Financial Daily from THE HINDU group of publications
Thursday, Mar 28, 2002
"ONE honest person should not be punished even if several dishonest go unpunished" is the cardinal principle of criminal jurisprudence. If this is the basic objective of law, the legal process should be equally reliable and credible. Even as the legal system brings the offenders to justice, it should treat the innocent with honour. Unfortunately, the current system of criminal courts falls short in this regard. It often puts the hapless to unnecessary harassment, contrary to the very objective of criminal law. Worse, the system at times operates so mechanically that it misses even the settled legal position.
Consider, for instance, cheque-bouncing offence. Public policy demands that cheques should be honoured, as this alone will instil confidence in commerce. Hence, if a banker returns a cheque, the drawer of the instrument is liable to be punished, as the beneficiary of the cheque can initiate criminal proceedings in the Magistrate Court. The personal liability attached to signatories ensures that they issue the cheques after ascertaining that the commitment will be honoured. In most cases, the moment a complaint is lodged with the Magistrate, the drawer, if solvent, settles the dues. What follows is a hypothetical case. Mr A, a company secretary, who resigned from X Co Ltd in July 1999, has not been able to find a job since. Nearly two-and-a-half years later, he receives summons from a Magistrate Court near Chandigarh as an offender in a cheque-bouncing case. X Ltd is alleged to have issued the cheque during the last week of January 2000, which had been returned by the bank for want of funds.
Mr A also notes that a complaint had been filed by the beneficiary of the cheque, Y Co Ltd, against him, being a director of X Ltd. The complaint is levelled against nine respondents Mr A, X Ltd and its seven directors.
Mr A tells his lawyer: First, he was never the director, but only an employee, of X Ltd and, on this ground, the complaint is wrong. Second, he was only employed as company secretary and, as such, during employment was doing only the duties of a company secretary. Third, he had no knowledge of any transaction alleged in the summons, as he had resigned about seven months before the alleged cheque-return took place. He has a copy of the relieving order of his former employer, X Ltd, and a certified copy of Form 32. Fourth, he never could have signed the cheque, as i) the complaint does not specifically mention that Mr A is a signatory of the cheque, and the cheque was returned long after his resignation, and ii) assuming he could have signed a post-dated cheques, while in employment, it was the duty of the employer to inform the bankers and the parties concerned about the change in signatories, the moment he resigned and another company secretary is appointed by the board of directors. Fifth, it was the managing director and/or the board of directors of X Co Ltd who took business decisions, and, the employees merely executed the instructions.
The lawyer tells Mr A that he is on strong ground, as he cannot, prima facie, be proceeded against on a matter which happened seven months after his resignation, and that he was never a director of X Ltd could be proved conclusively. Mr A asks his lawyer how litigation could commence on obviously false allegations? "Should there not be a procedure in place in the Magistrate Court to filter frivolous complaints such as these?"
"That is common sense. But our legal system, unfortunately, does not have such a procedure," the lawyer replies. "A criminal complaint can be filed against anybody, even if he is not connected with the matter (as in this case) at all. It is for the person against whom allegations are made to go to the proper court and get himself discharged".
"Do I have to appear before the Magistrate Court near Chandigarh on the hearing date," Mr A asks rather worriedly.
"If I fail to appear... "
"A non-bailable warrant (NBW) may be issued against you. With that the police can arrest you and produce you before the court."
This gives Mr A a rude shock. "What should I do now?" asks Mr A.
"Well, you have two options. One, engage a Delhi-based lawyer and ask him to file a `dispense with presence' petition. If you are successful, then you need not appear in the Magistrate Court near Chandigarh. Simultaneously, file `discharge' petition since you, prima facie, have a case. If successful, further proceedings against you may be dropped."
"Twice you said `if successful'. What are the chances?"
"Well, the Supreme Court has said that the Magistrate can use his discretion to dispense with even the first appearance if the accused has to travel a long distance, say, from Bhopal to Delhi, especially given that cheque bouncing is not as grave an offence as other crimes."
"Is not Chandigarh further from Chennai than Delhi is from Bhopal?"
"It is. But that decision is at the discretion of the Magistrate. Also the Magistrate may not appreciate the case, prima facie, at the initial stage. The court may take up all that only at the time of trial. The second option is to file a petition in the Chandigarh High Court to quash proceedings, since you have prima facie evidence of the obvious errors in the complaint against you."
"Can't I file the petition in the Madras High Court? Both options suggested by you would entail heavy costs. I can't afford it, as, I am out of job at the moment".
"You cannot, as only the Chandigarh High Court has proper jurisdiction to entertain the petition. As for the costs, why not you ask your former employer to reimburse you?"
"I can't do that. X Ltd is being wound up on a High Court order. There is nobody in the company."
"That is your problem. The law does not appreciate financial hardship."
"Why not I abandon the summon as it is and explain to the police that I had resigned about two-and-half years back and give them a certified true copy of Form 32 and its implications in law. So, either I have to incur huge costs to bring out the truth or suffer arrest. It is really a choice between the devil and the deep sea."
Cases like this are on the rise. The complainant does not care to ascertain the truth and is quick to move the Magistrate Court, which often is far away from the registered office of the company. The court, on the other hand, does not have any procedure to filter patently wrong complaints. If for any reasons, the accused does not appear before the court, they are issued NBWs. And the police have to merely follow instructions. Caught in between are non-executive directors of companies and wage-earning professionals, who live in constant threat of creditors, summons and NBWs. While no tangible information is available about the money in scam-ridden finance companies, it is the innocent who are harassed by the archaic, mechanical process of law. In a majority of cases, professionals such as company secretaries sign cheques or execute other jobs as part of their work their interests, unlike that of the promoters, do not go beyond this. It is a pity that law does not recognise these realities. The professional institutes, to further the interest of their members, should strive for more meaningful dialogue with the Department of Company Affairs and the Law Ministry rather than merely say that it is for the trial courts to decide, based on the merits of the case. Often, by the time the trial is over, the innocent would have already paid the price in terms of the hardship undergone. It is unfair to expect a professional to spend time and money attending litigation proceedings in different parts the country, more so when management support is not forthcoming.
Corporate law aims at promoting good governance by inviting talented people as non-executive directors. Unmindful of this, the legal process of criminal courts harasses the professionals. This being the situation, professional bodies would be guilty of dereliction of duty if they do not suggest to the Government what the law ought to be.
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