Ajith Balse vs Capt. Ranga Karkere

A.S. Pachhapure

The revisionist has challenged the concurrent findings of his conviction and sentence for the offence punishable u/s 138 of the Negotiable

Instruments Act [hereinafter referred to as ""the Act"" for short]. The facts relevant for the purpose of this revision in brief are as under.

The petitioner herein is the accused, whereas the respondent is the complainant before the trial Court. The accused-Ajith Balse is said to be the

Managing Director of Tim Tim Far East Export Trading Company Private Limited, PataIganga, Raigad District, Maharastra, whereas the

complainant is the Managing Partner of a concern by name Yermal Fish Trading [YFT], carrying on the business of supplying fishes. There is an

agreement dated 19.09.2001 between the parties, wherein the complainant has supplied beheaded and gutted ""Rani fish"" to the accused company.

The accused was paying the amount through telegraphic transfer and under the terms of the agreement, the complainant was to send the statement

of accounts by fax for every 15 days. At the end of fishing season i.e., on 04.06.2002, the complainant sent the final statement, under which the

accused was liable to pay Rs. 73,24,710-00 to the complainant. The accused had called the complainant to his company on 02.08.2002 to settle

the debt and at that time, the accused issued 3 cheques of the State Bank of India (1) bearing No. 5116 93 dated 14.08.2002 for Rs. 20 lakhs (2)

bearing No. 511694 dated 05.09.2002 for Rs. 15 lakhs and (3) bearing No. 511695 dated 17.09.2002 for Rs. 20 lakhs. The accused had

undertaken to settle the balance amount of Rs. 18,24,710 during the next fishing season. Later, the complainant received a notice dated

05.08.2002 from the accused castigating false aspersions on the complaint and in fact the accused had enquired about the said letter. The accused

pacified the complainant and requested to present the cheques for encashment after a week from the date of the cheques. The complainant

presented the cheque bearing No. 511693 dated 14.08.2002 for Rs. 20 lakhs to the Corporation bank and the said cheque was returned with

endorsement ""payment stopped"" and ""funds insufficient"". The complainant issued a legal notice dated 09.09.2002 by fax and also by registered

post acknowledgement. There was no compliance of the demand made in the notice. Hence the complainant approached the trial Court and

submitted the complaint on these facts and requesting to initiate action against the accused for the offence punishable u/s 138 of the Act.

During the trial, the complainant examined himself as P.W. I and in his evidence documents Exs. P1 to 151 were marked. Statements of the

accused were recorded u/s 313 Cr.P.C. He examined himself as D.W.2 and a witness D.W.1 In their evidence got marked the documents Exs.

D1 to 7. The trial Court after hearing counsel for the parties and on appreciation of the material on record, convicted the accused and ordered him

to pay a fine of Rs. 21,25,000-00, in default to undergo simple imprisonment for 6 months. An appeal against the order by the accused also came

to be dismissed on merits. Aggrieved by the concurrent findings, the present revision petition has been filed.

I have heard the Learned Counsel for the parties.

The validity of the orders of the Courts below were challenged on three grounds firstly, that there is no debt or liability due to the complainant,

secondly, that the cheques in question were obtained by giving threat and thirdly, that the complainant has not impleaded the company as a party to

the proceedings and therefore, the complaint is not maintainable in law.

The Learned Counsel for the respondent has supported the orders passed by the Courts below.

So far as the agreement between the parties is concerned, the complainant has produced the copy of the agreement at Ex. P151. It contains the

terms regarding the regular supply of beheaded and gutted ""Rani fish"" and it is signed by the accused. This fact is not disputed in the oral evidence

of the parties. Ex. D5 is a letter dated 03.10.2002 produced by the accused, in which it is stated ""Our clients have never denied that there was

Agreement for supply of beheaded and gutted fish in fresh and unspoiled condition by your clients"". So, from Ex. P 151 and demand made in Ex.

D5 produced by the accused, safely it could be concluded that there exists an agreement between the parties for supply of the fish.

