Resignation of Directors and their Liability in Cheque Bounce Cases : The Law

P Sathasivam
Supreme Court of India

The Supreme Court in Anita Malhotra Vs. Apparel Export Promotion Council had the occasion to examine the liability of a director for issuance of a cheque by a Company, in the light of the fact that the said Director had resigned prior to the relevant date of issue. We have already covered a post on the Liability of Directors in Cheque Bounce Cases. The relevant extracts from the judgment are reproduced hereinbelow;

10. Mr. Akhil Sibal by taking us through the relevant provisions of the Companies Act, 1956, particularly, Sections 159, 163 and 610(3) contended that the Annual Return dated 30.09.1999 is a public document and the same is reliable and legally acceptable insofar as the contents of the same are concerned. The said Sections are reproduced hereunder: 

159. Annual return to be made by company having a share capital.— 

(1) Every company having a share capital shall within sixty days from the day on which each of the annual general meetings referred to in section 166 is held, prepare and file with the Registrar a return containing the particulars specified in Part I of Schedule V, as they stood on that day, regarding— 

(a) its registered office, (b) the register of its members, (c) the register of its debenture-holders,  (d) its shares and debentures, (e) its indebtedness, (f) its members and debenture-holders, past and present, and (g) its directors, managing directors, managers and secretaries, past and present: Provided that any of the five immediately preceding returns has given as at the date of the annual general meeting with reference to which it was submitted, the full particulars required as to past and present members and the shares held and transferred by them, the return in question may contain only such of the particulars as relate to persons ceasing to be or becoming members since that date and to shares transferred since that date or to changes as compared with that date in the number of shares held by a member. 

Xxx xxxx" 163. Place of keeping and inspection of, registers and returns.— 

(1) The register of members commencing from the date of the registration of the company, the index of members, the register and index of debenture-holders, and copies of all annual returns prepared under sections 159 and 160, together with the copies of certificates and documents required to be annexed thereto under sections 160 and 161, shall be kept at the registered office of the company: 

Xxx xxxx" 610. Inspection, production and evidence of documents kept by Registrar. Xxxx xxx Xxxx xxx 

(3) A copy of, or extract from, any document kept and registered at any of the officers for the registration of 1companies under this Act, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document." 

11. A reading of the above provisions make it clear that there is a statutory requirement under Section 159 of the Companies Act that every Company having a share capital shall have to file with the Registrar of Companies an annual return which include details of the existing Directors. The provisions of the Companies Act require annual return to be made available by a company for inspection (S. 163) as well as Section 610 which entitles any person to inspect documents kept by the Registrar of Companies. The High Court committed an error in ignoring Section 74 of the Indian Evidence Act, 1872. Sub-section (1) of Section 74 refers to public documents and sub- section (2) provides that public documents include "public records kept in any State of private documents". A conjoint reading of Sections 159, 163 and 610(3) of the Companies Act, 1956 read with sub-section (2) of Section 74 of the Indian Evidence Act, 1872 make it clear that a certified copy of annual return is a public document and the contrary conclusion arrived at by the High Court cannot be sustained. Annual Return dated 30.09.1999 which provides the details about the existing Directors clearly show that the appellant was not a Director at the relevant time. Had the High Court considered the contents of the certified copy of the annual return dated 30.09.1999 filed by the Company which clearly shows that the appellant herein (A3) has not been shown as Director of the Company, it could have quashed the criminal proceedings insofar as A3 is concerned. 

12. In DCM Financial Services Limited vs. J.N. Sareen and Another, (2008) 8 SCC 1, this Court, while considering Sections 138 and 141 of the Act came to the following conclusion which is relevant for our purpose: 

"21. The cheque in question was admittedly a post-dated one. It was signed on 3-4-1995. It was presented only sometime in June 1998. In the meantime the first respondent had resigned from the directorship of the Company. The complaint petition was filed on or about 20-8- 1998. Intimation about his resignation was given to the complainant in writing by the first respondent on several occasions. The appellant was, therefore, aware thereof. Despite having the knowledge, the first respondent was impleaded as one of the accused in the complaint as a Director in charge of the affairs of the Company on the date of commission of the offence, which he was not. If he was proceeded against as a signatory to the cheques, it should have been disclosed before the learned Judge as also the High Court so as to enable him to apply his mind in that behalf. It was not done. Although, therefore, it may be that as an authorised signatory he will be deemed to be person in-charge, in the facts and circumstances of the case, we are of the opinion that the said contention should not be permitted to be raised for the first time before us. A person who had resigned with the knowledge of the complainant in 1996 could not be a person in charge of the Company in 1998 when the cheque was dishonoured. He had no say in the matter of seeing that the cheque is honoured. He could not ask the Company to pay the amount. He as a Director or otherwise could not have been made responsible for payment of the cheque on behalf of the Company or otherwise. [See also Saroj Kumar Poddar v. State (NCT of Delhi), Everest Advertising (P) Ltd. v. State, Govt. of NCT of Delhi and Raghu Lakshminarayanan v. Fine Tubes." 

13. In Harshendra Kumar D. vs. Rebatilata Koley and Others, (2011) 3 SCC 351, while considering the very same provisions coupled with the power of the High Court under Section 482 of the Code of Criminal Procedure, 1973 (in short `the Code') for quashing of the criminal proceedings, this Court held: 

"25. In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstance, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. It is fairly settled now that while exercising inherent jurisdiction under Section 482 or revisional jurisdiction under Section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an appropriate case, if on the face of the documents -- which are beyond suspicion or doubt -- placed by the accused, the accusations against him cannot stand, it would be travesty of justice if the accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the materials which have significant bearing on the matter at prima facie stage." 

As rightly stated so, though it is not proper for the High Court to consider the defence of the accused or conduct a roving enquiry in respect of merit of the accusation, but if on the face of the document which is beyond suspicion or doubt placed by the accused and if it is considered the accusation against her cannot stand, in such a matter, in order to prevent injustice or abuse of process, it is incumbent on the High Court to look into those document/documents which have a bearing on the matter even at the initial stage and grant relief to the person concerned by exercising jurisdiction under Section 482 of the Code. 

14. Inasmuch as the certified copy of the annual return dated 30.09.1999 is a public document, more particularly, in view of the provisions of the Companies Act, 1956 read with Section 74(2) of the Indian Evidence Act, 1872, we hold that the appellant has validly resigned from the Directorship of the Company even in the year 1998 and she cannot be held responsible for the dishonour of the cheques issued in the year 2004. 

15. This Court has repeatedly held that in case of a Director, complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused Company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. [Vide National Small Industries Corporation Limited vs. Harmeet Singh Paintal and Another, (2010) 3 SCC 330]. In the case on hand, particularly, in para 4 of the complaint, except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day to day affairs of the Company. We have verified the averments as regard to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day to day affairs of the Company. On this ground also, the appellant is entitled to succeed.

