Kasargod Self Employees Financing Co. vs State of Kerala and Another

V. Giri, J.—The appellant in all those appeals is one and the same person and after hearing learned Counsel on a preliminary issue, it was felt that there is a common issue which arises for consideration in these cases. Therefore, they were heard together and are being disposed of by a common judgment.

A crucial issue arises for consideration in Crl.A. 549/2008, which is against the order of acquittal in C.C. No. 662/1999 on the files of the Court of Chief Judicial Magistrate, Kasaragod. To an extent finding on this issue in Crl.A. 549/2008 would have.a bearing in the other appeals as well and therefore, I propose to consider that in the first instance.

The complainant in C.C. No. 662/1999 on the files of the Court of Chief Judicial Magistrate, Kasaragod is the appellant herein. The complainant is described as M/s. Kasargod Self Employees Financing Company (R) represented by its Power of Attorney holder one K. Satheesan. Allegation in the complaint are to the effect that the complainant is a partnership firm and its affairs were being managed by its Managing Partner, one Jayasheela, that for discharging a legally enforceable debt to the tune of Rs. 2,63,000/-, the accused had issued Ext.P2 cheque in favour of the complainant. When the cheque was presented for collection, the same was dishonoured and returned with the endorsement "Funds insufficient". The complainant sent a notice on 27.7.1999 demanding payment of the amount covered by the cheque. But payment was not made and hence the complaint was filed. That was taken cognizance of and case was registered as C.C. No. 662/1999.

PW1, the power of Attorney holder of the complainant firm was examined. Exts.P 1 to P8 were marked. In the course of the cross examination of PW 1, he deposed that a public limited company bearing the same name as the complainant firm took over the firm in the year 2000 and the firm has therefore merged in the company. To a question as to whether the company had executed any document authorizing him to conduct the case, he answered in the negative. But he further stated that he is a Director of the Company. Apparently, the accused challenged the competence of PW 1 to represent the complainant and one point which arose for consideration was whether PW1, the Power of Attorney holder, has the right to continue with the case especially when the firm by name Kasargod Self Employees Financing Company is not in existence. Appreciating the testimony of PW1, the Court below found that going by the version of PW1, the original firm namely the complainant firm is not in existence in as much as the same has merged with the Public limited company. The General Power of Attorney was executed in favour of PW1, when the firm was in existence. The Court below found that the company has not sought for permission of the Court to continue with the prosecution and for allowing PW 1 to continue with the case. Reference in this regard was made to the judgment of the Supreme Court in Jimmy Jahangir Madan v. Bally Cariayappa Hindley (D) by Lrs IT 2004 (9) SC 558. Court below then especially found that the complainant has not turned to give evidence to substantiate the prosecution case and found the said point in favour of the accused. Thereafter, the Court below proceeded to consider the issue as to whether the accused had issued the cheque in discharge of a liability and whether the offence u/s 138 of the Negotiable Instruments Act has been committed. Court below found the said issue also against the complainant, and ultimately the accused was acquitted u/s 255(1) Cr.P.C. This has been challenged in the appeals.

I heard Mr. Jaju Babu, learned Counsel for the appellant/complainant and Mr. Vipindas, learned Counsel for the accused. I also heard Mr. T.G. Rajendran, Mr. Sureshkumar Kodoth and Mr. Bechu Kurian, learned Counsel appearing for the accused in other appeals. I will deal with the individual cases at the appropriate stage. I think it is appropriate to consider the correctness of the finding of the Court below that the complainant did not turn up to give evidence in support of the complainant, which tantamounts to a finding that the complainant was absent from the Court.

