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Hemant Kumar Das & Anr vs State Of Bihar & Anr on 21 August, 2018

IN THE HIGH COURT OF JUDICATURE AT PATNA
Criminal Miscellaneous No.905 of 2018
Arising Out of PS.Case No. -160 Year- 2012 Thana -PATLIPUTRA District- PATNA

1. Hemant Kumar Das, S/o Late Sri Awadhesh Kumar Das, Managing Director,
Natural Dairy Pvt. Ltd., having its registered office at Rajeev Nagar, Industria l
Area, Patna-800013.

2. Mamta Agrawal W/o Hemant Kumar Das, Director, Natural Dairy Pvt. Ltd.,
having its registered office at Rajeev Nagar, Industrial Area, Patna-800013.
Both R/o of Flat No. 504, White House Apartment, Budh Marg, P.S.- Kotwali,
District- Patna.

…. …. Petitioners
Versus
The State of Bihar. …. …. Opposite Parties

Appearance :

For the Petitioner/s : Mr. Nikhil Kumar Agrawal, Advocate
Ms. Aditi Hansaria, Advocate
Ms. Deepika Sharma, Advocate
For the Opposite Party/s : Mr. Jharkhandi Upadhyay, APP

CORAM: HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH
ORAL JUDGMENT
Date: 21-08-2018

Heard Mr. Nikhil Kumar Agrawal, learned advocate

for the petitioners and Mr. Jharkhandi Upadhyay, learned

Additional Public Prosecutor for the State.

2. This application under Section 482 of the Code of

Criminal Procedure (for short „CrPC‟) has been filed by the

petitioners for quashing the order dated 25.08.2017 passed by the
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learned Judicial Magistrate-1st Class, Patna in Trial No.2413 of

2013 in connection with Patliputra P.S. Case No.160 of 2012

whereby the petition filed by the petitioners under Section 239 of

the Cr.P.C. for discharge from the case has been rejected.

3. First Information Report (for short „FIR‟) of

Patliputra P.S. Case No.160 of 2012 was registered on 19.07.2012

under Sections 406 and 420 of the Indian Penal Code, 1860 (for

short „IPC‟) and Section 138 of the Negotiable Instruments Act,

1881 (for short „NI Act‟) on the basis of a written report submitted

by one Akhilesh Kumar to the Officer-in-Charge of the Patliputra

Police Station on 19.07.2012. The facts stated by the informant in

his written report are as under:-

(a) That on 28.07.2009, he was appointed by the

petitioner no.1, the Managing Director of the Natural Dairy Pvt.

Ltd. as a Supervisor of the company. After his appointment, he

collected milk from various villages in Jandaha in the district of

Vaishali and the various villages in the district of Samastipur with

the help of milk suppliers and supplied the same to the milk

collection centre of the company from 28.07.2009 to 03.11.2011

vide vehicles bearing Registration No.BR 06/445 and BR 9D/7368.

(b) That the company did not make appropriate

payment of the milk to the milk suppliers and slowly siphoned off
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huge sums of money, i.e. an amount of Rs. 30,00,000/- due to

farmers, Rs. 80,000/- due to milk van, Rs. 55000/- due to him on

account of his salary and an amount of Rs.10,000/- due to the labour

at the milk van.

(c) That some milk suppliers were paid by cheque,

more particularly Cheque No.000365 dated 25.04.2011 for an

amount of Rs. 45,000/- to Shashi Bhushan Rai and Cheque

No.000366 dated 25.05.2011 for an amount of Rs.45,000/- to

Shashi Bhushan Rai. However, both the cheques were dishonoured

by the bank.

(d) That a compromise was entered into with certain

milk suppliers for payment of their outstanding amount in

installments. However, the said amounts were also not paid on time.

Subsequently, some milk suppliers were paid through cheques

which were called back by the company and the company never

issued any other cheque in lieu thereof.

(e) That in the manner specified above, the Directors

of the company, i.e. the petitioner nos. 1 and 2 have committed

fraud against the informant and others resulting in financial loss to

the farmers.

(f) That the company is not making payment of the

outstanding amount despite repeated requests and reminders and the
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milk suppliers have been pressurizing him to ensure that their

payment is released by the company.

4. On the basis of the allegations made above, the

Officer-in-Charge of the Patliputra Police Station after registering

the FIR entrusted investigation of the case to an assistant sub-

inspector of police.

5. After completion of investigation, the

investigating officer of the case submitted charge-sheet vide

Charge-sheet No.19 of 2013 dated 28.02.2013.

