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Orissa High Court
Soumen Chaudhry And vs Sriniwas Gupta And ……. Opposite … on 10 April, 2025
THE HIGH COURT OF ORISSA AT CUTTACK
CRLMC No. 1452 of 2017
(In the matter of an application under Section 482 of the Criminal
Procedure Code, 1973)
Soumen Chaudhry and ....... Petitioners
another
-Versus-
Sriniwas Gupta and ....... Opposite Parties
others
For the Petitioners : Mr. A.C. Pradhan,
Senior Advocate
For the Opp. Parties : Mr. Gokul Parida, Advocate
(For O.P. No.1)
CORAM:
THE HONOURABLE SHRI JUSTICE SIBO SANKAR MISHRA
Date of Hearing: 13.03.2025 Date of Judgment: 10.04.2025
S.S. Mishra, J. In the present petition, the petitioners have
challenged the order of cognizance dated 27.11.2015 passed in
I.C.C No.896 of 2014 by the learned S.D.J.M. (S), Cuttack on the
alleged commission of the offence punishable under Section 138 of
the N.I. Act initiated by opposite party no.1 on the allegation of
having dishonored of the cheque on presentation issued by the
petitioners.
Page 1 of 16
2. Heard Mr. A.C. Pradhan, learned Senior Counsel for the
petitioners and Mr. Gokul Parida, learned Counsel for the opposite
party no.1.
3. The opposite party no.1 filed four different complaint cases
impleading as many as 12 accused persons in each of the complaint.
Petitioner no.1 has been impleaded as accused no.10, whereas the
petitioner no.2 has been arrayed as accused no.8 in all the complaint
cases.
4. The facts of the present case are that the petitioners claiming
themselves as the Founder and Director of the International Institute
of Planning and Management Private Limited, having its Regd.
Office at 48, Level-11, Community Centre, Naraina Vihar,
Industrial Area, Phase-1, New Delhi-28 made an agreement on
13.03.2009 with the complainant and their co-sharer for monthly
rent/tenancy basis to use the premises of the complainant for
academic/educational institute and/or corporate office of IIPM or
any other business directly or indirectly related to the business of
the accused persons. The aforesaid agreement was executed by the
accused no.4, who is the Director and authorized signatory of the
IIPM. It is pertinent to the mention here that in latter part of 2011,
the accused persons have defaulted in payment of the rent as per the
agreement dated 13.03.2009 and after due discussions with the
Page 2 of 16
accused persons, the accused nos.7 and 8 had issued the cheque
bearing no. 123253 dated 30.04.2014 amounting to Rs.9,00,000/-
(Rupees Nine Lakhs) drawn on IDBI Bank Limited, Prakash House,
1-Mahipalpur, New Delhi-37 in favour of the complainant for part
payment of the debt/outstanding rent of IIPM. The accused nos.1, 2
and 9 are the Companies and other accused persons are the
Directors and accused no.12 is the Secretary of accused no.9-
company and are in-charge and responsible for the conduct of the
business of the company at the relevant time. They have actively
participated in the day to day business of the company. Thereafter,
the complainant presented the cheque in its account maintained in
Axis Bank, Cuttack Branch for clearance, but the cheque was
returned unpaid/dishonoured on account of reasons "funds
insufficient" on 06.06.2014, which was communicated to the
complainant by his banker on 10.06.2014. The complainant after
receipt of the intimation from his Banker about dishonour of the
cheque, issued a lawyer notice to the accused persons in their
correct address on 27.06.2014 regarding dishonoured of cheque
bearing no.123253 of Rs.9,00,000/- (Rupees Nine Lakhs)requesting
them to make payment within a period of 15 days. Though the
lawyer notice was issued to the accused persons in their correct
addresses and has been served on them on 27.06.2014 and
Page 3 of 16
28.06.2014, but the accused persons have failed to make payment of
the aforesaid cheque amount. The said cheque was issued by the
accused persons for discharge of their legally enforceable debt and
liability arising out of tenancy rent/commercial transaction with the
complainant. Therefore, the complainant instituted the criminal
complaint against the accused persons under Section 138 of N.I.
