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Delhi High Court Affirms Trustees’ Liability Under Section 138 NI Act: Notice to Trust Validly Served Through Trustees

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CASE TITLE – HARPREET SAHNI & ANR. v. SHRICHAND HEMNANI & ORS.

CASE NUMBER – CRL.M.C. 6094/2022 & CRL.M.A. 23877/2022 + CRL.M.C. 6095/2022 & CRL.M.A. 23881/2022 + CRL.M.C. 6096/2022 & CRL.M.A. 23889/2022 + CRL.M.C. 6097/2022 & CRL.M.A. 23894/2022

DATED ON – 15.05.2024

QUORUM – Justice Navin Chawla

FACTS OF THE CASE

These petitions have been filed under Section 482 of the Code of Criminal Procedure, 1973 (in short, ‘Cr.P.C.’) challenging the Order dated 20.12.2019 passed by the learned Metropolitan Magistrate-02 (NI Act), Delhi (hereinafter referred to as the ‘Trial Court’) in Complaint Case No.5505/2019, titled Shrichand Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6094/2022); Complaint case No. 5503/2019 titled Puja Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6095/2022); Complaint case No. 5504/2019 titled Asha Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6096/2022) and Complaint case No. 5501/2019 titled Vinod Hemnani v. Mother’s Pride Punjabi Bagh & Ors. (in CRL.M.C. 6097/2022) (hereinafter collectively referred to as the ‘Complaint Cases’), filed by the Respondents herein, under Section 138 of the Negotiable Instruments Act, 1881 (in short, ‘NI Act’). The above complaint cases have been originally filed by the Respondents herein, making 10 accused including Presidium Eduvision Trust, through its Trustees. In the Complaints, it is averred that somewhere in December, 2014, the respective respondents/complainants had contacted either the accused no.3, that is, Ms.Sudha Gupta, Chairman of Mother’s Pride Punjabi Bagh and Presidium Eduvision Trust or/and the accused no.2, that is, Presidium Eduvision Trust, through its trustees, for admission of the child in the school of Mother’s Pride Educational Institute Pvt. Ltd.. It was alleged that the accused nos.3 to 10 came in contact with the respondents and the family members, and represented and assured them about their position, inter alia, in the accused no.2, that is, Presidium Eduvision Trust, and also claimed about their relationship with the Mother’s Pride Educational Institute Pvt. Ltd.. It is alleged that based on their representation, the Respondents have allegedly extended loans to the accused, in the joint name of accused no.1-Mother’s Pride Punjabi Bagh and the accused no.2-Presidium Eduvision Trust. It is alleged that the accused were to pay interest at the rate of 19.5% per annum on the loan amount for the period of the loan. It is alleged that till the month of June, 2018, accused nos.1 to 10 paid interest on the said loan, however, thereafter they defaulted in payment of interest. It is claimed that on 01.12.2018, when the Respondents deposited the cheques issued by the accused nos.1 to 10 for repayment of the loan, the same were dishonoured with the remark „Funds Insufficient‟. It is averred that the Respondents thereafter issued respective legal notices dated 28.01.2019 to the accused nos.1 to 10 to repay the cheques amount, however, the same was not paid. The Respondents in the original complaints also pleaded and made similar allegations.

 

LEGAL PROVISIONS

Section 319 of the Criminal Procedure Code, 1973, deals with powers prescribes to the court to take action against someone who wasn’t originally named as an accused in the chargesheet.

Section 482 of the Criminal Procedure Code, 1973, deals with the Inherent Powers prescribes to the High Courts, which states the High Court has by its very nature, independent of any specific provision in the CrPC.

Section 138 of the Negotiable Instruments Act, 1881, deals with the situation such as when a cheque issued by someone (drawer) bounces because there aren’t enough funds in their account to cover the amount.

Section 141 of the Negotiable Instruments Act, 1881, deals with offences by companies related to negotiable instruments, most commonly cheques, where it assigns liability for cheque dishonorment offences by companies to specific individuals within the company.

Section 142 of the Negotiable Instruments Act, 1881, deals with how courts handle complaints regarding bounced cheques, which are covered under Section 138 of the Act.

 

CONTENTIONS BY THE PETITIONER

The Learned Counsel for the Petitioners argued that for maintainability of a complaint under Section 138 of the NI Act read with Section 142 of the NI Act, service of notice under Proviso (b) to Section 138 of the NI Act on the accused is mandatory. He also submitted that in the Complaint Cases, admittedly, the alleged demand notice dated 28.01.2019 was not addressed to the Petitioners in their individual capacity. He argued that, therefore, the complaints against the petitioners are not maintainable and the petitioners cannot be summoned in the same. The Learned Counsel further stated that merely by amending the complaints and now, in the relevant paragraphs, making averments against inter alia the Petitioners, and by merely changing the number of the accused, the Respondents cannot be said to have satisfied the requirements of Section 141 of the NI Act. He submits that, therefore, even otherwise the Complaint Cases, as against the Petitioners, are liable to be dismissed.

CONTENTIONS BY THE RESPONDENTS

The Learned Counsel for the Respondents submitted that the Trust (the accused no.2 in the Complaint Cases) had been issued the legal/demand notice dated 28.01.2019, to be served through its Trustees. The Respondents were not aware of the Trustees of the said Trust till the deposition of the official of the Axis Bank. He submitted that though the Respondents had dealt with the Petitioners, they were not aware of their status as Trustees of the accused no. 2. He also argued that the notice addressed to the Trust through its Trustees is sufficient notice to the Trustees themselves in their individual capacity as well.

