Alladi Narasimha Rao, S/O.Late Sri Allad Vs. M/S.Core Tree Solutions Private Limited, - Court Judgment

SooperKanoon Citationsooperkanoon.com/1030073
CourtAndhra Pradesh High Court
Decided OnOct-12-2012
JudgeG.KRISHNA MOHAN REDDY
AppellantAlladi Narasimha Rao, S/O.Late Sri Allad
RespondentM/S.Core Tree Solutions Private Limited,
Excerpt:
the honourable sri justice g.krishna mohan reddy criminal petition no.4976 o”12. 10.2012 alladi narasimha rao, s/o.late sri alladi yadagiri and others m/s.core tree solutions private limited, ac guards, hyderabad and another counsel for the petitioners: mr. k.rajendran counsel for the respondent no.1: mr.c.r.sridharan counsel for the respondent no.2: the public prosecutor : : ?cases referred:1. 2011 cri.l.j.3672 (delhi hc) 2. air 201.sc 3.3. 2012 cri.l.j.430 (gujarat hc) 4. 2005 cri.l.j.314 5. air 196.sc 117.: (1960) 3 scr 51.order:1. this criminal petition has been preferred by the petitioners (a1 to a8 in crl.p.no.4976 of 2010) under section 482 of the code of criminal procedure, 1973 (cr.p.c) to quash proceedings in c.c. no.95 of 2010 (c.c) on the file of the court of i additional chief metropolitan magistrate, hyderabad registered for offence punishable under section 138 of the negotiable instruments act, 1881 (the act) in respect of dishonour of a cheque.2. whereas the petitioners herein are a1 to a8 the second respondent herein is the complainant in the c.c., who for convenience, be referred to as they are arrayed in the c.c.3. it is necessary to note briefly the version of the complainant for proper appreciation of the petition. it is as follows. by virtue of a lease agreement dated 15.11.2007 the complainant became the lessee of the premises of a1 to a8 admeasuring 13,056 square feet in survey nos.240, 242 and 243 situated opposite to hanuman temple, china thokatta, new bowenpally, secunderabad, for three years on an agreed monthly rent of rs.6,00,000/- and subject to deposit of rs.30,00,000/- towards interest free refundable security deposit with a7 on behalf of all of them which was complied with by way of giving cheque no.295440 dated 21.11.2007 for rs.5,00,000/-, cheque nos.295459 to 295468 dated 27.11.2007 (ten cheques) for rs.1,00,000/- each, cheque no.301207 dated 17.12.2007 for rs.5,00,000/-, cheque no.301245 dated 17.12.2007 for rs.5,00,000/- and cheque no.318908 dated 03.4.2008 for rs.5,00,000/- drawn on hdfc bank, begumpet branch, hyderabad. it is claimed that as it was terminated by 30.11.2008 another lease agreement dated 15.11.2008 was entered into with effect from 01.12.2008 by reason of which the occupying capacity of the complainant-company was confined to 50 seats from 300 seats while keeping the rent at rs.3,00,000/- only. it is further claimed that a7 used to act on behalf of all of them and accept the corresponding monthly rents deposited by the complainant by way of cheques from time to time at rs.6,00,000/- and rs.3,00,000/- per month as per the agreements dated 15.11.2007 and 15.11.2008 respectively. further it is claimed that pursuant to entering into memorandum of association (mou) dated 23.10.2009 between the complainant and a1 to a8 which was signed by a7 as the person authorized to do so on behalf of all of them it was agreed to hand over the premises to a1 to a8 by the end of 31.12.2009 and return/refund the agreed interest free security deposit of rs.3,00,000/- after adjusting the actual rents paid in that behalf. apart from that a1 to a8 also agreed to return two upss (60 kva + 6 kva both with batteries) valued at rs.6,00,000/- belonging to the complainant for their own purpose by which the total amount agreed to be paid/returned to the complainant came upto rs.36,00,000/-. in addition to that, the complainant agreed for deducting the rents payable for the months of september to december, 2009 at rs.3,00,000/- per month following which the final amount to be paid to the complainant came at rs.24,00,000/-. further, it is claimed that in terms of clause 3 of the mou, a7 representing a1 to a8 issued two cheques one bearing no.450993 dated 12.11.2009 for rs.18,00,000/- drawn on andhra bank, bowenpally branch and the other cheque bearing no.060794 dated 15.11.2009 for rs.6,00,000/- drawn on ing vysya bank ltd., bowenpally branch, in discharge of the liability following which the complainant had handed over the vacant possession of the property to a1 to a8 by the end of december, 2009. consequently the complainant presented the two cheques before its banker i.e., hdfc bank vide banker's memo dated 17.11.2009 whereas from there the cheques were sent to the drawee banks of a1 to a8 but they were returned with endorsement "funds insufficient" together with intimation received by the bank of the complainant. in consequence of that the complainant got issued statutory notice under section 138 of the act to a1 to a8 observing necessary formalities, but a1 to a8 failed to comply with the demand having received the notices.4. the claim of a1 to a8 is as follows. the complainant as tenant paid the rents for the period upto october, 2008. thereafter he remained defaulter by reason of which he had to pay rs.40,00,000/- to them. in fact because of the financial constraints of the complainant, all of them entered into an arrangement