It seems to be clear from the evidence of PW1 that the complainant firm ceased to be in existence in the year 2000. Going by the finding given by the Court below in C.C. No. 449/1998 leading to Crl.A. 2123/2008, the complainant firm ceased to be in existence on 1.4.2000. A firm essentially ceases to be in existence when it stands dissolved. Such dissolution takes place either by a voluntary act of the partners constituting the same or by operation of law when one of the partners in the firm dies or retires or is declared insolvent and there is no provision in the partnership deed providing for the continuance of the firm in spite of the retirement or death of a partner. Dissolution of a firm also takes place when there is an order by the Court. Though the document evidencing the merger of the firm in the company, bearing the same name has not been placed on record before the Court, going by the version given by PW 1, it can only be treated as a case where the partners of the firm, resolved to float a company of the same name, the said company came into existence, and the assets and liabilities of the firm were taken over by the newly floated company. In other words, there was a transfer of the assets and liabilities of the firm in favour of the company, as an ongoing concern. This is what is discernible from the testimony of PW1. As rightly pointed out by Mr. Jaju Babu the concept of merger would essentially apply only between two corporate entities and in such a case, a merger would be regulated by the provisions of Sections 391 to 394 of the Companies Act. I proceed on the premise, going by the finding of the Court below and the testimony of PW 1, that the partners who constituted the complainant firm resolved that the entire assets and liabilities of the firm shall be transferred to and be treated as the assets of the public limited company of the same name. In fact, there came into being a dissolution of the firm by act of parties and consequently the complainant firm ceased to be an ongoing concern with effect from 1.4.2000, going by the finding of the Court below in C.C. No. 449/2008 leading to Crl.A. 2123/2008, I will have to proceed on this basis, since the factual premise has not been challenged by any of the parties.

The complaint was instituted by the firm and, except in the case of Crl.A. 661/2005 arising from C.C. No. 288/2001, the complainant firm was in existence when the cheque was issued, presented for collection, when the statutory demand notice was issued and more importantly when the complaint was instituted. The complainant was represented by a General Power of Attorney holder and the firm had executed the Power of Attorney in favour of the Power holder authorizing him to conduct the proceedings on behalf of the complainant firm. In all the aforementioned cases, there was no defect in the institution of the complaint as such. But during the pendency of the proceedings the complainant firm ceased to be in existence and as I mentioned above, the firm can cease to either by operation of law or by the voluntary act of the partners. It will tantamount to a case when the complainant is not in a position to thereafter appear before the Court and therefore, will have to treated as a case where the complainant is absent from the Court. But obviously in most of such cases, a dissolution of the firm, whether it is by act of partners or otherwise, would be evidenced by a document and the erstwhile partners or the continuing partners as the case may be, will have to provide for the continuance of such cases as are existing as on the date of dissolution and the right to continue the proceedings will have to be vested in one of the erstwhile partners of the firm. Each partner is an agent of the firm and is an agent of each other and therefore, the partners, who is authorized to continue the proceedings on behalf of the firm, will be in a position to continue the prosecution of the complaint. But in case where a dissolution of the firm takes place during the pendency of the proceedings before the trial Court, erstwhile partner, who is given the right to continue the proceedings, will have to approach the Court with an application u/s 302 of Cr.P.C. for a permission to continue the prosecution. Where the Deal of dissolution between the parties does not specifically provide that anyone of the partners may continue with the pending proceedings which the firm had actually instituted (or which the firm was defending as the case may be), then each one of the erstwhile partners would have a right to approach the Court or the right to continue the proceedings notwithstanding the dissolution, on the premise that the continuance of the proceedings are necessary to wind up the affairs of the firm and to complete the transactions taken but unfinished at the time of dissolution (Section 47 of the Partnership Act). But once there is a dissolution of the firm, which figures as a complainant, during the pendency of the complaint, there has to be a motion at the instance of a competent person, competent to represent the interest of the erstwhile firm, seeking the permission of the Court to continue the prosecution in terms of Section 302 of Cr.P.C. Failure to do so would result in a situation where the Court would be perforce compelled to proceed u/s 256 of the Cr.P.C.

In so far as the present case is concerned, P W1 was the Power of Attorney holder of the erstwhile firm and therefore he was competent to represent the interest of the firm while it was in existence and at any rate, competent to speak on behalf of the partners of the firm till the firm ceased to be in existence in the year 2000. Of course assets and liabilities of the firm, as an ongoing concern, came to be vested in the limited company. In such circumstances, the Public limited company, which was floated by the erstwhile partners of the firm as promoters would have been competent to make an application before die Court below u/s 302 of Cr.P.C. to continue the prosecution as such. Even a Director of the Company, without a separate Power of Attorney in his favour, would have been competent to represent the company. But an application to continue the prosecution should have come from the transferee in interest, broadly answering the description of a legal representative. This is the view that has been taken by the Supreme Court in the aforementioned decision (JT 2004 (9) SC 558). Admittedly, no such application was filed on behalf of the public limited company having the same name of the complainant firm at any point of time before the acquittal of the accused and consequently the Court below was right in holding that the complainant firm would be treated as bereft of a representation, after the dissolution of the firm as such. To that extent the finding of the Court below is justified and I uphold the same.

