O. T. G. Global Finance Ltd. Co. , Indore v. Mohan Mandelia
2011-09-26
G.D.SAXENA
body2011
DigiLaw.ai
ORDER 1. As the facts are the same, the aforementioned two revisions are heard together and disposed of by this common order. 2. Criminal Revision No.613/06 preferred under section 397/401 of the Code of Criminal Procedure 1973, by the petitioner No.1-accused OTG Global Finance Ltd. Company, Indore through its Director of Finance and Managing Director, namely, S.S. Yadav (petitioner No.2) and Janak Gandhi (petitioner No.3) is directed against a judgment dated 21st July 2006 passed in Criminal Appeal No.73/2006 by the Tenth Additional Sessions Judge, Gwalior (M.P.) arising out the impugned judgment dated 9th March 2006 in Criminal Case No.698/2004 by the Additional Chief Judicial Magistrate, Gwalior, convicting thereby the accused-appellants S.S. Yadav and Janak Gandhi for commission of offence punishable under section 138 of the Negotiable Instruments Act and sentenced each of them to suffer one year’s rigorous imprisonment with a fine Rs.5,000/- along with compensation to the tune of Rs.8,00,000/- (Rs. Eight lacs only), payable to the respondents whereas Criminal Revision No.999/07 is preferred by the revisionist against the said impugned judgment having been aggrieved with the modification of sentence. By the impugned judgment challenged in these revisions, though the conviction of the accused-petitioners for commission of offence under section 138 of the Act was maintained but the sentence of one year’s RI has been reduced to the sentence of one month’s SI without disturbing the findings in regard to payment of fine as well as compensation awarded under section 357 of CrPC. Further, the fine amount of Rs.5,000/- (Rs. Five thousand only) imposed on the petitioner No.1-Company by the trial Court along with punishment for default in payment of fine was maintained by the appellate Court. 3. The facts leading to filing the aforesaid revisions are adumbrated below : (a) The O.T.G. Global Finance Ltd. is a registered company under the Companies Act having its Head Office at Indore. It is engaged in the business of Cable TV Net working systems at Indore with adjoining towns. Petitioners No.2 and 3, namely, S.S. Yadav and Janak Gandhi are its Financial Director and Managing Director, respectively. (b) The respondent No.1-complainant Mohan Mandelia and Devendra Pal Singh are Directors/Partners of the Gwalior Network Television News Company called as GNTV and are engaged in the business of Cable Net working in the area.
Petitioners No.2 and 3, namely, S.S. Yadav and Janak Gandhi are its Financial Director and Managing Director, respectively. (b) The respondent No.1-complainant Mohan Mandelia and Devendra Pal Singh are Directors/Partners of the Gwalior Network Television News Company called as GNTV and are engaged in the business of Cable Net working in the area. (c) It is alleged that for running cable network in Gwalior, the petitioner-company O.T.G. Global Finance Ltd. collaborated with the respondent No.1’s company and executed a joint venture agreement with the partners of GNTV company on 19th December 2000, vide Ex.D-1 to give effect for starting network and channel in the name and style of OTG-GNTV in the city of Gwalior and surrounding areas. The MOU was signed by Janak Gandhi and S.S. Yadav on behalf of OTG Global Finance Ltd. Company Indore and Mohan Mandelia and Devendra Pal Singh on behalf of GNTV Gwalior. Both the companies had invested the capital for enhancement of Cable networking at Gwalior. (d) Similarly, in the course of business, the petitioner O.T.G. Global Finance Ltd. Company collaborated with another company in Guna running its business in the name of Guna Cable Network (GCN) and executed a joint venture agreement with the partners of GCN company forming thereby a new Company in the name and style of OTG-GCN in Guna city, which was being looked after by partner Parmindar Singh. In the said business, MOU was signed by Janak Gandhi and S.S. Yadav on behalf of OTG Global Finance Ltd. Company Indore on one side and Parmindar Singh and other partners/directors on behalf of GCN Guna on other side. Both companies invested the capital for enhancement of Cable net working at Guna. For smooth running the business of joint venture, a saving account No.01000050564 was operated with State Bank of India at Guna branch. The said joint saving bank account of the company (above) was to be operated under the signatures of the Directors, nominated by both the companies for the purposes of transaction etc. (e) It is alleged that after the MOU was executed for the OTG Global Finance Ltd. Company Indore by petitioner-accused Janak Gandhi and S.S. Yadav and for Gwalior Network Television News (GNTV) by the respondent No.1 Mohan Mandelia and Devendra Pal Singh, the amount was invested by both the companies for expansion of cable business in the Gwalior town and adjoining towns/district of Gwalior Division.