Related Post 

Liability of Director in Cheque Bounce Cases : The Law

Liability of Director in Cheque Bounce Cases : Principles

Justice P. Sathasivam

Supreme Court of India

The Supreme Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, has examined the provisions of the Negotiable Instruments Act vis-a-vis the liability of a Director for the offences committed by a company for cheque bouncing. While examining the authorities on the topic, the Supreme Court has culled out broad principles for determining the liability of directors in such cases. The relevant extracts from the judgment are reproduced hereinbelow;

9) Section 138 of the Act refers about penalty in case of dishonour of cheque for insufficiency of funds in the account. We are more concerned about Section 141 dealing with offences by Companies which reads as under:- 

141. Offences by companies.--(1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. 

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.-- For the purposes of this section,-- 

(a) `company' means any body corporate and includes a firm or other association of individuals; and 

(b) `director', in relation to a firm, means a partner in the firm. 

It is very clear from the above provision that what is required is that the persons who are sought to be made vicariously liable for a criminal offence under Section 141 should be, at the time the offence was committed, was in-charge of, and was responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. 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. It follows from the fact that if a Director of a Company 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 a criminal offence under the provisions. The liability arises from being in-charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. 

10) 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 No.1 was in-charge of or was 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. 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 fulfillment of the requirements under Section 141. 

11) In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company. 

12) In the light of the above provision and the language used therein, let us, at the foremost, examine the complainta filed by National Small Industries Corporation Limited and the DCM Financial Services Ltd. In the case of National Small Industries Corpn. Ltd., the High Court has reproduced the entire complaint in the impugned order and among other clauses, clause 8 is relevant for our consideration which reads as under: 

8. That the accused No. 2 is the Managing Director and accused No. 3 is the Director of the accused company. The accused No. 2 and 3 are the in-charge and responsible for the conduct of the business of the company accused No. 1 and hence are liable for the offences. 

13) In the case of DCM Financial Services Ltd., in complaint- Annexure-P2 the relevant clause is 13 which reads as under: 

13. That the accused No. 1 is a Company/Firm and the accused Nos. 2 to 9 were in charge and were responsible to the accused No. 1 for the conduct of the business to the accused No. 1 at the time when offence was committed. Hence, the accused Nos. 2 to 9 in addition to the accused No. 1, are liable to be prosecuted and punished in accordance with law by this Hon'ble Court as provided by section 141 of the N.I. Act, 1881. Further the offence has been committed by the accused No. 1 with the consent and connivance of the accused Nos. 2 to 9. 

14) Now, let us consider whether the abovementioned complaint in both cases has satisfied the necessary ingredients to attract Section 141 insofar as the respondents, namely, Directors of the company are concerned. Section 141 of the Act has been interpreted by this Court in various decisions. As to the scope of Section 141 of the Act, a three-Judge Bench of this Court considered the following questions which had been referred to it by a two-Judge Bench of this Court in SMS Pharmaceuticals vs. Neeta Bhalla and Anr. (2005) 8 SCC 89: 

(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company. 

(b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. 

(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against. 

While considering the above questions, this Court held as under: 

18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial. 

19. In view of the above discussion, our answers to the questions posed in the reference are as under: 

(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. 

(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that 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. 

(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141. 

Therefore, this Court has distinguished the case of persons who are in-charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in-charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be in- charge of and was responsible for the conduct and affairs of the company. 

15) In Sabitha Ramamurthy vs. R.B.S. Channabasavaradhya, (2006) 10 SCC 581, this Court while dealing with the same issue observed as under: ......It may be true that 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 are 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. Before a person can be made vicariously liable, strict compliance with the statutory requirements would be insisted. Not only the averments made in para 7 of the complaint petitions do not meet the said statutory requirements, the sworn statement of the witness made by the son of the respondent herein, does not contain any statement that the appellants were in charge of the business of the Company. In a case where the court is required to issue summons which would put the accused to some sort of harassment, the court should insist strict compliance with the statutory requirements. In terms of Section 200 of the Code of Criminal Procedure, the complainant is bound to make statements on oath as to how the offence has been committed and how the accused persons are responsible therefor. In the event, ultimately, the prosecution is found to be frivolous or otherwise mala fide, the court may direct registration of case against the complainant for mala fide prosecution of the accused. The accused would also be entitled to file a suit for damages. The relevant provisions of the Code of Criminal Procedure are required to be construed from the aforementioned point of view. 

16) In Saroj Kumar Poddar vs. State (NCT of Delhi) (2007) 3 SCC 693, while following SMS Pharmaceuticals case (supra) and Sabhita Ramamurthy case (supra), this Court held that with a view to make the Director of a company vicariously liable for the acts of the company, it was obligatory on the part of the complainant to make specific allegations as are required under the law and under Section 141 of the Act and further held that in the absence of such specific averments in the complaint showing as to how and in what manner the Director is liable, the complaint should not be entertained. The relevant portion of the judgment is reproduced hereinbelow:- 

12. A person would be vicariously liable for commission of an offence on the part of a company only in the event the conditions precedent laid down therefor in Section 141 of the Act stand satisfied. For the aforementioned purpose, a strict construction would be necessary. 

13. The purported averments which have been made in the complaint petitions so as to make the appellant vicariously liable for the offence committed by the Company read as under: That Accused 1 is a public limited company incorporated and registered under the Companies Act, 1956, and Accused 2 to 8 are/were its Directors at the relevant time and the said Company is managed by the Board of Directors and they are responsible for and in charge of the conduct and business of the Company, Accused 1. However, cheques referred to in the complaint have been signed by Accused 3 and 8 i.e. Shri K.K. Pilania and Shri N.K. Munjal for and on behalf of Accused 1 Company. 

14. Apart from the Company and the appellant, as noticed hereinbefore, the Managing Director and all other Directors were also made accused. The appellant did not issue any cheque. He, as noticed hereinbefore, had resigned from the directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the Company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in para 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act. 

17) In a subsequent decision in N.K. Wahi vs. Shekhar Singh & Ors., (2007) 9 SCC 481 while following the precedents of SMS Pharmaceuticals's case (supra), Sabhita Ramamurthy's case (supra) and Saroj Kumar Poddar's case (supra), this Court reiterated that for launching a prosecution against the alleged Directors, there must be a specific allegation in the complaint as to the part played by them in the transaction. The relevant portion of the judgment is as under: 

7. This provision clearly shows that so far as the companies are concerned if any offence is committed by it then every person who is a Director or employee of the company is not liable. Only such person would be held liable if at the time when offence is committed he was in charge and was responsible to the company for the conduct of the business of the company as well as the company. Merely being a Director of the company in the absence of above factors will not make him liable. 

