Arun Charnthimath vs Suresh Jain

Anand Byrareddy, J.—Heard the learned counsel for the appellant.

The appellant was the complainant before the Trial Court alleging an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as ''the Act'', for brevity). It is stated that the appellant was an Advocate by profession and the Dominion Clubs and Resorts, according to the complainant was believed to be a Company of which accused No. 2 was the Managing Director and accused Nos. 3 to 6 were the Directors and it was his further case that the said accused had embarked, on a project of establishing an exclusive ladies health and ayurvedic spa and therefore, was looking out for investors and since the present appellant was an acquaintance of the said Directors, they had persuaded him to lend a sum of Rs. 5,00,000/- on the promise of huge returns on the investment and that they would be able to discharge the loan within a span of six months. It is the case of the appellant that he had infact lent a sum of Rs. 5,00,000/- believing that the accused would provide huge returns on the money. However, since there was no sign of repayment even after 18 months, the complainant was constrained to demand repayment. Thereafter, he was re-assured that the accused were negotiating the sale of the land and property and that his amount would be returned immediately on such transaction being completed. Since even that did not materialize, it transpires that accused No. 6 who was the new Chairman of the Company, took the initiative of settling the dispute and issued a Cheque for a sum of Rs. 5,00,000/- dated 4.6.2004 in favour of the appellant. The Cheque was issued on behalf of Dominion Clubs and Resorts represented by its Director accused No. 6. The same, when presented for encashment, was returned with the Banker''s endorsement that no such account existed with the Bank. The appellant thereafter had issued a notice demanding payment and when the payment was not forthcoming, had filed a complaint against Dominion Clubs and Resorts as accused No. 1 and the Managing Director and other Directors, as accused Nos. 2 to 6. The Magistrate having taken cognizance, had issued summons to the accused and the accused had entered appearance and pleaded, not guilty. Thereafter, the appellant had tendered evidence as PW-1 and had produced Ex. P1 to Ex. P30. After recording the statement of the accused, accused No. 2 had examined himself as PW-2 and got marked Ex. D1 to Ex. D3 and after hearing both the sides, the Court of Magistrate had framed the following points for consideration:

"(1) Whether the complainant has proved beyond all reasonable doubt that the accused has committed the offence punishable under Section 138 of Negotiable Instruments Act as alleged in the complaint?

(2) What order?"

The Magistrate Court answered the same in the affirmative and convicted the accused Nos. 1 to 3, 5 and 6 for the offence punishable under Section 138 of the Act and were sentenced to pay a fine of Rs. 7,60,000/-, of which Rs. 7,50,000/- was to be paid as compensation to the complainant. It is seen that accused Nos. 2 and 3 had alone filed an appeal against the said judgment. It is stated that accused No. 4 has died in the interregnum and accused Nos. 5 and 6 however, have not chosen to file any appeal. The Appellate Court intern has held that there were several infirmities which the Court of Magistrate had overlooked and which would go to the root of the matter and has set aside the judgment insofar as it convicted and sentenced accused Nos. 2 and 3. It is that judgment which is sought to be challenged in the present appeal.

Though the judgment as against accused Nos. 5 and 6 has attained finality, having regard to the findings of the Appellate Court where the Court has given findings which are in the nature of vitiating the entire complaint, the appellant, as a matter of prudence, has sought to prefer this appeal.

The case of the appellant is that the Appellate Court has mainly assigned three reasons. Firstly that the accused No. 1 is shown to be Dominion Clubs and Resorts. It is found as a fact that there was no such Company in existence and that it was not a Company at all. On the other hand, accused Nos. 2 to 6 were said to be the Directors of an entity known as M/s. Maruti Comforts Inn Private Limited and the said Company was not made a party to the proceedings and when it was not demonstrated that Dominion Clubs and Resorts was an entity represented by accused Nos. 2 to 6, the complaint itself was misconceived and could not be proceeded with.