Act.
5. The statutory notice has been issued under Section 138 (b) of
N.I. Act by opposite party no.1-complainant admitted to have been
not reciprocated by the accused persons. Therefore, on different
dates the opposite party no.1 has filed the complaint cases. The trial
court, vide order dated 27.11.2015 has taken the cognizance of the
offence U/s 138 of the N.I. Act and issued process, the impugned
order reads thus:-
"The case record is put up today on the strength of advance
petition filed by the counsel for the complainant. Court fee
worth of Rs. 1000/- and I/D of complainant has already been
filed and also files a memo with original documents. Hence Put
up later for order.
Later:
The case record is put up today for order. Perused the complt
petition and initial statement of complt in shape of affidavit
along with all original documents filed by the complt from
which it reveals that there is a prima facie material against
accused u/s. 138 of NI Act is made out. Hence cognizance of
offence u/s. 138 of NI Act is taken. As there is sufficient material
to proceed against the accused persons No. 7 to No. 12. Complt
is directed to file requisite with three days. Put up on 6.1.16 for
appearance of accused. As there is no sufficient material to
proceed against the accused persons No.1 to 6. So no provision
can be issued against the accused persons No.1 to 6."
Page 4 of 16
By the impugned order the learned SDJM has taken
cognizance of the offence under Section 138 of the N.I. Act only
against accused persons no.7 to 12, while refraining from taking
cognizance against accused persons no. 1 to 6. The rationale behind
this distinction appears to be that accused nos.1 to 6 include the
institution, IIPM, and individuals associated with it, who had merely
taken the premises on lease and subsequently defaulted on rent
payment. However, accused persons no.7 to 12 comprise a company
and its associated individuals who were directly involved in the
issuance of the dishonoured cheque. It is contended in the complaint
that on the basis of settlement, the cheque was issued.
Consequently, the learned SDJM upon finding sufficient material
only against accused nos.7 to 12 proceeded to take cognizance
against them, while declining to do so against accused nos.1 to 6 for
lack of requisite material. The present petition has been filed by
accused No.8 and 10.
6. It is pertinent to mention here that the present petitioners who
have come before this Court assailing the order of cognizance are
majorly related to the company which has issued the cheque in
subject. The Petitioner no.1 who has been impleaded as accused
no.10 in the instant case happens to be the Director of the company
Page 5 of 16
who has issued the cheque and petitioner no.2 who has been arrayed
as accused no.8 in this instant case happens to be the authorized
signatory for the company, who has signed the cheque in subject.
7. Mr. Pradhan, the learned Senior Counsel for the petitioners
submits that, the petitioners have no direct liability to the
complainant. There is no documentary evidence to establish that the
petitioners took over the responsibility for paying the due rent by
the International Institute of Planning and Management Private
Limited (IIPM). The petitioners, according to the Senior Counsel,
have not executed any agreement or signed any document binding
them personally to discharge the debts or liabilities incurred by the
principal Company. The petitioners, as Directors and authorized
signatories of a separate Company, are being unjustly roped into the
proceedings without any concrete evidence or specific averments
that would establish their personal involvement to recover the
liability. The learned Senior Counsel, therefore, prays that the
petitioners be discharged from any liability, and the present criminal
proceedings under Section 138 of the Negotiable Instruments Act
(N.I. Act) against them be quashed.
