S. 489-F--Pre-arrest bail--“Dishonestly” in the context of Section 489-F, PPC means a fraudulent act or intent to defraud others, especially the creditors--Application is allowed--

 PLJ 2022 Cr.C. 1083

Criminal Procedure Code, 1898 (V of 1898)--

----S. 498--Pakistan Penal Code, (XLV of 1860), S. 489-F--Pre-arrest bail--Grant of--Delay in registration of FIR is not always fatal for the prosecution--The executants of a promissory note cannot avoid personal liability on the ground that words were added to his signature which indicate that he was acting as an agent or in a representative character--The promissory note had the firm’s rubber stamp and even otherwise there was evidence that the appellant had the mandate to transact business on its behalf, including operation of the bank account--“Dishonestly” in the context of Section 489-F, PPC means a fraudulent act or intent to defraud others, especially the creditors--Application is allowed-- Petitioner is admitted to bail.

                                            [Pp. 1084, 1085, 1086 & 1090] A, B, C & D

2010 CLC 1345; 2007 YLR 1378; 2014 YLR 882; 2013 PCr.LJ 175; PLD 2021 SC 708; 2001 Cr.LJ 3120; 2017 GLH (2) 87 ref.

Mr. Daud Ahmad Asif, Advocate for Petitioner.

Mr. Muhammad Mustafa Chaudhry, Deputy Prosecutor General for State.

Ch. Muhammad Mansha, Advocate for Complainant.

Date of hearing: 24.2.2022.

 PLJ 2022 Cr.C. 1083
[Lahore High Court, Lahore]
Present: Tariq Saleem Sheikh, J.
WAQAR HUSSAIN BHATTI--Petitioner
versus
STATE etc.--Respondents
Crl. Misc. No. 25327/B of 2021, decided on 24.2.2022.

Order

Through this application the Petitioner, Waqar Hussain Bhatti, seeks pre-arrest bail in case FIR No. 171/2021 dated 15.02.2021 registered at Police Station Gulshan-e-Ravi, District Lahore, for an offence under Section 489-F of the Pakistan Penal Code, 1860 ("PPC").

2. Briefly, the prosecution case is that in February, 2017, M.B. Dyes Chemicals & Silk Industries (Private) Limited (the "Company") sold chemicals worth Rs. 834,250/- to MOD Paints. The price was payable in instalments so the Petitioner issued the Company seven cheques of different amounts but all of them were dishonoured.

3. The learned counsel for the Petitioner contended that, firstly, the Company had lodged the FIR with a delay of about four years without giving any explanation. According to him, the said delay made the prosecution case highly doubtful. Secondly, MOD Paints was a proprietary concern owned, managed and controlled by Mumtaz Hussain Bhatti. The Petitioner was an employee of the said Mumtaz and he had given him a mandate to operate his bank account. He could not be held liable for dishonor of the cheques as he was merely his agent. Thirdly, Mumtaz had paid the entire amount due against the cheques in question to the Company and nothing was outstanding. He had also filed a civil suit in that respect which was still pending. The Company had got the FIR registered with the malafide intent to counter those proceedings.

4. The learned Deputy Prosecutor General, assisted by the learned counsel for the Company/Complainant, vehemently opposed this application. He submitted that the Petitioner and Mumtaz were real brothers. He was operating the bank account on his behalf and was liable for the dishonor of the cheques. The learned Law Officer argued that the word "whoever" used in Section 489-F, PPC was significant and the Petitioner was covered by it.

5. Arguments heard. Record perused.

6. It is trite that delay in registration of FIR is not always fatal for the prosecution, more particularly in cases involving white collar crimes or where the entire evidence is documentary. The Court considers the impact of delay in every case with reference to its peculiar facts and circumstances. The same holds true of the offence under Section 489-F, PPC though, generally speaking, delay in these matters is of little consequence as they are based on dishonor of a cheque. Civil Courts have their own procedure and deal with the claims founded on such instrument accordingly. In the instant case, it is admitted that the cheques were not out of time when the Company presented them. Prima facie, nothing turns on the fact that it approached the police four years after they bounced off.

7. The Petitioner's contention that Mumtaz has paid the entire amount to the Company that was due against the above-mentioned cheques has been found incorrect during investigation. I would avoid further comment on this issue lest it may prejudice the trial of this case or the civil suit instituted by Mumtaz against the Company.

8. The question as to whether the Petitioner being an agent of Mumtaz can be held liable under Section 489-F, PPC requires deep thought. I begin with Section 28 of the Negotiable Instruments Act, 1881 (the "Act"), which reads as under:

28. Liability of agent signing.--(1) Where a person signs a promissory note, bill of exchange or cheque without adding to his signature words indicating that he signs it as an agent for and on behalf of a principal or in a representative character, he is personally liable thereon but the mere addition to his signature of words describing him as an agent or as filling a representative character does not exempt him from personal liability.