Secondly, it is held that it was necessary to record the plea of accused No. 1 if it was to be treated as a Company and an entity. Since it is said to be an incorporeal body, it could only be represented by its Directors and the plea of the Advocate representing accused Nos. 2 to 6, having been recorded in the stead of the accused, could not be countenanced in that, plea of the accused could not be recorded through their counsel and hence, the proceedings were vitiated.

Thirdly, that the statements of accused have been jointly recorded under Section 313 of the Code of Criminal Procedure, 1973 (hereinafter referred to as ''Cr.P.C., for brevity). The same ought to have been done individually, in respect of each of the accused and a common statement of all the accused could not be recorded and therefore, this would also vitiate the proceedings.

It is also pointed out by the Appellate Court that when the Banker had issued an endorsement to state that there was no such account of Dominion Clubs and Resorts, it would bolster the case of the accused that there was no such Company as Dominion Clubs and Resorts and the complaint itself is misconceived and could not be prosecuted.

Insofar as the first contention that there was no such Company as Dominion Clubs and Resorts is concerned, it is the case of the learned counsel for the appellant that the complainant was mislead into believing that there was indeed such an entity and that the accused Nos. 2 to 6 represented the same as its Directors. In this regard, he would also draw attention to the Cheque in question which has been issued on an account of Dominion Clubs and Resorts and accused No. 2 representing himself as the Director of Dominion Clubs and Resorts. Therefore, while issuing the notice of demand and lodging the complaint and even tendering the evidence, was on that basis. The defence sought to be set up by the accused that there was no such entity, was a half truth. In that, Ex. P27 which includes a director''s report would categorically disclose that M/s. Maruti Comforts Inn Private Limited had embarked on a project entitled as Dominion Clubs and Resorts which was a project of the said entity. But, however, the same having been vaguely defined and even then the appellant claiming to be an Advocate, not having addressed the true structure and status of Dominion Clubs and Resorts and having proceeded on the basis that Dominion Clubs and Resorts was also a Company and having been further mislead by the Cheque issued in the name of Dominion Clubs and Resorts and later having found out that the Company was actually M/s. Maruti Comforts Inn Private Limited, it was incumbent on the complainant to have impleaded the said Company which was indeed the entity of which the Dominion Clubs and Resorts was merely a project and accused Nos. 2 to 6 were infact Directors of M/s. Maruti Comforts Inn Private Limited and this would have cured the defect, if any, in the complaint in having been filed in the name of the entity which infact was responsible for discharging the liability. Though the Cheque having been issued in the name of Dominion Clubs and Resorts would really relate back to M/s. Maruti Comforts Inn Private Limited and the accused either by design or otherwise having mislead the appellant into believing that the Cheque was issued in the name of Dominion Clubs and Resorts when it was not, ought not to result in the complaint being defeated on that ground. Therefore, the finding of the Appellate Court that Dominion Clubs and Resorts was not an entity and that the complaint could not have been brought against Dominion Clubs and Resorts, cannot be found fault with. But on a closer examination of the record it is evident that accused Nos. 2 to 6 were actually representing M/s. Maruti Comforts Inn Private Limited which was the entity which was transacting with the complainant. Therefore, the complainant, in any event, having made accused Nos. 2 to 6 as the parties to the complaint, while having dithered in making M/s. Maruti Comforts Inn Private Limited which was the actual defaulter and which ought to have been made a party, could have been corrected even at the stage of appeal. However, the same having passed muster and the Appellate Court summarily holding that there was no transaction whatsoever, is bad in law.

