Chairman of co-operative society is liable for dishonour cheque issued by him

Section 2(20) of the Maharashtra Cooperative 
Societies   Act,   1960,   in   fact,   embrace   in   its   sweep 
term   `officer'   to   mean   and   include,   ­   a   person 
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elected   or   appointed   by   a   society   to   any   office   of 
such society according to its by­laws; and includes a 
chairman,   vice­chairman,   president,   vice­president, 
managing   director,   manager,   secretary,   treasurer, 
member of the committee, and any other person elected 
or   appointed   under   this   Act,   the   rules   or   the   by­
laws, to give directions in regard to the business of 
such  society.    In the light  of this  definition,  the 
status  of the applicant,  vis­a­vis,  Vyankat  society, 
is primarily indicated.  The applicant is vicariously 
liable   to   affairs   of   company   as   he   was   at   the 
material   time   responsible   to   the   affairs   of   society 
as a Chairman and he was drawer of the cheque.   Any 
subsequent   change   in   status   will   not   be   detrimental 
to the complainant.

IN THE HIGH COURT OF JUDICATURE OF BOMBAY
BENCH AT AURANGABAD
Ritesh s/o Deoram Patil

      VERSUS


Dhanvantari Urban Co.op.
 Credit Society Ltd.,

22nd JANUARY,2013.


                 
                 
                                 

Heard   both   the   Criminal   Applications 
finally.     No   notice   to   respondent   No.1   –   Credit 
Co.op. society.
2)
The   applicant   has   questioned   process   under 
Section   138   of   the   Negotiable   Instruments   Act   (for 
short,   the   Act)   dated   17.10.2007   issued   by   learned 
Judicial Magistrate First Class, Bhusawal in both the 
cases.
3)
The   applicant   has   not   resorted   to   the 

available   remedy   of   revision   before   the   learned 
4)
District Judge.
The respondent No.1 – Dhanvantari Urban Co­
op.   Credit   Society   Ltd.,   Bhusawal   had   invested   an 
amount  of Rs.1,55,00,000/­  with  Vyankat  Urban  Credit 
Co.op.   Society   Ltd.   (for   short,   Vyankat   society)   on 
27th  March, 2006.   The deposit was to accrue interest 
@ 10.5%. An advance cheque in respect of said deposit 
and   also   accrued   interest   of   Rs.11,43,756/­   was 
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issued by the applicant – Ritesh on 28.3.2006 in the 

capacity as Chairman of Vyankaresh society.
After expiry of period of the deposit, the 
said   cheques   were   deposited   in   Jalgaon   Janata   Co­
operative   Society   Ltd.,   Branch   Bhusawal   for 
encashment.     Both   the   cheques   were   dishonoured   with 
endorsement   "Refer   to   drawer,   funds   insufficient". 
This was followed with statutory notice.  However, it 
was   not   accepted   and   returned   as   "not   claimed"   on 
22.8.2007.  Hence, complaint, petition, and as stated 
above, issuance of the process.
6)
The bone of contention of Mr. Salunke, the 
learned   Counsel   for   the   applicant,   is,   on   4.4.2006, 
and   25.5.2006   the   applicant   has   resigned   from   the 
post   of   Chairman   and   Director   respectively   of   the 
Vyankat   society.     New   elections   were   held   and 
thereafter,  by notification  in local  newspaper  dated 
12.6.2006 (notice dated 10.6.2006), the names of new 
office­bearers   and   Directors   of   Vyankaresh   society 
are   informed   to   the   public   and   consequently,   no 

liability   could   be   saddled   upon   the   applicant   – 
On   17.10.2007,   which   is   the   date   of   the 
verification,   the   applicant   was   not   Chairman   of   the 
society. The transaction was with the Vyankat society 
and  it is not arrayed  as accused.    Consequently,  no 
cause of action arose.

