 77] Negotiable Instruments Act, 1881 – s.138 – Penal provision – Has to be strictly construed:

Held: Section 138 of the NI Act being penal in nature has to be strictly construed and advertence to the object behind its enactment can only be made to supplement the language employed in the text of the statute and not to supplant it or render it overly broad and susceptible to misuse. [Para 68]

Negotiable Instruments Act, 1881 – ss.138 and 141 – Scope – Liability and vicarious liability:

Held: It is only the drawer of the cheque who can be held liable under Section 138 – Section 141 is an exception to this scheme of the NI Act and provides for vicarious liability of persons other than the drawer of the cheque in cases where the drawer of the cheque under Section 138 is a corporate person. [Para 39] Negotiable Instruments Act, 1881 – ss.7 and 138 – Expression “on an account maintained by him with a banker” used in s.138 – Meaning of:

Held: The expression describes the relationship between the account holder and the banker – This relationship is fundamental to the application of Section 138 – The act of maintaining an account is exclusively tied to the account holder and does not extend to any third party whom the account holder may authorize to manage the account on its behalf – Therefore, any delegation of authority to manage the account does not alter the intrinsic relationship existing between the account holder and the banker as envisaged under the NI Act. [Para 45]

Negotiable Instruments Act, 1881 – ss.7, 138 and 141 – Whether authorized signatory of a company falls within the ambit of the expression “drawer”:

Held: Corporate persons like companies, which are mere legal entities and have no soul, mind or limb to work physically, discharge their functions through some human agency recognised under the law to work – Therefore, if some function is discharged by such human agency for and on behalf of the company it would be an act of the company and not attributable to such human agent – One such instance of discharge of functions could be the authority to manage the bank accounts of the company, issue and sign cheques on its behalf, etc. which may be delegated to an authorised signatory – However, such authorisation would not render the authorised signatory as the maker of those cheques – It is the company alone which would continue to be the maker of these cheques, and thus also the drawer within the meaning of Section 7 of the NI Act – The authorised signatory is merely the physical limb that signs and makes the cheque on behalf of the company’s incorporeal personality – The company, for all purposes, continues to remain the drawer of the cheques. [Paras 45, 46] Negotiable Instruments Act, 1881 – Cheque drawn upon a joint account – Liability upon account holders of a joint account – Discussed:

Held: A company vis-à-vis its authorised signatory stands on a completely different footing as compared to account holders of a joint account – In the former, it is only the company which holds an account with the banker, whereas in the latter, each joint account holder can be said to hold an account with the banker – Thus, while in the case of a cheque drawn on the account of the company the authorised signatory cannot be held to be the drawer, in the case of a cheque drawn upon a joint account, each account holder affixing his signature to the cheque may be said to have drawn such a cheque. [Para 47]

Negotiable Instruments Act, 1881 – s.138 – “any debt or other liability” appearing in s.138 of the Act – Scope of: Held: Section 138 of the NI Act does not envisage that only those cases where a cheque issued towards the discharge of the personal liability of the drawer towards the payee gets dishonoured would come within the ambit of the provision – The expression “of any debt or other liability” appearing in Section 138 when read with the Explanation to the provision is wide enough to bring any debt or liability which is legally enforceable within its fold – Thus, the requirement under the provision is that the debt or any other liability has to be legally enforceable and the emphasis is not on the existence of such debt or other liability between the drawer and the payee – Even those cases where a person assumes the responsibility of discharging the debt of some other person, and in furtherance thereof draws a cheque on an account maintained by him, which subsequently gets dishonoured upon being presented before the drawee, would be covered by Section 138 if the payee is able to establish that there was some sort of an arrangement by way of which the debt was assumed by the drawer. [Para 52]