The second reason for the Appellate Court to have held that there was no case made out by the complainant, was on the finding that the Banker on which the Cheque was issued, had endorsed that there was no such account with the Bank. However, the very Bank has subsequently issued yet another clarification, at Ex. P26, to state that there was indeed an account with the Bank in the name of Dominion Clubs and Resorts, but that was subsequently closed at the instance of the accused. This has been overlooked by the Appellate Court in coming to a conclusion that the transaction was not established and that there was no entity as Dominion Clubs and Resorts. In other words, the appellant has demonstrated that accused Nos. 2 to 6 were the Directors of M/s. Maruti Comforts Inn Private Limited which was an entity and which ought to have been the accused, in the first instance. Therefore, if this infirmity of M/s. Maruti Comforts Inn Private Limited not being made a party, is now made a party and the matter remanded for a fresh consideration by the Court below, there would remain no infirmity which could defeat the complaint.

Further, insofar as the finding of the Appellate Court that the plea of the accused could not be recorded through their counsel, is also not a correct finding. The opinion of the Appellate Court that it could be done only in petty matters and not in all cases, is not wholly correct. The Apex Court in the case of M/s. Bhaskar Industries Ltd. Vs. M/s. Bhiwani Denim and Apparels Ltd. and Others, has observed as under:

"It is clear from Section 273 Cr.P.C. that the normal rule is that the evidence shall be taken in the presence of the accused. However, even in the absence of the accused, such evidence can be taken but then his Counsel must be present in the Court, provided the accused has been granted exemption from attending the Court. The concern of the Criminal Court should primarily be the administration of Criminal Justice. For that purpose, the proceedings of the Court in the case should register progress. Presence of the accused in the Court is not for making his attendance just for the sake of seeing him in the Court. It is to enable the Court to proceed with the trial. If the progress of the trial can be achieved even in the absence of the accused, the Court can certainly take into account the magnitude of the sufferings which a particular accused person may have to bear with in order to make himself present in the Court in that particular case.

Sections 251 and 205(1) make it clear that in appropriate cases the Magistrate can allow an accused to make even the first appearance through a counsel. The Magistrate is empowered to record the plea of the accused even when his Counsel makes such plea on behalf of the accused in a case where the personal appearance of the accused is dispensed with. Section 317 of the Code has to be viewed in the above perspective as it empowers the Court to dispense with the personal attendance of the accused (provided he is represented by a Counsel in that case) even for proceeding with the further steps in the case. However, one precaution which the Court should take in such a situation is that the said benefit need be granted only to an accused who gives an undertaking to the satisfaction of the Court that he would not dispute his identity as the particular accused in the case, and that a Counsel on his behalf would be present in Court and that he has no objection in taking evidence in his absence. This precaution is necessary for the further progress of the proceedings including examination of the witnesses.

As regards the question as to what might happen if the Counsel engaged by the accused (whose personal appearance is dispensed with) does not appear or that the Counsel does not co-operate in proceedings with the case, the Legislature has taken care of such eventualities. Section 205(2) says that the Magistrate can in his discretion direct the personal attendance of the accused at any stage of the proceedings. The Last limb of Section 317(1) confers discretion on the Magistrate to direct the personal attendance of the accused at any subsequent stage of the proceedings. He can even resort to other steps for enforcing such attendance. Thus, it is within the powers of a Magistrate and in his judicial discretion to dispense with the personal appearance of an accused either throughout or at any particular stage of such proceedings in a summons case, if the Magistrate finds that insistence of his personal presence would itself inflict enormous suffering or tribulations on him, and the comparative advantage would be less. Such discretion need be exercised only in rare instances where due to the far distance at which the accused resides or carries on business or on account of any physical or other good reasons the Magistrate feels that dispensing with the personal attendance of the accused would only be in the interests of Justice. However, the Magistrate who grants such benefit to the accused must take the precautions enumerated above, as a matter of course. When an accused makes an application to a Magistrate through his duly authorised Counsel praying for affording the benefit of his personal presence being dispensed with the Magistrate can consider all aspects and pass appropriate orders thereon before proceeding further.