Learned Counsel for the applicant has placed 
reliance to the following judgments:
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(a) Aneeta   Hada   Vs.   Godfather   Travels   &   Tours   pvt. 
Ltd. ­ 2003(2)Bom.C.R.(Cri.) 24 (S.C.): 2012 (5) SCC 
661;
(b) P.C.Agarwala Vs. Payment of Wages Inspector, M.P. 
And Ors. ­ AIR 2006 SC 3576;
(c) Judgment   of   the   learned   Single   Judge   of   this 
Court in group of writ petitions, one of the petition 
being WP No.5223/2009 (decided on 22nd December, 2010)

The  learned  Counsel  has  also   canvassed,  in 
the   light   of   definition   of   `officer'   under   Section 
2(20)  of the Maharashtra  Co­operative  Societies  Act, 
1960,   there   cannot   be   vesting/fastening   of 
responsibility upon the applicant.

Basically,   the   subject   complaint   under 
Section   138   of   the   Negotiable   Instruments   Act,   is 
filed  against  Vyankat  society,  through  an authorized 
signatory   –   Ritesh   Deorao   Patil,   Chairman   of   the 
Vyankat society.   The accused No.2 – is Abhay Jayant 
Shravage,   Manager   of   Vyankat   society,   consequently, 
it cannot be said that society is not prosecuted.

The   Three­Judges   Bench   judgment   in   the 

matter   of   Aneeta   Hada   (cited   supra),   conceived   the 
situation, where, a company/society is not arrayed as 
accused in terms of Section 138 or 141 of the Act. In 
that   event,   it   was   held,   ­   "liability   of   Director 
flows   necessarily   from   the   company.     Company   is   a 
juristic person and in the absence of company arrayed 
as   accused,   there   could   not   be   a   liability   solely 
fastened   against   the   Director.     The   text   of   the 
complaint is narrated herein before.   In unequivocal 
terms,   Vyankat   society   is   arrayed   as   accused.     The 
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name of the applicant is also referred as accsued and 
as   authorized   signatory.     Applicant   was   a   drawer   of 

the cheques.
The   applicant's   resignation   subsequent   to 
issuance   of   the   cheque   will   not   dilute   primary 
liability to answer as drawer of the cheque issued in 
favour   of   the   payee   in   discharge   of   legally 
enforceable   liability.     The   verification,   to   which 
reference is given, cannot be faulted as there could 
not be any communication to the original complainant 
in respect of change of status of the applicant.  The 
public   notice   in   newspaper,   has   no   legal   sanctity. 
The resignation and resolution, to which reference is 
given   by   the   learned   Counsel,   are   not   a   public 
document.  If they stand in the definition of `public 
document',   the   picture   would   have   been   quite 
different.   

The legal position is also explained in the 
matter   of  Harshendra   Kumar   D.   Vs.   Rebatilata   Koley  
and Ors. ­ (2011) 3 SCC 351, by the Hon'ble Supreme 

Court in respect of exercise of powers by the Court. 
The   Hon'ble   Lordships   observed   that   an   Ex­Director 
cannot   be   made   accountable   and   fastened   with 
liability   for   anything   done   by   company   after 
acceptance   of   his   resignation   by   company.     In 
paragraph 25, it is observed, ­ "It is fairly settled 
now that while exercising inherent jurisdiction under 
Section  482  or revisional  jurisdiction  under  Section 
397 of the Code in a case where complaint is sought 
to be quashed, it is not proper for the High Court to 

consider the defence of the accused or embark upon an 
enquiry   in   respect   of   merits   of   the   accusations. 
However,   in   an   appropriate   case,   if   on   the   face   of 
the documents – which are beyond suspicion or doubt – 
placed   by   the   accused,   the   accusations   against   him 
cannot stand, it would be travesty of justice if the 
accused   is   relegated   to   trial   and   he   is   asked   to 
prove his defence before the trial court.   In such a 
matter,   for   promotion   of   justice   or   to   prevent 
injustice   or   abuse   of   process,   the   High   Court   may 
look   into   the   materials   which   have   significant 
bearing on the matter at prima facie stage."