The Learned Counsel argued that once it was discovered that the Petitioners are the Trustees of the accused no.2 Trust and are also alleged to be involved in the alleged transactions with the Respondents, they are liable to be proceeded against, in terms of Section 141 of the NI Act. He stated that the purpose of Section 319 of the Cr. P.C. is to address such a situation.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court viewed that Proviso (b) to Section 138 of the NI Act read with Section 142 of the NI Act shows that for the maintainability of a complaint for an offence under Section 138 of the NI Act, the payee or the holder in due course of the cheque, as the case may be, should make a demand for the payment of the said amount of money by giving a notice in writing ‘to the drawer of the cheque’ within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The notice, therefore, is to be given ‘to the drawer of the cheque’. Section 7 of the NI Act defines the term ‘drawer’ as the maker of the bill of exchange or cheque. And in the present cases, the cheques are drawn by the accused no.2 Trust. It is, therefore, the ‘drawer of the cheques’. The notice has, admittedly, been issued to the ‘drawer’, that is, the accused no.2- Trust. The same has been addressed to be served on the drawer/Trust through its Trustees. Presently, it is not disputed by the petitioners that they are the Trustees of the accused No.2-Trust. And also noticed that Section 141 of the NI Act states that for the purpose of Section 141 of the NI Act, the term ‘company’ means any body corporate and includes a firm or other association of individuals. It is not disputed by the petitioners that a Trust will be covered by the above definition of the term ‘company’ and, therefore, the Trustees would be persons who would be responsible to the Trust for the conduct of its business and be in-charge of its business and, therefore, deemed to be guilty of the offence under Section 138 of the NI Act. The Notice having been served on the Trust through its Trustees, all the Trustees are deemed to have been duly served with the legal/demand notices, thereby meeting the requirement of Proviso (b) to Section 138 of the NI Act. And as far as the plea of the Learned Counsel for the Petitioners that the Respondent has merely changed the number of the accused in the complaints and there is a lack of necessary pleadings in the complaint cases in this regard, for which the Court found no merit in the same.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Power to record additional evidence should only be exercised when the party was prevented from presenting the evidence in the trial: Supreme Court

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Case title: Ajitsinh Chehuji Rathod vs State of Gujarat & Anr.

Case no.: SLP(Crl.) No(s). 16641 of 2023

Decided on: 29.01.2024

Quorum: Hon’ble Justice B.R Gavai, Hon’ble Justice Sandeep Mehta

FACTS OF THE CASE:

The current SLP appeal is based on a Gujarat High Court order. The appellant was charged with violating Section 138 of the Negotiable Instruments Act, 1881, alleging that a cheque in the amount of Rs. 10 lakhs issued by the appellant in favour of the complainant Shri Mahadevsinh Cahndaasinh Champavat was dishonoured “for insufficient funds and account dormant” when presented in the bank.

During the trial, the appellant filed an application with the learned trial Court requesting that the cheque be sent to a handwriting expert for comparison of the handwriting and signature appearing on it, claiming that his signatures had been forged on the cheque in question. The trial Court denied the application and convicted the appellant. On appeal, the high court rejected and upheld the conviction. As a result, the Supreme Court is hearing the appeal.

LEGAL PROVISIONS:

The appellant filed the appeal with an application under Section 391 CrPC. According to Section 391 of the CrPC, the power to record additional evidence should only be exercised when the party making such request was prevented from presenting the evidence in the trial despite due diligence, or when the facts giving rise to such prayer were discovered at a later stage during the pendency of the appeal and that non-recording of such evidence may result in the failure of justice.

The NI Act’s Section 118 Subclause (e) clearly presumes that endorsements made on a negotiable instrument are made in the order that they appear on the document. Therefore, the holder of the disputed cheque, who is the complainant in this instance, benefits from the presumption that the endorsements on it are authentic.

APPELLANTS CONTENTIONS:

After comparing the admitted signature of the accused appellant with the signature on the disputed cheque, the appellant filed an application to have the handwriting expert’s opinion. In the aforementioned application, there was also a request to summon the relevant Post Office officer in order to support the defence’s argument that the accused appellant never received the notice required by Section 138 of the NI Act.

COURT ANALYSIS AND JUDGEMENT:

The court ruled that a certified copy of a bank-issued document is admissible under the Bankers’ Books Evidence Act of 1891 even without any formal proof. Thus, we believe that if the appellant wanted to prove that the signatures on the cheque issued from his account were not genuine, he could have obtained a certified copy of his specimen signatures from the Bank and made a request to summon the concerned Bank official in defence to give evidence about the genuineness or otherwise of the signature on the cheque.

The court stated that, despite having the opportunity, the accused appellant did not question the bank official examined in defence to establish his plea of purported mismatch of signature on the cheque in question, and thus, they are of the firm opinion that the appellate Court was not required to come to the appellant’s aid and assistance in collecting defence evidence at his behest. The presumptions under the NI Act, while rebuttable, work in favour of the complainant. As a result, it is up to the accused to rebut such presumptions by presenting appropriate defence evidence, and the Court cannot be expected to assist the accused in gathering evidence on his behalf. Consequently, the appeal was dismissed.

 

 

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Written by – Surya Venkata Sujith

 

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