A.S. Supehia, J. (CAV) - In the present application the applicants have prayed for quashing and set aside Criminal Complaint No 2750 of 2016 filed before Judicial Magistrate First Class at Vapi under section 482 of the Code of Criminal Procedure, 1973 (for short "Cr.P.C.").

2. The brief facts of the case are as under:

2.1 The respondent No.2 has filed the impugned Criminal Complaint No.2750 of 2016 before Judicial Magistrate First Class at Vapi alleging the offence punishable under section 138 of the Negotiable Instruments Act, 1881 (the N.I. Act) for the return of cheque No.398111 dated 01.07.2016 for Rs. 22,50,000/drawn on Axis Bank, Rajkot branch by one Sheetalbhai Shashikant Mehta from his personal account, for which he has also been impleaded as accused No.3 in the aforesaid Criminal Complaint.

2.2 It is the case of the applicants that the respondent No. 2 original complainant has alleged in the Criminal Complaint No.2750 of 2016 that the respondent No.2 has initially filed four complaints against the applicants No.1 and 2 as well as Sheetalbhai Shashikant Mehta, the details of which are as under:

Criminal Complaint No.

Cheque

No.

Amount

(Rs.)

1815 of 2014

000481

5,00,000/-

1816 of 2014

000487

5,00,000/-

000488

5,00,000/-

000489

5,00,000/-

000490

5,00,000/-

000491

5,00,000/-

1818 of 2014

000476

5,00,000/-

1819 of 2014

000479

5,00,000/-

Total

40,00,000/-

2.3 The said Criminal Complaints were not proceeded further in view of the fact that the settlement was arrived at between the complainant and the accused in the said four complaints and Memorandum of Understanding (MOU) was executed between them on 12.02.2016 and in view of the said settlement, Sheetalbhai Shashikant Mehtaaccused No.3 has given a cheque of Rs. 22,50,000/out of his own personal Bank Account. The said cheque was however, given by the said Sheetalbhai Shashikant Mehtaaccused No.3 from his joint Account with his wife namely Meeraben Sheetalbhai Mehtaapplicant No.3. It was understood between the parties in the said MOU that the cheque given by Sheetalbhai Shashikant Mehta would be realized on its presentation in the Bank and if, the said cheque would be returned, in that case the complainant would be entitled to file Criminal Complaint against the accused Nos.1 to 3 in the said complaints under section 138 of the N.I. Act as well as under Sections 406 and 420 of the Indian Penal Code, 1860. The complainant has thereafter, presented the said cheque in her bank account with DCB Bank Ltd, Vapi Branch, Vapi and the said cheque was returned uncleared along with cheque return memo dated 25.08.2016. The respondent No.2 has thereafter, issued statutory notice on 06.09.2016 to all the four accused. However, notice issued on accused No.1 Company could not be served on the ground that the Company is not in existence at the given address. The accused Nos.3 and 4 have refused the said notice as stated in the complaint and the notice was served on the accused No.2 on 10.09.2016.

Since the amount of Rs. 22,50,000/could not be paid by any of the four accused, the Criminal Complaint No.2750 of 2016 was filed by the respondent No.2.

3. Learned advocate Mr.D.K.Puj, appearing for the applicants, has submitted that respondent No.2 has filed absolutely false, frivolous and vexatious Criminal Complaint against the applicants. There is no truth or substance in the said complaint. It is further submitted by him that applicants No.1 and 2 were duly absolved from their liabilities no sooner, the settlement was arrived at and earlier complaints filed against them were withdrawn. The accused No.3 Sheetalbhai Shashikant Mehta has undertaken the said liability and the cheque was also issued by him from his personal account. Though, the said cheque was returned uncleared. The liability to pay the debt was fastened upon him only and the applicant No.3 namely Meeraben Sheetalbhai Mehta is absolutely unconcerned with the controversy as she was neither a party to the original complaint nor she was in any way connected with the accused No.1 Company. She has also not signed the MOU and no liability was undertaken by her. Simply because her husband namely Sheetalbhai Shashikant Mehta has given the cheque from the joint account, she would not be made liable for discharging any liability either of the Company or of her husband.

3.1 He has further submitted that there is not a single allegation in the entire complaint against the applicants. The respondent No.2 has made all the allegations against accused No.3 Sheetalbhai Shashikant Mehta and the applicants are impleaded only under the belief that accused No.3 has issued the cheque of Rs. 22,50,000/as the chief officer of the accused Company and that the accused No.2 is the director of the said Company and that the accused No.4 is the wife of accused No.3 and from their joint account of accused No.3 and 4, the cheque in question was given. Therefore, the accused Nos.1, 2 and 4 are wrongly impleaded in the said complaint and on the basis of these facts, it is urged by Mr.Puj to quash the complaint.