When the dispute arose in conducting business, the parties agreed to retire from the previous joint agreement and in that connection petitioner-accused S.S. Yadav issued in favour of the respondent No.1, a cheque No.532357 dated 16th March 2004 for Rs.20,00,000/- of Saving Bank Account No.01000050564 of State Bank of India at Guna to be operated by OTG-GCN Guna. On presentation of the said cheque by the respondent No.1, same was returned back by the bank with the endorsement “insufficient funds”. Accordingly, the notices were sent against the petitioners-accused through registered post on the given address. The notices sent under certificate of posting were served duly on the alleged Company and its Directors. Since no payment was made even after service of the notices, the complaint under section 138 of the Negotiable Instruments Act was filed before the criminal Court. After full trial, the accused, i.e., the Managing Director Janak Gandhi and Director Finance who issued the cheque in question were convicted and sentenced for the offence mentioned herein before. On appeal by the convicts, same was partly allowed subject to modification of sentence awarded by the trial Court without disturbing the amount of fine as well as compensation imposed under the judgment by the trial Court. (f) Defence of the accused-petitioners was that during business with OTG Global Finance Ltd. Company and GCN Guna, for facilitating the work of transaction, the cheque book of joint account was issued and blank cheques with duly signed by S.S. Yadav Director of Finance were handed over to the local office of the company of OTG-GCN Guna with a view to meet out the requirements. It is stated that generally, the cheque book having black cheques, duly signed by the Director of Finance S.S. Yadav remained under the custody of the local Directors/staff of the joint venture company in Local Office at Guna. It is alleged that the complainant with the connivance with the Directors/local staff of the OTG-GCN Joint Venture Guna obtained the bank cheques signed by the Director of Finance S.S. Yadav and committed cheating mentioning the amount in the questioned cheque and used against the petitioner-accused company and its Directors. To prove the defence, witnesses Parmindar Singh and M.B. Shrivastava, Deputy Manager of State Bank of Indore Branch Guna were examined. 4.
To prove the defence, witnesses Parmindar Singh and M.B. Shrivastava, Deputy Manager of State Bank of Indore Branch Guna were examined. 4. From perusal of the facts extracted above, it is noted that on dishonour of cheque No.532357 dated 16th March 2004 drawn by the petitioner-company in the sum of Rs.20,00,000/- of Saving Bank Account No.01000050564 of State Bank of India at Guna to be operated by OTG-GCN Guna in favour of the complainant, the complainant-respondent No.1 issued notice to the petitioner-company and its Financial as well as Managing Directors, demanding payment within fifteen days from the receipt of the notice failing which the petitioner-company and its Directors would be prosecuted for having committed offence punishable under section 138 of the Negotiable Instruments Act. As the petitioner-company and its Directors refused to comply with the notices, a complaint under section 138 of the Negotiable Instruments Act, came to be filed in the Court of the Judicial Magistrate, against the petitioner-company and its Directors, which ended in the conviction and sentence of the petitioners-accused. 5. It is the case of the petitioners that the complaint filed by the respondent No.1-complainant was only with a view to harass and pressurize the petitioners. It is submitted that with a view to pressurize the petitioner-company and its Directors, the respondent No.1-complainant has deliberately joined all the non-working and sleeping Directors as the accused persons, though they had no control over the day-to-day administration of the petitioner-company or over the working of the company, and further the complaint fails to disclose any liability on the part of any of the accused-petitioners by which the cheque came to be issued and, therefore, the learned Courts below without any application of mind, mechanically, passed the judgments against the petitioners. 6. It is submitted on behalf of the petitioners that the learned lower appellate Court has erred in passing the impugned judgment against the petitioner-company and its Directors when the entire complaint is silent as to how and in which manner the Directors of the petitioner-company were incharge of or responsible to the company for the conduct of the business of the Joint Venture Company, and, therefore, in the absence of any such averments in the complaint, the conviction and sentence are bad in law. 7.
7. In the course of hearing, the learned counsel for the petitioners, made their challenge to the impugned judgment on the sole ground that as the complaint is silent about the liabilities of the Directors of the Company who are made accused, they are not liable to be proceeded against and punished for having committed offence under section 138 of the Negotiable Instruments Act, 1881. It is pointed out that the complaint does not specify as to in what manner the petitioners of the company were in-charge of and were responsible to the joint venture company for the conduct of its business. According to the learned counsel, there was no material either before the learned trial Court or the appellate Court nor there were sufficient grounds for proceeding against the petitioners and, therefore, the conviction and sentence recorded against them are not sustainable in law. It is submitted that section 141 of the Negotiable Instruments Act, 1881, lays down that if the person committing an offence under section 138 of the Negotiable Instruments Act, 1881, is a company, every person who, at the time the offence is committed, was in-charge 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, and, therefore, it is necessary for the complainant to make out a case in the complaint as well as in the verification statement as to how the persons who have been arrayed as accused, were in-charge of and were responsible for the Company for the conduct of the business of the Company and unless there is sufficient material to prima facie show the involvement of the accused persons, the learned Magistrate has no option but to dismiss the complaint on the basis that there is no sufficient ground for proceeding. It is therefore contended on the basis of the above submissions, that the impugned judgment is clearly vitiated and needs to be set aside. 8.
