Anil Sachar & Anr.
Vs. M/s. Shree Nath Spinners P.Ltd. & Ors. etc.
J U D G M E N T
ANIL R. DAVE, J.
aggrieved by the common Judgment delivered in Criminal Appeal Nos.379-MA of 2007
and 381-MA of 2007 dated 16th December, 2008 by the High Court of Punjab and
Haryana at Chandigarh, the original complainants have filed these appeals. By
virtue of the aforestated judgment and order, the High Court has confirmed the
Orders dated 4th May, 2007 passed in Criminal Complaint Nos. 46 and 299 of 1999
by the Judicial Magistrate, First Class, Ludhiana whereby the accused in the
aforestated complaints had been acquitted of the charges levelled against them.
facts leading to the present litigation in a nut shell are as under:
23rd February, 1999, Respondent no.4 - Munish Jain, a Director of M/s. A.T. Overseas
Ltd. had given in all four cheques for different amounts to Anil Sachar, partner
of M/s. Rati Woolen Mills who are appellant Nos. 1 and 2 respectively. According
to the case of the complainants, the said cheques were given to M/s. Rati
Woolen Mills, of which appellant no.1 is a partner, in consideration of supply
of goods to M/s. Shree Nath Spinners Pvt. Ltd.
aforestated cheques, which had been given by Munish Jain as Director of M/s.
A.T. Overseas Ltd., had not been honoured and due to dishonour of the said cheques,
the complainant, namely, Anil Sachar, as a partner of M/s. Rati Woolen Mills had
issued notice as required under the provisions of Section 138 of the Negotiable
Instruments Act (hereinafter referred to as `the Act'). In spite of the said notice,
the complainant was not paid the amount covered under the aforestated cheques
and, therefore, complaints had been filed against the present respondents.
case of the present respondents before the trial court as well as before the High
Court was that the dispute was of a civil nature and with an oblique motive it was
given a colour of criminal litigation. The said reply had been given especially
in view of the fact that the complaint had also been filed making out a case
against the accused under the provisions of Sections 406 & 420 of the
Indian Penal Code.
case of the complainants was that M/s. A.T. Overseas Ltd. is a sister concern of
M/s. Shree Nath Spinners Pvt. Ltd. and the aforestated cheques were given by Munish
Jain towards dues of M/s. Shree Nath Spinners Pvt. Ltd. as a Director of M/s.
A.T. Overseas Ltd. After considering the evidence adduced and the arguments
made before the trial court, the trial court acquitted the accused for the reason
that the goods had been supplied by the complainants to M/s. Shree Nath Spinners
Pvt. Ltd. and the cheques had not been given by M/s. Shree Nath Spinners Pvt.
Ltd. but they had been given by M/s. A.T. Overseas Ltd. As M/s. Shree Nath Spinners
Pvt. Ltd. and M/s. A.T. Overseas Ltd. are two different legal entities and as there
was nothing on record to show that the cheques were given by M/s. A.T. Overseas
Ltd. in consideration of goods supplied by the complainants to M/s. Shree Nath
Spinners Pvt. Ltd., the conclusion was that there was no liability of M/s. A.T.
Overseas Ltd. and, therefore, dishonour of the aforestated cheques would not
make signatory of the cheques from the account of M/s. A.T. Overseas Ltd. liable
under the provisions of the Act.
aggrieved by the orders passed by the learned Judicial Magistrate, First Class,
Ludhiana, dated 4th May, 2007, criminal appeals were filed before the High Court
of Punjab and Haryana at Chandigarh, but the said appeals have been dismissed and,
therefore, the original complainants have approached this Court by way of these
may be noted here that during the pendency of the proceedings, Mohinder Jain, accused/respondent
no.3 expired and, therefore, deleted from the array of parties.
Nidhesh Gupta, learned Senior Counsel appearing for the complainants mainly submitted
that the learned Judicial Magistrate as well as the High Court committed an error
by acquitting the accused simply because the goods had been supplied to M/s.
Shree Nath Spinners Pvt. Ltd. whereas the cheques were given by M/s. A.T. Overseas
Ltd. He submitted that both the concerns, referred to hereinabove, are sister
concerns having common Directors and, therefore, the courts below ought to have
lifted the corporate veil so as to find out the realities. He also submitted
that Munish Jain, who had signed the aforesaid cheques was Director in both the
sister concerns viz. M/s. Shree Nath Spinners Pvt. Ltd. and M/s. A.T. Overseas
Ltd. Moreover, he submitted that once the cheques had been issued by the accused,
as per provisions of Section 139 of the Act, burden was on the accused to show that
there was no consideration. So as to substantiate his aforestated submission, the
learned counsel relied upon the Judgments delivered by this Court in ICDS Ltd. v.