3.2 In support of his submission, learned advocate Mr.Puj has placed reliance on the judgment of the Apex Court reported in in the case of Jugesh Sehgal v. Shamsher Singh Gogi, 2009(14) SCC 683. He has submitted that as per the observations made by the Apex Court, parameters laid down in said judgment are not fulfilled in the present case and hence, the impugned complaint is required to be quashed and set aside.

3.3 He has further placed reliance on the judgment of this Court dated 03.09.2013 passed in Criminal Mis. Application No.11078 of 2018 and has submitted that the applicants are not liable under privity of the contract as alleged by the respondent and only drawer of the cheque can be made liable for criminal action.

4. Vehemently, opposing the submissions advanced by learned advocate Mr.Puj, learned advocate Mr.Zubin Bharda, appearing for the complainant, has submitted that the impugned complaint does not require any interference since the applicants have acted contrary to the settlement and hence, the present writ petition may be dismissed.

4.1 He has further submitted that as per the settlement arrived at between the applicants and the complainant, earlier liability of Rs. 40,00,000/- was reduced to Rs. 22,50,000/-, which was to be paid by the accused No.3 Sheetalbhai Shashikant Mehta. He has submitted that since the cheque issued, after the aforesaid settlement, was not honoured as per the conditions stipulated therein, the complainant has lodged the complaint against all the accused, who are liable to pay the amount of Rs. 40,00,000/- comprising all four cheques, which were issued earlier. He has submitted that the complainant had lodged the complaint under section 138 of the N.I. Act for the dishonouring of the cheques amounting Rs. 40,00,000/-. The compromise was arrived at and amount was reduced to Rs. 40,00,000/- to Rs. 22,50,000/-, which was to be paid by the accused No.3 Sheetalbhai Shashikant Mehta. He has submitted that as such earlier complaint would get revived and hence, appropriate order may be passed in this regard.

5. Heard the learned advocates for the respective parties.

6. It is not in dispute that the complaint was initially lodged as Criminal Complaint No.2750 of 2016 against four accused as stated in the complaint since the aforenoted cheques to the tune of Rs. 40,00,000/were dishonoured. During the pendency of the said complaint, the complainant and the four accused of the complaint have arrived at compromise, which was executed between them on 12.02.2016, pursuant to which one Sheetalbhai Shashikant Mehta issued a cheque of Rs. 22,50,000/out of his own personal bank account, which ultimately got dishonoured. It is pertinent to note that Sheetalbhai Shashikant Mehta was holding a joint account with his wife Meeraben Sheetalbhai Mehta i.e applicant No.3.

7. This Court has perused the contents of the Memorandum of Understanding incorporating the terms of compromise. The MOU stipulates specific condition that if cheque No.398111 dated 01.07.2016 for the amount of Rs. 22,50,000/gets dishonored, the complainant shall be at liberty to file appropriate complaint under section 138 of the N.I. Act against the persons, who are the signatories to such compromise.

8. Before embarking upon the rival contentions, it will be necessary to reproduce section 138 of the N.I. Act.

"138. Dishonour 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 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 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.

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

9. The quintessential feature for attracting the provision of section 138 of the N.I. Act is "cheque drawn by a person on an account maintained by him". In the present case, the respondent No.2 has entered into a compromise with the applicant Nos.1 and 2 pursuant to which Sheetal Mehta issued the cheque from his personal account. Thus, applicant Nos.1 and 2 cannot be held liable for any offence under section 138 of the N.I. Act since they are not the drawers of the cheque. The consequences of the cheques for which the earlier complaint was filed gets washed away in view of the compromise, and if the compromise is not honored by the person who has shouldered the liability by issuing the cheque from his personal account, he alone can be prosecuted for the offence under section 138. The compromise entered by the respondent and the petitioner nos.1 and 2 cannot override the provisions of the section 138 of the. The complainant can initiate action against the person who has issued the cheque in case the cheque is dishonoured since the proceedings under section 138 of theare penal proceedings. The drawer of the cheque is only liable for penal proceedings in respect of the dishonoured cheque.

10. The expression "debt or other liability" postulated in the Explanation to section 138 cannot be extended to other persons who are signatories to the compromise. It is true that the debt and liability was of the company and the persons who were signatory were directors of the company but after the compromise, the entire liability was shouldered by Sheetal Mehta who had issued the cheque from his personal account and not from the account of the Company. In the present case the accussed no.1 is the company. section 141 of the N.I. Act deals with offences by companies. It reads as follows:-

"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 subsection 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 subsection (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."

11. The three Judge Bench of the Supreme Court in the decision rendered in the case of Aneeta Hada v. Godfather Travels and Tours Private Limited, 2012 (5) SCC 661 [LQ/SC/2012/406] has held that when the company is prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. It has been further held therein that there cannot be any vicarious liability unless there is a prosecution against the company. In the case at hand, the company has been arrayed as the accused No. 1 along with the Director and the wife of Sheetal Mehta.