6. On perusal of the FIR, the materials collected

during investigation and the charge-sheet submitted by the police,

the learned Chief Judicial Magistrate, Patna vide order dated

01.04.2013 took cognizance of the offences punishable under

Sections 406, 420 of the IPC and Section 138 of the NI Act and

summoned the petitioners to face trial and transferred the case to the

court of Judicial Magistrate-1st Class, Patna for disposal.

7. On receipt of the record from the court of Chief

Judicial Magistrate, the learned Magistrate supplied to the accused

the copy of police report and other documents, as provided under

Section 207 of the CrPC and, thereafter, fixed the case for framing

of charges against the petitioners.

8. At the stage of framing of charge, an application
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under Section 239 of the CrPC was filed by the petitioners seeking

discharge from the case on the ground that upon considering the

police report and the documents sent with it under Section 173 of

the CrPC, it would be apparent that the charge against the

petitioners was groundless.

9. After hearing the parties on the application

preferred under Section 239 of the CrPC, the learned Magistrate

rejected the same vide impugned order dated 25.08.2017 holding

therein that the witnesses examined in course of investigation have

supported the allegations made in the FIR.

10. Mr. Nikhil Kumar Agarwal, learned Advocate

appearing for the petitioners submitted that the FIR has been

registered against the directors of the Natural Dairy Pvt. Ltd., a

company, by an employee of the company claiming defaults in

payment made by the company to certain milk suppliers and other

persons but the company has not been made an accused in the

instant proceeding. He submitted that in absence of the company

being made an accused, the petitioners cannot be prosecuted for the

offences either under the IPC or under the NI Act.

11. Mr. Agrawal further contended that the

informant was appointed in the company on a temporary basis for a

period of three months on a salary of Rs. 6,000/- per month. Since
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his service was not found satisfactory by the company after

completion of the probation period of three months, his service was

not confirmed. He has drawn my attention towards the appointment

letter of the informant, which is annexed to the FIR. He submitted

that being an estranged employee, the informant has maliciously

filed the present FIR on behalf of the milk suppliers. The alleged

aggrieved persons have not filed any FIR against the company, as

they have no grievance either against the company or its directors.

He pleaded that all the allegations made by the informant are

baseless and concocted, as the company has made full payments of

all the milk suppliers and other persons engaged by the company

during the course of its business.

12. Mr. Agrawal further argued that there is nothing

in the FIR to show that the essential ingredients of the offences

punishable under Sections 406 and 420 of the IPC and/or Section

138 of the NI Act are attracted.

13. Per contra, Mr. Jharkhandi Upadhyay, learned

Additional Public Prosecutor appearing for the State submitted that

the instant application filed under Section 482 of the CrPC lacks

merit. He submitted that the FIR do attract the ingredients of the

cognizable offences under the IPC as well as the NI Act and, thus,

no error can be found with the order impugned passed by the
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learned Magistrate whereby she has refused to discharge the

petitioners from the case. He submitted that since the offence

alleged was committed by the petitioners in their individual

capacity, there was no necessity to implead the company also as an

accused. He further contended that the guilt for an offence under

Section 138 of the NI Act will be deemed to be against a person

connected with the company in view of Section 141 of the NI Act.

14. I have heard learned counsel for the parties and

carefully perused the record.

15. In proceedings instituted on an FIR, exercise of

inherent powers to quash the proceedings would arise only in case

where the allegations do not disclose any offence or are frivolous.

Similarly, a person can be discharged from a criminal proceeding

only if the charges are groundless.

16. Having noticed the allegations made in the FIR,

which were supported during investigation, let me examine now

whether the allegations made in the FIR when taken on their face

value would constitute the offences punishable under Sections 406

and 420 of the IPC.

17. Section 406 prescribes punishment for „criminal

breach of trust‟ as defined in Section 405 of the IPC.

18. Admittedly, the company has not been made an
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accused in the instant case.

19. Section 405 IPC, which defines the offence of

„criminal breach of trust‟ reads as under:-

“405. Criminal breach of trust –Whoever,
being in any manner entrusted with property, or
with any dominion over property, dishonestly
misappropriates or converts to his own use that
property, or dishonestly uses or disposes of that
property in violation of any direction of law
prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or
implied, which he has made touching the discharge
of such trust, or wilfully suffers any other person
so to do, commits “criminal breach of trust”.”

20. From a reading of Section 405 of the IPC, it

would be manifest that the ingredients of the offence are as under:-

(a) a person should have been entrusted with
property or with any dominion over property;

(b) that person should dishonestly misappropriate
or convert that property to his own use; or
dishonestly uses or disposes of that property or
willfully suffers any other person so to do;

(c) that such misappropriation, conversion, use or
disposal should be in violation of any direction of
law prescribing the mode in which such trust is to
be discharged, or any of legal contract which
person has made touching the discharge of such
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trust.