following which the business of the complainant was shifted to a different location subject to the payment of rs.3,00,000/- per month towards the rent. thus it is claimed that even on the adjustment of the security deposit of rs.30,00,000/- still the complainant has to pay rs.19,00,000/- to a1 to a8. further it is claimed that the complainant and a1 to a8 entered into an agreement to sell 207 computer systems along with one ups of 60 kva and another ups of 6 kva (both msn make) for a sum of rs.24,00,000/- to a7's company i.e., m/s.first league infotech private limited whereas a1 to a8 agreed to buy them. it is further claimed that a7 delivered the two cheques for rs.18,00,000/- and rs.6,00,000/- respectively drawn on andhra bank, bowenpally branch and ing vysya bank ltd., bowenpally branch respectively, but the systems and upss were not delivered accordingly to a7 which make it very clear that there was no legally enforceable debt.5. learned counsel for a1 to a8 submits that importantly a1 to a6 and a8 did not sign the two cheques said to be dishonoured. hence absolutely there is no basis to say that a1 to a6 and a8 got any connection with those two dishonoured cheques. apart from that there has been no relationship of firm and partners in order to connect a1 to a6 and a8 with any liability under the two cheques. he claims that the cheques were issued by a7 on his behalf or on the behalf of his company only to the defacto complainant in connection with the agreement to sell the computer systems and upss whereby only a7 may be prosecuted. learned counsel for a1 to a8 would further contend that in order to apply section 138 of the act, there should be account in the name of the drawer of the cheque whereas for the purpose of invoking section 141 of the act, it is necessary that the cheque should have been issued by a company or a firm or an association of persons, which is not the case here, by reason of which also the prosecution of all of them under section 138 of the act is not tenable. to substantiate his claim he has placed reliance upon the decisions in hardeep singh nagra v state1, mrs.anita malhotra v apparel export promotion council2 and sarojben ashwinkumar shah v state of gurajat3.6. contrary to that learned counsel for the opposite party claims that as a1 to a8 were collectively responsible for the payment of rents covered by the two cheques by which the mou was entered into by them with the complainant, but the cheques were dishonoured when presented before the concerned banks, it is very categorical that there was legally enforceable debt payable by a1 to a8 who come within the purview of the words "association of individuals" as employed in section 141 of the act to prosecute them for the offence punishable under section 138 read with section 141 of the act.7. therefore it is to be seen prima facie whether there was legally enforceable debt and whether a1 to a8 would constitute "other association of individuals" as a result of which they consequently are liable for prosecution for the offence punishable under section 138 read with section 141 of the act.8. in this behalf, it is necessary to extract sections 138, 141 and 139 of the act. section 138 enjoins: dishonour of cheque for insufficiency, etc., of funds in the accounts 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 provisions of this act, be punished with imprisonment for a term which may extend 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 induce 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 cheques as unpaid, and (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. explanation: for the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability. section 141 enjoins: offences by companies (1) if the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: provided further that where a person is nominated as a director of a company by virtue of his holding any office or employment in the central government or state government or a financial corporation owned or controlled by the central government or the state government, as the case may be, he shall not be liable for prosecution under this chapter. (2) notwithstanding anything contained in sub-section (1), where any offence under this act, has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. explanation: for the purpose 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. section 139 enjoins: presumption in favour of holder it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability.9. owing to section 139 of the act when a cheque is issued towards payment of certain amount, it is to be presumed that there was existence of a legally enforceable debt. hence the person or persons who issued or responsible to issue the cheques have to rebut the presumption placing necessary evidence.10. section 138 of the act signifies at the outset that there should be account in the name of the drawer for the discharge of legally enforceable debt when the corresponding cheque was issued or presented before the concerned bank for collection. on the other hand, by virtue of the explanation (a) under sub- section (2) of section 141 of the act, if the person committing an offence under section 138 of the act is a company, every person who, at the time the offence