12. In the case of K.K. Ahuja v. V.K. Vora and Anr, 2009 (10) SCC 48 , [LQ/SC/2009/1378] the Supreme Court has summarized the position under Section 141 of theas under:

"The position under Section 141 of thecan be summarized thus:

(1) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix "Managing" to the word "Director" makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.

(ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under subsection (2) of Section 141.

(iii) In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that subsection.

(iv) Other officers of a company cannot be made liable under subsection (1) of Section 141. Other officers of a company can be made liable only under subsection

(2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence."

13. A conspectus of the aforenoted observations of the Apex Court is that if the cheque is singed by the Director or a officer of the Company who has signed the cheque on behalf of the Company would give rise to the responsibility of liability under section 141 of the. In the present case the cheque in question was issued by the Sheetal Mehta in his personal capacity from his personal account and he has not signed the same on behalf of the Company though he was working as a Chief Executive Officer. Thus, the applicants cannot be held vicarious liable for the act of Sheetal Mehta after the respondent no.2 entered into settlement with the present applicants. The contents of the complaint made by the Respondent no.2 before the Judicial Magistrate reveal that he has stated that as per the settlement Sheetal Mehta in his personal capacity had taken the responsibility of paying the amount in question. Pursuant to which he issued the cheque of Rs. 22,50,000/from the joint account with his wife. Thus, the provision of section 141 of thecannot be stretched in the present case for fixing the liability of the applicants in wake of the undisputed fact that the concerned cheque was issued by Sheetal Mehta from his personal account in personal capacity.

14. As regards the criminal liability of respondent no.3 is concerned, she is only the joint holder and has not signed the cheque. The Supreme Court in case of Aparna A.Shah v. Sheth Developers Private Limited, 2013 (8) SCC 71 [LQ/SC/2013/638] has observed thus:

"22. In the light of the above discussion, we hold that under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination-in-chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque.

23 We also hold that under section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to section 141 of the N.I. Act which would have no application in the case on hand. The proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complainant has no remedy against the appellant but certainly not under Section 138. The culpability attached to dishonour of a cheque can, in no case "except in case of section 141 of the N.I. Act" be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of admission/denial of documents. In such circumstances, it cannot be concluded that the trial is in advanced stage."

15. In light of the aforesaid observations of the Apex Court, applicant No.3, who is not the signatory of the cheque issued by Sheetal Mehta, cannot be held liable for the offence under 138 of the Negotiable Instruments Act, 1881.

16. Before parting with the judgment, the facts of of the case necessitate observations against the modus operandi adopted by the applicant Nos.1 and 2, and Sheetal Shashikant Mehta, Chief Executive Officer of the applicant No.1 in committing fraud against the complainant, who is a lady of 65 years. The complainant, after she entered into settlement with them, in bona fide belief of getting her dues, had withdrawn the Criminal Complaint Nos.1815 of 2014, 1816 of 2014, 1818 of 2014 and 1819 of 2014 filed by her against them for a total debt liability of an amount of Rs. 40,00,000/. In the settlement, the amount was reduced to Rs. 22,50,000/and the liability was shouldered by Sheetal Mehta by issuing the cheque, which was also subsequently dishonoured. Thus, the complainant was left without any remedy of pursuing her original complaints for the amount of Rs. 40,00,000/since the same were disposed of in view of the settlement. As per section 147 of the N.I. Act, the offences punishable under the are compoundable and hence, the effect of the compounding will amount to acquittal. In the considered opinion of his Court, if a complaint is disposed of pursuant to any settlement, and the cheque which is issued pursuant to such settlement gets dishonoured, then the original accused, who are the signatories to the compromise cannot be letoff only for the reason that some other person has shouldered the liability of discharging the debt and they cannot be prosecuted in view of acquittal. In such cases it can be presumed that the accused have in fact abused the process of law and by adopting such tactics they were successful in obtaining acquittal because of the compounding of the offence under section 147 of the N.I. Act. In such circumstances, the complainant can file an appeal against the acquittal of the accused. Thus, it will be open for the respondent No.2 to initiate appropriate proceedings against the accused of Criminal Complaint Nos. 1815 of 2014, 1816 of 2014, 1818 of 2014 and 1819 of 2014 challenging their acquittal.

17. Resultantly, the present writ application is allowed. The impugned Criminal Complaint No.2750 of 2016 filed before Judicial Magistrate, First Class at Vapi as well as all other consequential proceedings arising from the impugned criminal complaint are hereby quashed and set aside qua the applicants. Rule is made absolute to the aforesaid extent.