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2012 DIGILAW 197 (KER)

Susan Zachariah v. Muthoot Capital Services Ltd.

2012-02-14

K.HARILAL

body2012
ORDER : K. Harilal, J. The petitioners are the accused Nos. 3 to 5 in C.C. No. 2737 of 2003 on the file of Judicial First Class Magistrate Court I, Kochi. The first respondent herein is the complainant in the above case. The case of the complainant is that the first accused is a partnership firm and 2nd accused is its Managing Partner and accused Nos. 3 to 5 are partners. The accused availed a hire purchase loan from the complainant company and as part payment towards the above loan, 1st accused issued a cheque dated 31.5.2003 for Rs.1,74,000/- drawn in favour of Canara Bank, Aluva Branch. But the above cheque was dishonoured with an endorsement `exceeds arrangement'. Thereafter legal notice was issued, but not paid the amount and thereby committed offence under Section 138 of the N.I. Act. True copy of the complaint is marked as Annexure A1. 2. This Crl. M.C is filed to quash Annexure A1 complaint on the grounds, inter alia, that there is no statutory compliance under Section 138(b) and the averments in the petition are not in conformity with Section 141 of the N.I. Act. Sri. Shaijan Joseph, the learned counsel for the petitioner mainly submitted two points in support of the grounds pleaded. i. The first respondent/complainant failed to comply the mandatory requirements under Section 138(b) of the N.I. Act, before filing the complaint. No notice of demand under Section 138(b) had been served against the petitioners 1 to 3 as partners, prior to the lodging of the complaint. Therefore the complaint is not maintainable against the petitioners. ii. There is no specific averments in the complaint that petitioners were in charge of and was responsible to the firm for the conduct of the business of the firm as well as the firm. The petitioners 1 and 2 are not partners of the 1st accused firm and it is evident from Annexure A2 partnership deed. The third petitioner is only a sleeping partner and he has no role in the day to day administration of the firm as he was excluded from such liabilities by clause 6 of the partnership deed. 3. Per contra, Sri. Millu Dandapani, the counsel appearing for the first respondent stiffly opposed the said arguments. The third petitioner is only a sleeping partner and he has no role in the day to day administration of the firm as he was excluded from such liabilities by clause 6 of the partnership deed. 3. Per contra, Sri. Millu Dandapani, the counsel appearing for the first respondent stiffly opposed the said arguments. The learned counsel fairly admitted that no notice has been issued against these partners but submits that notice has been issued against first accused firm and second accused Managing Partner and it is sufficient to proceed against the petitioners also. So, the non-service of notice against petitioners 1 to 3 will not affect the maintainability of the complaint. According to him, the averment that 1st accused has issued cheque with `consent' and 'connivance' of all other accused makes the allegation against others in conformity with Section 141(1) of the N.I. Act. 4. I have given my anxious consideration to the rival submissions made by the counsel for the petitioners and respondent. The first question to be considered is whether prosecution under Section 138 read with Section 141 of the N.I. Act against the partner of a firm requires separate notice under Section 138(b), prior to the lodging of complaint? This question has been decided divergently by the Division Benches of two High Courts. In Dilipkumar Jaiswal v. Debapriya Banerji, ( 1992(2) KLT 35 (Cal.)), a Division Bench of Calcutta High Court held that notice issued to the company is sufficient and separate notice to the directors of the company is not required to be served, prior to the filing of the complaint. Later in Raman v. Sharun Chemicals, (2007 (1) KLT 106 (Mad.) a Division Bench of Madras High Court in a reference held that individual notice under Section 138(b) is required against all partners, before prosecuting them. Though that Division Bench has considered so many decisions ( 1992(2) KLT 35 (Cal.)) was not brought to the notice of the above Bench. But in between these two decisions, in Target Overseas Exports (P) Ltd. v. Iqbal, (2005 (2) KLT 45) the learned Single Judge of this Court held that "a person facing indictment under Section 141 is not entitled to notice under Section 138(b). The person who is entitled to notice is the drawer company and not the person who has not signed the cheque on behalf of the drawer." 5. The person who is entitled to notice is the drawer company and not the person who has not signed the cheque on behalf of the drawer." 5. In the above said divergent legal back ground, this question again comes up for the decision of this Court. Among the divergency, which decision can be agreed and followed? Now, it is worthy to go through Section 138(b) itself. Section 138(b) of the N.I. Act reads as follows : "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 (thirty) days of the receipt of information by him from the bank regarding the return of the cheque as unpaid." 