Avneet Bedi vs. The State of West Bengal and Anr: An Examination of Corporate Responsibility in Cheque Bounce Cases

CASE TITLE: 

Avneet Bedi vs. The State of West Bengal and Anr.

DATE OF ORDER:

14^th December 2022

BENCH:

Hon’ble Justice Tirthankar Ghosh

PARTIES:

Petitioner (s)- Avneet Bedi

Respondent (s)- The State of West Bengal

SUBJECT:

Legal Challenge to Vicarious Criminal Liability for Dishonoured Cheques under Section 138/141 of the Negotiable Instruments Act in the Calcutta High Court

IMPORTANT PROVISIONS:

Section 138 and 141 of the Negotiable Instruments Act

BRIEF FACTS:

•  In the current case, a revisional application has been submitted that challenges the complaint case no. C/36041/2010's proceeding under Section 138/141 of the Negotiable Instruments Act, including any orders made therein. This matter is currently before the Metropolitan Magistrate of Calcutta.
•  In the complaint petition filed by TATA Steel Processing and Distribution Ltd. (hereinafter referred to as the "Complainant company") against IDEB Projects (P) Ltd. (hereinafter referred to as the "Accused company"), it is alleged that the accused company issued two cheques totaling Rs. 50,000 each in order to satisfy legally enforceable debts and liabilities related to the supply of cut and bend reinforcement bar by the complainant company.
• The cheques were signed by Accused 2 (Harkirat Singh Bedi), a director of the Accused Company, and delivered to the Complainant Company at its location on March 31, 2010, after being drawn from HDFC Bank.
• The aforementioned cheques were handed over by the complaining firm to its banker HDFC, however they were disregarded and returned unpaid with the notation "insufficient funds" in accordance with memo dated September 27, 2010.
• The complaint corporation then sent a demand notice through speed post with A/D on October 25, 2010, requesting payment of the amount covered by the bounced check within 15 days of receiving the notice of demand. On October 28, 2010, the demand notice was properly served to Accused 1 through 3 at their place of business.
• The accused failed to pay the needed sum, which was covered by the bounced check, in full despite receiving the demand notice within the allotted 15-day period. The defendants have allegedly rendered themselves subject to prosecution under the terms of Sections 138 read along with Section 141 of the Negotiable Instruments Act.

ARGUMENTS FROM THE APPELLANT:

• The fundamental argument stated in the revisional application submitted with regard to the petitioner by Learned Counsel is that even if the allegations in the petition of complaint were regarded as genuine, they would not constitute an offense in the case of the current petitioner Avneet Bedi.
• The counsel representing the appellant contested the continuation of the proceedings on two grounds: first, that the impugned complaint lacked an allegation regarding the personal knowledge of the complainant's representative, and second, that the petition for complaint lacked sufficient averments. However, the learned Advocate relinquished his right to argue the first issue about the absence of an averment in the complaint petition pertaining to the complainant firm representative's personal knowledge at the time of arguments.
• Regarding the second problem, a knowledgeable advocate claimed that a person becomes criminally liable when they commit a wrong act and have malicious intent. It was argued that criminal culpability is always person-specific and that the concept of "responsible superior" has no place in criminal law. This argument was based on the established principle embodied in the Latin maxim "actus non facit reum nisi mens sit rea."The learned Advocate claims that Section 141 of the N.I. Act, which holds a firm and its executives accountable for their actions, incorporates the concepts of vicarious responsibility as an explanation.
• The learned Advocate claimed that a director is not presumed to be liable; to support this claim, the learned Advocate cited the 2005 case of S.M.S. Pharmaceuticals Ltd. v. State of Maharashtra. National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal was the subject of a 2010 Supreme Court case, 8 SCC 89. Anita Malhotra v. Apparel Export Promotion was reported in (2012) 1 SCC 520; 2 SCC 330.
• The learned attorney also frankly stated that, despite the ruling that the Hon'ble Apex Court did not insist on allegations regarding the precise or detailed role of the Directors in the petition of complaint, the Hon'ble Supreme Court of India recently upheld the standards established by the Hon'ble Supreme Court in S.M.S. Pharmaceuticals (supra) in Pawan Kumar Goel -Vs. - State of U.P. & Anr. Additionally, it has been argued that because the directors are not presumed to be at fault, the complaint does not meet statutory requirements, and as a result, the proceedings against Accused No. 3 Petitioner Avneet Bedi should be dismissed.