8. To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable. 

18) The said issue again came up for consideration before a three-Judge Bench of this Court recently in Ramraj Singh vs. State of M.P. & Anr. (2009) 6 SCC 729. In this case, the earlier decisions were also considered in detail. Following the decisions of SMS Pharmaceuticals' case (supra), Sabhita Ramamurthy's case (supra), Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra) this Court held that it is necessary to specifically aver in a complaint under Section 141 that at the time when the offence was committed, the person accused was in-charge of, and responsible for the conduct of the business of the company. Furthermore, it held that vicarious liability can be attributed only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused/Director therein vicariously liable for the offence committed by the company. It was further held that before a person can be made vicariously liable, strict compliance of the statutory requirements would be insisted. Thus, the issue in the present case is no more res integra and has been squarely covered by the decisions of this Court referred above. It is submitted that the aforesaid decisions of this Court have become binding precedents. 

19) In the case of second SMS Pharmaceuticals vs. Neeta Bhalla, (2007) 4 SCC 70, this Court has categorically held that there may be a large number of Directors but some of them may not assign themselves in the management of the day-to-day affairs of the company and thus are not responsible for the conduct of the business of the company. 

Para 20 of the said judgment is relevant which is reproduced hereunder:- 

20. The liability of a Director must be determined on the date on `which the offence is committed. Only because Respondent 1 herein was a party to a purported resolution dated 15-2-1995 by itself does not lead to an inference that she was actively associated with the management of the affairs of the Company. This Court in this case has categorically held that there may be a large number of Directors but some of them may not associate themselves in the management of the day-to-day affairs of the Company and, thus, are not responsible for the conduct of the business of the Company. The averments must state that the person who is vicariously liable for commission of the offence of the Company both was in charge of and was responsible for the conduct of the business of the Company. Requirements laid down therein must be read conjointly and not disjunctively. When a legal fiction is raised, the ingredients therefor must be satisfied. 

20) Relying on the judgment of this Court in Everest Advertising Pvt. Ltd. vs. State Govt. of NCT of Delhi & Ors., (2007) 5 SCC 54, learned counsel for the appellants argued that this Court has not allowed the recalling of summons in a criminal complaint filed under sections 138 and 141. However, a perusal of the judgment would reveal that this case was of recalling of summons by the Magistrate for which the Magistrate had no jurisdiction. Further, para 22 of the judgment would reveal that in the complaint allegations have not only been made in terms of the wordings of section but also at more than one place, it has categorically been averred that the payments were made after the meetings held by and between the representative of the Company and accused nos. 1 to 5 which would include Respondent Nos. 2 and 3. In para 23, this Court concluded that it is therefore, not a case where having regard to the position held by the said respondents in the Company, they could plead ignorance of the entire transaction. Furthermore, this Court has relied upon S.M.S. Pharamaceutical's case (three-Judge Bench) (supra), Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra). 

21) Relying on the judgment of this Court in N. Rangachari vs. Bharat Sanchar Nigam Ltd., (2007) 5 SCC 108, learned counsel for the appellants further contended that a payee of cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in-charge of its affairs and the Directors are prima facie in that position. However, it is pertinent to note that in this case it was specifically mentioned in the complaint that (i) accused no. 2 was a director and in charge of and responsible to the accused Company for the conduct of its business; and (ii) the response of accused no. 2 to the notice issued by BSNL that the said accused is no longer the Chairman or Director of the accused Company was false and by not keeping sufficient funds in their account and failing to pay the cheque amount on service of the notice, all the accused committed an offence. Therefore, this decision is clearly distinguishable on facts as in the said case necessary averments were made out in the complaint itself. Furthermore, this decision does not and could not have overruled the decisions in S.M.S. Pharmaceutical's case (three-Judge Bench)(supra), Ramraj Singh's case (three-Judge Bench)(supra), Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra) wherein it is clearly held that specific averments have to be made against the accused Director. 

22) Learned counsel for the appellants after elaborately arguing the matter, by inviting our attention to Paresh P. Rajda vs. State of Maharashtra & Anr., (2008) 7 SCC 442 contended that a departure/digression has been made by the Court in the case of N. Rangachari vs. BSNL (supra). However, in this case also the Court has observed in para 4 that the High Court had noted that an overall reading of the complaint showed that specific allegations had been leveled against the accused as being a responsible officer of the accused Company and therefore, equally liable. In fact, the Court recorded the allegations in the complaint that the Complainant knew all the accused and that accused no. 1 was the Chairman of the accused Company and was responsible for day to day affairs of the Company. This Court though has only noted the decision in N. Rangachari's case (supra) and observed that an observation therein showed a slight departure vis-`-vis the other judgments (i.e. S.M.S. Pharmaceuticals first case and S.M.S. Pharmaceutical's second case), but then Court went on to record that in N.K. Wahi's case (supra) this Court had reiterated the view in S.M.S. Pharmaceutical's case (supra). The Court then concluded in para 11 that it was clear from the aforequoted judgments that the entire matter would boiled down to an examination of the nature of averments made in the complaint. On facts, the Court found necessary averments had been made in the complaint. 

23) Though, the learned counsel for the appellants relying on a recent decision in K.K. Ahuja vs. V.K. Vora & Anr., (2009) 10 SCC 48, it is clearly recorded that in the complaint it was alleged that the accused were in-charge of and was responsible for the conduct of the day-to-day business of the accused Company and further all the accused were directly and actively involved in the financial dealings of the Company and the same was also reiterated in the pre-summoning evidence. Furthermore, this decision also notes that it is necessary to specifically aver in a complaint that the person accused was in-charge of and responsible for the conduct of the business of the Company. After noting Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra), this Court further noted in para 9 that ......the prevailing trend appear to require the Complainant to state how a Director who is sought to be made an accused, was in-charge of the business of the Company, as every Director need not be and is not in-charge of the business of the Company...... In Para 11, this Court has further recorded that .....When conditions are prescribed for extending such constructive criminal liability to others, courts will insist upon strict literal compliance. There is no question of inferential or implied compliance. Therefore, a specific averment complying with the requirements of Section 141 is imperative... Though the Court then said that an averment in the complaint that the accused is a Director and in-charge of and responsible for the conduct of the business may be sufficient but this would not take away from the requirement that an overall reading of the complaint has to be made to see whether the requirements of Section 141 have been made out against the accused Director or not. Furthermore, this decision cannot be said to have overruled the various decisions of this Court. 

24) Section 291 of the Companies Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do. A company, though a legal entity, can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in-charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other Directors are concerned, they can be prosecuted only if they were in-charge of and responsible for the conduct of the business of the company. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses 24, 26, 30, 31 and 45 of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company: 

(a) the Managing Director/s; 

(b) the whole-time Director/s; 

(c) the Manager; 

(d) the Secretary; 

(e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; 

(f) any person charged by the Board of Directors with the responsibility of complying with that provision; Provided that the person so charged has given his consent in this behalf to the Board; 

(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors: Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form. 

