P.J. AGRO TECH LIMITED & ORS.versusWATER BASE LIMITED

                    [2010] 9 S.C.R. 119


            P.J. AGRO TECH LIMITED & ORS.                          A
                              V.
                  WATER BASE LIMITED
            (Criminal Appeal No. 1357 of 2010)

                       JULY 28, 2010
                                                                   B
[ALTAMAS KABIR AND DR. MUKUNDAKAM SHARMA,
                    JJ.]

    NEGOTIABLE INSTRUMENTS ACT, 1881:
                                                                   c
     s. 138-Dishonour of cheque-Liability for default-Held:
In order to attract the provisions of s. 138, the cheque must
have been drawn by a person on the account maintained by
him with the banker-In the instant case, the cheque in
question was neither drawn on the account maintained by the        D
company against which the complaint was made, nor was it
signed by any of its directors and, therefore, the company and
its directors cannot be made liable for the default committed
by another person~lnterpretation of statutes.

    INTERPRETATION OF STATUTES;                                    E

     Strict construction-Held: Provisions in respect of
criminal and quasi criminal action are to be strictly construed,
as such matters are in personam and cannot be used to foist
an offence on some other person, who under the statute was         F
not liable therefor-Negotiable Instruments Act, 1881-s.
136.

     Appellant no.1 company, its Managing Director and
the Chairperson, as also the proforma respondents were             G
served with summons in a case filed by respondent No.1
against them purported to be u/s 138 of the Negotiable
Instruments Act, 1881 for dishonour of a cheque drawn
by respondent No.11. The appellant company along with

                              119                                  H
    120      SUPREME COURT REPORTS           [2010] 9 S.C.R.


A others challenged the order issuing the summonses,
  before the High Court contending that the cheque was
  neither drawn on its account nor was it signed by any of
  its directors but was drawn by respondent no.11 on his
  own savings bank accounts; and the complaint was
B abuse of the process of the court filed with the sole
  motive of extracting money from the appellants. The High
  court dismissed the petition. Aggrieved, the Company
  and its directors filed the appeal.

          Allowing the appeal, the Court
c
       HELD: 1.1. From a reading of s. 138, of the Negotiable
  Instruments Act, 1881, it is very clear that in order to
  attract the provisions thereof a cheque which is
  dishonoured will have to be drawn by a person on an
D account maintained by him with the banker for payment
  of any amount of money to another person from out of
  that account for the discharge, in whole or in part of any
  debt or other liability. It is only such a cheque which, if
  dishonoured, would attract the provisions of s. 138 of the
E Act against the drawer of the cheque. [Para 8] [125-H;
  126-A-B]

       1.2. In the instant case, the cheque in question may
  have been issued by the respondent No.11 for
F discharging the dues of the appellant Company and its
  directors to the respondent-company which may have a
  good case against the appellant-company for recovery of
  its dues before other fora, but it would not be sufficient
  to attract the provisions of s.138 of the 1881 Act. The
  appellant-company and its directors cannot be made
G liable u/s 138 of the 1881 Act for a default committed by
  the respondent No.11. [Para 9) [126-C-E]

      2.An action in respect of a criminal or a quasi-
  criminal provision has to be strictly construed in keeping
H with the provisions alleged to have been violated. The
P.J. AGRO TECH LIMITED & ORS. v. WATER BASE                  121
                   LIMITED
proceedings in such matters are in personam and cannot               A
be used to foist an offence on some other person, who
under the statute was not liable for the commission of
such offence. [Para 9] [126-D-E]

    CRIMINAL APP ELLATE JURISDICTION : Criminal Appeal               B
No. 1357 of 2010.

    From the Judgment & Order dated 14.09.2006 of the High
Court of Judicature at Madras in Crl. O.P. No. 22207 of 2003.

    Siddhartha Dave, Senthil Jagadeesan for the Appellants.          C

     Sudarsh Menon for the Respondent.