21. Thus, in order to attract punishment under Section

406 IPC for „criminal breach of trust‟, as defined in Section 405

IPC, the prosecution must prove (i) that the accused was entrusted

with that property or with dominion over property; and, (ii) he:- (a)

dishonestly misappropriated or converted it to his own use; or (b)

dishonestly used or disposed of it.

22. So far as the present case is concerned, there is no

allegation of entrustment with property and misappropriation done

in dishonest manner.

23. The allegation so far as the present case is

concerned is that the company did not make appropriate payment of

milk to the milk suppliers and others and it also failed to make

payment of salary to the informant.

24. In the opinion of this Court, simply because the

company withheld payment either to the milk suppliers or it failed

to make payment due to the milk van and salary to the informant,

the same would not constitute an offence punishable under Section

406 of the IPC.

25. In order to make out a case of criminal breach of

trust, it is not sufficient to show that the money has been retained by

the company but also that the company dishonestly disposed of the
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same or dishonestly retained the same. The mere fact that the

accused persons did not pay the amount due would not amount to

criminal breach of trust.

26. As far as the offence punishable under Section

420 IPC is concerned, the same prescribes punishment for the

offence of „cheating‟, which is defined under Section 415 of the

IPC.

27. Section 415 of the IPC reads as under:-
“415. Cheating — Whoever, by deceiving any
person, fraudulently or dishonestly induces the
person so deceived to deliver any property to any
person, or to consent that any person shall retain
any property, or intentionally induces the person
so deceived to do or omit to do anything which he
would not do or omit if he were not so deceived,
and which act or omission causes or is likely to
cause damage or harm to that person in body,
mind, reputation or property, is said to “cheat”.”

Illustrations

(a) A, by falsely pretending to be in the Civil
Service, intentionally deceives Z, and thus
dishonestly induces Z to let him have on credit goods
for which he does not mean to pay. A cheats.

(b) A, by putting a counterfeit mark on an article,
intentionally deceives Z into a belief that this article
was made by a certain celebrated manufacturer, and
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thus dishonestly induces Z to buy and pay for the
article. A cheats.

(c) A, by exhibiting to Z a false sample of an

article, intentionally deceives Z into believing that

the article corresponds with the sample, and thereby

dishonestly induces Z to buy and pay for the articles.

A cheats.

(d) A, by tendering in payment for an article a bill

on a house with which A keeps no money, and by

which A expects that the bill will be dishonoured,

intentionally deceives Z, and thereby dishonestly

induces Z to deliver the article, intending not to pay

for it. A cheats.

(e) A, by pledging as diamonds article which he
knows are not diamonds, intentionally deceives Z,
and thereby dishonestly induces Z to lend money. A
cheats.

(f) A intentionally deceives Z into a belief that A
means to repay any money that Z may lend to him
and thereby dishonestly induces Z to lend him
money. A not intending to repay it. A cheats.

(g) A intentionally deceives Z into a belief that
A means to deliver to Z a certain quantity of
indigo plant which he does not intend to deliver,
and thereby dishonestly induces Z to advance
money upon the faith of such delivery. A cheats;
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but if A, at the time of obtaining the money,
intends to deliver the indigo plant, and afterwards
breaks his contract and does not deliver it, he
does not cheat, but is liable only to a civil action
for breach of contract.

(h) A intentionally deceives Z into a belief that A
has performed A‟s part of a contract made with Z,
which he has not performed, and thereby dishonestly
induces Z to pay money. A cheats.

(i) A sells and conveys an estate to B. A, knowing
that in consequence of such sale he has no right to
the property, sells or mortgages the same to Z,
without disclosing the fact of the previous sale and
conveyance to B, and receives the purchase or
mortgage money from Z. A cheats. (emphasis mine)

28. For the offence of cheating and dishonestly

inducing delivery of property, punishment is prescribed under

Section 420 of the IPC, which reads as under:-

“420. Cheating and dishonestly inducing
delivery of property.- Whoever cheats and
thereby dishonestly induces the person deceived
to deliver any property to any person, or to make,
alter or destroy the whole or any part of a
valuable security, or anything which is signed or
sealed, and which is capable of being converted
into a valuable security, shall be punished with
imprisonment of either description for a term
which may extend to seven years, and shall also
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be liable to fine”.

29. The aforestated Section 420 of the IPC consists of

two distinct parts of cheating. The first part contemplates where by

deception practiced upon a person the accused dishonestly or

fraudulently induces that person to deliver a property to any person

or to consent that any person shall retain any property. The second

part envisages where by deception practiced upon a person the

accused intentionally induces that person to do or omit to do so, if

he were not so deceived, and which act or omission causes or is

likely to cause damage or harm to that person in body, mind,

reputation or property.