But if the accused is not one of the persons who falls under the category of persons who are responsible to the company for the conduct of the business of the company then merely by stating that he was in-charge of the business of the company or by stating that he was in- charge of the day-to-day management of the company or by stating that he was in-charge of, and was responsible to the company for the conduct of the business of the company, he cannot be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person liable under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under sub-section (2) of Section 141 of the Act. 

25) 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 accused therein vicariously liable for offence committed by company along with averments in the petition containing that 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 accused is Managing Director or 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 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 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.

Statement of Accused u/s 313 Cr PC is Not 'Evidence' : Delhi High Court

Justice S.N. Dhingra

Justice S.N. Dhingra of the Delhi High Court has held in V.S. Yadav v. Reena that the statement of accused under Section 281 Cr. P.C. or under Section 313 Cr. P.C. is not the evidence of the accused and it cannot be read as part of evidence. It was further held that where the accused does not examine himself as a witness, his statement under Section 281 Cr. P.C. or 313 Cr. P.C. cannot be read as evidence of the accused and it has to be looked into only as an explanation of the incriminating circumstance and not as evidence. The relevant extracts of the said judgment is reproduced hereinbelow;

4. It must be remembered that reasoning for appreciating evidence does not mean that reasoning bereft of logic. Reasoning also does not mean mis-reasoning. All reasoning must stand the test of basic logic of a judicial mind showing that the judge had knowledge of law and had appreciated facts in the light of law. Section 6 of N.I. Act defines Cheque as under: 

“A ''cheque" is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form” 

A bare definition of cheque shows that cheque is a Bill of Exchange drawn on specified banker and is an order by drawer on his own agent i.e. bank for payment of certain sum of money to the bearer or the order to person in whose favour cheque is drawn. This order of payment by person to the holder of cheque is not made in casual manner just for the sake of fun. This order is made for consideration and that is why Section 139 of the N.I. Act provides that the holder of a cheque is presumed to have received the cheque in discharge of whole or in part of a debt or liability. It was sufficient for complainant to prove the debt and liability by making a statement that the cheques were issued by the respondent for payment of debt. Merely because the complainant did not remember the exact date and stated that the loan was taken from him about a week before 23rd /24th June, 2006, would not throw doubt on the testimony of the complainant, more so, when the complainant specifically testified that the accused and her husband were having business in the name of S.K. Enterprises, situated at RZ-133/213 and he was approached for a friendly loan by the accused/respondent through her husband. The cross examination of this witness further shows that it was in the knowledge of accused that the complainant used to grant loan to persons and the accused himself cited 3 or 4 examples where the complainant had given loans to the persons. In fact, cross examination of complainant proved unequivocally that the appellant/complainant had advanced loan to respondent also. Whether the complainant was having a license for giving loans or not, was not the subject matter of the inquiry before the learned MM as it was not the defence of the respondent that loan was advanced without license. 

5. It must be borne in mind that the statement of accused under Section 281 Cr. P.C. or under Section 313 Cr. P.C. is not the evidence of the accused and it cannot be read as part of evidence. The accused has an option to examine himself as a witness. Where the accused does not examine himself as a witness, his statement under Section 281 Cr. P.C. or 313 Cr. P.C. cannot be read as evidence of the accused and it has to be looked into only as an explanation of the incriminating circumstance and not as evidence. There is no presumption of law that explanation given by the accused was truthful. In the present case, the accused in his statement stated that he had given cheques as security. If the accused wanted to prove this, he was supposed to appear in the witness box and testify and get himself subjected to cross examination. His explanation that he had the cheques as security for taking loan from the complainant but no loan was given should not have been considered by the Trial Court as his evidence and this was liable to be rejected since the accused did not appear in the witness box to dispel the presumption that the cheques were issued as security. Mere suggestion to the witness that cheques were issued as security or mere explanation given in the statement of accused under Section 281 Cr. P.C., that the cheques were issued as security, does not amount to proof. Moreover, the Trial Court seemed to be obsessed with idea of proof beyond reasonable doubt forgetting that offence under Section 138 of N.I. Act was a technical offence and the complainant is only supposed to prove that the cheques issued by the respondent were dishonoured, his statement that cheques were issued against liability or debt is sufficient proof of the debt or liability and the onus shifts to the respondent/ accused to show the circumstances under which the cheques came to be issued and this could be proved by the respondent only by way of evidence and not by leading no evidence. 

6. The respondent in this case took the stand that he had replied to the notice but surprisingly he had not placed on record the copy of his reply. If it is believed that he had sent reply to the notice of the complainant, the copy of that reply must have been retained and could have been easily placed on record and proved by the respondent. Not placing the copy of reply on record and not proving it, in fact, prove the assertion made by the complainant that instead of sending reply, blank sheets of paper were sent in envelope to the complainant. 

7. The respondent has placed reliance on Krishna Janardhan Bhat v. Dattatraya G. Hegde, 2008 Crl. L.J. 1172, which is also the case relied upon by the Trial Court. In this judgment itself Hon’ble Supreme Court has specifically observed that Court should not be blind to the ground realities and the rebuttal of presumption under Section 139 of N.I. Act would largely depend upon the factual matrix of each case. The Trial Court in this case turned a blind eye to the fact that every accused facing trial, whether under Section 138 of N.I. Act or under any penal law, when charged with the offence, pleads not guilty and takes a stand that he has not committed the offence. Even in the cases where loan is taken from a bank and the cheques issued to the bank stand dishonoured, the stand taken is same. Mere pleading not guilty and stating that the cheques were issued as security, would not give amount to rebutting the presumption raised under Section 139 of N.I. Act. If mere statement under Section 313 Cr. P.C. or under Section 281 Cr. P.C. of accused of pleading not guilty was sufficient to rebut the entire evidence produced by the complainant/ prosecution, then every accused has to be acquitted. But, it is not the law. In order to rebut the presumption under Section 139 of N.I. Act, the accused, by cogent evidence, has to prove the circumstance under which cheques were issued. It was for the accused to prove if no loan was taken why he did not write a letter to the complainant for return of the cheque. Unless the accused had proved that he acted like a normal businessman/prudent person entering into a contract he could not have rebutted the presumption u/s 139 N.I. Act. If no loan was given, but cheques were retained, he immediately would have protested and asked the cheques to be returned and if still cheques were not returned, he would have served a notice as complainant. Nothing was proved in this case.