(2) Notwithstanding anything contained in sub-section (1), any person signing a promissory note, bill of exchange or cheque for and on behalf of the principal is not liable to a person who induces him to sign upon the belief that the principal alone would be held liable.

9. The above provision was considered by this Court in Zahid Mahmood v. Mst. Sabrina Iqbal (2004 CLD 930) which was a regular second appeal arising from a suit for recovery of Rs. 150,000/- filed on the footing of a promissory note and a receipt executed on the letterhead of Muhammad Younas & Company (Registered) by the defendant. The question arose as to whether the pronote and the receipt were executed by the appellant in his personal capacity or on behalf of the firm. The learned Judge held that under Section 28 of the Act the executant of a promissory note cannot avoid personal liability on the ground that words were added to his signature which indicate that he was acting as an agent or in a representative character. In this case the pronote bore the firm's rubber stamp and the accompanying receipt was on its letterhead which showed that both the instruments were issued on its account. There was no evidence, oral or documentary, to establish that the appellant assumed or intended to assume personal liability. In Zahid Mehmood v. Tahir Aziz Chughtai and 2 others (2010 CLC 1345) the appellant obtained a loan from the respondent-plaintiff representing himself as a partner in the firm and having implied authority of its partners and executed a pronote affixing the firm's rubber stamp over his signature. The profit/interest accrued on that money was paid on monthly basis for some time as per agreement and then it was stopped. It later transpired that the appellant was the firm's manager and not its partner. The respondent sued the appellant and the firm's partners for recovery of money but surprisingly did not claim a joint and several decree against them. The appellant and the firm's partners submitted separate written statements. The appellant contended that the pronote represented loan to the firm and not to him in his personal capacity. The Court agreed. It observed that the promissory note had the firm's rubber stamp and even otherwise there was evidence that the appellant had the mandate to transact business on its behalf, including operation of the bank account. Further, it was proved that the loan was credited to the firm's account and there was no allegation that he had embezzled it. Section 28 of the Act could not be invoked to the appellant's detriment. Accordingly, the Court accepted the appeal and set aside the judgment and decree passed against him.

10. The above judgments were rendered in civil appeals. Would the same principles apply to the cases under Section 489-F, PPC which is a criminal legislation? In our country this appears to be a case of first impression. One may refer to Shahzad Waseem and another v. The State (2007 YLR 1378) and Syed Shan Abbas v. The State and another (2014 YLR 882) but both are distinguishable on facts and not relevant to the issue under consideration. In Shahzad Waseem the cheque was not issued by the accused but by his brother and in Syed Shan Abbas the cheque was drawn by a third person and the accused "handed it over" to the complainant. In both these cases this Court granted pre-arrest bail to the accused- petitioner on the ground that Section 489-F, PPC was not attracted.

11. In India Section 138 of the Indian Negotiable Instruments Act criminalizes issuance of bad cheques. It provides:

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 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 in due 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 cheque 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 purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.

12. India has a few cases relevant to the subject out of which I would refer to three.

i)        Smt. Sova Mukherjee v. Rajiv Mehra (1998 (2) ALD Cri 171)

Smt. Sova issued a cheque to the complainant as a duly constituted attorney of the party which was actually liable for payment of money under the contract. The said cheque, however, bounced off as it exceeded the arrangements. The accused sought quashing of proceedings. The lady contended that she was not liable under any principle of law, including that of vicarious liability. The Calcutta High Court nixed the argument holding as under:

"A constituted attorney by his acts and deeds can bind the principal. It means a person appointed by another to do something for him. Therefore, a constituted attorney when duly appointed under a document authorizing the person to whom it is given to act in all respects as the grantor of the power, in relation to the matter specified in the document. When the power is general, it applies to everything in which the grantor in interested. But when it is special, it applies to specific matter, such as the power to sign cheques, to make transfers, to receive money, to present documents for registration etc. Thus, the cheque issued by the constituted attorney, the revisionist No. 2 in partial discharge of the debt deemed to have been issued under the authority of the revisionist No. 1, who might be a lady. The revisionist cannot shrug off the claim of demand of the respondent opposite parties under the pretence that the revisionist No. 1 owes no liability under the Negotiable Instruments Act, when the cheque was issued to discharge the partial liability is patent. A principal is always bound by the act of his or her attorney so long the attorney does not exceed his right."

ii)       G. Rukkumani v. K. Rajendran (2001 Cr.LJ 3120)

The petitioner was the proprietor of Sri Lakshmi Agencies and had given mandate to her son to operate the bank account. The son issued a cheque to the respondent which was dishonoured whereupon the latter instituted a private complaint against him and the petitioner for having committed an offence under Section 138 of the Indian Negotiable Instruments Act. The petitioner sought quashing of proceedings before the Judicial Magistrate. The Madras High Court dismissed the petition holding as under:

"Offence under Section 138 of the Negotiable Instruments Act is a statutory offence. Section 138 of the Negotiable Instruments Act excludes mens rea by creating strict liability. It does not say that there should be a direct nexus between the person who commits the act and the offence. But, from the words, 'such person shall be deemed to have committed an offence' giving room for a deeming provision would show that not only the principal or direct offender, an indirect offender who has allowed room for perpetuation of the offence, is also liable. Section 140 of the Negotiable Instruments Act in clear terms excludes the defence that the drawer had no reason to believe when he issued a cheque that it may be dishonoured on presentment for the reasons stated in Section 138 of the Negotiable Instruments Act. The exclusion of mens rea as a necessary ingredient of an offence under Section 138 of the Negotiable Instruments Act is very explicit. Therefore, when the petitioner herein had permitted the second accused to act as an authorized signatory, she is bound by the act and as such she is also liable."

iii)      Krishna Trading Company v. State of Gujarat [2017 GLH (2) 87]

The petitioner had appointed an attorney to operate the account of his proprietary concern. The attorney issued two cheques drawn to the complainant under his signature which were dishonoured on the ground that the account had been closed. The latter filed a private complaint before the Metropolitan Magistrate and in reaction the petitioner moved for its quashing. The Gujarat High Court held:--

"To sum up, the principles of vicarious criminal liability cannot be attributive upon the principal, who has granted power of attorney in favour of the Power of Attorney Holder for the commission of the offence under Section 138 of the N.I. Act, caused by the dishonour of the cheque for want of sufficient funds, drawn and issued by the Power of Attorney Holder. The Power of Attorney Holder cannot escape from his penal liability by saying that he signed the cheque only under authority given by the principal and not in his individual capacity."

13. The Negotiable Instruments Act, 1881, was enacted during the British rule and after the Independence both Pakistan and India adopted it and subsequently made some amendments to meet their individual requirements. Section 28 reproduced in paragraph 8, above, is the same in both the countries. It would be seen that the Indian Courts apply Section 138 exclusively for determination of criminal liability for dishonor of cheques and do not consider Section 28 for that purpose.

14. The facts of Rukkumani, supra, are closest to the case before me but, in my opinion, the principle laid in it cannot be followed in Pakistan. It is based on interpretation of Section 138 of the Indian Negotiable Instruments Act whose language is substantially different from Section 489-F, PPC. The former excludes mens rea and creates strict liability while the latter does not. For facility of reference Section 489-F, PPC is reproduced below:

489-F. Dishonestly issuing a cheque.--Whoever dishonestly issues a cheque towards repayment of a loan or fulfillment of an obligation which is dishonoured on presentation, shall be punishable with imprisonment which may extend to three years, or with fine, or with both, unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank to ensure that the cheque would be honoured and that the bank was at fault in not honouring the cheque.

15. The foundational elements to constitute an offence under Section 489-F, PPC are: (a) the cheque should be valid; (b) it should be issued with dishonest intent; (c) it should be for repayment of a loan or fulfillment of an obligation; and (d) it should have been dishonoured. The term "dishonestly" has been defined in Section 24, PPC to mean doing anything with the intention of causing wrongful gain to one person or wrongful loss to another person. In Naseeb Gul v. Amir Jan and another (2013 PCr.LJ 175) it was held that "dishonesty" in the context of Section 489-F, PPC means a fraudulent act or intent to defraud others, especially the creditors.

16. The offence of issuing a bad cheque in Pakistan is governed by Section 489-F, PPC. Since it employs the terms "whoever" and "issues", I agree with the learned Deputy Prosecutor General that it would include the duly authorized agent/attorney who draws the cheque. Nevertheless, the prosecution would be required to establish dishonesty on his part to make him liable to criminal sanction.

17. In the case on hand the documents available on record evince that MOD Paints is a proprietary concern owned by Mumtaz Hussain Bhatti who had authorized the Petitioner, his real brother, to operate his account with Bank Alfalah Limited, Gulshan-e-Ravi Branch, Lahore, and to issue cheques on his behalf. However, at present there is no material on the file which may suggest that he issued any cheque to the Company dishonestly.

18. In Shahzada Qaiser Arfat alias Qaiser v. The State and another (PLD 2021 SC 708) the Hon'ble Supreme Court of Pakistan held that "the power of the High Courts and the Courts of Sessions to grant pre-arrest bail, first and foremost, must be examined in the constitutional context of liberty, dignity, due process and fair trial. Pre-arrest bail is in the nature of a check on the police power to arrest a person. The non-availability of incriminating material against the accused or non-existence of a sufficient ground, including a valid purpose, for making arrest of the accused person in a case by the investigating officer would as a corollary be a ground for admitting the accused to pre-arrest bail, and vice versa."

19. In view of the above, this application is allowed. The Petitioner is admitted to post-arrest bail subject to his furnishing bail bond in the sum of Rs. 200,000/- (Rupees two hundred thousand) with one surety in the like amount to the satisfaction of the learned trial Court.

(K.Q.B.)          Bail allowed