8. Learned Senior Counsel, Mr Pradhan to substantiate his claim
relied upon the judgment of the Hon'ble Supreme Court in Pooja
Page 6 of 16
Ravinder Devidasani v. State of Maharashtra,1 relevant part of
which is reproduced as under:
"17. There is no dispute that the appellant, who was wife
of the Managing Director, was appointed as a Director of the
Company--M/s Elite International (P) Ltd. on 1-7-2004 and
had also executed a letter of guarantee on 19-1-2005. The
cheques in question were issued during April 2008 to
September 2008. So far as the dishonour of cheques is
concerned, admittedly the cheques were not signed by the
appellant. There is also no dispute that the appellant was not
the Managing Director but only a non-executive Director of
the Company. Non-executive Director is no doubt a custodian
of the governance of the company but is not involved in the
day-to-day affairs of the running of its business and only
monitors the executive activity. To fasten vicarious liability
under Section 141 of the Act on a person, at the material time
that person shall have been at the helm of affairs of the
company, one who actively looks after the day-to-day
activities of the company and is particularly responsible for
the conduct of its business. Simply because a person is a
Director of a company, does not make him liable under the
NI Act. Every person connected with the Company will not
fall into the ambit of the provision. Time and again, it has
been asserted by this Court that only those persons who were
in charge of and responsible for the conduct of the business
of the Company at the time of commission of an offence will
be liable for criminal action. A Director, who was not in
charge of and was not responsible for the conduct of the
business of the Company at the relevant time, will not be
liable for an offence under Section 141 of the NI Act.
In National Small Industries Corpn. [National Small
Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3
SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri)
1113] this Court observed: (SCC p. 336, paras 13-14)
"13. Section 141 is a penal provision creating vicarious
liability, and which, as per settled law, must be strictly
construed. It is therefore, not sufficient to make a bald
cursory statement in a complaint that the Director (arrayed
as an accused) is in charge of and responsible to the
company for the conduct of the business of the
company without anything more as to the role of the
Director. But the complaint should spell out as to how and in
what manner Respondent 1 was in charge of or was
1
(2014) 16 SCC 1
Page 7 of 16
responsible to the accused Company for the conduct of its
business. This is in consonance with strict interpretation of
penal statutes, especially, where such statutes create
vicarious liability.
14. A company may have a number of Directors and to
make any or all the Directors as accused in a complaint
merely on the basis of a statement that they are in charge of
and responsible for the conduct of the business of the
company without anything more is not a sufficient or
adequate fulfilment of the requirements under Section 141."
18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal
Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri)
279 : AIR 1971 SC 2162] , this Court observed that a person
"in charge of a business" means that the person should be in
overall control of the day-to-day business of the Company.
19. A Director of a company is liable to be convicted for
an offence committed by the company if he/she was in charge
of and was responsible to the company for the conduct of its
business or if it is proved that the offence was committed with
the consent or connivance of, or was attributable to any
negligence on the part of the Director concerned (see State of
Karnataka v. Pratap Chand [State of Karnataka v. Pratap
Chand, (1981) 2 SCC 335 : 1981 SCC (Cri) 453] ).
20. In other words, the law laid down by this Court is that
for making a Director of a company liable for the offences
committed by the company under Section 141 of the NI
Act, there must be specific averments against the Director
showing as to how and in what manner the Director was
responsible for the conduct of the business of the company.
21. In Sabitha Ramamurthy v. R.B.S.
Channabasavaradhya [Sabitha Ramamurthy v. R.B.S.
Channabasavaradhya, (2006) 10 SCC 581 : (2007) 1 SCC
(Cri) 621] , it was held by this Court that: (SCC pp. 584-85,
para 7)
"7. ... it is not necessary for the complainant to
specifically reproduce the wordings of the section but
what is required is a clear statement of fact so as to enable
the court to arrive at a prima facie opinion that the
accused is vicariously liable. Section 141 raises a legal
fiction. By reason of the said provision, a person although
is not personally liable for commission of such an offence
would be vicariously liable therefor. Such vicarious
liability can be inferred so far as a company registered or
incorporated under the Companies Act, 1956 is concerned
only if the requisite statements, which are required to be
averred in the complaint petition, are made so as to make
the accused therein vicariously liable for the offence
committed by the company."