Compounding Cheque Bounce Case After Conviction - Permissibility : The Law

Justice Altamas Kabir

The Supreme Court in K.M. Ibrahim Vs. K.P. Mohammed has examined whether the Court has the power of compounding an offence under S. 138 of the Negotiable Instruments Act, after the accused has been convicted. While considering various pronouncements on the issue the Supreme Court held as under;

7. Appearing for the appellant, Mr. Mukul Rohtagi, learned Senior Advocate, contended that since a specific power had been given to the parties to a proceeding under the Negotiable Instruments Act under Section 147 to compound the offence, there could be no reason as to why the same cannot be permitted even after conviction, which had been affirmed upto the High Court. It was urged that in order to facilitate settlement of disputes, the legislature thought it fit to insert Section 147 by Amending Act 55 of 2002. Such amendment came into effect from 6th February, 2003, and provided that notwithstanding anything contained in the Code of Criminal Procedure, 1973, every offence punishable under the Act would be compoundable. Mr. Rohtagi urged that in view of the non-obstante clause, the provisions of Section 147 were given an overriding effect over the Code and in view of the clear mandate given to the parties to compound an offence under the Act, reference to Section 320 Cr.P.C. can be made for purposes of comparison only in order to understand the scope of Section 147 of the Negotiable Instruments Act. Mr. Rohtagi submitted that the said position had been accepted by this Court in various decisions, such as in the case of O.P. Dholakia vs. State of Haryana & Anr. [(2000) 1 SCC 762], wherein it was held that since the petitioner had already entered into a compromise with the complainant and the complainant had appeared through counsel and stated that the entire money had been received by him and he had no objection if the conviction already recorded under Section 138 of the Negotiable Instruments Act is set aside, the Hon'ble Judges thought it appropriate to grant permission, in the peculiar facts and circumstances of the case, to compound the offence. While doing so, this Court also indicated that necessarily the conviction and sentence under Section 138 of the Act stood annulled. 

7A. The said view has been consistently followed in the case of 

(1) Anil Kumar Haritwal & Anr. vs. Alka Gupta & Anr. [(2004) 4 SCC 366]; 

(2) B.C. Seshadri vs. B.N. Suryanarayana Rao [2004 (11) SCC 510] decided by a three Judge Bench; 

(3) G. Sivarajan vs. Little Flower Kuries & Enterprises Ltd. & Anr. [(2004 11 SCC 400]; 

(4) Kishore Kumar vs. J.K. Corporation Ltd. [(2004 13 SCC 494]; 

(5) Sailesh Shyam Parsekar vs. Baban [(2005 (4) SCC 162]; 

(6) K. Gyansagar vs. Ganesh Gupta & Anr. [(2005) 7 SCC 54]; 

(7) K.J.B.L. Rama Reddy vs. Annapurna Seeds & Anr. [(2005) 10 SCC 632]; 

(8) Sayeed Ishaque Menon vs. Ansari Naseer Ahmed [(2005) 12 SCC 140]; 

(9) Vinay Devanna Nayak vs. Ryot Sewa Sahakari Bank Ltd. [(2008) 2 SCC 305], wherein some of the earlier decisions have been noticed; and 

(10) Sudheer Kumar vs. Manakkandi M.K. Kunhiraman & Anr. [2008 (1) KLJ 203], which was a decision of a Division Bench of the Kerala High Court, wherein also the issue has been gone into in great detail. 

8. The golden thread in all these decisions is that once a person is allowed to compound a case as provided for under Section 147 of the Negotiable Instruments Act, the conviction under Section 138 of the said Act should also be set aside. In the case of Vinay Devanna Nayak (supra), the issue was raised and after taking note of the provisions of Section 320 Cr.P.C., this Court held that since the matter had been compromised between the parties and payments had been made in full and final settlement of the dues of the Bank, the appeal deserved to be allowed and the appellant was entitled to acquittal. Consequently, the order of conviction and sentence recorded by all the courts were set aside and the appellant was acquitted of the charge leveled against him. 

9. The object of Section 320 Cr.P.C., which would not in the strict sense of the term apply to a proceeding under the Negotiable Instruments Act, 1881, gives the parties to the proceedings an opportunity to compound offences mentioned in the table contained in the said section, with or without the leave of the court, and also vests the court with jurisdiction to allow such compromise. By virtue of Sub-Section (8), the Legislature has taken one step further in vesting jurisdiction in the Court to also acquit the accused/convict of the offence on the same being allowed to be compounded. Inasmuch as, it is with a similar object in mind that Section 147 has been inserted into the Negotiable Instruments Act, 1881, by amendment, an analogy may be drawn as to the intention of the Legislature as expressed in Section 320(8) Cr.P.C., although, the same has not been expressly mentioned in the amended section to a proceeding under Section 147 of the aforesaid Act. 

10. Apart from the above, this Court is further empowered under Article 142 of the Constitution to pass appropriate orders in line with Sub-Section (8) of Section 320 Cr.P.C. in an application under Section 147 of the aforesaid Act, in order to do justice to the parties. 

11. As far as the non-obstante clause included in Section 147 of the 1881 Act is concerned, the 1881 Act being a special statute, the provisions of Section 147 will have an overriding effect over the provisions of the Code relating to compounding of offences. The various decisions cited by Mr. Rohtagi on this issue does not add to the above position. 

12. It is true that the application under Section 147 of the Negotiable Instruments Act was made by the parties after the proceedings had been concluded before the Appellate Forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. Accordingly, we find no reason to reject the application under Section 147 of the aforesaid Act even in a proceeding under Article 136 of the Constitution.

Accused has no right to file Affidavit of Evidence in Cheque Bounce Cases

Justice Tarun Chatterjee
Supreme Court of India

The Supreme Court in M/s Mandvi Co-op Bank Ltd. v Nimesh B. Thakore ruled that in cheque bouncing cases, the right to give evidence on affidavit, as provided to the complainant under section 145 of the Negotiable Instruments Act, is not available to the accused for expeditious decision in such mounting cases which are chocking the administration of criminal justice system in the country.

A bench comprising justices Tarun Chatterjee and Aftab Alam said it is not difficult to see that sections 143 to 147 were inserted in the Act by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 to do away with all the stages and processes in a regular criminal trial that normally cause inordinate delay in its conclusion and to make the trial procedure as expeditious as possible without in any way compromising on the right of the accused for a fair trial.