30. It would also be evident from combined reading

of Sections 415 and 420 of the IPC that one of the essential

ingredients of Section 420 IPC is mens rea of the accused at the

time of making the inducement.

31. It is well settled position in law that in order to

attract the provisions of Section 420 IPC, the guilty intent at the

time of making the promise is a prerequisite and an essential

ingredient thereto, and subsequent failure to fulfil the promise by

itself would not attract the provisions of Section 420 IPC.

32. As a matter of fact illustration (g) of Section 415

makes the position clear enough to indicate that mere failure to
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deliver in breach of an agreement would not amount to cheating but

is liable only to a civil action for breach of contract.

33. In Dalip Kaur Ors. Vs. Jagnar Singh

Anr. [(2009) 14 SCC 696], the question for determination before

the Supreme Court was whether breach of contract of an agreement

for sale would constitute an offence under Section 406 or Section

420 of the IPC. After examining the fact of the case and relevant

Sections of the IPC, the Supreme Court held that an offence of

„cheating‟ would be constituted when the accused has fraudulent or

dishonest intention at the time of making of promise or

representation. A pure and simple breach of contract does not

constitute the offence of „cheating‟. It further held that if the

dispute between the parties was essentially a civil dispute resulting

from a breach of contract on the part of the appellants for non-

refunding the amount of advance, the same would not constitute an

offence of „cheating‟ or „criminal breach of trust‟.

34. In Alpic Finance Ltd. vs. P. Sadasivan and

Anr., [(2001) 10 SCC 228], the Supreme Court highlighted the

grounds on which criminal proceedings are to be quashed under

Section 482 of the CrPC and noted the ingredients of Section 420 of

the IPC. In that case, the appellant was a registered company having

its head office at Mumbai. It was carrying business, inter alia, of
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leasing and hire purchase. The first respondent therein was the

chairman and founder-trustee of a trust. The second respondent was

also a trustee. The trust was running a dental college in the name

and style of Rajiv Gandhi Dental College. The respondents therein

entered into agreement with the appellant company therein whereby

the appellant had agreed to finance the purchase of 100

hydraulically-operated dental chairs of which cost was around

Rs.92,50,000/-. The appellant company agreed to finance the

respondents for the purchase of chairs through a lease agreement

and as per the agreement. The respondents were liable to pay

rentals. The respondents agreed to pay quarterly the sum of

Rs.7,50,000/- for the first year, Rs.12,50,000/- for the second year,

Rs.8,00,000/- for the third year and Rs.6,25,000/- for the fourth

year. In accordance with the agreement, the appellant made

payments to M/s United Medico Dental Equipments and they

delivered the dental chairs to the respondents. The appellant

company alleged that the respondents were not regular in making

payments and committed default in payment of the installments and

that the bank had dishonoured certain cheques issued by the

respondents. The appellant company also alleged that on physical

verification, certain chairs were found missing from the premises of

the respondents and thus they committed cheating and caused
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misappropriation of the property belonging to the appellant. The

appellant company filed a complaint under Section 200 of the CrPC

before the Chief Metropolitan Magistrate, Bangalore alleging that

the respondents had committed offences under Sections 420, 406

and 423 read with Section 120-B of the IPC. The Magistrate took

cognizance of the alleged offence under Section 190 of the CrPC

and issued summons to the respondents. The order taking

cognizance was challenged by the respondents by filing an

application under Section 482 of the CrPC before the Karnataka

High Court. The High Court quashed the entire proceedings. Being

aggrieved, the appellant company preferred an appeal before the

Supreme Court. It was contended on behalf of the appellant in that

case that the High Court had seriously erred in quashing the

proceedings under Section 482 of the CrPC. It was also contended

that allegation in the complaint clearly made out offences

punishable under Sections 420, 406, 423, 424 read with Section

120-B of the IPC. It was contended on behalf of the respondents

that the complaint was filed only to harass the respondents and it

was motivated by mala fide intention. It was argued that the entire

transaction was of civil nature and that the respondents have made a

substantial payment as per the hire-purchase agreement and the

default, if any, was not willful and there was no element of
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misappropriation or cheating.

35. After considering the powers under Section 482

of the CrPC and the facts and law involved in the case, the Supreme

Court dismissed the appeal and concluded that the learned Judge of

the High Court was perfectly justified in quashing the proceedings.