Page 8 of 16
By verbatim reproducing the words of the section without a
clear statement of fact supported by proper evidence, so as to
make the accused vicariously liable, is a ground for quashing
proceedings initiated against such person under Section 141
of the NI Act."
In support of the petitioners' claim, the learned Senior
Counsel, Mr. Pradhan, in light of the above judgement contended
that merely being a Director does not by itself create liability under
the N.I. Act, unless there are specific averments in the complaint
demonstrating that the person was directly responsible for the
conduct of day to day business that led to the issuance and
dishonour of the cheque. In the present case, the petitioners were
Director and Authorized Signatory of Centre for Vocational and
Entrepreneurship Studies (The organization that issued the cheque
on behalf of IIPM), but there is no material on record to show that
they played any role in the transaction that led to the dishonour of
the cheque or they have taken over the liability of IIPM. The
Supreme Court has consistently held that vague and general
statements without clear factual backing are insufficient to fasten
criminal liability. The learned Senior Counsel submits that in the
absence of any specific averment alleging the petitioners' direct
involvement, the proceedings against them are liable to be quashed.
9. Besides that the learned Senior Counsel also places reliance
on the detailed principle regarding the enforcement of the vicarious
Page 9 of 16
liability as enunciated by the Hon'ble Apex Court in the judgement
of National Small Industries Corpn. Ltd. v. Harmeet Singh
Paintal2, wherein the Hon'ble Court held as under:
"39. From the above discussion, the following principles
emerge:
(i) The primary responsibility is on the complainant to make
specific averments as are required under the law in the
complaint so as to make the accused vicariously liable. For
fastening the criminal liability, there is no presumption that
every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the
offence. The criminal liability can be fastened only on those
who, at the time of the commission of the offence, were in
charge of and were responsible for the conduct of the business
of the company.
(iii) Vicarious liability can be inferred against a company
registered or incorporated under the Companies Act, 1956
only if the requisite statements, which are required to be
averred in the complaint/petition, are made so as to make the
accused therein vicariously liable for offence committed by
the company along with averments in the petition containing
that the accused were in charge of and responsible for the
business of the company and by virtue of their position they
are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be
pleaded and proved and not inferred.
(v) If the accused is a Managing Director or a Joint
Managing Director then it is not necessary to make specific
averment in the complaint and by virtue of their position they
are liable to be proceeded with.
(vi) If the accused is a Director or an officer of a company
who signed the cheques on behalf of the company then also it
is not necessary to make specific averment in the complaint.
(vii) The person sought to be made liable should be in
charge of and responsible for the conduct of the business of
the company at the relevant time. This has to be averred as a
fact as there is no deemed liability of a Director in such
cases."
2
(2010) 3 SCC 330
Page 10 of 16
He has submitted that the principles laid down by the Hon'ble
Supreme Court in the aforementioned judgement clearly outlined
the conditions under which liability can be fastened upon the
accused. In this context, it is crucial to emphasize that the
complainant must make specific averments in the complaint to
establish the involvement of the accused in the offence. It is not
sufficient for the complainant to rely on general presumptions, but
must ensure that the accused's role in the transaction is clearly
articulated. As pointed out in the judgment, the complainant must
specify that the accused were in charge of and responsible for the
business of the company which owes the liability at the relevant
time.
Additionally, the learned Senior Counsel highlighted that liability
can only be inferred where the accused held the positions in the
company that inherently entail responsibility for the conduct of the
company's affairs. This includes, but not limits to the persons such
as the Managing Director, Joint Managing Director, and Directors
or officers who directly handle Company operations, such as
signing cheques etc. Such positions in the Company automatically
entail them to potential liability without the need for additional
Page 11 of 16
averments in the complaint, provided their responsibility for the
business is clearly established.
