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REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1472 OF 2009

MAINUDDIN ABDUL SATTAR SHAIKH      …APPELLANT :Versus:

VIJAY D. SALVI         …RESPONDENT

J U D G M E N T

Pinaki Chandra Ghose, J.

1. This appeal, by special leave, has been filed against the

judgment  and  order  dated  9.10.2007  passed  by  the  High

Court of Judicature at Bombay in Criminal Application No.646

of 2006, whereby the High Court has refused leave to appeal

against  the  judgment  of  the  Trial  Court,  to  the  appellant

herein.

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2. The brief  facts necessary to dispose of  this  appeal  are

that  in  the  year  1999,  the  appellant  had  booked  a  flat  at

Khargar  Project  proposed  to  be  developed  by  M/s.  Salvi

Infrastructure  Pvt.  Ltd.  through  the  accused-respondent  by

paying  him  Rs.74,200/-.  In  acknowledgment  of  the  said

amount,  the accused respondent  issued two receipts  to the

appellant,  for  a  sum  of  Rs.59,000/-  and  Rs.14,200/-,

respectively.  By the year 2003, as alleged by the appellant,

the  aforesaid  project  of  the  respondent  did  not  materialize.

After much persuasion, the accused respondent drew cheque

No.075073 for Rs.74,200/- in favour of the appellant, of an

account maintained by him with his banker towards refund of

the aforesaid booking amount. The cheque was drawn by the

respondent in his individual capacity and not in the capacity

as  a  Director  of  M/s.  Salvi  Infrastructure  Pvt.  Ltd.  or  as

Proprietor  of  Salvi  Builders  and  Developers.   When  the

appellant presented the said cheque on 1.08.2003 to his Bank

for  realization,  the  same  was  returned  unpaid.  Hence,  the

appellant sent notice of demand dated 25.8.2003 through his

advocate under Section 138(b) of the Negotiable Instruments

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Act,  1881  (hereinafter  referred  to  as  “the  NI  Act”),  to  the

respondent.  As  the  accused  respondent  failed  to  pay  the

amount within 15 days of the notice of demand, the appellant

filed a complaint under Section 138 of the N.I. Act.   3. The aforesaid complaint filed by the appellant was taken

up by the Metropolitan Magistrate,  33rd Court,  Ballard Pier,

Mumbai, and vide his order dated 15.12.2005 passed in C.C.

No.5194/2003,  the   Metropolitan  Magistrate  acquitted  the

respondent.   The  reasons  given  for  the  acquittal  of  the

respondent were that the Company M/s. Salvi Infrastructure

Pvt.  Ltd.  was  not  made  the  accused  and  instead  the

respondent was made accused in his personal capacity. The

cheque could not be said to have been issued for the discharge

of whole or part of the liability because it exceeded the liability.

Further,  it  had not  been proved that  the respondent was a

person  liable  to  make  the  payment  for  M/s.  Salvi

Infrastructure Pvt. Ltd.

4. Being aggrieved by the order passed by the Metropolitan

Magistrate,  the  appellant  filed  an  application  for  leave  to

appeal  under  Section 378 of  Cr.P.C.  along with  a  Criminal

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Application No.646 of 2006 under Section 378(4) of Cr.P.C.,

before  the  Bombay  High  Court.  The  High  Court  by  the

impugned order dismissed the said application on the ground

that the reasoning set out by the Trial Court in its order did

not call for reconsideration.  

5. The appellant is thus before us.  Learned counsel for the

appellant  has  raised  the  following  grounds  in  this  appeal.

Learned counsel submits that the Courts below have failed to

appreciate  that  under  Section  138  of  the  NI  Act,  it  is  the

drawer  of  the  cheque  who  is  made  punishable  for  offence

under Section 138 of the NI Act.  Further,  the Courts below

have failed to appreciate that in the present matter the cheque

in  question  was  drawn  by  the  respondent  and  not  by  the

Company of which the respondent is the Managing Director.

The cheque was drawn by him in his personal capacity on an

account maintained by him with his Banker. The Courts below

have wrongly concluded that notices under Section 138(b) of

the N.I.  Act were sent to all  the Directors of  the Company.

Learned  counsel  for  the  appellant  contended  that  such  a

conclusion was not supported by any evidence inasmuch as

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there was only one acknowledgment card on record, showing

receipt  of  notice  under  Section  138(b)  of  the  Act,  by  the

respondent.  The  Courts  below  did  not  appreciate  that  the

accused  respondent  in  his  statement  under  Section  313

Cr.P.C. had admitted that he was paid Rs.74,200/- as earnest

money and that he had issued receipt for the same and thus

there is no substance in the argument of the respondent that

the cheque for Rs.74,200/- cannot be said to have been issued

for discharge of whole or part of liability, because it exceeded

the liability.

6. The plea taken by the learned counsel for the respondent

in the Court  of  Metropolitan Magistrate,  33rd Court,  Ballard

Pier, Mumbai, was that the Company had not been made an

accused in the case. As per Section 141 of the NI Act, if the

person  committing  an  offence  under  Section  138  is  a

Company,  every  person  who,  at  the  time  the  offence  was

committed,  was  incharge  of,  and  was  responsible  to  the

Company for the conduct of business of the Company as well

the  Company,  shall  be  liable.  In  the  complaint  and  the

affidavit, M/s. Salvi Infrastructure Pvt. Ltd. was not made the

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accused. Further, it was argued that there was no averment

that the accused was the person incharge of, and responsible

for the affairs of the Company. In that case the accused was

mentioned as the said person incharge. In the present case,

the  accused  Vijay  Salvi  was  made  accused  in  his  personal

capacity.  