It is therefore contended on the basis of the above submissions, that the impugned judgment is clearly vitiated and needs to be set aside. 8. It is further contended that as per evidence on record it appears that on termination of business between joint venture company OTG-GNTV Gwalior, some sort of agreement arrived at between both the companies and in pursuance thereto, the cheque of the Saving Bank of another joint venture, i.e., OTG-GCN Company was issued for the liabilities of the OTG-GNTV to respondent No.1 Mohan Mandelia, who was one of the partners of Gwalior Network Television News Company (GNTV). It is stated that since the cheque was signed and issued by one of the joint signatories of the account holder, it cannot be said to be valid because as per provisions of sections 48 and 51 of the Act, an endorsement is not said to be valid unless made by each of the individual in case of joint makers/payee or endorsers. After return as unpaid of the cheque delivered for the liabilities of the company, nolegal action was taken against the OTG-GCN Company at Guna. It is contended that the cheque in question was issued by OTG-GCN Company at Guna, but no complaint against that particular company through its Directors was filed by the complainant-respondent No.1 Mohan Mandelia, in his personal capacity or on behalf of GNTV Company Gwalior. It is submitted that both the Courts have failed to consider the legal aspects of the complaint. The Courts below did not properly appreciate the oral and documentary evidence adduced before the criminal Court. On the contrary, the defence of the petitioners-accused is that they did not issue the questioned cheque in favour of the complainant. It is stated that the alleged cheque was stolen away from the proper custody and thereafter forgery was committed by the complainant against them. On the basis of the premised submissions, it is prayed that by allowing the revisions, the accused be acquitted of the offence under section 138 of the Negotiable Instruments Act.
It is stated that the alleged cheque was stolen away from the proper custody and thereafter forgery was committed by the complainant against them. On the basis of the premised submissions, it is prayed that by allowing the revisions, the accused be acquitted of the offence under section 138 of the Negotiable Instruments Act. In support of the submissions aforesaid, reliance is placed on the decisions in the cases of M/s. Sunrise Oleo Chemicals Ltd. v. K.M. Enterprises [2003 Criminal Law Journal 3135], Brij Lal v. Jugal Kishnore [1(1996) BC 155], Satyajit Banerjee v. State of West Bengal [ (2005)1 SCC 115 ], Benedict Balathan Mahendra @ Bala Mahendran v. State [1996 Criminal Law Journal 2619 (Madras High Court)], Dhagabat Marandi v. State of Orissa [2001 Criminal Law Journal NOC 109 (Orissa)], Ram Brish Singh v. Ambika Yadav [CC 665], Hydru v. State of Kerla [ (2004)13 SCC 374 ], M/s. Narayana Menon @ Mani v. State of Kerla [ (2006)6 SCC 39 ], Kundan Lal Rallaram v. Custodian Evacuee Property Bombay [ AIR 1961 SC 1361 ], G. Vasu v. Syed Yaseen Siffudin Quadri [ AIR 1987 A.P. 139 ], Krishna Janardhhan Bhat v. Dattatraya G. Hegde [ (2008)4 SCC 54 ], P. Venu Gopal v. Madan P. Sarthi [ (2009)1 SCC 492 ], Vinod Tanna v. Zahir Siddiqui [ (2002)7 SCC 541 ], Voruganti Seshireddi v. Venkta Subbayya [AIR 1953 Madras 840], Babulal v. Khimji Ratanshri Dedhia 7 others [DCR 475 (Bombay High Court)], Anil Handa v. Indian /Acrylic Ltd. [DCR 705], Sheo Ratan Agrawal v. State of M.P. [1985 JLJ 180= (1984)4 SCC 352 ], State of Madras v. G.V. Parekh [ (1970)3 SCC 491 ], M/s. Amncient Investment Pvt. Ltd. v. Kotak Securities [DCR 481 (Bombay High Court)], Hiten Sagar v. IMC Ltd.and others [1(2002) BC 221 (Bombay High Court)], Sitasurian v. Thangavelu [(2006)6 SCC 532], Dilip S. Dhanukar v. Kotak Mahendra Co.Ltd. [ (2007)6 SCC 528 ], Sanjeev P.R. v. Thriveni Credit Corporation Thodupuzua [2007 Criminal Law Journal (NOC) 529 Kerla High Court], State of Gujarat v. Mohan Lal Jeetmal [(1987)2 SCC 354], and lastly Ram Babu v. State of Maharashtra [ (2001)4 SCC 759 ]. 9.