10. On the contrary, Mr. Parida, learned counsel for the opposite
party No.1, vehemently opposed the claims made by the petitioners,
asserting that the matter is still pending trial. He contended that the
question of the petitioners' involvement in the transaction remains
unresolved and can only be determined through the rigors of the
trial. It is yet to be ascertained whether the company that issued the
cheque had a direct relationship with the institution that leased the
building on rent and whether a legally enforceable debt truly exists.
In light of these uncertainties, he argues that any interference by this
Court at this stage would be premature and unwarranted, as it would
disrupt the due process of trial and result in a miscarriage of justice.
11. In this context, it would be apt to rely on the judgement of the
Hon'ble Supreme Court in Rajesh Jain v. Ajay Singh3, in which it
was held thus:-
"33. The NI Act provides for two presumptions : Section 118
and Section 139. Section 118 of the Act inter alia directs that
it shall be presumed, until the contrary is proved, that every
negotiable instrument was made or drawn for consideration.
Section 139 of the Act stipulates that "unless the contrary is
proved, it shall be presumed, that the holder of the cheque
received the cheque, for the discharge of, whole or part of any
debt or liability". It will be seen that the "presumed fact"
3
(2023) 10 SCC 148
Page 12 of 16
directly relates to one of the crucial ingredients necessary to
sustain a conviction under Section 138. [The rules discussed
hereinbelow are common to both the presumptions under
Section 139 and Section 118 and are hence, not repeated--
reference to one can be taken as reference to another]
34. Section 139 of the NI Act, which takes the form of a "shall
presume" clause is illustrative of a presumption of law.
Because Section 139 requires that the Court "shall presume"
the fact stated therein, it is obligatory on the Court to raise
this presumption in every case where the factual basis for the
raising of the presumption had been established. But this does
not preclude the person against whom the presumption is
drawn from rebutting it and proving the contrary as is clear
from the use of the phrase "unless the contrary is proved".
35. The Court will necessarily presume that the cheque had
been issued towards discharge of a legally enforceable
debt/liability in two circumstances. Firstly, when the drawer
of the cheque admits issuance/execution of the cheque
and secondly, in the event where the complainant proves that
cheque was issued/executed in his favour by the drawer. The
circumstances set out above form the fact(s) which bring
about the activation of the presumptive clause. [Bharat Barrel
& Drum Mfg. Co. v. Amin Chand Payrelal [Bharat Barrel &
Drum Mfg. Co. v. Amin Chand Payrelal, (1999) 3 SCC 35] ]"
In the above case, the Supreme Court's ruling clarifies that the
conditions under which the presumption under Section 139 of the
N.I. Act becomes operative. The cheque in question was admittedly
issued by the company of the present petitioners, and significantly,
the petitioners have not responded to the statutory demand notice
issued under Section 138(b) of the N.I. Act. Their failure to refute or
deny any involvement in the transaction through a reply strongly
indicates their role in the issuance of the cheque. Had they played
no part in the alleged transaction, they could have explicitly
disclaimed any liability in response to the demand notice. However,
Page 13 of 16
their silence reinforces the presumption that the cheque was indeed
issued by them towards a legally enforceable debt or liability.
Additionally it would also be apposite to rely on the judgement of
Shiv Kumar v. Ramavtar Agarwal4 in which the Hon'ble Apex
Court held thus: -
"4. Mr Mahesh Jethmalani, learned Senior Counsel
appearing for the appellant contends that the Judicial
Magistrate First Class could have examined the materials
filed along with the complaint and from the materials which
were brought on the record it was clear that there was no
legally enforceable debt, hence there was no case for taking
cognizance of the offence and registering the criminal
complaint. He referred to the agreement dated 21-10-2014
Annexure P-2 between the parties. The learned counsel for the
appellant has also referred to the judgment of the High Court
and specifically paras 23 and 32. The High Court in paras 23
and 32, which has been relied and referred to by the counsel
for the appellant, observed: (Shiv Kumar case [Shiv
Kumar v. Ramavtar Agrawal, 2016 SCC OnLine Chh 2121] ,
SCC OnLine Chh)
"23. The presumption available under Section 139 of the NI
Act has to be rebutted and that rebuttal can only be done after
adducing evidence. This, by itself clearly reflects that the
rebuttal presumption cannot be looked into at the stage of the
Court taking cognizance of the offence and registering the
case: all that Court would have to see is whether there is a
prima facie case made out meeting the conditions precedent
as envisaged under Section 138 of the NI Act, which in the
instant case, in the opinion of this Court, the respondent has
in fact been able to establish and fulfil all such ingredients.
