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Madhya Pradesh High Court · body

2008 DIGILAW 1213 (MP)

Mahaveer Traders v. Gangadhar Sharma and Sons

2008-10-14

RAKESH SAKSENA

body2008
Judgment ( 1. ) HEARD on admission. Revision is admitted. ( 2. ) WITH the consent of both the parties, this revision is heard finally today. ( 3. ) APPLICANT has filed this revision against the order dated 22. 05. 2007 passed by the XIth Additional Sessions Judge, Bhopal in Criminal Revision no. 43/2007 setting aside the order dated 11. 12. 2006 passed by the Judicial magistrate First Class, Bhopal in R. T. A. No. 11172/2006 whereby he took cognizance of the offence under Section 138 of the Negotiable Instruments Act and issued process against the respondents. ( 4. ) IN short, the facts of the case are that the applicant/complainant filed a private complaint against the respondents under Section 138 of the negotiable Instruments Act stating that Dilip Sharma, partner of firm M/s gangadhar Sharma and Sons, on behalf of the firm purchased iron worth rs. 1,15,200/-from him. He paid Rs. 5200/-in cash and issued a cheque on 19. 09. 2006 for the remaining amount of Rs. 1,10,000/-, drawn on the Bank of india, Bhopal. Similarly, Dilip Sharma purchased cement bags from him worth rs. 2,19,600/ -. He made cash payment of Rs. 19,600/-and issued a cheque for rs. 2,00,000/-on 27. 09. 2006. When the aforesaid cheques were presented in the Bank for encashment, same were dishonoured and returned with endorsement of insufficient fund. He gave notice to partner Dilip Sharma on 11. 10. 2006. Despite receipt of notice, the aforesaid amount was not paid. ( 5. ) IT is to be noted that on 18. 10. 2006, unfortunately, Dilip Sharma expired. ( 6. ) THE complainant then filed the complaint under Section 138 of the negotiable Instruments Act against the respondent firm as well as against remaining partners Ritesh Sharma and Yashoda Bai Sharma and also against tarun Sharma. ( 7. ) LEARNED Magistrate on the basis of allegations made in the complaint and the evidence on record, took cognizance of the offence and issued process against the respondents. Challenging the aforesaid order, the respondents filed Criminal Revision before the Court of 11th Additional Sessions judge, Bhopal on the ground that the respondents did not sign the cheques, no notice was issued to them and that they were not in charge of and were not responsible to the firm for the conduct of business of the firm. Challenging the aforesaid order, the respondents filed Criminal Revision before the Court of 11th Additional Sessions judge, Bhopal on the ground that the respondents did not sign the cheques, no notice was issued to them and that they were not in charge of and were not responsible to the firm for the conduct of business of the firm. It was also contended that accused Tarun Sharma was not the partner of the firm. Learned additional Sessions Judge placing reliance on S. M. S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, (2005) 8 SCC 89 , allowed the revision holding that it was not made clear in the complaint that the accused persons were in charge of and were responsible for the conduct of business of the firm; and set aside the order of taking cognizance and issuance of process. ( 8. ) BEING aggrieved, the applicant/complainant has filed this revision against the order passed by the lower Revisional Court. ( 9. ) LEARNED counsel for the applicant/complainant submits that this case is squarely covered by the law laid down by the Apex Court in n. Rangachari Vs. Bharat Sanchar Nigam Ltd. , (2007) 5 SCC 108 , therefore, the lower Revisional Court committed serious illegality in setting aside the order passed by the Magistrate. He submits that in business transactions with the company or firm, a person is supposed to presume that the partners of the firm or directors of the company would be in charge of the affairs of the company/firm, therefore, the complaint filed against commission of any offence for the acts of a partner, acting on behalf of the firm cannot be nipped in the bud. The partners of the firm or directors of the company should establish in the trial that there were restrictions on their power under the partnership agreement. He further submits that the objection raised by the accused/partners could be considered and dealt with only after commencement of the trial. ( 10. ) LEARNED counsel for the respondents, on the other hand, submits that since no specific allegation was made in the complaint to show that the accused/partners were in charge and responsible to the conduct of business of the firm, they are not liable to be prosecuted and the proceedings against them deserve to be quashed. ( 10. ) LEARNED counsel for the respondents, on the other hand, submits that since no specific allegation was made in the complaint to show that the accused/partners were in charge and responsible to the conduct of business of the firm, they are not liable to be prosecuted and the proceedings against them deserve to be quashed. He submits that there is nothing on record to indicate that Tarun Sharma was the partner of the firm, therefore, the prosecution against him is not maintainable. ( 11. ) I have heard the learned counsel for both the parties and perused the impugned order and record. In case of S. M. S. Pharmaceuticals Ltd. Vs. Neeta Bhalla, (2005) 8 SCC 89 , the Apex Court has held that :? 4. ?. . The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others. Section 141 of the Act is an instance of specific provision which in case an offence under section 138 is committed by a company, extends criminal liability for dishonour of a cheque to officers of the company. Section 141 contains conditions which have to be satisfied before the liability can be extended to officers of a company. Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. ????? ?it makes every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, liable for the offence. The proviso to the sub-section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence. ? ( 12. ) IN case of N. Rangachari Vs. The proviso to the sub-section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence. ? ( 12. ) IN case of N. Rangachari Vs. Bharat Sanchar Nigam Ltd. , (2007) 5 scc 108 , the Apex Court observed that : ?16. ??. . The scope of Section 141 has been authoritatively discussed in the decision in S. M. S. Pharmaceuticals Ltd. binding on us and there is no scope for redefining it in this case. Suffice it to say, that a prosecution could be launched not only against the company on behalf of which the cheque issued has been dishonoured, but it could also be initiated against every person who at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company. In fact, section 141 deems such persons to be guilty of such offence, liable to be proceeded against and punished for the offence, leaving it to the person concerned, to prove that the offence was committed by the company without his knowledge or that he has exercised due diligence to prevent the commission of the offence. Sub-section (2) of Section 141 also roped in Directors, Managers, secretaries or other officers of the company, if it was proved that the offence was committed with their consent or connivance. ? ?19. Therefore, a person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are in charge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at the trial. It is in that context that Section 141 of the Negotiable instruments Act provides that when the offender is a company, every person, who at the time when the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company, shall also be deemed to be guilty of the offence along with the company. It appears to us that an allegation in the complaint that the named accused are directors of the company itself would usher in the element of their acting for and on behalf of the company and of their being in charge of the company??? ?21. A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. . Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position. ? ( 13. ) ON perusal of the record it is revealed that the respondents/accused Ritesh Sharma and Yashoda Bai Sharma had executed a power of attorney authorizing partner Dilip Sharma to act on their behalf and represent them in the dealings of the firm. Therefore, in my opinion at the initial stage of the prosecution it was not possible to hold that they were not liable to be prosecuted for dishonour of cheque issued by partner Dilip Sharma on behalf of the firm. On perusal of the cheques itself it is clear that the cheques were issued by him as a partner of firm M/s Gangadhar Sharma and Sons. ( 14. ) THE question as to whether the accused persons were in charge of and were responsible to the firm for the conduct of it?s business in the context of section 141 of the Negotiable Instruments Act could be decided only during the trial at appropriate stage. ( 14. ) THE question as to whether the accused persons were in charge of and were responsible to the firm for the conduct of it?s business in the context of section 141 of the Negotiable Instruments Act could be decided only during the trial at appropriate stage. On perusal of Sections 138 and 141 of the Negotiable instruments Act it is revealed that if other elements of the offence under Section 138 are satisfied, the burden would be on the partners of the firm to show that they were not liable to be convicted. Any restriction on their power or existence of any special circumstance exonerating them would be the fact exclusively within their knowledge, therefore, it would be for them to establish at the trial that at the relevant time they were not in charge of the affairs of the firm. ( 15. ) ON perusal of the complaint wherein it has been specifically mentioned that the accused/partners were responsible for the acts done by Dilip sharma on behalf of the firm. It is also peculiar in this case that after service of notice on partner Dilip Sharma, he expired. In this view of the matter also, other partners of the firm cannot avoid their liability at least at the initial stage of taking cognizance. ( 16. ) IN Monaben Ketanbhai Shah and another Vs. State of Gujarat and others, (2004) 7 SCC 15, it has been observed that it is not necessary to reproduce the language of Section 141 of the Negotiable Instruments Act verbatim in the complaint as the complaint is required to be read as a whole. If the substance of the allegations made in the complaint fulfill the requirements of section 141, the complaint has to proceed and is required to be tried with. It is also true that in construing a complaint a hyper-technical approach should not be adopted so as to quash the same. It is duty of the Court to discharge the accused persons if taking everything stated in the complaint as correct and construing the allegations made therein liberally in favour of the complainant. The ingredients of the offence are altogether lacking. In the present case, on perusal of the allegations made in the complaint, at this stage it cannot be said that there are no averments made against the accused persons. ( 17. The ingredients of the offence are altogether lacking. In the present case, on perusal of the allegations made in the complaint, at this stage it cannot be said that there are no averments made against the accused persons. ( 17. ) ON perusal of the partnership deed as well as the power of attorney executed by the partners in favour of Dilip Sharma, it is revealed that tarun Sharma was not the partner of the firm, therefore, the learned Additional sessions Judge rightly quashed the proceedings against him. Probably because of this reason, the applicant/complainant deleted his name from the array of respondents in this revision. ( 18. ) FOR the reasons stated above, this revision is allowed. The impugned order dated 22. 05. 2007 passed by the 11th Additional Sessions judge, Bhopal in Criminal Revision No. 43/2007, but for Tarun Sharma, is set aside and the order dated 11. 12. 2006 passed by the Judicial Magistrate First class, Bhopal in R. T. A. No. 11172/2006 is restored.