9. Per contra, learned counsel appearing for the respondent No.1-complainant contended that the cheque was issued by the petitioner-company against the settlement of dues and the complaint under section 138 of the Negotiable Instruments Act (for short “N.I. Act”) was filed in respect of such debt and liability towards which a cheque was issued by the petitioner-company in favour of the respondent No.1-complainant, drawn on State Bank of India, Guna, which came to be dishonoured. The respondent No.1-complainant issued a registered notice as required and as no payment came forward even after the lapse of fifteen days therefrom, the complaint came to be filed against the petitioner-company and its Directors. It is submitted that the respondent No.1-complainant has made a specific averment in the complaint that the petitioners before this Court as well as the accused in the complaint were/are responsible to the petitioner No.1-company for the conduct of its business and non-payment of the said amount is attributable to and by negligence on the part of the accused and, hence, the petitioners are liable to be prosecuted for having committed an offence under section 138 of the N.I. Act. It is submitted that it is sufficient if the persons in charge of and responsible to the company for the conduct of its business, or the persons, with whose consent or connivance or due to any neglect on their part, the offence had been committed, that prosecution proceedings are maintainable against them, irrespective of whether the Company is prosecuted or not. Further, it is also not necessary that there should be specific averment in the complaint as to the persons responsible to and in-charge of the company, as the same is not material for the prosecution of such persons as described in section 141 of the N.I. Act. On the other hand, in the instant complaint filed by the respondent No.1-complainant, there is specific averment to that effect. Hence, it is submitted that the complainant, having made out a prima facie case against the petitioners in its complaint, duly supported by the documents, i.e., the material on record placed along with the complaint, which meets the requirement of law, the conviction and sentence recorded does not call for any interference by this Court. 10.
Hence, it is submitted that the complainant, having made out a prima facie case against the petitioners in its complaint, duly supported by the documents, i.e., the material on record placed along with the complaint, which meets the requirement of law, the conviction and sentence recorded does not call for any interference by this Court. 10. As regards Criminal Revision No.999/07, the contention on behalf of the petitioner-complainant is that the learned lower appellate Court has committed an illegality in reducing the sentence without there being any cogent material. It is submitted that the sentence imposed by the trial Court is just and proper and the reduction therein is uncalled for. Hence, it is requested that the impugned judgment of the lower appellate Court while partly allowing the appeals preferred by the accused with modification of their sentence be set aside. Reliance for this purpose has been placed on the decision in the case of Janak Gandhi v. Mohan Mandelia and two others [ 2005(1) MPHT 5 ]. 11. Considered the contentions raised on behalf of the parties and perused the record of the case with relevant provisions of the Act and the law governing the situation. 12. To launch a prosecution against the Director of the Company, there must be specific allegations in the complaint as to the part played by them in the transactions and there must be clear and unambiguous allegations as to how all the partners are in-charge of and responsible for the conduct of the business. There should be clear description and also allegations that the offence was committed with their knowledge and that they had not exercised due diligence to prevent the commission of such offence. The Court should also make attempt to find out whether on the available allegations the offence was committed with the consent or connivance or is attributable to any negligence on the part of the Directors or partners of or members of any Association or a group of persons, and as there was absolutely no allegations made against them, proceedings against them may be quashed and they be discharged. 13.
13. Thus, it is clear that the Directors of the Company can be made vicariously liable for offences committed by the Company only if they were in-charge of and were responsible to the Company for the conduct of the business of the Company relating to the nature of the transaction in which the offence is alleged to have been committed and in absence of such a case being made out by the complainant, the Court is justified in quashing the proceedings. 14. In the case of N. Doraisamy v. M/s. Archana Enterprises [2000 DoCh. (Mad.) 1070:1995 Cri.LJ 2306], the Madras High Court has taken a view that in case of prosecution under section 138 of the N.I. Act, if the offences are committed by a company, then persons in-charge and responsible to the Company for the conduct of its business are liable to be prosecuted and they can escape from their liability only if they prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent the commission of such an offence. 15.
15. Under section 138 of the N.I. Act, in case of dishonour of a cheque, which has been issued for the discharge, in whole or in part, of any debt or other liability, the drawer of the cheque shall be deemed to have committed an offence and shall, without prejudice to any other provision of the said Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both; and for the said purpose, (a) the cheque has to be presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be to the holder in due course of the cheque within fifteen days of the receipt of the said notice. In order that the Court should take cognizance of the offence, section 142 provides that a complaint in writing should be made by the payee or, as the case may be, the holder in due course of the cheque. Such a complaint is made within one month on the date on which the cause of action arises under clause (c) of the proviso to section 138, and that no Court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the First Class shall try any offence punishable under section 138. In respect of offences by Companies, section 141 provides as under: “141. Offences by Companies.