6. Going by the plain reading of the Section, it could be seen that the object of giving notice is to give an intimation of the dishonour of the cheque to the `drawer' and thereby provide an opportunity to pay back the dishonoured cheque amount. The section mandates issuance of the notice to the `drawer' of the cheque only. When an offence under Section 138 is committed by a company or firm, who is the `drawer' of the cheque contemplated under Section 138? According to Section 7 of the N.I. Act the maker of a bill of exchange or cheque is called drawer. Then the question is who is the maker of the cheque? The partnership firm is a juristic person capable of suing and be sued in its own name. The Managing Partner or partner signs the cheque for and on behalf of the firm by virtue of the authority given by the company or firm by its constitution. The firm being a juristic person comprised of all its instrumentalities such as managing partner, partner, manager or any officer responsible to the firm and acts through them. The partners are made vicariously liable to be held guilty by applying the principles of `vicarious liability' only. The firm is the account holder and cheque issued from the account maintained by the firm in its own name and seal. 7. It is true that a key word `person' is employed in Section 138. The section begins as `where any cheque drawn by a `person' on an account maintained by him'. The firm is the account holder and cheque issued from the account maintained by the firm in its own name and seal. 7. It is true that a key word `person' is employed in Section 138. The section begins as `where any cheque drawn by a `person' on an account maintained by him'. The word `person' is not defined in the N.I. Act. But latter Section 141 clarifies the scope and meaning of the word `person'. Section 141 says "if the person committing an offence under Section 138 is a company......" So the word `person' employed in Section 138 means and includes company also. This interpretation gets support from the definition of `person' in Indian Penal Code. According to Section 11 of the Indian Penal Code the word `person' includes any company or association or body of person whether incorporated or not. Therefore, company can be `drawer' of cheque as well as the juristic person committing the offence under Section 138. Thus indisputably, the maker of the cheque is none other than the firm and thereby the `drawer' also. If that be so, notice against the company alone is sufficient to comply mandatory requirement under Section 138(b) and the object and purpose of issuing notice is served by issuing notice against firm only. Notice against the firm can be deemed to be a notice against all its instrumentalities, and no separate notice need be issued individually under Section 138(b) against each partner. It appears that the legislature was so conscious to employ the expression `drawer'. By issuing notice against firm, all partners also get opportunity to act upon the notice. Prosecution against the partners does not require notice under Section 138(b) of the N.I. Act, prior to the lodging of complaint and the question is answered accordingly. 8. I am unable to agree with Raman v. Sharun Chemicals, (2007(1) KLT 106 (Mad.)), though it has also a persuasive value and I fully agree with Dilipkumar Jaiswal v. Debapriya Banerji, ( 1992(2) KLT 35 (Cal.)), the decision to which Single Bench of this Court agreed earlier in Target Overseas Export Ltd. v. Iqbal, (2005(2) KLT 45), and this decision has a binding force also on me. 9. The next question to be considered is, whether the averments in the complaint against the petitioners are in conformity with Section 141 of the Negotiable Instruments Act. 9. The next question to be considered is, whether the averments in the complaint against the petitioners are in conformity with Section 141 of the Negotiable Instruments Act. Whether the averments in the complaint disclose and constitute the offence under Section 138 read with 141 against these petitioners? Section 141 of the N.I Act reads as under : 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....... Provided........ (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation: (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm. 10. Going by the section, it could be understood that every person, notwithstanding his designation in the firm may be liable, if he satisfies the requirement of being in charge of and responsible for the conduct of the business of the firm. Hence, the legislative intent is to cast liability on every person who can be said to be connected with the commission of the offence. So invariably all partners cannot be held liable for the offences committed by the firm. Only those partners who were in charge of and responsible for the conduct of the business of the firm at the time of the commission of the offence alone can be held liable. In short criminal liability under Section 141(1) of the N.I. Act depends on the actual role he played notwithstanding his designation or status in the firm. 11. Only those partners who were in charge of and responsible for the conduct of the business of the firm at the time of the commission of the offence alone can be held liable. In short criminal liability under Section 141(1) of the N.I. Act depends on the actual role he played notwithstanding his designation or status in the firm. 11. Coming to Section 141(2), when an offence under Section 138 is committed by a firm, if it is proved that the offence has been committed with the `consent' or `connivance' of or is attributable to any `neglect' on the part of any partner, manager or other officer of the firm, he shall be deemed to be guilty of that offence and shall be liable to be proceeded against. 12. Therefore, to fasten criminal liability under Section 138 on a partner of the firm he must come either under Section 141(1) or under Section 141(2) of the N.I. Act. 13. In S.M.S. Pharmaceuticals Ltd v. Neeta Bhalla & Anr., (2005(4) KLT 209 (SC) : JT 2005 (8) SC 450),.the Supreme Court held that : "To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a Company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That respondent falls within parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141 he would issue the process. We have seen that merely being described as a Director in a Company is not sufficient to satisfy the requirement of Section 141. Even a non Director can be liable under Section 141 of the Act. If the Magistrate is satisfied that there are averments which bring the case within Section 141 he would issue the process. We have seen that merely being described as a Director in a Company is not sufficient to satisfy the requirement of Section 141. Even a non Director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial." 14. In Sabitha Ramamurthy & Anr. v. R.B.S. Channabasavaradhya, (2006(4) KLT 1017 (SC) : JT 2006 (12) SC 20) Supreme Court held that :- ........Section 141 raises legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a Company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the Company. Before a person can be made vicariously liable, strict compliance of the statutory requirements would be insisted....." 