In the oral evidence, P.W. I has stated having supplied fish as per the terms of the agreement and to substantiate this contention, he has

produced Exs. P11 to 139, the receipts regarding the freight charges, advance paid and the balance due as per the supply of ""Rani fish"" to the Tim

Tim Far East Sea Food, Patalanga, which the accused is the Managing Director and the statement of account maintained by the complainant has

been produced as per Exs. P142 to 148 and it reveals that an amount of Rs. 73,24,710-00 was due by the accused. The complainant also

produced Exs. P152, letter issued on behalf of the accused company to the Learned Counsel for the complainant, wherein it is stated ""Our clients

have even in our letter dated October 3, 2002 admitted that there is a sum of Rs. 23,79,428-00 due as on 30.06.2002 to your clients for the fish

supplied. So, clearly under this letter, the accused admitted the liability at least to an extent of Rs. 23,79,428-00, though the complainant claims

that an amount of Rs. 73,24,710-00 was due, the cheque Ex. P1 in dispute is for Rs. 20 lakhs. So, there is no necessity for this Court to find out

as to whether the accused is due for more than Rs. 73,24,710-00 lakhs when to an extent of Rs. 23,79,428-00 the liability is admitted by the

accused.

So far as the second contention is concerned, it is relevant to note that D.W. 2-accused has admitted in para 9 of his cross-examination that

there are as many as 150 workers in the company apart from the security personnel provided and that without the permission of the security

personnel no one would enter the premises of the company of the accused. Though it is contended that the complainant was accompanied by as

many as 8 persons, the evidence of D.W. 1 discloses that one Razak was the person who accompanied the complainant and on that day i.e., on

02.08.2008 it was Friday. D.W. 2 admits in the cross-examination that the company made arrangement of a car to Razak. to go to Mosque for

the purpose of offering prayer. Furthermore, the accused admits in the cross-examination that the cheque-Ex. P1 was- given to the complainant by

one Sushanth Welkar, who is also a director of the company. If there was a threat for issuance of the cheque, the accused could have examined

Sushanth Welkar, who gave cheque Ex. P1 to the complainant. That apart, the evidence of D. W. 2 also reveals that there were as many as 5

telephones in the office of the company and if there was really a threat by the complainant and his associates, the fact could have been informed to

the Police over phone. Ex. D6 is the copy of the complaint and it discloses that even on the previous evening the complainant went to the residence

of Sushanth Welkar and threatened the members of the family. But, despite the said threat, the accused did not take any steps to lodge complaint

immediately and considering the circumstances stated above, the evidence of D.Ws.1 and 2 is insufficient to hold that there was either a threat or

duress by the complainant in obtaining the 3 post dated cheques.

Thirdly, the Learned Counsel for the revisionist has placed reliance on the decision of this Court reported in ILR 2010 Kar. 3287 [Sri Rajesh

Adani and another Vs. Assistant Labour Commissioner and Another], wherein it has been held:

Company is a necessary party in a complaint filed against the Directors. The complaint cannot be entertained when the Company is not made as a

party.

He also relied upon 2008 AIR SCW 3608 [Aneeta Hada Vs. M/s. Godfather Travels & Tours Pvt. Ltd.], wherein the learned Judge of the

Division Bench held:

The Company is necessary party, whereas the other opinion was that the Company is not a necessary party and in the circumstances, the matter

was referred to a larger bench.

In part I(2010) BC 674(SC) [National Small Industries Corporation Ltd. Vs. Harmeet Singh Paintal & anr.], it has been held:

The penal provision creating vicarious liability e.g., Section 141 of the Negotiable Instruments Act, must be strictly construed.

So also reliance is placed on the decision of this Court reported in ILR 2011 Kar. 2475 [Smt. Rasheeda Mehaboob Vs. Replicon Software

(India) Private Limited Represented by its Manager], wherein it is held:

It is clear from the provisions of Section 138 of Negotiable Instruments Act that it is only a person who has drawn the cheques, who is deemed to

have committed an offence u/s 138 of N.I. Act, if the cheque drawn by the said person is returned from the bank with an endorsement ''insufficient

funds''. It is not possible to read from the contents of the Section 138 of the N.I. Act that even a person who is not the drawer of the cheque also

can be made liable in respect of an offence u/s 138 of N.I. Act. The Trial Court in the instant case was not justified in issuing summons to the

petitioner in respect of an offence u/s 138 of N.I. Act when the petitioner was not the drawer of the cheques in question.