In respect of offences by Companies, section 141 provides as under: “141. Offences by Companies. -- (1) If the person committing an offence under section 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 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.” 16. Therefore, it can be seen that there are two categories of persons who can be deemed to be guilty of the offence under section 138 of the N.I. Act, if the person who committed an offence under that section is a Company. First category consists of every person who, at the time the offence was committed, was in-charge of and was responsible to the company for the conduct of its business. The second category of persons as given in sub-section (2) of section 141 are those against whom it is proved that the offence has been committed with the consent or connivance of, or 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 be liable to be proceeded against and punished accordingly.
The only defence provided in case of these persons and which is available at the trial is in proviso to sub-section (1) of section 141 of the Negotiable Instruments Act, which reads as under : “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.” 17. The necessary ingredients of section 138 of the N.I. Act are incorporated in the said section, namely, that there should be the dishonour of the cheque which has been issued for the discharge, in whole or in part, of any debt or other liability, and that such dishonour should be when the cheque is presented within the prescribed period of six months from the date on which it is drawn or within the period of its validity, of which notice is given in writing to the drawer of the cheque within 15 days of the receipt of information by him from the bank, and on receipt of such notice, the drawer of such cheque fails to make the payment of the said amount of money to payee or as the case may be to the holder in due course of the cheque within fifteen days of the receipt of the said notice. The explanation to section 138 makes it clear that the debt or other liability means a legally enforceable debt or other liability. Further section 139 provides for presumption in favour of the holder, that unless the contrary is proved, the holder of the cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability. As regards fulfilment of these ingredients, there is not much dispute between the parties before the Court. 18.
As regards fulfilment of these ingredients, there is not much dispute between the parties before the Court. 18. The following questions are involved in this case for consideration, which run as are under : (A) Whether in the proceedings of transaction between two of the companies, i.e., OTG Global Finance Ltd. Company, Indore and OTG-GNTV Gwalior, issuance of the cheque by another company, i.e., OTG-GCN Guna for the liability of another company OTG-GNTV Gwalior, OTG Global Finance Ltd. Company Indore, can be made liable for the liability of another company OTG-GCN Guna, without making the particular company as a party to the complaint proceedings and without issuing notice to the same, as per requirement of proviso (B) to section 138 of the Negotiable Instruments Act and whether for the alleged act, petitioner-company or common Directors of that company who are nevertheless responsible for the liability of OTG-GNTV Gwalior can be punished? (B) Whether the companies OTG Global Finance Ltd. Company Indore and OTG-GCN Guna being the sisters concern companies/joint venture companies, the common Directors of both the companies can issue the cheque of OTG-GCN Guna, without following procedural rules of the Saving Bank Account of the State Bank of Indore, branch Guna and whether complaint filed against the Company or the Director of Finance or against the Managing Director of that company is maintainable and they can be punished, ignoring the provisions of sections 48 and 51 of the Act? 19. Additionally, the sole question is, who all are liable to be proceeded against and punished for having committed the said offence. 20. As regards the contention raised by the learned counsel for the petitioners that the present complaint is filed with intention to harass and pressurise the accused Company and its Directors and to make illegal gain and that the petitioners are unnecessarily joined as parties to the complaint and as per the provision of section 141 of the N.I. Act, only the persons in-charge of the business of the Company can be made party, in case of prosecution. 21. It is clear from perusal of the record that the petitioners No.2 and 3 are in-charge of the business of the petitioner No.1/Company, which fact is brought on record and attracts negligence towards them.
21. It is clear from perusal of the record that the petitioners No.2 and 3 are in-charge of the business of the petitioner No.1/Company, which fact is brought on record and attracts negligence towards them. As already submitted by the learned counsel for the petitioners, the question requiring examination is about the vicarious liability of both the Directors of the Company. 22. At least, there can be no challenge to the prosecution of the signatory of the cheque on behalf of the petitioner-Company. Obviously by signing the cheque on behalf of the petitioner-Company, the accused-petitioner No.2, Financial Director, cannot disown his liability, as contemplated in sub-section (1) of section 141 of the N.I. Act. 23. In the case of State of Haryana v. Brij Lal Mittal [ AIR 1998 SC 2327 ], the apex Court, while considering the vicarious liability for offence committed by companies held as under : “8.Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of section 34(1) of the Act which reads as under -- Offences by Companies : (1) Where an offence under this Act has been committed by 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 such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.” 24. It is thus seen that the vicarious liability of a person for being prosecuted for an offence committed under the Act by a Company arises if at the material time he was in-charge of and was also responsible to the company for the conduct of its business. Simply because a person is a Director of the company it does not necessarily mean that he fulfills both the above requirements so as to make him liable.