***
32. As has been stated in the preceding paragraphs since
there is a presumption to be drawn of there being a debt or
liability in part or in whole of the drawer to the holder of the
instrument, the court below cannot be said to have faulted
upon in taking cognizance and in registering the offence.
Since it is a rebuttal presumption and all the contentions and
averments made by the counsel for the petitioner being his
4
(2020) 12 SCC 500
Page 14 of 16
defence, it would be open for him to raise all these grounds at
the stage of leading evidence including the defence of
existence of legally enforceable debt or liability. However,
there can be no doubt that at the time of filing of complaint
there was always initial presumption which would be in
favour of the complainant.”
We are in full agreement with the opinion of the High Court
expressed in the abovenoted paragraphs which has been
referred by the learned counsel for the appellant. It is well
settled that the rebuttal can be made with reference to the
evidence of the prosecution as well as of defence.
5. We, thus, at this stage do not find any error in the impugned
judgment [Shiv Kumar v. Ramavtar Agrawal, 2016 SCC
OnLine Chh 2121] of the High Court dismissing the criminal
miscellaneous petition. With these observations, the appeal is
dismissed. However, it shall be open for the appellant to raise
all his pleas before the trial court.”
In light of the judgment in Shiv Kumar v. Ramavtar Agarwal
(supra), it can be safely held the presumption under Section 139 of
the N.I. Act can only be rebutted during the trial by adducing
evidence, and not at the stage of cognizance. The Hon’ble Supreme
Court, while affirming the Chhattisgarh High Court’s decision, has
categorically held that once a complaint under Section 138 of the
N.I. Act satisfies the necessary ingredients, the presumption of a
legally enforceable debt or liability is drawn in favour of the
complainant. Any rebuttal to this presumption must be established
during the trial process through evidence, rather than at the pre-trial
stage.
12. Applying the first principle as discussed above to the present
case, the petitioners’ contention that if legally enforceable debt
Page 15 of 16
existed or not, cannot be considered at this juncture, as such, it can
only be examined during the trial. Since the issuance of the cheque
by the petitioners’ company remains undisputed and there has been
no response to the statutory demand notice, the presumption under
Section 139 of the N.I. Act r/w Section 114 of Evidence Act
operates in favour of the complainant. Moreover, as reiterated in
Shiv Kumar (supra), the trial court is the appropriate forum for the
petitioners to present any defence regarding the absence of a legally
enforceable debt, and any interference at this stage would be
premature and unwarranted.
13. Therefore, in view of the legal principles laid down by the
Hon’ble Supreme Court in Rajesh Jain (supra) and Shiv Kumar
(supra), and considering the petitioners’ failure to rebut the statutory
presumption at this stage, there is no justifiable ground for this
Court to intervene in the ongoing trial. Any challenge to the validity
of the transaction underlying the cheque must be raised and
adjudicated during the trial, as per the well-settled principles
governing the proceedings under Section 138 of the N.I. Act.
14. Accordingly, the CRLMC is dismissed.
Signature Not Verified
Digitally Signed
Signed by: ASHOK KUMAR JAGADEB MOHAPATRA (S.S. Mishra)
Designation: Secretary
Reason: Authentication
Location: High Court of Orissa
Judge
Date: 15-Apr-2025 12:04:14 The High Court of Orissa, Cuttack.
The 10th day of April 2025/Ashok
Page 16 of 16
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