JUDGEMENT ANALYSIS:

• According to the court, more than ten years had elapsed since then. The accused is now arguing that there are not enough grounds to proceed against him based on the allegations in the complaint petition. Evidence will be accepted starting on and after 14.12.2012.
• The allegations in paragraphs 2 and 6 of the complaints satisfy the criteria for proceeding against the complainant, especially given the circumstances of the case, which started in 2010 and was concluded on August 24, 2012, after the examination under Section 251 of the Code of Criminal Procedure. Nothing in the records to yet indicates that the substance of the accusations read to the accused was false or erroneous.
• The Negotiable Instruments Act's provisions are meant to offer swift and effective relief, but the court expressed regret that there has been a systematic delay in the proceedings for almost 12 years. This case blatantly disregards the Act's provisions, which are meant to provide swift and effective relief.
• In considering the current revisional application, the court cited the following passage from the ruling in the matter of S.P. Mani & Mohan Diary vs. Dr. Snehalatha Elangovan 2022 SCC OnLine SC 1238: "33. Therefore, the legal principles that may be inferred from the court's ruling above can be summed up as follows:--

(a)Those who are in control of and accountable to the corporation or firm for the conduct of its operations may be held vicariously liable. The firm is considered a corporation for the purposes of Section 141;

(b) As the complaint must be read in its whole, it is not essential to provide the exact words of Section 141 in its entirety;

(c) The complaint must continue legally if the core of the claims presented in the complaint meet the standards of Section 141.

(d) In order to dismiss a complaint, a hyper-technical approach should not be used to interpret it.

(e) The concerned Court should keep in mind the admirable goals of eliminating check bounces and upholding the legitimacy of business transactions, which led to the establishment of Sections 138 and 141, respectively.

 (f) These clauses establish a legal presumption of dishonesty, making it illegal for someone to make a payment after receiving notice if it is not paid within the prescribed time frame.

(g) When the factual basis for the offense has been established in the complaint, it should not be quashed since the power of quashing should only be used rarely.

(h) If the complaint's whole is true and its claims are generously interpreted in the complainant's favor, the court in question is required to release the accused if none of the elements of the crime are present.

CONCLUSION:

• The complainant's main duty, the court found, is to provide precise allegations in the complaint that hold the accused vicariously accountable. There is no legal obligation for the complainant to demonstrate that the accused partner of the company was aware of each and every transaction in order to strengthen the criminal responsibility.
• On the other hand, Section 141 of the Act's first proviso clearly states that the accused will not be subject to punishment if they can demonstrate to the satisfaction of the Court that the offense was committed without their knowledge or that they took reasonable steps to prevent it.
• Only the company's directors or partners, depending on the situation, are in a position to demonstrate to a judge that they were not in charge of the company's affairs at the pertinent time based on their special knowledge of their roles within the organization. When the other elements of an offense under Section 138 are satisfied, it is the Board of Directors or the officers in charge of the company's affairs/partners of a firm's burden to demonstrate that they were not subject to conviction, according to references to Sections 138 and 141 of the Act, respectively. Whether there are any unique circumstances that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.
• When the position of the partners "qua" the firm is clearly alleged in the complaint, vicarious criminal culpability might be inferred against the partners of a firm. Although it might subject them to prosecution, it does not always result in a conviction. As a result, they are not biased in any way if they are ultimately found not guilty because acquittal would be a necessary result..
• The court also reaffirmed the points made by this Court in the case of Rallis India Ltd. v. Poduru Vidya Bhusan, (2011) 13 SCC 88, almost ten years ago, regarding how the High Court should use its authority to halt criminal proceedings when those proceedings are connected to offenses committed by corporations. "The world of business transactions has many distinctive complexities, many of which are not yet statutorily controlled. More specifically, the concept outlined in Section 141 of the NI Act, which is pari materia with similar parts in other Acts like the Food Safety and Standards Act 2006, is open to exploitation by dishonest businesses to the harm of unwitting third parties.
• Last but not least, it was determined that the High Court's consideration of the matter was a belated one. In light of the case's current status and the fact that the trial has already begun, I am of the opinion that it would not be appropriate to interfere with the proceedings currently being conducted before the learned Metropolitan Magistrate, 8th Court, Calcutta. As a result, the lawsuit was dropped..