Simply because a person is a Director of the company it does not necessarily mean that he fulfills both the above requirements so as to make him liable. Conversely, without being a Director a person can be in-charge of and responsible to the company for the conduct of its business. From the complaint in question this Court finds that there is specific allegations to indicate, even prima facie, that the petitioners were in-charge of the company and also responsible to the company for the conduct of its business. In the case of National Small Industries Corporation Ltd. v. Harmeet Singh Paintal [2010 AIR SCW 1508], the apex Court held : “25. From the above discussion, the following principles emerge : (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.
(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) The person sought to be made liable should be in-charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.” 25. So far as the petitioner No.3-Managing Director is concerned, from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence, vicarious liability being an incident of an offence under the Act. 26. As discussed earlier, it is the case of the respondent No.1-complainant that on receipt of the notice, the petitioner-Company and its Directors failed to give any reply to the said notice and also make payment of the said amount of money to the respondent No.1-complainant, within fifteen days of the receipt of the said notice. This was the first opportunity available to the petitioner-Company to have brought on record as to who are the persons who were in-charge of and responsible to the company for the conduct of its business, in reference to the said dishonour of the cheque. It is submitted by the petitioners, that the petitioners-Directors who are the accused before the trial Court, are neither in-charge of the day-to-day activities of the joint venture company nor they are the working Directors of that Company. 27. Before this Court, it is only the petitioner No.1-Company but the petitioners No.2 and 3 by virtue of their position in the petitioner/Company as Managing Director as well as the Financial Director, do much dispute their prosecution. It is not disputed that the cheque in question was issued in favour of the respondent No.1-complainant by the petitioner-Company in discharge of their financial liability, i.e., according to the respondent No.1-complainant, this liability arises out of the termination of the settlement between the parties. Section 292(1)(c) of the Companies Act, 1956, specifically provides that the Board of Directors of a Company shall exercise the power to borrow monies otherwise than on debentures and it shall do so only by means of resolutions passed at meetings of the Board.
Section 292(1)(c) of the Companies Act, 1956, specifically provides that the Board of Directors of a Company shall exercise the power to borrow monies otherwise than on debentures and it shall do so only by means of resolutions passed at meetings of the Board. Learned counsel on behalf of the respondent No.1-complainant has canvassed the case that the petitioner-Company did pass a resolution and accepted the liabilities to avail financial facilities from the respondent No.1/complainant and this can very well be demonstrated by the record. Even though, the documents on record at their face value may not implead the petitioner/Company, but the same form the part of the material relied upon by the complainant (respondent). Therefore, by virtue of the fact that the petitioner-Company and its Directors could avail of financial assistance from the respondent No.1-complainant and their power to borrow monies otherwise than on debentures, solely rests with the Board of Directors of the Company as provided under section 292 of the Companies Act, 1956, there can be no hesitation to hold that the accused before the trial Court are prima facie liable to be proceeded against and punished for having committed offence under section 138 of the N.I. Act. To put it in the words of the apex Court, while dealing withthe case of U.P. Pollution Control Board v. M/s. Modi Distillery [ AIR 1988 SC 1128 ], it is held : “It cannot be doubted that in such capacity they were in-charge of and responsible for the conduct of the business of the Company and were, therefore, deemed to be guilty of the said offence and liable to be proceeded against and punished under section 47 of the Act.” 28. Recently, in Criminal Appeal No.5166/2003 {M/s. Gammon Induia Ltd. v. Commissioner of Customs, Mumbai (Decided on July 6, 2011) [2011 AIR SCW 4175]}, the apex Court while commenting upon the termof “Joint Venture” held : “The expression “Joint Venture” is more frequently used in the United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contributes assets and share risks.
It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contributes assets and share risks. It requires a community of interest in the performance of the subject-matter, a right to direct and govern the policy in connection therewith and duty which may be altered by agreement to share both in profit and in losses. (Black’s Law Dictionary, 6th Edition, page 839). According to Words and Phrases, Permanent Edition a joint venture is an association of two or more persons to carryout a single business enterprise for benefit (Page 117 Veolume 23). A joint venture can take the form of a corporation wherein two or more persons or companies may join together. A joint venture corporation has to be defined as a corporation which has joined with other individuals or corporations within the corporate framework in some specific undertaking commonly found in oil, chemicals, electronic, atomic fields. (Black’s Law Dictionary).” 29. Now, coming to the case, it may be noted that on 19th December 2000, vide Memorandum of Undertaking and agreement (Ex.D-1), for running of cable television network in the city of Gwalior and its surrounding towns, like Bhind, Morena, Shivpuri and Datia, the Gwalior Network Television News (for short GNTV Gwalior) a partnership firm consisting of respondent No.1-complainant Mohan Mandelia and Devendra Pal Singh, agreed with OTG Global Finance Ltd., a company registered under the Indian Companies Act at Indore, through its Director of Finance S.S. Yadav and Managing Director established a joint venture firm in the name and style of “OTG-GNTV, Network Gwalior. Subsequently, the joint venture agreement dated 19th December 2000 was terminated on 8th March 2003. The liabilities between the joint venture partners were settled on 16th March 2003, as per settlement between the companies/partnership firm GNTV Gwalior and OTG Global Finance Ltd. The Director of Finance of the company, namely, S.S. Yadav for the liability due over the company delivered the cheque above of saving bank account of OTG-GCN Guna to be drawn at State Bank of Indore, Guna Branch.