Beena Shabeer and Anr. [2002(6) SCC 426], K.K. Ahuja v. V.K. Vora and Anr., [2009(10)
SCC 48] and K.N. Beena v. Muniy appan and Anr. [2001(8) SCC 458].
the aforestated reasons, the learned counsel strenuously submitted that the High
Court had erred in confirming the orders of acquittal because upon lifting the corporate
veil, the correct position could have been revealed and the correct position according
to the learned counsel was that the cheques had been given by a sister concern,
namely, M/s. A.T. Overseas Ltd. in consideration of the goods supplied to M/s
Shree Nath Spinners Pvt. Ltd. The learned counsel also drew our attention to the
fact that there were several inter se transactions between the above-named two sister
concerns and, therefore, the courts below ought to have believed that the 6payment
had been made by one company for another company and the courts below ought to have
believed that there was a consideration behind issuance of the aforestated two
cheques. He also draw our attention to the relevant evidence which was adduced
by the complainants to establish the aforestated facts.
the other hand, the learned counsel appearing for the respondents supported the
reasons recorded by the courts below while acquitting the accused. He mainly submitted
that the cheques had been issued by M/s. A.T. Overseas Ltd. to whom no goods
had been supplied by the complainants and, therefore, there was no consideration.
In absence of any consideration, according to the learned counsel, the accused could
not have been held guilty and, therefore, the courts below rightly acquitted
The learned counsel
relied upon the judgments delivered in Indowind Energy Ltd. v. Wescare (India)
Ltd. and Anr. [2010(5) SCC 306] and in Rahul Builders v. Arihant Fertilizers &
Chemicals and Anr. [2008(2) SCC 321]. According to him, even if two companies are
having common Directors, both companies would remain different legal entities
and, therefore, the submission made on behalf of the appellants that both the companies
are sister concerns and, therefore, one company should be made liable for the dues
of another company cannot be sustained. He further submitted that there was
nothing to substantiate the submission that M/s. A.T. Overseas Ltd. had made
payment in consideration of goods supplied to M/s. Shree Nath Spinners Pvt. Ltd.
He, therefore, submitted that the appeals be dismissed.
hearing the learned counsel appearing for the parties and upon perusal of the record
pertaining to the cases and the impugned judgment delivered by the High Court
confirming the order passed by the trial court and upon considering the judgments
cited by the learned counsel, we are of the view that the decision rendered by
the courts below cannot be sustained.
perusal of the record, we find that the complainants had established before the
trial court that there was an understanding among the complainants and the
accused that in consideration of supply of goods to M/s. Shree Nath Spinners
Pvt. Ltd., M/s. A.T. Overseas Ltd. was to make the payment. The aforestated understanding
was on account of the fact that directors in both the aforestated companies
were common and the aforestated companies were sister concerns. In the circumstances,
it can be very well said and it has been proved that in consideration of supply
of goods to M/s. Shree Nath Spinners Pvt. Ltd., M/s. A.T. Overseas Ltd. had
made the payment. In view of the above fact, in our opinion, the trial court
was 8not right when it came to the conclusion that there was no reason for M/s.
A.T. Overseas Ltd. to give the cheques to the complainants.
The aforestated facts
are very well reflected in the statement made in the complaint and in the evidence
by the complainant which have not been controverted. Paras 2 and 3 of the
complaint are reproduced herein below: "2. That the accused had business
dealings with the complainant and supply of the goods which duly supplied by my
client vide separate bills from time to time which was duly acknowledged by the
accused no. 5 Varun Jain director of the accused no. 1. 3. That in order to
discharge the liability of making the payment, the accused issued following two
cheques in favour of the complainant through their sister concern M/S A.T.
Overseas Ltd. i.e. Accused No. 1 and the cheques were duly signed by Mr. Munish
Jain one of its directors"
trial court materially erred while coming to a conclusion that in criminal law no
presumption can be raised with regard to consideration as no goods had been
supplied by the complainants to M/s. A.T. Overseas Ltd.. The trial court ought to
have considered provisions of Section 139 of the Act, which reads as under:- "139.
Presumption in favour of holder - It shall be presumed, unless the contrary is
proved, that the holder of a cheque received the cheque of the nature referred
to in Section 138 for the discharge, in whole or in part, of any debt or other
to the provisions of the aforestated section, there is a presumption with regard
to consideration when a cheque has been paid by the drawer of the cheque. In the
instant case, M/s. A.T. Overseas Ltd. paid the cheque which had been duly
signed by one of its Directors, namely, Munish Jain. Munish Jain is also a Director
in M/s. Shree Nath Spinners Pvt. Ltd.. As stated hereinabove, both are sister concerns
having common Directors. Extracts of books of accounts had been produced before
the trial court so as to show that both the companies were having several
transactions and the companies used to pay on behalf of each other to other parties
or their creditors.