16. It may be noted that the provisions of Sections 143, 144, 145 and 147 expressly depart from and override the provisions of the Code of Criminal Procedure, the main body of adjective law for criminal trials. The provisions of Section 146 similarly depart from the principles of the Indian Evidence Act. Section 143 makes it possible for the complaints under Section 138 of the Act to be tried in the summary manner, except, of course, for the relatively small number of cases where the Magistrate feels that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily. It is, however, significant that the procedure of summary trials is adopted under Section 143 subject to the qualification "as far as possible", thus, leaving sufficient flexibility so as not to affect the quick flow of the trial process. Even while following the procedure of summary trials, the non-obstante clause and the expression "as far as possible" used in Section 143 coupled with the non-obstante clause in Section 145 allows for the evidence of the complainant to be given on affidavit, that is, in the absence of the accused. This would have been impermissible (even in a summary trial under the Code of Criminal Procedure) in view of Sections 251 and 254 and especially Section 273 of the Code. The accused, however, is fully protected, as under Sub-section (2) of Section 145 he has the absolute and unqualified right to have the complainant and any or all of his witnesses summoned for cross-examination. Sub-section (3) of Section 143 mandates that the trial would proceed, as far as practicable, on a day-to-day basis and Sub-section (4) of the section requires the Magistrate to make the endeavour to conclude the trial within six months from the date of filing of the complaint. Section 144 makes the process of service of summons simpler and cuts down the long time ordinarily consumed in service of summons in a regular civil suit or a criminal trial. Section 145 with its non-obstante clause, as noted above, makes it possible for the evidence of the complainant to be taken in the absence of the accused. But the affidavit of the complainant (or any of his witnesses) may be read in evidence "subject to all just exceptions". In other words, anything inadmissible in evidence, e.g., irrelevant facts or hearsay matters would not be taken in as evidence, even though stated on affidavit. Section 146, making a major departure from the principles of the Evidence Act provides that the bank's slip or memo with the official mark showing that the cheque was dishonoured would by itself give rise to the presumption of dishonour of the cheque, unless and until that fact was disproved. Section 147 makes the offences punishable under the Act, compoundable.

17. It is not difficult to see that Sections 142 to 147 lay down a kind of a special code for the trial of offences under Chapter XVII of the Negotiable Instruments Act and Sections 143 to 147 were inserted in the Act by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 to do away with all the stages and processes in a regular criminal trial that normally cause inordinate delay in its conclusion and to make the trial procedure as expeditious as possible without in any way compromising on the right of the accused for a fair trial.

18. Here we must take notice of the fact that cases under Section 138 of the Act have been coming in such great multitude that even the introduction of such radical measures to make the trial procedure simplified and speedy has been of little help and cases of dishonoured cheques continue to pile up giving rise to an unbearable burden on the criminal court system. The Law Commission in its report number 213 sent to the Union Minister for Law and Justice on November 24, 2008 advocated the setting up of Fast Track Magisterial courts for dealing with the huge pendency of dishonoured cheque cases. In paragraph 1.5 of the report it was stated as follows:

1.5. Over 38 lac cheque bouncing cases are pending in various courts in the country. There are 7,66,974 cases pending in criminal courts in Delhi at the Magisterial level as on 1st June, 2008. Out of this huge workload, a substantial portion is of cases under Section 138 of the Negotiable Instruments Act which alone count for 5,14,433 cases (cheque bouncing). According to Gujarat High Court sources, there are approximately two lac cheque bouncing cases all over t he State, with the majority of them (84,000 cases) in Ahmedabad, followed by Surat, Vadodara and Rajkot. 73,000 cases were filed under Section 138 of the Negotiable Instruments Act (cheque bouncing) on a single day by a private telecom company before a Bangalore court, informed the Chief Justice of India, K. G. Balakrishnan, urging the Government to appoint more judges to deal with 1.8 crore pending cases in the country. The number of complaints which are pending in Bombay courts On the date of the report, there were 5,91,818 cases pending in sub-ordinate courts of State of Maharashtra, 1,57,191 cases pending in the sub-ordinate courts of State of Karnataka, 1,10,311 cases pending in the sub-ordinate courts of State of Kerala and 5,14,433 cases in the sub-ordinate courts of the State of Delhi under Section 138 of the Negotiable Instrument Act. seriously cast shadow on the credibility of our trade, commerce and business. Immediate steps have to be taken by all concerned to ensure restoration of the credibility of trade, commerce and business.

19. The situation arising from the mounting arrears is so grave that in the `Vision Statement' presented by the Union Minister for Law and Justice to the Chief Justice of India in course of the National Consultation for strengthening the Judiciary towards reducing pendency and delays held on October 24, 2009, cases of dishonoured cheques were cited among one of the major bottlenecks in the criminal justice system. In paragraph 2 under the heading `the Action Plan' it was stated as follows:

2. Identification of Bottlenecks: Clearing the System

1. Studies have shown that cases under certain statutes and area of law are choking dockets of magisterial and specialised courts, and the same need to be identified.

2. Bottlenecks shall be identified as follows:

a) Matrimonial cases.

b) Cases under Section 498A of the Indian Penal Code, 1860.

c) Cases under Section 143 of the Negotiable Instrument Act, 1881.

d) to (i) xxxxxxxxxx

20. Once it is realized that Sections 143 to 147 were designed especially to lay down a much simplified procedure for the trial of dishonoured cheque cases with the sole object that the trial of those cases should follow a course even swifter than a summary trial and once it is seen that even the special procedure failed to effectively and expeditiously handle the vast multitude of cases coming to the court, the claim of the accused that on being summoned under Section 145(2), the complainant or any of his witnesses whose evidence is given on affidavit must be made to depose in examination-in- chief all over again plainly appears to be a demand for meaningless duplication, apparently aimed at delaying the trial.

21. Nevertheless, the submissions made on behalf of the parties must be taken note of and properly dealt with. Mr Ranjit Kumar, learned Senior Advocate, appearing for the appellant in appeal arising from SLP (Crl.) No. 4760/2006 pointed out that Sub-section (2) of Section 145 uses both the words, "may" (with reference to the court) and "shall" (with reference to the prosecution or the accused). It was, therefore, beyond doubt that in the event an application is made by the accused, the court would be obliged to summon the person giving evidence on affidavit in terms of Section 145(1) without having any discretion in the matter. There can be no disagreement with this part of the submission but the question is when the person who has given his evidence on affidavit appears in court, whether it is also open to the accused to insist that before cross-examining him as to the facts stated in the affidavit he must first depose in examination-in-chief and be required to verbally state what is already said in the affidavit. Mr. Ranjit Kumar referred to Section 137 of the Indian Evidence Act, that defines "examination-in- chief", "cross-examination" and "re-examination" and on that basis sought to argue that the word "examine" occurring in Section 145(2) must be construed to mean all the three kinds of examination of a witness. This, according to him, coupled with the use of the word "shall" with reference to the application made by the accused made it quite clear that a person giving his evidence on affidavit, on being summoned under Section 145(2) at the instance of the accused must begin his deposition with examination-in-chief, before he may be cross-examined by the accused. In this regard he submitted that Section 145 did not override the Evidence Act or the Negotiable Instruments Act or any other law except the Code of Criminal Procedure. He further submitted that the plain language of Section 145(2) was clear and unambiguous and was capable of only one meaning and, therefore, the provision must be understood in its literal sense and the High Court was in error in resorting to purposive interpretation of the provision. In support of the submission he relied upon decisions of this Court in Dental Council of India v. Hari Prakash and Ors. MANU/SC/0509/2001 : (2001) 8 SCC 61 and Nathi Devi v. Radha Devi MANU/SC/1071/2004 : (2005) 2 SCC 271. Mr. Siddharth Bhatnagar, learned Counsel for the appellant in the appeal arising from SLP (Crl.) No. 1106/2007 also joined Mr. Ranjit Kumar in the submission based on literal interpretation. He also submitted that ordinarily the rule of literal construction should not be departed from, particularly when the words of the statute are clear and unambiguous. He relied upon the decision in Raghunath Rai Bareja v. Punjab National Bank MANU/SC/5456/2006 : (2007) 2 SCC 230.