was committed, was in charge of, and was responsible for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of that offence, whereas in view of the explanation (a) to section 141 of the act, a company means any body corporate and includes a firm or other association of individuals. if section 138 of the act alone is taken into consideration only a7 who issued the cheques in his individual name or on behalf of his company as the case may be is liable for the alleged dishonour of the cheques. thereby unless the words "other association of individuals" as employed for "company" in the explanation (a) of section 141 of the act comes to the aid of the complainant, a1 to a6 and a8 cannot be brought within the purview of section 138 of the act for prosecuting all of them thereunder.11. in jagdish rai agarwal v state of andhra pradesh4, while considering the scope of section 138 of the act with reference to issuance of a cheque by a member of hindu undivided family (huf) on behalf of himself and also on behalf of other members of their huf, this court held that in view of the explanation given under section 141 of the act all of them should be treated as the directors of a company and hence they could be prosecuted under section 138 of the act. this observation appears to be against the concept of sections 138 and 141 of the act, which in clear terms contemplate that there should be account in the name of a drawer of a cheque which was dishonoured or in order to make others responsible for the dishonour of the cheque, they should come within the purview of the meaning of the company as incorporated under sub-section (2) of section 141 of the act. no doubt a1 to a8 cannot be termed as body corporate or a firm whereas it is necessary to ascertain as to whether they can be brought within the ambit of the words "other association of individuals".12. if the principle laid down in jagdish rai agarwal is taken as the correct proposition, members of huf would fall within the purview of section 138 read with 141 of the act when similar situation arises. there is no doubt that in order to implicate anybody for the offence punishable under section 138 of the act on the ground of dishonour of a cheque such person should have issued the cheque having got the corresponding account, otherwise he cannot be prosecuted accordingly. in this case when as per the material available only a7 gave the cheque, which was dishonoured, on the ground that there were no funds in his account, thereby there is material to prosecute him for the alleged offence which leaves to determine the complicity of a2 to a6 and a8 only in the matter.13. in commissioner of income tax, bombay v indira balkrishna5 while dealing with section 3 of the income tax act, 1922 it was held that the word "associate" means, according to the oxford dictionary, "to join in common purpose". therefore, an association of persons must be one in which two or more persons join in a common purpose or common action, and as the words occur in the section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains".14. there is no specification in the explanation (a) to section 141 of the act as to whether the words "other association of individuals" should be in relation to a business enterprise or a business deal. the intendment of these words can be gathered by examining in which context those words were employed. in order to have clear picture of this aspect it is also necessary to examine in what context the words "company" and "firm" are employed in the section. these words associate with business enterprises. thereby when the words "association of individuals" are employed in the explanation as per the legislative intendment those words should be taken to have same connotation with the other words subject to their ambit. this emphasizes that the very same words cannot be taken as meant just an association of individuals formed for any other purpose also in the present context.15. the mou was executed between all the accused on one hand and the complainant on the other with reference to the payment of rents for the buildings. can that be termed as "business deal"? certainly not, because it is only an understanding with regards to the payment of rents which is different from the word "business"; therefore, it cannot be held that there was "other association of individuals" formed for a definite purpose of conducting or achieving something. thereby it is not proper to bring the acts of a1 to a6 and a8 within the ambit of section 138 read with section 141 of the act, which of course does not preclude the examination of the matter from a different angle if there is a scope to do so. in other words if the ingredients of cheating are satisfied with reference to the material available, the court below is at liberty to proceed in that line as per law. that court has to exercise its discretion judicially in accordance with the authority conferred upon it.16. subject to the observations made above, ultimately, the criminal petition is allowed so far as a1 to a6 and a8 are concerned, and is dismissed so far as a7 is concerned. miscellaneous petitions pending if any shall stand closed. __________________________________ (g. krishna mohan reddy, j) 12th october, 2012
Judgment:

THE HONOURABLE SRI JUSTICE G.KRISHNA MOHAN REDDY CRIMINAL PETITION No.4976 o”

12. 10.2012 Alladi Narasimha Rao, S/o.Late Sri Alladi Yadagiri and others M/s.Core Tree Solutions Private Limited, AC Guards, Hyderabad and another Counsel for the Petitioners: Mr. K.Rajendran Counsel for the Respondent No.1: Mr.C.R.Sridharan Counsel for the Respondent No.2: The Public Prosecutor : : ?Cases referred:

1. 2011 CRI.L.J.

3672 (Delhi HC) 2. AIR 201.SC 3.3. 2012 CRI.L.J.

430 (Gujarat HC) 4. 2005 Cri.L.J.

314 5. AIR 196.SC 117.: (1960) 3 SCR 51.ORDER:

1. This Criminal Petition has been preferred by the petitioners (A1 to A8 in Crl.P.No.4976 of 2010) under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C) to quash proceedings in C.C. No.95 of 2010 (C.C) on the file of the Court of I Additional Chief Metropolitan Magistrate, Hyderabad registered for offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (the Act) in respect of dishonour of a cheque.

2. Whereas the petitioners herein are A1 to A8 the second respondent herein is the complainant in the C.C., who for convenience, be referred to as they are arrayed in the C.C.

3. It is necessary to note briefly the version of the complainant for proper appreciation of the petition. It is as follows. By virtue of a lease agreement dated 15.11.2007 the complainant became the lessee of the premises of A1 to A8 admeasuring 13,056 Square feet in Survey Nos.240, 242 and 243 situated Opposite to Hanuman Temple, China Thokatta, New Bowenpally, Secunderabad, for three years on an agreed monthly rent of Rs.6,00,000/- and subject to deposit of Rs.30,00,000/- towards interest free refundable security deposit with A7 on behalf of all of them which was complied with by way of giving cheque No.295440 dated 21.11.2007 for Rs.5,00,000/-, cheque Nos.295459 to 295468 dated 27.11.2007 (ten cheques) for Rs.1,00,000/- each, cheque No.301207 dated 17.12.2007 for Rs.5,00,000/-, cheque No.301245 dated 17.12.2007 for Rs.5,00,000/- and cheque No.318908 dated 03.4.2008 for Rs.5,00,000/- drawn on HDFC Bank, Begumpet Branch, Hyderabad. It is claimed that as it was terminated by 30.11.2008 another lease agreement dated 15.11.2008 was entered into with effect from 01.12.2008 by reason of which the occupying capacity of the complainant-company was confined to 50 seats from 300 seats while keeping the rent at Rs.3,00,000/- only. It is further claimed that A7 used to act on behalf of all of them and accept the corresponding monthly rents deposited by the complainant by way of cheques from time to time at Rs.6,00,000/- and Rs.3,00,000/- per month as per the agreements dated 15.11.2007 and 15.11.2008 respectively. Further it is claimed that pursuant to entering into Memorandum of Association (MoU) dated 23.10.2009 between the complainant and A1 to A8 which was signed by A7 as the person authorized to do so on behalf of all of them it was agreed to hand over the premises to A1 to A8 by the end of 31.12.2009 and return/refund the agreed interest free security deposit of Rs.3,00,000/- after adjusting the actual rents paid in that behalf. Apart from that A1 to A8 also agreed to return two UPSs (60 KVA + 6 KVA both with batteries) valued at Rs.6,00,000/- belonging to the complainant for their own purpose by which the total amount agreed to be paid/returned to the complainant came upto Rs.36,00,000/-. In addition to that, the complainant agreed for deducting the rents payable for the months of September to December, 2009 at Rs.3,00,000/- per month following which the final amount to be paid to the complainant came at Rs.24,00,000/-. Further, it is claimed that in terms of clause 3 of the MoU, A7 representing A1 to A8 issued two cheques one bearing No.450993 dated 12.11.2009 for Rs.18,00,000/- drawn on Andhra Bank, Bowenpally Branch and the other cheque bearing No.060794 dated 15.11.2009 for Rs.6,00,000/- drawn on ING Vysya Bank Ltd., Bowenpally Branch, in discharge of the liability following which the complainant had handed over the vacant possession of the property to A1 to A8 by the end of December, 2009. Consequently the complainant presented the two cheques before its banker i.e., HDFC Bank vide Banker's memo dated 17.11.2009 whereas from there the cheques were sent to the drawee Banks of A1 to A8 but they were returned with endorsement "Funds insufficient" together with intimation received by the Bank of the complainant. In consequence of that the complainant got issued statutory notice under Section 138 of the Act to A1 to A8 observing necessary formalities, but A1 to A8 failed to comply with the demand having received the notices.