The   Full   Bench   of   this   Court,   way   back   in 
2008,   in   the   matter   of  Abasaheb   Yadav   Honmane   Vs.  
State of Maharashtra – 2008 (2) Mh.L.J. 856, has also 
clarified the legal position.
14)
The   Three­Judges   Bench   of   the   Hon'ble 
Supreme Court in the matter of State of Karnataka Vs. 
L.Muniswamy and Ors. ­ AIR 1977 SC 1489, observed, " 
In the exercise of the wholesome power under Section 


482   Cr.P.C.,   the   High   Court   is   entitled   to   quash   a 
proceeding   if   it   comes   to   the   conclusion   that 
allowing the proceeding to continue would be an abuse 
of   the   process   of   the   Court   or   that   the   ends   of 
justice   requires   that   the   proceeding   ought   to   be 
quashed."

Section 2(20) of the Maharashtra Cooperative 
Societies   Act,   1960,   in   fact,   embrace   in   its   sweep 
term   `officer'   to   mean   and   include,   ­   a   person 

elected   or   appointed   by   a   society   to   any   office   of 
such society according to its by­laws; and includes a 
chairman,   vice­chairman,   president,   vice­president, 
managing   director,   manager,   secretary,   treasurer, 
member of the committee, and any other person elected 
or   appointed   under   this   Act,   the   rules   or   the   by­
laws, to give directions in regard to the business of 
such  society.    In the light  of this  definition,  the 
status  of the applicant,  vis­a­vis,  Vyankat  society, 
is primarily indicated.  The applicant is vicariously 
liable   to   affairs   of   company   as   he   was   at   the 
material   time   responsible   to   the   affairs   of   society 
as a Chairman and he was drawer of the cheque.   Any 
subsequent   change   in   status   will   not   be   detrimental 
to the complainant.

Learned counsel interrupts and says, he has 
also referred to section 73(1) of the Maharashtra Co­
operative Societies Act.  

At   page   30   of   the   petition,   a   statutory 
notice   in   terms   of   Section   73(3)   of   the   Maharashtra 

Cooperative Societies Act, is enclosed while page 31 
of   the   petition   refers   the   names   of   newly   elected 

body members. 
For   satisfaction   of   the   learned   Counsel, 
Section 73(1) is reproduced, as under:
"73(1)
The   management   of   every 
society   shall   vest   in   a   committee, 
constituted   in   accordance   with   this 
Act,   the   rules   and   bye­laws,   which 
shall  exercise  such  powers  and  perform 

such   duties   as   may   be   conferred   or 
imposed   respectively   by   this   Act,   the 

rules and the bye­laws."
Reading   both   the   provisions,   it   does   not 
attract   primarily   that   there   is   no   liability   of   the 
applicant.  The scheme and purport of Section 138 and 
141   of   the   Negotiable   Instruments   Act,   should   be 
properly digested before embarking to no liability.

In the matter of P.C.Agarwala (cited supra), 
the   liability   of   the   Directors   was   fixed   in   respect 
of payment of wages of the employees. The Apex court 
did not approve the same, as the term "occupier" used 
in Factories Act, has not been taken care of by the 
High Court.

In   the   Writ   Petition   No.5223/2009,   this 
Court was dealing with directions issued by Consumer 
Forum in different proceedings, holding the Directors 
of   the   Credit   Cooperative   Society   personally   liable 
to refund deposits of the investors. These judgments, 

in the above backdrop of the events, will not apply 

to the present proceedings.
Testing on these parameters and touch­stone, 
the factual matrix illustrated herein above does not 
call   for   interference   in   the   order   of   issue   of 
process.
The   Criminal   Applications   lack   merit, 

dismissed.     The   observations   are   prima   facie   in 
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nature.
                                      
  
         sd/­
  
    
(K.U.CHANDIWAL) 
    
    JUDGE