It held in para 10 as under :-

“10. … The injury alleged may form basis of civil
claim and may also constitute the ingredients of
some crime punishable under criminal law. When
there is dispute between the parties arising out of a
transaction involving passing of valuable
properties between them, the aggrieved person
may have right to sue for damages or
compensation and at the same time, law permits
the victim to proceed against the wrongdoer for
having committed an offence of criminal breach of
trust or cheating. Here the main offence alleged by
the appellant is that respondents committed the
offence under Section 420 I.P.C. and the case of
the appellant is that respondents have cheated him
and thereby dishonestly induced him to deliver
property. To deceive is to induce a man to
believe that a thing is true which is false and
which the person practising the deceit knows or
believes to be false. It must also be shown that
there existed a fraudulent and dishonest
intention at the time of commission of the
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offence. There is no allegation that the
respondents made any willful
misrepresentation. Even according to the
appellant, parties entered into a valid lease
agreement and the grievance of the appellant is
that the respondents failed to discharge their
contractual obligations. In the complaint, there
is no allegation that there was fraud or
dishonest inducement on the part of the
respondents and thereby the respondents
parted with the property. It is trite law and
common sense that an honest man entering into
a contract is deemed to represent that he has
the present intention of carrying it out but if,
having accepted the pecuniary advantage
involved in the transaction, he fails to pay his
debt, he does not necessarily evade the debt by
deception”. (emphasis mine)

36. In Anil Mahajan vs. Bhor Industries Ltd. and

Anr. [(2005) 10 SCC 228], a three-Judge Bench of the Supreme

Court considered a case relating to the issuance of process for the

offence punishable under Sections 415, 418 and 420 of the IPC. In

that case also, the Bench analyzed the difference between „breach

of contract‟ and „cheating’. The appellant therein was the accused

in complaint filed against him by the respondent company for the

offence punishable under Sections 418 and 420 of the IPC. On the
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basis of the allegations made in the complaint, the Magistrate issued

the process against the accused. The order of Magistrate would

demonstrate that the complainant had filed documents on record to

show that the accused promised to pay the amount, but he did not

pay the same with the intent to deceive the complainant. Therefore,

the Magistrate held that the complainant had been able to make out

a case to issue process against the accused under Sections 415, 418

and 420 of the IPC.

37. The said order of the Magistrate was challenged

before the court of sessions. The learned Additional Sessions Judge,

who heard the matter, set aside the order of Magistrate issuing

process. The order of the learned Additional Sessions Judge was set

aside by the High Court.

38. The order of the High Court was challenged by

the appellant before the Supreme Court. After analyzing the

provisions of the IPC under which the complaint was filed and the

allegation made in the complaint, the Court observed that it was a

simple case of civil dispute between the parties. It held that requisite

averments so as to make out a case of „cheating‟ are absolutely

absent. It further held that the principles laid down in Alpic

Finance Ltd. vs. P. Sadasivan and Anr., (supra) were rightly

applied by learned Additional Sessions Judge while setting aside the
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order of the Magistrate issuing process to the appellant.

39. In S. W. Palanitkar and Ors. vs. State of Bihar

and Anr. [(2002) 1 SCC 241], it has been held by the Supreme

Court in para 21 as under :-

“21. … In order to constitute an offence of
cheating, the intention to deceive should be in
existence at the time when the inducement was
made. It is necessary to show that a person had
fraudulent or dishonest intention at the time of
making the promise, to say that he committed
an act of cheating. A mere failure to keep up
promise subsequently cannot be presumed as an
act leading to cheating”.

40. In State of Kerala vs. A. Pareed Pillai and

Anr. [(1972) 3 SCC 661], the Supreme Court held in para 16 as

under :-

“16. … To hold a person guilty of the offence
of cheating, it has to be shown that his intention
was dishonest at the time of making the
promise. Such a dishonest intention cannot be
inferred from the mere fact that he could not
subsequently fulfil the promise”.

41. In the present case, what has been alleged by the

informant in his written report is that the company did not make

appropriate payment to the milk suppliers. It also failed to make
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payment due to the milk van and salary of the informant as also

wages due to the labour of the milk van. Apart from the allegation

of non-payment of dues to various persons, as discussed above,

there is no iota of allegation they had dishonest intention in

misappropriation of property. There is no allegation that the

company or the petitioners made any willful misrepresentation.

There is also no allegation that the petitioners induced the informant

to believe anything to be true which was false and which the

petitioners knew or believed to be false.

42. The informant has also alleged that certain

compromise was arrived at between the milk suppliers and the

company for settlement of their dues, which has not been fulfilled

by the company.

43. In view of the allegation made by the informant,

the agreement, if any, was between the milk suppliers and the

company and the informant had got no concern with such

agreement. In the event, the company failed to fulfill its liability

under the agreement, the aggrieved persons would have been the

milk suppliers.