7. We have  heard  the  learned  counsel  appearing  for  the

parties and have perused the order passed by the Metropolitan

Magistrate, 33rd Court, Ballard Pier, Mumbai.  

8. In our opinion, the issue involved in the present case is

whether the respondent can be made liable  in his  personal

capacity when the Company has not been made a party to the

complaint.  

9. From a bare reading of  Section 138 of the NI Act,  the

following essentials  have  to  be  met  for  attracting  a  liability

under  the  Section.  The  first  and  foremost  being  that  the

person who is to be made liable should be the drawer of the

cheque  and should  have  drawn the  cheque  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

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discharge in whole or part, of any debt or other liability. We

see that from the bare text of the Section it has been stated

clearly that the person, who draws a cheque on an account

maintained  by  him,  for  paying  the  payee,  alone  attracts

liability.  

10. In the present case, it is an admitted fact that the drawer

of the cheque was the respondent, who had drawn the cheque,

bearing  No.075073  for  Rs.74,200/-  on  a  bank  account

maintained by him towards the refund of the booking amount.

Therefore, he was the drawer of the cheque.  The case of the

appellant,  apart  from  being  supported  by  the  provision  of

Section  138  of  the  NI  Act,  also  gets  buttressed  by  the

judgment  in  P.J.  Agro Tech Limited and Ors.  Vs. Water

Base Limited,1 where this Court has dealt with the scope of

Section 138 and held  that  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 account maintained

by him with the banker for payment of any amount of money

1

 (2010) 12 SCC 146

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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  is  dishonoured  which  would  attract  the

provisions of Section 138 of the above Act against the drawer

of the cheque.  

11. About the liability under Section 138 of the NI Act, where

the cheque drawn by the employee of the appellant company

on his personal account, even if it be for discharging dues of

the  appellant-company  and   its  Directors,  the

appellant-company and its Directors  cannot be made liable

under  Section  138.  Thus,  we  observe  that  in  the

abovementioned case,  the personal  liability  was upheld and

the Company and its Directors were absolved of the liability.

The logic applied was that the Section itself makes the drawer

liable  and  no  other  person.  This  Court in  P.J.  Agro  Tech

Limited  (supra) noted as under:   

“An action in respect of a criminal or a quasi-criminal provision has to be strictly construed in keeping with the  provisions  alleged  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

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under the statute was not liable for the commission of such offence.”  

(Emphasis Supplied)

Going by the strict interpretation of the provision the drawer

which in the present case is the respondent is liable under

Section 138 of the N.I. Act.  

12. The Respondent has adduced the argument that in the

complaint the appellant has not taken the averment that the

accused was the person incharge of and responsible for the

affairs of the Company.  However, as the respondent was the

Managing Director of M/s. Salvi Infrastructure Pvt. Ltd. and

sole proprietor of M/s. Salvi Builders and Developers, there  is

no need of specific averment on the point. This Court has held

in  National  Small  Industries  Corporation  Ltd.  Vs.

Harmeet Singh Paintal and Anr.,2   as follows:

Para 39 (v)  “If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint  and by virtue of  their  position they are liable to be proceeded with.”  

2

 (2010) 3 SCC 330

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13. Thus, in the light of the position which the respondent in

the present case held, we are of the view that the respondent

be made liable under Section 138 of the NI Act, even though

the  Company  had  not  been  named  in  the  notice  or  the

complaint.  There was no necessity for the appellant to prove

that  the said  respondent  was incharge  of  the  affairs  of  the

company, by virtue of the position he held. Thus, we hold that

the respondent Vijay D Salvi  is  liable  for  the offence under

Section 138 of the NI Act.

14. The law laid down by this Court in R. Vijayan Vs. Baby

and Anr.,3  was to the following effect:

“As  the  provisions  of  Chapter  XVII  of  the  Act strongly lean towards grant of reimbursement of the loss  by  way  of  compensation,  the  courts  should, unless there are special circumstances, in all cases of conviction, uniformly exercise the power to levy fine up to twice the cheque amount (keeping in view the cheque amount and the simple interest thereon at  9% per  annum as  the  reasonable  quantum of loss)  and  direct  payment  of  such  amount  as compensation.  Direction  to  pay  compensation  by way of restitution in regard to the loss on account of dishonor  of  the  cheque  should  be  practical  and realistic, which would mean not only the payment of the  cheque  amount  but  interest  thereon  at  a

3

 (2012) 1 SCC 260

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reasonable  rate.  Uniformity  and  consistency  in deciding similar cases by different courts, not only increase  the  credibility  of  cheque  as  a  negotiable instrument,  but  also  the  credibility  of  courts  of justice.”

We, therefore, award compensation to the extent of twice the

cheque amount and simple interest thereon at 9% per annum

to the complainant. Accordingly, the respondent Vijay D Salvi

is sentenced to undergo simple imprisonment for a period of

five months for the offence under Section 138 of the NI Act.

Considering the fact that the cheque amount is Rs.74,200/-,

we direct the respondent Vijay D Salvi to pay a compensation

of Rs.1,48,400/- (Rupees one lakh forty-eight thousand four

hundred only) with simple interest thereon at 9% per annum,

to the complainant-appellant. In default of payment of the said

compensation,  the  respondent  will  have  to  undergo  simple

imprisonment for a period of six months.      

15.  Accordingly,  this  appeal  is  allowed and the impugned

order passed by the High Court as also the order passed by

the Metropolitan Magistrate, 33rd Court, Ballard Pier, Mumbai,

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are set aside.  We direct that the respondent shall be taken

into custody forthwith to undergo the sentence.  

……………………………..J (Pinaki Chandra Ghose)

……………………………..J (Uday Umesh Lalit)

New Delhi;

July 06, 2015.