These are days when prosecutions for the offence under Section 138 of the Negotiable Instruments Act are galloping up in Criminal Courts. Due to the increase of inter-State transactions through facilities of the banks, it is not uncommon that when prosecutions are instituted in one State, the accused might belong to a different State, sometimes a far distant State. Not very rarely, such accused would be ladies also. For prosecution under Section 138 of the Negotiable Instruments Act, the trail should be that of a summons case. When a Magistrate feels that insistence of personal attendance of the accused in a summons case, in a particular situation would inflict enormous hardship and cost to a particular accused, it is open to the Magistrate to consider how he can relieve such an accused of the great hardships, without causing prejudice to the prosecution proceedings."

In view of the above observations of the Hon''ble Supreme Court, the finding of the Appellate Court to the above effect is not the correct position of law.

Insofar as compliance of Section 313 of Cr.P.C., we may notice the language of Section 313 of Cr.P.C., which reads as follows:

"313. Power to examine the accused.

(1) In every inquiry or trial, for the purpose of enabling the accused personally to explain any circumstances appearing in the evidence against him, the Court--

(a) may at any stage, without previously warning the accused put such questions to him as the Court considers necessary;

(b) shall after the witnesses for the prosecution have been examined and before he is called on for his defence question him generally on the case:

Provided that in a summons-case where the Court has dispensed with the personal attendance of the accused, it may also dispense with his examination under clause (b).

(2) No oath shall be administered to the accused when he is examined under sub-section (1)

(3) The accused shall not render himself liable to punishment by refusing to answer such question, or by giving false answers to them.

(4) The answers given by the accused may be taken into consideration in such inquiry or trial, and put in evidence for or against him in any other inquiry into, or trial for, any other offence which such answers may tend to show he had committed."

The above Section lays down that in a summons case where the Court has dispensed with personal attendance of accused, it also dispenses with, his examination under clause (b), would indicate that such examination and recording of statement of an accused in a summons case would not be of much significance, especially if his presence has been dispensed with. In the instant case on hand, which is a proceeding of a quasi criminal nature and the trial contemplated being in the nature of a summary trial, the examination of all the accused together who are arrayed as representing a Company which is the defaulter, does not result in any miscarriage of justice. In that, the defence of all the accused was common and they were made as parties only in order to ensure the representation of a Company which is an incorporeal body. Therefore, there is no independent defence of each of the accused which would entail the recording of individual statements under Section 313 of Cr.P.C. The defence of the accused was one and they were merely representing a Company as its Directors. Therefore, the recording of statement under Section 313 of Cr.P.C. in a case which only addresses the dishonour of a Cheque issued by an incorporeal body, does not result in any miscarriage of justice or infirmity which could go to the root of the matter. For that matter, there is no infirmity at all and consequently, the finding that the recording of a statement under Section 313 of Cr.P.C. jointly of all the Directors, who, either by volition or otherwise, offered themselves for questioning jointly, does not result in any miscarriage of justice.

Consequently, since Section 141 of Cr.P.C. requires that when the offence is by a Company, every person who was incharge and was responsible to the Company, for the conduct of the business of the Company, as well as the Company is deemed to be guilty of the offence and shall be liable to be proceeding against and punished. It was necessary for the petitioner to have made M/s. Maruti Comforts Inn Private Limited as a party to the proceeding. The reason as to why this is not been done was on account of a willful misleading of the complainant as to the structure of the Company and the status of Dominion Clubs and Resorts which was merely a project of M/s. Maruti Comforts Inn Private Limited which has resulted in the appellant overlooking this primary fact. However, that by itself ought not to enable the accused, who would otherwise be guilty of the offence, to absolve themselves on such a technicality.

Consequently, since there only requires a formality to be met, in making M/s. Maruti Comforts Inn Private Limited as a party, for otherwise, accused Nos. 2 to 6 would very well represent the said Company and to bring it in accordance with form, it would be necessary for the matter to be remanded to the Trial Court with liberty to the appellant to take such steps as may be necessary to bring the matter in accordance with form and the law. The judgment of the Appellate Court is therefore set aside and the matter is remanded to the Trial Court for proceedings to be commenced afresh.