It is relevant to mention here that OTG-GCN Guna is another joint venture concern formed byOTG GlobalFinance Ltd. Indore having collaborations with Guna Cable Network through its partner Palvindar Singh Grewal vide Memorandum of Undertaking and agreement dated 10th August 2001. Now, it is clear that OTG Global Finance Ltd. Company, Indore had first joint venture with Gwalior Network Television (GNTV) with Guna Cable Network Guna with separate entities. It is also clear from the record that S.S. Yadav, the Director of Finance of OTG Global Finance Ltd. Company Indore for the liabilities created out of termination of joint venture of OTG-GNTV issued the cheque in question in favour of respondent No.1/complainant. 30. On perusal of the provisions of section 138 Negotiable Instruments Act 1881, it appears that for offence “Dishonour of cheques for insufficiency etc. of funds in the account accused shall be punishable with imprisonment for a term which may be extended to two years or with fine which may extend to twice the amount of the cheque or with both”. In the case of Pankajbhai Nagjibhai Patel v. State of Gujarat [ AIR 2001 SC 567 =2001 AIR SCW 184], it is observed that : “Non-application of the Code on “any special jurisdiction or power conferred by any other law for the time being in force” is thus limited to the area where such special jurisdiction or power is conferred. Section 142 of the Negotiable Instruments Act has not conferred any “special jurisdiction or power” on a JudicialMagistrate of First Class. That section has only excluded the powers of other Magistrates from trying the offence under section 138 of the Negotiable Instruments Act. Even that apart, a Magistrate who thinks it fit that the complainant must be compensated with his loss he can resort to the course indicated in section 357 of the Code. This aspect has been dealt with in K. Bhaskaran v. Sankaran Vaidhyan Balan [1999 SCC (Cri.) 1284] (supra), as follows : “However, the Magistrate in such cases can alleviate the grievance of the complainant by making resort to section 357(3) of the Code. It is well to remember that this Court has emphasized the need for making liberal use of that provision {Hari Singh v. Sukhbir Singh [(1984)4 SCC 551]}. No limit is mentioned in the sub-section and therefore, a Magistrate can award any sum as compensation.
It is well to remember that this Court has emphasized the need for making liberal use of that provision {Hari Singh v. Sukhbir Singh [(1984)4 SCC 551]}. No limit is mentioned in the sub-section and therefore, a Magistrate can award any sum as compensation. Of course while fixing the quantum of such compensation the Magistrate has to consider what would be the reasonable amount of compensation payable to the complainant. Thus, even if the trial was before a Court of Magistrate of the First Class in respect of a cheque which covers an amount exceeding Rs.5,000/- the Court has power to award compensation to be paid to the complainant. In our view this question does not now pose any practical difficulty. Whenever a Magistrate of the First Class feels that the complainant should be compensated he can, after imposing a term of imprisonment, award compensation to the complainant for which no limit is prescribed in section 357 of the Code. In the result, while retaining the sentence of imprisonment of six months, we delete the fine portion from the sentence and direct the appellant to pay compensation of Rs.83,000/- to the respondent-complainant. The said amount shall be deposited with the trial Court within six months failing which the trial Court shall resort to the steps permitted by law to realise it from the appellant.” 31. In the present case, the trial Magistrate found the company OTG Global Finance Ltd. through its Director of Finance S.S. Yadav, who issued the cheque in question and the Managing Director Janak Gandhi guilty being in-charge of and responsible for the conduct of the business of the Company for commission of offence punishable under section 138 of the Act and imposed a fine of Rs.5,000/- on the company whereas sentenced the accused-petitioners No.2 and 3 to suffer one year’s rigorous imprisonment with fine of Rs.5,000/- each and in default to undergo five months’ rigorous imprisonment and also directed petitioners No.2 and 3 to pay Rs.8,00,000/ (Rs. Eight lacs only) each to complainant towards compensation under section 357(3) of CrPC. The appellate Court, by the impugned judgment did not think it proper to interfere with the conviction awarded by the trial Magistrate, but while passing the judgment found that excessive jail sentence has been awarded to the petitioners-accused S.S. Yadav and Janak Gandhi and hence modified the same to one month’s RI.