The above fact
strengthens the presumption to the effect that M/s. A.T. Overseas Ltd. had paid
the cheques to the complainants, which had been signed by Munish Jain, in consideration
of goods supplies to M/s Shree Nath Spinners Pvt. Ltd. Of course, the presumption
referred to in Section 139 is rebuttable. In the instant case, no effort was
made by Munish Jain or any of the Directors of M/s. A.T. Overseas Ltd. for
rebuttal of the aforestated presumption and, therefore, the presumption must go
in favour of the holder of the cheques. Unfortunately, the trial court did not consider
the above facts and came to the conclusion that there was no consideration for
the cheques which had been given by M/s. A.T. Overseas Ltd. to the
is true that a limited company is a separate legal entity and its directors are
different legal persons. In spite of the aforestated legal position, in view of
the provisions of Section 139 of the Act and the understanding which had been
arrived at among the complainants and the accused, one can safely come to a
conclusion that the cheques signed by Munish Jain had been given by M/s. A.T.
Overseas Ltd. to the complainants in discharge of a debt or a liability, which
had been incurred by M/s Shree Nath Spinners Pvt. Ltd.
may also refer to the judgment delivered by this Court in the case of ICDS Ltd.
(supra). In the said judgment this Court has referred to the nature of liability
which is incurred by the one who is a drawer of the cheque. If the cheque is given
towards any liability or debt which might have been incurred even by someone else,
the person who is a drawer of the cheque can be made liable under Section 138 of
the Act. The relevant observation made in the aforestated judgment is as under:
" The words
"any cheque" and "other liability" occurring in Section 138
are the two key expressions which stand as clarifying the legislative intent so
as to bring the factual context within the ambit of the provisions of the statute.
These expressions leave no manner of doubt that for whatever reason it may be, the
liability under Section 138 cannot be avoided in the event the cheque stands
returned by the banker unpaid. Any contra-interpretation would defeat the
intent of the legislature. The High Court got carried away by the issue of
guarantee and guarantor's liability and thus has overlooked the true intent and
purport of Section 138 of the Act. ...... 1 The language, however, has been
rather specific as regard the intent of the legislature.
The commencement of
the section stands with the words "where any cheque". The above noted
three words are of extreme significance, in particular, by reason of the user of
the word "any" - the first three words suggest that in fact for
whatever reason if a cheque is drawn on an account maintained by him with a
banker in favour of another person for the discharge of any debt or other liability,
the highlighted words if read with the first three words at the commencement of
Section 138, leave no manner of doubt that for whatever reason it may be, the liability
under this provision cannot be avoided in the event the same stands returned by
the banker unpaid. The legislature has been careful enough to record not only
discharge in whole or in part of any debt but the same includes other liability
as well. This aspect of the matter has not been appreciated by the High Court,
neither been dealt with or even referred to in the impugned judgment."
to the facts of the case and law on the subject, we are of the view that all
the four cheques referred to in both the complaints are presumed to have been given
for consideration. The presumption under Section 139 of the Act has not been
rebutted by the accused and, therefore, we are of the view that the trial court
wrongly acquitted the accused by taking a view that there was no consideration
for which the cheques were given by Munish Jain to the complainants. The aforesaid
incorrect view was wrongly confirmed by the High Court. We, therefore, set
aside the acquittal order and convict accused Munish Jain under Section 138 of
view of the aforestated facts and legal position, in our opinion, the accused ought
to have been held guilty, especially accused no. 4, Munish Jain who had signed 1all
the cheques for M/s A.T. Overseas Ltd. We, therefore, hold Munish Jain, accused
no. 4 and respondent no. 4 herein, in both the cases guilty of the offence under
Section 138 of the Act.
Munish Jain was acquitted by the trial court and the High Court has confirmed the
acquittal, which is being set aside by this Court by allowing these appeals. In
the circumstances, as per the provisions of Section 235(2) of the Criminal Procedure
Code, this Court will have to give an opportunity of being heard to him on the
question of sentence. We, therefore, adjourn the case to 2.8.2011 for hearing
the accused Manish Jain on the question of sentence. If on that day he fails to
appear before this Court, we shall hear his counsel on the question of
(Dr. MUKUNDAKAM SHARMA)
(ANIL R. DAVE)