In 2007 AIR SCW 6482 [M/s. Sarav Investment & Financial Consultants Pvt. Ltd. & Anr. Vs. Liyods Register of Shipping Indian Office Staff

Provident Fund & Anr.], wherein it has been held:

(D) Negotiable Instruments Act (26 of 1881), S.141-Dishonour of cheque - Offence by Company - Accused, a Director of Company -- He is

merely vicariously liable for acts of Company He could be prosecuted only if ingredients laid down in Section 141 are satisfied.

That when the offence is by the Company and the accused is a director of the said Company, he is merely said to be vicariously liable for the acts

of the Company and he could be prosecuted only if the ingredients laid down in Section 141 are satisfied. Placing reliance on this decision, it is the

contention of the Learned Counsel that when the Company is not a party to the proceedings, the complaint against the accused is not maintainable

in

Now as could be seen from the provisions of Section 141 of the N.I. Act, it reads thus:

Offences by companies.-(1) If the person committing an offence u/s 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.

(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.

A similar provision as above is also provided under the provisions of Section 10 of the Essential Commodities Act, 1955. The said provision is

extracted herein for the purpose of convenience:

(1) If the person contravening an order made under Sec. 3 is a company, every person who, at the time the contravention was committed, was in

charge of, and was responsible to, the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and

punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment I he proves that the contravention took

place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where an 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.

The Apex Court while considering the provisions of Section 10 of the Essential Commodities Act, in a decision reported in Sheoratan Agarwal and

Another Vs. State of Madhya Pradesh, held as under:

In respect of the offences by Companies, separate prosecution of person-in-charge or an Officer of the company without prosecuting the

conviction is permissible

Even as could be seen from the provisions of Section 10 of the above said Act, it does not state that if the person contravening an order made u/s

3 is a company, the prosecution of the director, the officers and servants of the Company or other persons is precluded unless the company itself is

prosecuted. So, there is no statutory compulsion that the person-in-charge or any officer of the Company may not be prosecuted unless he be

ranged alongside the Company itself. So also, in State (Govt. of NCT of Delhi) Vs. D.A.M. Prabhu and Another, where there was contravention

by a Company and a person in charge of the offences and the company, it was held that he could be prosecuted separately or along with the

Company, no statutory compulsion, he may not be prosecuted unless he is ranged along with the Company itself.

In 2000(1) Crimes 26 (SC) [Anil Hada Vs. Indian Acrylic Ltd. ], the Apex Court took into consideration the directions of Section 141 of the

Act and in the said case a contention was raised by the directors to drop the complaint against them on the plea that without prosecuting the

Company, they could not be prosecuted. The Apex Court held that contention is not tenable and the prosecution of the Company is not sine qua

non for prosecuting its directors, even if the prosecution proceedings against the company are not taken or could not be continued, it is no bar for

proceeding against other persons falling within the purview of sub-Sections (1) and (2) of Section 141.

In 2001 Crl.L.J. 4936 [R. Rajgopal Vs. S.S. Venkat], the Apex Court in a case where there was a complaint u/s 138 of the Act and the

Company/Partnership firm on whose behalf the cheque was dishonoured, was not made an accused and only partner made an accused, it was held

that quashing of the complaint on that ground was improper.

In 1994 Crl.L.J. 3115 [V.N.Samant Vs. M/s. K.G.N. Traders an another] this Court held:

Section 141 of the Act provides that if the persons committing an offence u/s 138 is a Company, every persons 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. The explanation to that section provides

that the Company means and includes a firm also. However it cannot be contended that the persons who were incharge of and were responsible to

the company for the conduct of the business cannot be prosecuted for the offence committed by the company without the company itself being

prosecuted. Therefore when the offence u/s 138 of the Act was committed by a partnership firm it cannot be said that as the offence is committed

by the firm, the partners cannot be prosecuted without the firm being arraigned as an accused.