But if this be the position that results from the dissolution of the firm, which figured as a complainant, then, in my view, further finding of the Court below, on an appreciation of the defence taken by the accused, that the cheque was not issued in discharge of a liability and the course of action adopted by the Court below in acquitting the accused u/s 255(1) is not correct. In my view, if it is a case where the complainant ceases to be in existence or the case where the complainant is not properly represented at any point of time, then it tantamounts to a case of absence of the complainant u/s 256(1). Since the firm is the complainant and therefore, the death of the complainant is not possible, on dissolution of the firm a cessation of the firm comes into being and unless there is an application by a competent person entitled to continue to represent the interest of the complainant made before the Court accepts the same, it is a case where the Court will have to proceed on the premise that the complainant is absent, u/s 256(1). If that be the case, the learned Chief Judicial Magistrate should have obviously proceeded u/s 256(1) and not u/s 255(1) of the Cr.P.C.

Further, consistent with the finding which I have just made above that the complainant firm stood admittedly dissolved with effect from 2000, it also has to be held that if therefore, the accused was to be acquitted u/s 256(1) on the premise that the complainant is absent and the finding itself was in existence in 2000 and there was no application by a competent person to continue the prosecution in terms of Section 302 of Cr.P.C. the appeal itself may have to be held as incompetent. The appeal is presented by the firm and since the appeal u/s 378 Cr.P.C. could be presented only by the complainant (in the case of a private complaint), the dissolution of the complainant firm and absence of a competent person to continue the prosecution, in such circumstances, will stand in the way of the complainant firm continuing the prosecution after obtaining leave from this Court u/s 378 Cr.P.C. This in my view, would be an additional factor which stands in the way of the appellant seeking reversal of the order of acquittal.

For all these reasons mentioned above, I do not find my way to reverse the acquittal as such. But I hold that the order of acquittal of the accused u/s 255(1) is illegal. The said order therefore, is set aside. Instead, it is directed that the accused be treated as acquitted u/s 256(1) of the Code. Subject to the above, the appeal shall stand dismissed.

Crl.A. Nos. 1667/2003, 1687/2004, 1558/2003, 2121/2007 & 2123/2007

The discussion held in relation to Crl A549/2008 would apply to the above appeals also. But Counsel for the appellant Mr. Jaju Babu is right in submitting that the competence of the complainant firm to continue with the prosecution or the Power of Attorney holder to. continue to represent the complainant was not called in question in any of these cases and therefore the accused have been acquitted u/s 255(1). I refrain from embarking upon an appreciation of the evidence and correctness of the finding of the Court below to the effect that the accused are to be acquitted u/s 255(1), in circumstances where I am of the view that going by the admission of PW1 that the firm ceased to be in existence in 2D00, the Court below should have proceeded on the premise that the complainant is absent and in such circumstances should have proceeded to acquit the accused u/s 256(1). In the result, the order of acquittal in all these cases u/s 255(1) is set aside and it is directed that instead the accused be treated as acquitted u/s 256(1) of Cr.P.C. Subject to the above, appeals shall stand dismissed.

Crl.A. 661/2005

The complainant in C.C. No. 288/2001 on the files of the Chief Judicial Magistrate, Kasargode is the appellant in this case. Going by the averments made in the complaint, the cheque in question forming the subject matter of the complaint itself, was issued only on 20.4.2001 and apparently the complainant firm had ceased to be in existence on the same date. Taking note of the facts which I have found above, this seems to be a case where the complaint was not maintainable but in circumstances where this plea has not been specifically considered by the Court below, I do not think it is necessary to finally pronounce on this aspect. Suffice it to say that there would be no justification in interfering with the order of acquittal passed by the Court below. Therefore, the appeal is dismissed.