    The Judgment of the Court was delivered by

    ALTAMAS KABIR, J. 1. Leave granted.                              D
      2. The Appellant No.1 herein is an agro-based company
having varied interests in providing feed supplements, vaccines
etc. The Appellant N_os.2 and 3 are the Managing Director and
Chairperson of the Appellant No.1 Company, which is based
in Hyderabad in the State of Andhra Pradesh. In order to utilize
                                                                     E
the dealer network of the Appellant No.1 Company, the
Respondent No.1 Company approached the Appellants for
distribution of prawn feed manufactured by it. Inasmuch as, the
said venture did not turn out to be very successful, the Appellant
No.1 Company took a decision to discontinue its dealings with        F
the Respondent No.1 Company. In furtherance of the above, the
Appellant Company settled all its outstandings with the
Respondent No.1 Company and also gave an authorization
letter to the Respondent No.1 Company to collect all other dues
directly from the customers of the Appellant No.1 Company,           G
who had bought the feed but were yet to pay the price therefor.
The concerned customers were also informed about the
aforesaid decision. Thereafter, on 4th October, 2001, the
Appellant Company requested the Respondent No.1 Company
to coordinate with one K. Balashankar Reddy, the then General        H
    122     SUPREME COURT REPORTS                 [2010] 9 S.C.R.


A Manager at Nellore, for collecting the dues which were still
  outstanding. From the contents of the said letter it appears that
  the Respondent Company had accepted the said offer.
  However, in the course of making collections from the
  customers directly, it was found that some of its employees had
B conspired with the said K. Balashankar Reddy and had
  misappropriated some amounts of money and the same was
  intimated by the Respondent No.1 Company to the Appellant
  Company which asked the former to take action against the
  said Balashankar Reddy and its concerned employees.
c       3. Subsequently, however, the Appellant and the Proforma
  Respondents received a notice dated 13th December, 2002,
  from the Respondent No.1 Company purporting to be a notice
  under Section 138 of the Negotiable Instruments Act, 1881,
  hereinafter referred to as "the 1881 Act", wherein it was stated
D that a cheque issued by K. Balashankar Reddy on 25th
  November, 2002, drawn on the State Bank of Hyderabad,
  Nellore Branch, had been returned dishonoured with the
  endorsement "Account closed". The notice also demanded
  repayment of the cheque amount from the Appellants.
E
        4. On receiving the said notice, the Appellants replied to
  the same on 26th December, 2002, stating that they never had
  any account with the State Bank of Hyderabad and the cheque
  in question had not been issued by the Appellant No.1
F Company. Apparently, there was no response to the reply sent
  on behalf of the Appellants and instead the Appellants were
  served with summons from the Court of XVlllth Metropolitan
  Magistrate, Saidapet, Chennai, in Complaint Case No.1142 of
  2003 based on the complaint which had been filed by the
  Respondent No.1 on 23rd January, 2003. The Appellants
G entered appearance in the aforesaid complaint case and upon
  obtaining copies of the complaint, they were surprised to learn
  that the same had been filed against the Appellants on the basis
  of a personal cheque issued by the Accused No.11, K.
  Balashankar Reddy, from out of his personal savings bank
H account. The said summons was challenged by the Appellants
 P.J. AGRO TECH LIMITED & ORS. v. WATER BASE 123
           LIMITED [ALTAMAS KABIR, J.]
and the Proforma Respondents before the High Court on the          A
ground that the Company did not have any account with the
State Bank of Hyderabad and that the cheque had been issued
by K. Balashankar Reddy (Accused No.11) from out of his
personal savings bank account and that none of the Directors
had signed the said cheque. It was contended that the complaint    B
was an abuse of the process of Court and had been filed with
the sole motive of extracting money from the Appellants. On 14th
September, 2006, the High Court dismissed the said petition
holding that the cheque which had been issued by K.
Balashankar Reddy was to meet the liability of the Appellant       c
No.1 Company and its Directors on their request and that as a
result they had rightly been prosecuted under Section 138 of
the 1881 Act. The said order of the High Court dismissing the
Appellants' petition has been challenged in the instant Appeal
essentially on the ground that the High Court had erred in         D
allowing the complaint proceedings to continue although the
same were not maintainable against the Appellants and the
 Proforma Respondents who were not the drawers of the
 cheque, nor was the cheque issued from any of their banks.

      5. Appearing for. the Appellants, Mr. Siddharth Dave,        E
learned Advocate, submitted that both the learned Magistrate
as well as the High Court had failed to consider in their proper
perspective the provisions of Section 138 of the Negotiable
Instruments Act, 1881. It was pointed out by Mr. Dave that in
order to attract the provisions of Section 138 of the 1881 Act,    F
it was necessary that a cheque would have to be drawn by a
person on an account maintained by him with his banker and
if the said cheque was dishonoured, it would be deemed that
such person had committed an offence and would, without
prejudice to any other provision of the Act, be punished with      G
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. Mr. Dave urged that in order to maintain an action
against a person under Section 138 of the 1881 Act, it would
be necessary to show that the cheque had been issued by such       H
    124      SUPREME COURT REPORTS                   (2010] 9 S.C.R.