In 2004 Crl.L.J. 3170 [B.V. Rangam Vs. B. Govinda Reddy and another], the High Court of Andhra Pradesh had an occasion to consider the

provisions of Section 141 of the Act and in a complaint for dishonour of cheque, a contention was raised for non-joinder of necessary parties, the

accused was impleaded in his personal capacity as the Managing Director of the Company and it was held that merely because that the Company

is not made a party to the complaint, it cannot be said that the complaint is not maintainable against the accused.

The High Court of Himachal Pradesh in the decision reported in B.N. Mehta Vs. Kapoor Agencies and Another, wherein the accused was

General Manager of Super Bazar and was in-charge/officer of the super Bazar, cheque was drawn by him in his capacity as a General Manager of

the Super Bazar, failure to implead Super Bazar/Cooperative Society as co-accused was said to be not fatal and it was held that the proceedings

against the accused alone are maintainable.

The High Court of Allhabad in a decision reported in Bimal Kumar Nopani Vs. State of Uttar Pradesh and Ajay Bathwal, held that the person

responsible for conduct and in-charge of the business of the Company can be prosecuted without prosecuting the Company itself.

In S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, the Apex Court considering the dishonour of a cheque in the offence by the

Company held that the Managing Director, Joint Managing Director are in-charge of and responsible for conduct of business of the Company by

virtue of office they hold and that they get covered u/s 141 of the Act. It further held that the signatory on the cheque which is dishonoured is

clearly responsible for incriminating act as he is covered under sub-Section (2) of Section 141 of the Act.

In the decision reported in M/s. Bilakchand Gyanchand Co. Vs. A. Chinnaswami, the Apex Court in a petition u/s 482 Cr.P.C., wherein the

cheque signed by the M.D. of the Company-notice u/s 138 were sent to the M.D., who is the signatory of the cheque, it held as there is no

infirmity and the complaint is not liable to be quashed on the ground that the notice was not sent to the Company itself.

Now, as could be seen from catena of decisions referred to supra of different High Courts and also the Apex Court, it is well established

principle of law that a complaint against any of the Director or person/s in-charge of the Company is very much maintainable despite the fact that

the Company is not arrayed as an accused.

In 2008 AIR SCW 3608 [Aneeta Hada Vs. M/s. Godfather Travels & Tours Pvt. Ltd.], while the same principle was being considered by the

Division Bench of the Apex Court, there was difference of opinion and the matter now stands transferred to a larger bench for disposal. So, the

larger bench has not yet taken any decision on the question as to whether a Director cannot be prosecuted in the absence of the Company as an

accused. But, anyhow, till the reference of the matter to the larger bench, the Apex Court in many cases has taken a decision that the Company is

not a necessary party and there is no necessity to array it as an accused. So, as the law now stands, it has to be held that a presumption u/s 138 of

the Act can be maintained even in the absence of the Company as an accused. It is not in dispute that the accused is the signatory of cheque--Ex.

P1 and therefore, the prosecution of the accused in the absence of the Company as a party, there is no impediment to prosecute the accused in the

absence of the Company.

The cheque-Ex. P1 has been issued in favour of the complainant by name Ranga Karkera. It is not in the name of either the proprietorship

concern or a firm. The evidence reveals that the complainant is doing the business in his own capacity and though the records disclose that YFT is

either a partnership firm or a proprietorship concern, as the cheque has been issued in the name of the complainant and it is admitted by the

accused that the complainant is doing business in his personal capacity. Hence, I do not find any impediment to hold the complaint is maintainable.

So, in view of the material facts and the law laid down, this Court is of the view that the conviction ordered by the Courts below and the sentence

has to be upheld. In that view of the matter, I proceed to pass the following:

ORDER

The revision petition is dismissed. No costs.