44. In view of the ratio laid down by the Supreme

Court in the cases discussed above, as also the allegation made by

the informant in the FIR, I have no hesitation in holding that even if
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the entire allegations are believed to be true at their face value, the

ingredients of the offences punishable under Sections 406 and 420

IPC are not attracted in the present case.

45. Apart from the fact that the allegations made in

the FIR lacks necessary ingredients of sections 406 and 420 of the

IPC, concept of vicarious liability is unknown to criminal law. The

IPC does not provide for vicarious liability upon the directors of the

comapny for any offences alleged to be committed by a company.

46. In S.K. Alagh vs. State of U.P. and Ors.[(2008)

5 SCC 662], the Supreme Court observed:-

“Indian Penal Code, save and except some
provisions specifically providing therefor, does
not contemplate any vicarious liability on the
part of a party who is not charged directly for
commission of an offence”.

47. In Maksud Saiyed vs. State of Gujarat

[(2008) 5 SCC 668], the Supreme Court held as under:-

“Indian Penal Code does not contain any
provision for attaching vicarious liability on the
part of the Managing Director or the Directors
of the Company when the accused is the
Company. The learned Magistrate failed to
pose unto himself the correct question viz. as to
whether the complaint petition, even if given
face value and taken to be correct in its entirety,
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would lead to the conclusion that the
respondents herein were personally liable for
any offence. The Bank is a body corporate.
Vicarious liability of the Managing Director
and Director would arise provided any
provision exists in that behalf in the statute.
Statutes indisputably must contain provision
fixing such vicarious liabilities. Even for the
said purpose, it is obligatory on the part of the
complainant to make requisite allegations
which would attract the provisions constituting
vicarious liability”.

48. In R. Kalyani v. Janak C. Mehta [(2009) SCC

(Cri) 567], the Supreme Court observed as under:-

“32. Allegations contained in the FIR are for
commission of offences under a general statute.
A vicarious liability can be fastened only by
reason of a provision of a statute and not
otherwise. For the said purpose, a legal fiction
has to be created. Even under a special statute
when the vicarious criminal liability is fastened
on a person on the premise that he was in charge
of the affairs of the company and responsible to
it, all the ingredients laid down under the statute
must be fulfilled. A legal fiction must be
confined to the object and purport for which it
has been created”.

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49. As seen above, the dues, if any, was against the

company namely, Natural Dairy Pvt. Ltd. According to the

informant himself, his appointment was in the company for

collection of milk and milk had been procured from the milk

suppliers in the district of Vaishali and Samastipur for and on behalf

of the company.

50. Thus, in view of the ratio laid down by the

Supreme Court in S.K. Alagh (supra), Maksud Saiyed (supra)

and R. Kalyani (supra), in absence of the company having been

impleaded as accused, the petitioners cannot be charged and put on

trial for the offences punishable under the IPC.

51. As far as the offence punishable under Section

138 of the NI Act is concerned, I am of the opinion that the

petitioners cannot be charged for the said offence due to various

legal flaws. However, before highlighting those legal flaws, firstly, I

would like to extract the provisions prescribed under Sections 138,

141 and 142 of the NI Act hereunder:-

“138. Dishonor of cheque for insufficiency, etc.,
of funds in the account. – Where any cheque
drawn by a person on an account maintained by
him with a banker for payment of any amount of
money to another person from out of that account
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for the discharge, in whole or in part, of any debt
or other liability, is returned by the bank unpaid,
either because of the amount of money standing to
the credit of that account is insufficient to honour
the cheque or that it exceeds the amount arranged
to be paid from that account by an agreement
made with that bank, such person shall be deemed
to have committed an offence and shall, without
prejudice to any other provision of this Act, be
punished with imprisonment for a term which may
be extended to two years, or with fine which may
extend to twice the amount of the cheque, or with
both.

Provided that nothing contained in this section
shall apply unless-

(a) the cheque has been presented to the bank
within a period of six months from the date on
which it is drawn or within the period of its
validity, whichever is earlier.

(b) the payee or the holder in due course of the
cheque, as the case may be, makes a demand for
the payment of the said amount of money by
giving a notice, in writing, to the drawer of the
cheque, within thirty days of the receipt of
information by him from the bank regarding the
return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the
payment of the said amount of money to the payee
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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or, as the case may be, to the holder in due course
of the cheque within fifteen days of the receipt of
the said notice.

Explanation: For the purposes of this section,
“debt or other liability” means a legally
enforceable debt or other liability.

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.

(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,
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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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 relating to a firm, means a
partner in the firm.