A person on an account maintained by him, which fact was absent
  in the instant case as far as the Appellants are concerned. It
  was reiterated that the cheque in question had been drawn by
  the Respondent No.11 in his personal capacity on his bank and
  upon dishonour thereof, only he could be prosecuted under
B Section 138 of the 1881 Act. It was further submitted that the
  proceedings against the Company and its Directors were not
  maintainable and the High Court had erred in law in not
  quashing the same.

       6. The stand taken on behalf of the Appellants was
C vehemently opposed on behalf of the Respondent No.1
  Company and a spirited attempt was made to involve thA
  Appellant No.1 Company and its Directors for dishonour of the
  cheque which had been issued by the Respondent No.11 from
  his own bank, which did not attract the provisions of Section
D 138 of the 1881 Act against the Appellant No.1 Company and
  its Directors. It was urged that since the cheque had been
  issued by the Respondent No.11 to liquidate the dues of the
  Appellant Company and its Directors, the High Court had quite
  justifiably refused to quash the complaint filed by the
E Respondent No.1 Company.

       7. From the submissions made on behalf of the respective
  parties, it is quite apparent that the short point for decision in
  this Appeal is whether a complaint under Section 138 of tile
F 1881 Act would be maintainable against a person who was not
  the drawer of the cheque from an account maintained by him,
  which ultimately came to be dishonoured on presentation.

       8. Since the provisions of Section 138 of the 1881 Act
  have fallen for consideration in this Appeal, the same are
G extracted hereinbelow :-

          "138. Dishonour of cheque for in::,ufficiency, etc., of funds
          in the account - Where any cheque drawn by a person on
          an account maintained by him with a banker for payment
H         of any amount of money to another person from out of that
P.J. AGRO TECH LIMITED & ORS. v. WATER BASE 125
          LIMITED [ALTAMAS KABIR, J.]

  account for the discharge, in whole or in part, of any debt      A
  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           B
  be deemed to have committed an offence and shall,
  without prejudice to any other provisions 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:                    c
        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      D
          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
                                                                   E
          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
                                                                   F
    (c)   the drawer of such cheque· fails to make the
          payment of the said amount of money to the payee
          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.                                         G

   Explanation.-For the purposes of this section, "debt or
   other liability" means a legally enforceable debt or other
   liability."

   From a reading of the said Section, it is very clear that in    H
    126       SUPREME COURT REPORTS                  [2010] 9 S.C.R.


A order to attract the provisions thereof a cheque which is
  dishonoured will have to be drawn by a person on an account
  maintained by him with the banker for payment of any amount
  of money to another person from out of that account for the
  discharge, in whole or in part of any debt or other liability. It is
B only such a cheque which is dishonoured which would attract
  the provisions of Section 138 of the above Act against the
  drawer of the cheque.

       9. In the instant case, the cheque which had been
  dishonoured may have been issued by the Respondent No.11
C for discharging the dues of the Appellant No.1 Company and
  its Directors to the Respondent No.1 Company and thi::
  Respondent Company may have a good case against the
  Appellant No.1 Company for recovery of its dues before other
  fora, but it would not be sufficient to attract the provisions of
D Section 138 of the 1881 Act. The Appellant Company and its
  Directors cannot be made liable under Section 138 of the 1881
  Act for a default committed by the Respondent No.11. An
  action in respect of a criminal or a quasi-criminal provision has
  to be strictly construed in keeping with the provisions alleged
E to have been violated. The proceedings in such matters are in
  personam and cannot be used to foist an offence on some
  other person, who under the statute was not liable for the
  commission of such offence.

F      10. Having regard to the above, we allow the Appeal and
  set aside the order passed by the High Court and quash the
  complaint filed by the Respondent No.1 Company as far as the
  Appellants and other Proforma Respondents are concerned.
  In the event, any of the Appellants and/or Proforma
G Respondents have been released on bail, they shall stand
  discharged from their bail bonds forthwith.

           11. The Appeal is allowed to the aforesaid extent.

    R.P.                                            Appeal allowed.
H