22. We are completely unable to appreciate the submission. The plea for a literal interpretation of Section 145(2) is based on the unfounded assumption that the language of the section clearly says that the person giving his evidence on affidavit, on being summoned at the instance of the accused must start his deposition in court with examination-in-chief. We find nothing in Section 145(2) to suggest that. We may also make it clear that Section 137 of the Evidence Act does not define "examine" to mean and include the three kinds of examination of a witness; it simply defines "examination-in- chief", "cross-examination" and "re-examination". What Section 145(2) of the Act says is simply this. The court may, at its discretion, call a person giving his evidence on affidavit and examine him as to the facts contained therein. But if an application is made either by the prosecution or by the accused the court must call the person giving his evidence on affidavit, again to be examined as to the facts contained therein. What would be the extent and nature of examination in each case is a different matter and that has to be reasonably construed in light of the provision of Section 145(1) and having regard to the object and purpose of the entire scheme of Sections 143 to 146. The scheme of Sections 143 to 146 does not in any way affect the judge's powers under Section 165 of the Evidence Act. As a matter of fact, Section 145(2) expressly provides that the court may, if it thinks fit, summon and examine any person giving evidence on affidavit. But how would the person giving evidence on affidavit be examined, on being summoned to appear before the court on the application made by the prosecution or the accused? The affidavit of the person so summoned that is already on the record is obviously in the nature of examination-in-chief. Hence, on being summoned on the application made by the accused the deponent of the affidavit (the complainant or any of his witnesses) can only be subjected to cross-examination as to the facts stated in the affidavit. In so far as the prosecution is concerned the occasion to summon any of its witnesses who has given his evidence on affidavit may arise in two ways. The prosecution may summon a person who has given his evidence on affidavit and has been cross-examined for "re-examination". The prosecution may also have to summon a witness whose evidence is given on affidavit in case objection is raised by the defence regarding the validity and/or sufficiency of proof of some document(s) submitted along with the affidavit. In that event the witness may be summoned to appear before the court to cure the defect and to have the document(s) properly proved by following the correct legal mode. This appears to us as the simple answer to the above question and the correct legal position. Any other meaning given to Sub-section (2) of Section 145, as suggested by Mr. Ranjit Kumar would make the provision of Section 145(1) nugatory and would completely defeat the very scheme of trial as designed under Sections 143 to 147.

23. Mr. Ranjit Kumar next submitted that Section 145(2) was identical to Section 296(2) of the Code of Criminal Procedure and this Court, in its decision in State of Punjab v. Naib Din MANU/SC/0597/2001 : (2001) 8 SCC 578 dealing with Section 296(2) of the Code made the following observation:

8. ...If any party to a lis wishes to examine the deponent of the affidavit it is open to him to make an application before the court that he requires the deponent to be examined or cross- examined in court. This is provided in Sub-section (2) of Section 296 of the Code. When any such application is made it is the duty of the court to call such person to the court for the purpose of being examined.

24. Mr. Siddharth Bhatnagar representing the appellant in the appeal arising from SLP (Crl.) No. 1106/2007 also joined Mr. Ranjit Kumar in the submission based on Section 296(2) of Code. Mr. Bhatnagar submitted that since Section 145(2) is identical to Section 296(2) of the Code, it should be interpreted in light of the legislative history of Section 296(2) and he tried to take us into the details of the legislative history of Section 296 of the Code.

25. In our view the submission is wholly without merit. Neither section 296(2) of the Code nor the decision in Naib Din has any relevance or application to the trial concerning a dishonoured cheque under sections 143 to 146 of the Act. The decision in Naib Din was rendered in a totally different context and the issue before the court was not, whether on being summoned on the application made by the accused, the person giving evidence on affidavit must begin his deposition with examination-in-chief. The appellants are reading into the passage from the decision in Naib Din something that was not said by the court. Moreover, the crucial difference between section 296(2) of the Code and section 145(2) of the Act is that the former deals with the evidence of a formal nature whereas under the latter provision, all evidences including substantive evidence may be given on affidavit. Section 296 is part of the elaborate procedure of a regular trial under the Code while the whole object of section 145(2) of the Act is to design a much simpler and swifter trial procedure departing from the elaborate and time consuming trial procedure of the Code. Hence, notwithstanding the apparent verbal similarity between section 145(2) of the Act and section 296(2) of the Code, it would be completely wrong to interpret the true scope and meaning of the one in the light of the other. Neither the legislative history of 296(2) nor any decision on that section can persuade us to hold that under section 145(2) of the Act, on being summoned at the instance of the accused the complainant or any of his witnesses should be first made to depose in examination-in-chief before cross-examination. 

26. Mr. Ranjit Kumar next submitted that in giving evidence on affidavit, the deponent (the complainant or any of his witnesses) can introduce hearsay or irrelevant facts in evidence to which the accused could have objected if the deposition was made in court as examination-in-chief. Hence, the accused must have the right to call the complainant (or his witness giving evidence on affidavit) into the witness box for examination-in-chief so as to get the inadmissible parts in the affidavit excluded from his evidence. Once again the submission is devoid of merit. It is noted above that the evidence given on affidavit by the complainant is "subject to all just exceptions". This simply means that the evidence given on affidavit must be admissible and it must not include inadmissible materials such as facts not relevant to the issue or any hearsay statements. In case the complainant's affidavits contain statements that are not admissible in evidence it is always open to the accused to point those out to the court and the court would then surely deal with the objections in accordance with law. 

27. Mr. Ranjit Kumar lastly submitted that when the complainant gives his evidence on affidavit, then the documents produced along with the affidavit(s) are not proved automatically and unless the accused admits those documents under section 294 of the Code of Criminal Procedure the documents must be proved by oral testimony. We find no substance in this submission either and we see no reason why the affidavits should not also contain the formal proof of the enclosed documents. In case, however, the accused raises any objections with regard to the validity or sufficiency of proof of the documents submitted along with the affidavit and if the objections are sustained by the court it is always open to the prosecution to have the concerned witness summoned and get the lacuna in the proof of the documents corrected. 

28. Mr. Ranjit Kumar also made a feeble attempt to contend that the provisions of sections 143 to 147 inserted in the Act with effect from February 6, 2003 would operate prospectively and would not apply to cases that were pending on that date. The High Court has considered the issue in great detail and has rightly taken the view that the provisions of sections 143 to 147 do not take away any substantive rights of the accused. Those provisions are not substantive but procedural in nature and would, therefore, undoubtedly, apply to the cases that were pending on the date the provisions came into force. We are fully in agreement and in order to buttress the view taken by the High Court we will only refer to a decision of this court. 