142. Cognizance of offences.- Notwithstanding
anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974),-

(a) no court shall take cognizance of any offence
punishable under section 138 except upon a
complaint, in writing, made by the payee or, as the
case may be, the holder in due course of the
cheque;

(b) such complaint is made within one month of
the date on which the cause of action arises under
clause (c) of the proviso to section 138:

(c) no court inferior to that of a Metropolitan
Magistrate or a Judicial Magistrate of the first
class shall try any offence punishable under
section 138.”

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52. From perusal of Section 138 of the NI Act, it

would be evident that the same mandates for filing a complaint case

after issuance of a statutory notice.

53. In the present case, no cause of action had arisen,

as no statutory notice as mentioned under the provisions of Section

138 of the NI Act was served upon the petitioners or the company

by the aggrieved persons.

54. Further, the informant is not an aggrieved person

within the meaning of provisions of Section 138 of the NI Act.

55. Furthermore, the cognizance of an offence under

Section 138 of the NI Act is forbidden under Section 142 of the NI

Act except upon a complaint in writing by the payee or the holder of

the cheque in due course within a period of one month from the date

the cause of the cheque.

56. I further find that the alleged cheques dated

25.04.2011 and 25.05.2011 for an amount of Rs.45,000/- each

drawn on Bank of India, Rajiv Nagar, Patna issued in favour of

Shashi Bhushan Rai, which were dishonoured, are part of the FIR.

57. From perusal of the cheques, it would be apparent

that the alleged cheques were issued under the signature of
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petitioner no. 1 on behalf of Natural Dairy Pvt. Ltd. Thus, the

liability to pay, if any, was of the company of which the petitioner

no.1 was the authorized signatory.

58. It is settled position in law that when a cheque,

which is drawn by the company, is dishonoured, the company will

have to be made a party to the proceedings under Section 138 of the

NI Act and failure to do so will vitiate the prosecution.

59. In Aneeta Hada v. Godfather Travels and

Tours Private Limited [(2008) 13 SCC 703], an appeal had

initially came up before a two Judge Bench of the Supreme Court,

which due to divergence of opinion by its order referred the

question to a three-Judge Bench. The question before the three-

Judge Bench of the Supreme Court in Aneeta Hada Vs. Godfather

Travels and Tours Private Limited [(2012) 5 SCC 661] was

whether a complaint under Section 138 of the NI Act read with

Section 141 thereof against a Director or authorized signatory of a

cheque but without joining the company as an accused was

maintainable.

60. Answering in negative and allowing the appeal,

after analyzing the provisions of NI Act in detail, the three-Judge

Bench held as under:-

Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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“In view of our aforesaid analysis, we arrive at
irresistible conclusion that for maintaining the
prosecution under Section 141 of the Act
arraigning of a company as an accused is
imperative. The other categories of offenders can
only be brought in the dragnet on the touchstone
of vicarious liability as the same has been
stipulated in the provision itself”.

61. In N. Harihara Krishnan v. J. Thomas [2017

SCC Online SC 1017], it was clarified by the Supreme Court that

the general concept under CrPC that cognizance is taken against the

offence and not against the offender was not appropriate in

prosecution under the NI Act.

62. In that case, the complainant was issued a

cheque, which was signed by one Harihara Krishnan. The cheque

was drawn allegedly in discharge of balance sale consideration by

M/s Norton Granites and Spinners Pvt. Ltd. However, the cheque

was in fact drawn on account of another private limited company,

M/s Dakshin Granites Pvt. Ltd. in which also Harihara Krishnan

was a director. The cheque got dishonoured for insufficiency of

funds. The complaint was filed only against Harihara Krishnan as

an accused. Later on, the prosecution sought to summon Dakshin

Granites Pvt. Ltd. as an accused invoking powers under Section 319
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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of the CrPC. The court of Magistrate allowed the application under

Section 319 CrPC. The challenge to the order before the High Court

in revision also failed. The reasoning of the High Court was that

cognizance is taken of the offence and not the offender and, thus,

there was no impediment in adding an additional accused once the

cognizance was already taken. However, the Supreme Court held

that the reasoning was erroneous. While relying on Aneeta Hada

vs. Godfather Travels and Tours Private Limited (2012) 5 SCC

661], the Supreme Court held that complaint against a director was

not maintainable without arraying the company as an accused. It

was further stated that the offence under Section 138 of the NI Act

unlike other offences under IPC was person specific. It held as

under:-

“By the nature of the offence under Section 138
of the Act, the first ingredient constituting the
offence is the fact that a person drew a cheque.