4. The claim of A1 to A8 is as follows. The complainant as tenant paid the rents for the period upto October, 2008. Thereafter he remained defaulter by reason of which he had to pay Rs.40,00,000/- to them. In fact because of the financial constraints of the complainant, all of them entered into an arrangement following which the business of the complainant was shifted to a different location subject to the payment of Rs.3,00,000/- per month towards the rent. Thus it is claimed that even on the adjustment of the security deposit of Rs.30,00,000/- still the complainant has to pay Rs.19,00,000/- to A1 to A8. Further it is claimed that the complainant and A1 to A8 entered into an agreement to sell 207 computer systems along with one UPS of 60 KVA and another UPS of 6 KVA (both MSN make) for a sum of Rs.24,00,000/- to A7's company i.e., M/s.First League Infotech Private Limited whereas A1 to A8 agreed to buy them. It is further claimed that A7 delivered the two cheques for Rs.18,00,000/- and Rs.6,00,000/- respectively drawn on Andhra Bank, Bowenpally branch and ING Vysya Bank Ltd., Bowenpally branch respectively, but the systems and UPSs were not delivered accordingly to A7 which make it very clear that there was no legally enforceable debt.

5. Learned counsel for A1 to A8 submits that importantly A1 to A6 and A8 did not sign the two cheques said to be dishonoured. Hence absolutely there is no basis to say that A1 to A6 and A8 got any connection with those two dishonoured cheques. Apart from that there has been no relationship of firm and partners in order to connect A1 to A6 and A8 with any liability under the two cheques. He claims that the cheques were issued by A7 on his behalf or on the behalf of his company only to the defacto complainant in connection with the agreement to sell the computer systems and UPSs whereby only A7 may be prosecuted. Learned counsel for A1 to A8 would further contend that in order to apply Section 138 of the Act, there should be account in the name of the drawer of the cheque whereas for the purpose of invoking Section 141 of the Act, it is necessary that the cheque should have been issued by a company or a firm or an association of persons, which is not the case here, by reason of which also the prosecution of all of them under Section 138 of the Act is not tenable. To substantiate his claim he has placed reliance upon the decisions in Hardeep Singh Nagra v State1, Mrs.Anita Malhotra v Apparel Export Promotion Council2 and Sarojben Ashwinkumar Shah v State of Gurajat3.

6. Contrary to that learned counsel for the opposite party claims that as A1 to A8 were collectively responsible for the payment of rents covered by the two cheques by which the MoU was entered into by them with the complainant, but the cheques were dishonoured when presented before the concerned Banks, it is very categorical that there was legally enforceable debt payable by A1 to A8 who come within the purview of the words "Association of individuals" as employed in Section 141 of the Act to prosecute them for the offence punishable under Section 138 read with Section 141 of the Act.

7. Therefore it is to be seen prima facie whether there was legally enforceable debt and whether A1 to A8 would constitute "Other association of individuals" as a result of which they consequently are liable for prosecution for the offence punishable under Section 138 read with Section 141 of the Act.

8. In this behalf, it is necessary to extract Sections 138, 141 and 139 of the Act. Section 138 enjoins: Dishonour of cheque for insufficiency, etc., of funds in the accounts 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 provisions of this Act, be punished with imprisonment for a term which may extend 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 induce 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 cheques as unpaid, and (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. Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability. Section 141 enjoins: Offences by companies (1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: PROVIDED that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: PROVIDED FURTHER that where a person is nominated as a Director of a Company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act, has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation: For the purpose 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. Section 139 enjoins: Presumption in favour of holder It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, or any debt or other liability.

9. Owing to Section 139 of the Act when a cheque is issued towards payment of certain amount, it is to be presumed that there was existence of a legally enforceable debt. Hence the person or persons who issued or responsible to issue the cheques have to rebut the presumption placing necessary evidence.