29. In Gurbachan Singh vs. Satpal Singh and Ors., 1990 (1) SCC 445, the court was called upon to consider whether section 113A of the Evidence Act that created a presumption as to abetment of a suicide by a married woman would operate retrospectively or prospectively. The court held: 

"37. The provisions of the said section do not create any new offence and as such it does not create any substantial right but it is merely a matter of procedure of evidence and as such it is retrospective and will be applicable to this case. It is profitable to refer in this connection to Halsbury's Laws of England, Fourth Edition, Volume 44 page 570 wherein it has been stated that: 

"The general rule is that all statutes, other than those which are merely declaratory or which relate only to matters of procedure or of evidence, are prima facie prospective, and retrospective effect is not to be given to them unless, by express words or necessary implications, it appears that this was the intention of the legislature..." 

38. It has also been stated in the said volume of Halsbury's Laws of England at page 574 that: 

"The presumption against retrospection does not apply to legislation concerned merely with matters of procedure or of evidence; on the contrary, provisions of that nature are to be construed as retrospective unless there is a clear indication that such was not the intention of Parliament."" 

(emphasis added) 30. Coming now to the last question with regard to the right of the accused to give his evidence, like the complainant, on affidavit, the High Court has held that subject to the provisions of sections 315 and 316 of the Code of Criminal Procedure the accused can also give his evidence on affidavit. The High Court was fully conscious that section 145(1) does not provide for the accused to give his evidence, like the complainant, on affidavit. But the High Court argued that there was no express bar in law against the accused giving his evidence on affidavit and more importantly providing a similar right to the accused would be in furtherance of the legislative intent to make the trial process swifter. In paragraph 29 of the judgment, the High Court observed as follows: 

"It is true that section 145(1) confers a right on the complainant to give evidence on affidavit. It does not speak of similar right being conferred on the accused. The Legislature in their wisdom may not have thought it proper to incorporate a word `accused' with the word `complainant' in sub-section (1) of section 145 in view of the immunity conferred on the accused from being compelled to be a witness against himself under Article 20(3) of the Constitution of India...." 

Then in paragraph 31 of the judgment it observed: 

".... Merely because, section 145(1) does not expressly permit the accused to do so, does not mean that the Magistrate cannot allow the accused to give his evidence on affidavit by applying the same analogy unless there is just and reasonable ground to refuse such permission. There is no express bar on the accused to give evidence on affidavit either in the Act or in the Code..... I find no justified reason to refuse permission to the accused to give his evidence on affidavit subject to the provisions contained in sections 315 and 316 of the Code." 

31. On this issue, we are afraid that the High Court overreached itself and took a course that amounts to taking-over the legislative functions. 

32. On a bare reading of section 143 it is clear that the legislature provided for the complainant to give his evidence on affidavit and did not provide for the accused to similarly do so. But the High Court thought that not mentioning the accused along with the complainant in sub-section (1) of section 145 was merely an omission by the legislature that it could fill up without difficulty. Even though the legislature in their wisdom did not deem it proper to incorporate the word `accused' with the word `complainant' in section 145(1), it did not mean that the Magistrate could not allow the accused to give his evidence on affidavit by applying the same analogy unless there was a just and reasonable ground to refuse such permission. There are two errors apparent in the reasoning of the High Court. First, if the legislature in their wisdom did not think "it proper to incorporate a word `accused' with the word `complainant' in section 145(1)......", it was not open to the High Court to fill up the self perceived blank. Secondly, the High Court was in error in drawing an analogy between the evidences of the complainant and the accused in a case of dishonoured cheque. The case of the complainant in a complaint under section 138 of the Act would be based largely on documentary evidence. The accused, on the other hand, in a large number of cases, may not lead any evidence at all and let the prosecution stand or fall on its own evidence. In case the defence does lead any evidence, the nature of its evidence may not be necessarily documentary; in all likelihood the defence would lead other kinds of evidences to rebut the presumption that the issuance of the cheque was not in the discharge of any debt or liability. This is the basic difference between the nature of the complainant's evidence and the evidence of the accused in a case of dishonoured cheque. It is, therefore, wrong to equate the defence evidence with the complainant's evidence and to extend the same option to the accused as well. 

33. Coming back to the fist error in the High Court's reasoning, in the guise of interpretation it is not permissible for the court to make additions in the law and to read into it something that is just not there. In Union of India and Anr. vs. Deoki Nandan Aggarwal, 1992 Supp. (1) SCC 323, this court sounded the note of caution against the court usurping the role of legislator in the guise of interpretation. The court observed: 

"14. ...it is not the duty of the court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The court cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the legislature the court could not go to its aid to correct or make up the deficiency. Courts shall decide what the law is and not what it should be. The court of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught the legislative judgment is subversive of the constitutional harmony and comity of instrumentalities...." 

34. In Raghunath Rai Bareja and Anr. vs. Punjab National Bank and Ors., (2007) 2 SCC 230 while observing that it is the task of the elected representatives of the people to legislate and not that of the Judge even if it results in hardship or inconvenience, Supreme Court quoted in affirmation, the observation of Justice Frankfurter of the US Supreme Court which is as follows:

"41. As stated by Justice Frankfurter of the US Supreme Court (see "Of Law and Men: Papers and addresses of Felix Frankfurter") 

"Even within their area of choice the courts are not at large. They are confined by the nature and scope of the judicial function in its particular exercise in the field of interpretation. They are under the constraints imposed by the judicial function in our democratic society. As a matter of verbal recognition certainly, no one will gainsay that the function in construing a statute is to ascertain the meaning of words used by the legislator. To go beyond it is to usurp a power which our democracy has lodged in its elected legislature. The great judges have constantly admonished there bretheren of the need for discipline in observing the limitations. A judge must not rewrite a statute, neither to enlarge nor to contract it. Whatever temptations the statesmanship of policy- making might wisely suggest, construction must eschew interpolation and evisceration. He must not read in by way of creation. He must not read out except to avoid patent nonsense or internal contradiction." 

35. In Duport Steels Ltd. vs. Sirs, [1980] 1 All ER 529, 534, Lord Scarman expounded the legal position in the following words: 

"But in the field of statute law the judge must be obedient to the will of Parliament as expressed in its enactments. In this field Parliament makes and unmakes the law. The judge's duty is to interpret and to apply the law not to change it to meet the judge's idea of what justice requires. Interpretation does, of course, imply in the interpreter a power of choice where differing construction are possible. But our law require the judge to choose the construction which in his judgment best meets the legislative purpose of the enactment. If the result be unjust but inevitable, the judge may say so and invite Parliament to reconsider its provision. But he must not deny the statute."