The identity of the drawer of the cheque is
necessarily required to be known to the
complainant (payee) and needs investigation and
would not normally be in dispute unless the
person who is alleged to have drawn a cheque
disputes that very fact. The other facts required to
be proved for securing the punishment of the
person who drew a cheque that eventually got
dishonoured is that the payee of the cheque did in
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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fact comply with each one of the steps
contemplated under Section 138 of the Act before
initiating prosecution. Because it is already held
by this Court that failure to comply with any one
of the steps contemplated under Section 138
would not provide “cause of action for
prosecution”. Therefore, in the context of a
prosecution under Section 138, the concept of
taking cognizance of the offence but not the
offender is not appropriate. Unless the complaint
contains all the necessary factual allegations
constituting each of the ingredients of the offence
under Section 138, the Court cannot take
cognizance of the offence. Disclosure of the name
of the person drawing the cheque is one of the
factual allegations which a complaint is required
to contain. Otherwise in the absence of any
authority of law to investigate the offence under
Section 138, there would be no person against
whom a Court can proceed. There cannot be a
prosecution without an accused. The offence
under Section 138 is person specific. Therefore,
the Parliament declared under Section 142 that
the provisions dealing with taking cognizance
contained in the CrPC should give way to the
procedure prescribed under Section 142. Hence
the opening of non-obstante clause under Section

142. It must also be remembered that Section 142
does not either contemplate a report to the police
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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or authorise the Court taking cognizance to direct
the police to investigate into the complaint”.

63. Thus, in absence of the company having been

made an accused, by no stretch of imagination, the petitioners can

be tried for the offence punishable under Section 138 of the NI Act.

64. Apart from the ground on which prosecution of

the petitioners would be bad, as stated above, there is yet another

reason as to why the petitioners can not be tried for the offence

under Section 138 of the NI Act.

65. The present case is based on an FIR whereas

Section 142(a) provides that notwithstanding anything contained in

the Code of Criminal Procedure, no court shall take cognizance of

any offence punishable under Section 138 except upon a complaint

in writing made by the payee or, as the case may be, the holder in

due course of the cheque.

66. Though, the word „complaint‟ has not been

defined under the NI Act, the NI Act states that after dishonour of

cheque a notice within thirty days of information received from the

banker complaint be instituted before Magistrate of the first clas

having jurisdiction to try the case.

67. However, Section 2(d) of the CrPC defines
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„complaint‟ as under:-

“2(d) „Complaint‟ means any allegation made
orally or in writing to a Magistrate, with a view
to his taking action under this Code, that some
person, whether known or unknown, has
committed an offence, but does not include a
police report”.

Explanation- A report made by a police officer
in a case which discloses, after investigation, the
commission of a non-cognizable offence shall be
deemed to be a complaint; and the police officer
by whom such report is made shall be deemed to
be the complainant.

68. From the definition of the term „complaint‟, as

noted above, it would be apparent that it does not include a police

report. As per explanation to Section 2(d) of the CrPC report of

police officer after investigation disclosing commission of non-

cognizable offence shall be deemed to be a complaint. Clause (a) of

Section 142 of the NI Act contemplates filing of a complaint only.

Section 142 of the NI Act does not provide for filing a complaint by

the payee or holder in due course to the police for investigation

under Section 156 of the CrPC. Hence, no cognizance could have

been taken by the court of Magistrate under Section 138 of the NI

Act on the basis of an FIR instituted in the police station which
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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culminated in filing of a chargesheet under Sections 406 and 420 of

the IPC and Section 138 of the NI Act.

69. In N. Harihara v. J. Thomas (supra), the

Supreme Court has held that the scheme of the prosecution under

Section 138 of the NI Act is different from the scheme of the CrPC.

Section 138 of the NI Act creates an offence and prescribes

punishment. No procedure for investigation is contemplated. The

prosecution is initiated on the basis of complaint made by the payee

of a cheque.

70. In view of the foregoing discussion, this Court is

of the opinion that the criminal proceedings initiated against the

petitioners in the present case, is an abuse of the process of law and,

as such, the criminal proceedings as well as the impugned order

cannot be sustained. The Court is also of the opinion that the

learned Judicial Magistrate-1st Class, Patna without appreciating the

facts and considering the settled provisions of law rejected the

application filed by the petitioners under Section 239 of the CrPC in

the most mechanical manner.

71. Resultantly, the criminal proceedings of Trial

No.2413 of 2013 arising out of Patliputra P.S. Case No.160 of 2012

as well as the impugned order dated 25.08.2017 passed by the
Patna High Court Cr.M isc. No.905 of 2018 dt.21-08-2018

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learned Judicial Magistrate-1st Class, Patna rejecting the discharge

petition is set aside.

72. The application stands allowed.

(Ashwani Kumar Singh, J.)
Sanjeet/-

AFR/NAFR NAFR
CAV DATE NA
Uploading Date 22.08.2018
Transmission 22.08.2018
Date

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