10. Section 138 of the Act signifies at the outset that there should be account in the name of the drawer for the discharge of legally enforceable debt when the corresponding cheque was issued or presented before the concerned Bank for collection. On the other hand, by virtue of the Explanation (a) under Sub- section (2) of Section 141 of the Act, if the person committing an offence under Section 138 of the Act is a company, every person who, at the time the offence was committed, was in charge of, and was responsible for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of that offence, whereas in view of the Explanation (a) to Section 141 of the Act, a company means any body corporate and includes a firm or other association of individuals. If Section 138 of the Act alone is taken into consideration only A7 who issued the cheques in his individual name or on behalf of his company as the case may be is liable for the alleged dishonour of the cheques. Thereby unless the words "Other association of individuals" as employed for "company" in the Explanation (a) of Section 141 of the Act comes to the aid of the complainant, A1 to A6 and A8 cannot be brought within the purview of Section 138 of the Act for prosecuting all of them thereunder.

11. In Jagdish Rai Agarwal v State of Andhra Pradesh4, while considering the scope of Section 138 of the Act with reference to issuance of a cheque by a member of Hindu Undivided Family (HUF) on behalf of himself and also on behalf of other members of their HUF, this Court held that in view of the Explanation given under Section 141 of the Act all of them should be treated as the directors of a company and hence they could be prosecuted under Section 138 of the Act. This observation appears to be against the concept of Sections 138 and 141 of the Act, which in clear terms contemplate that there should be account in the name of a drawer of a cheque which was dishonoured or in order to make others responsible for the dishonour of the cheque, they should come within the purview of the meaning of the company as incorporated under Sub-section (2) of Section 141 of the Act. No doubt A1 to A8 cannot be termed as body corporate or a firm whereas it is necessary to ascertain as to whether they can be brought within the ambit of the words "Other association of individuals".

12. If the principle laid down in Jagdish Rai Agarwal is taken as the correct proposition, members of HUF would fall within the purview of Section 138 read with 141 of the Act when similar situation arises. There is no doubt that in order to implicate anybody for the offence punishable under Section 138 of the Act on the ground of dishonour of a cheque such person should have issued the cheque having got the corresponding account, otherwise he cannot be prosecuted accordingly. In this case when as per the material available only A7 gave the cheque, which was dishonoured, on the ground that there were no funds in his account, thereby there is material to prosecute him for the alleged offence which leaves to determine the complicity of A2 to A6 and A8 only in the matter.

13. In Commissioner of Income Tax, Bombay v Indira Balkrishna5 while dealing with Section 3 of the Income Tax Act, 1922 it was held that the word "Associate" means, according to the Oxford Dictionary, "To join in common purpose". Therefore, an association of persons must be one in which two or more persons join in a common purpose or common action, and as the words occur in the Section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains".

14. There is no specification in the Explanation (a) to Section 141 of the Act as to whether the words "Other association of individuals" should be in relation to a business enterprise or a business deal. The intendment of these words can be gathered by examining in which context those words were employed. In order to have clear picture of this aspect it is also necessary to examine in what context the words "company" and "firm" are employed in the Section. These words associate with business enterprises. Thereby when the words "Association of individuals" are employed in the Explanation as per the legislative intendment those words should be taken to have same connotation with the other words subject to their ambit. This emphasizes that the very same words cannot be taken as meant just an association of individuals formed for any other purpose also in the present context.

15. The MoU was executed between all the accused on one hand and the complainant on the other with reference to the payment of rents for the buildings. Can that be termed as "Business deal"? Certainly not, because it is only an understanding with regards to the payment of rents which is different from the word "Business"; therefore, it cannot be held that there was "Other association of individuals" formed for a definite purpose of conducting or achieving something. Thereby it is not proper to bring the acts of A1 to A6 and A8 within the ambit of Section 138 read with Section 141 of the Act, which of course does not preclude the examination of the matter from a different angle if there is a scope to do so. In other words if the ingredients of cheating are satisfied with reference to the material available, the Court below is at liberty to proceed in that line as per law. That Court has to exercise its discretion judicially in accordance with the authority conferred upon it.

16. Subject to the observations made above, ultimately, the criminal petition is allowed so far as A1 to A6 and A8 are concerned, and is dismissed so far as A7 is concerned. Miscellaneous petitions pending if any shall stand closed. __________________________________ (G. KRISHNA MOHAN REDDY, J) 12th October, 2012