The appellate Court, by the impugned judgment did not think it proper to interfere with the conviction awarded by the trial Magistrate, but while passing the judgment found that excessive jail sentence has been awarded to the petitioners-accused S.S. Yadav and Janak Gandhi and hence modified the same to one month’s RI. On considering the overall facts and circumstances of the case and in view of the detailed discussions on the law, this Court is of view that the jail sentence as awarded by the appellate Court does not call for any leniency. However, in the opinion of this Court, the complainant must be compensated with his loss for which no limit is prescribed in section 357 of the Code. 32. In the result, Revision Petition Nos.613/2006 and 999/2007 are partly allowed. Petitioner-accused No.1 OTG Global Finance Ltd. Company is acquitted from the charges framed under section 138 of the Negotiable Instruments Act. Eventually, the sentence passed by the trial Magistrate and affirmed by the appellate Court is set aside. However, the conviction recorded by the trial Magistrate and affirmed by the appellate Court against the petitioners No.2 and 3-accused calls for no interference and stands hereby confirmed. 33. As regards sentence, it is contended by the learned counsel appearing for the petitioners-accused No.2 and 3 that after pronouncement of the judgment by the trial Court on 9.3.2006, the accused preferred an appeal and the appellate Court vide order dated 5.4.2006 suspended the impugned sentence of the petitioners subject to furnishing bail bonds. Finally, the appellate Court by the impugned judgment dated 21.7.2006 maintained the judgment of their conviction recorded by the trial Magistrate, however, the sentence of the accused-petitioners were reduced to simple imprisonment of one month. Again on challenging the findings of the lower appellate Court under revisions, this Court vide order dated 26.7.2006 suspended the sentence of the accused. Hence, according to the learned counsel for the petitioners-accused the sentence awarded to the petitioners under the impugned judgment have already been suffered by them in the aforesaid manner. 34.
Again on challenging the findings of the lower appellate Court under revisions, this Court vide order dated 26.7.2006 suspended the sentence of the accused. Hence, according to the learned counsel for the petitioners-accused the sentence awarded to the petitioners under the impugned judgment have already been suffered by them in the aforesaid manner. 34. Having regard to the peculiar facts and circumstances of this case and keeping in view the fact that the petitioners-accused No.2 and 3 have already suffered the sentence of imprisonment awarded to them under the impugned judgment, in the opinion of this Court, interest of justice would be sub-served if any further substantial punishment is not awarded and same is taken to be sufficient. While holding so, it is directed that now, the petitioner-accused No.2 and 3, namely, Janak Gandhi Managing Director and S.S. Yadav, Director of Finance of OTG Global Finance Ltd. shall equally be responsible to pay Rs.10,00,000/- (Rs. Ten lacs) instead of Rs.8,00,000/- (Rs. Eight lacs). The portion of fine amount imposed against them is deleted herewith. The said amount of compensation shall be deposited with the trial Court within a period of six months. The complainant-accused shall further have liberty to adopt the legal recourses if the law permits them before the civil Court to settle their disputes regarding the settlement of their liabilities after termination of joint venture companies/partnership of Cable Network at Gwalior. In that case the amount of compensation shall be adjusted in the amount which may be awarded by the civil Courts in future.The fine amount, the cash or securities and bank guarantee under direction of this Court/appellate Court/trial Court, if deposited/filed before the trial Court/Registry of this Court, be returned back to the petitioners-accused subject to enforceable law prevailing, or on the request of the parties, may be adjusted in the compensation amount as awarded by this Court. 35. At the time of pronouncement of the order by this Court, learned counsel appearing for the parties submitted at bar that the matter has been settled between the parties out of the Court and in the light of the compromise so arrived at, now the complainant, respondent No.1 does not wish to pursue his complaint any more and, therefore, the petitioners be acquitted of the alleged offences.
In support of submissions, learned counsel placed reliance on the decision of the apex Court in the case of K.M. Ibrahim v. K.P. Mohammed [ (2010)1 SCC 798 ]. 36. An application for compounding of offence filed under section 320 of CrPC after pronouncement of the judgment in appeal/revision, petition does not lie as the Court has no more seisin over the case. Compounding of offence under section 320 of CrPC is permissible only when the case is pending before the Court. In this very case, after pronouncement of the judgment, it was stated that the compromise application has been moved. In the case of State of Orissa v. Ram Chander Agarwala [ AIR 1979 SC 87 ], it was held by the apex Court that once a judgment has been pronounced by a High Court that either in exercise of its appellate or its revisional jurisdiction, no review or revision can be entertained against that judgment as there is no provision in the Code which would enable the High Court to review the same or to exercise revisional jurisdiction. The same situation does arise in this case. Consequently, the applications (I.A. Nos.10466/11 and 10468/11) are not tenable before this Court. Such application is permissible only when the case is pending before the Court and not at the stage when the case is fixed for pronouncement of the judgment by the Court. Consequently, both the applications stand rejected with a liberty to the petitioners to take appropriate recourse in accordance with law. .............