15. Turning back to the instant case, going by the averments, the only allegation incriminating the petitioners alleged in the complaint reads as under : "The 1st accused had issued the cheque with the `consent' and `connivance' of all other accused and hence all accused are jointly and severally liable." 16. Thus there is no averment of fact that these petitioners being the partners were in charge of and were responsible to the firm for the conduct of the business of the firm, at the time when the offence was committed. Therefore these petitioners will not fall under Section 141(1). 17. Coming to Section 141(2), the learned counsel for the respondent submits that the allegation that cheque had been issued with the `consent' and `connivance' of the petitioners is the sufficient fact to constitute and disclose the offence against the petitioners. According to the respondent `consent' and `connivance' are the words employed in the section and very same words are employed in the complaint also, though the allegation is confined in one sentence. According to the respondent `consent' and `connivance' are the words employed in the section and very same words are employed in the complaint also, though the allegation is confined in one sentence. So nothing more is required in the complaint to disclose the offence. Is it sufficient to constitute or disclose the offence? 18. I am afraid that the above submission constrains me to throw light to certain fundamental aspects as well as some elementary sections of the three major acts which would be borne in mind while dealing with a private complaint. Neither the Negotiable Instruments Act nor the Code of Criminal Procedure prescribes a particular form or method for the narration of facts in a complaint and also it is neither practicable nor possible in criminal cases, where the offences occur through unforeseen and unpredictable ways and dimensions. But unlike a case registered on a police report, where mere information is sufficient to set the law in motion, in a private complaint filed under Sections 190(1)(a) and 200 of the Code of Criminal Procedure narration of facts containing allegations constituting and disclosing offence assume much significance. By several judicial precedents from R. P. Kapoor v. State of Punjab, ( AIR 1960 SC 866 ) onwards it is consistently and plithorically well settled that "where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out a case against accused, the complainant is liable to be quashed at the threshold, in exercise of the jurisdiction under Section 482 of the Code of Criminal Procedure." 19. According to Section 2(d) of the Code of Criminal Procedure complaint means "any allegation made orally or in writing to a Magistrate, with a view to his taking action under this Code, that some person, whether known or unknown, has committed an offence, but does not include a police report." But in the case of a private complaint, Section 190(1)(a) gives more clarity and meaning to "complaint" defined under Section 2(d). According to 190(1)(a), "the Magistrate may take cognizance of any offence upon receiving a complaint of facts which constitute such offence." Then, the question is what is fact ? According to 190(1)(a), "the Magistrate may take cognizance of any offence upon receiving a complaint of facts which constitute such offence." Then, the question is what is fact ? According to Section 3 of the Indian Evidence Act, the fact means and includes (i) anything, state of things, or relation of things capable of being perceived by the senses: (2) any mental condition of which any person is conscious. The illustrations (a) to (d) given under this section is sufficient to understand `fact'. In this connection, the definitions of `offence' and `act' in the Code of Criminal Procedure are also relevant. According to 2(n) "offence" means any `act' or `omission' made punishable by any law for the time being in force. 20. According to Section 33 of the Indian Penal Code the word "act" denotes as well series of acts as a single `act'; the word omission denotes as well a series of omissions as a single omission. According to Black's Law Dictionary 7th Edition "act" "is something done or performed especially voluntarily; a deed also. On a conjoint reading of the aforesaid elementary sections of the major statutes, it could be held that "what is required in a private complaint is actual facts constituting and disclosing allegations containing what was done or performed voluntarily by the accused in the commission of offence or what was the deed of the accused in the commission of the offence." Thus the accused also should be made to know what kind of act or deed was complained of against him. 21. The expressions employed in the sections of the penal statute prescribing offence are the ingredients constituting the offence and the ingredients are the compendious outcome of the act done or omission made. So the expressions comprised in the sections alone are not invariably capable and sufficient to disclose the actual act done or omission made. 22. Mere adoption or reproduction of the exact words or expressions employed in the section, to the complaint without stating the `facts' constituting and disclosing any kind of incriminating circumstances or inculpating acts or omission indicating involvement and culpability of the accused, does not disclose the offence. "Facts' are the material fabric on which allegations are made out and laid down. Mere adoption or reproduction of the exact words or expressions employed in the section, to the complaint without stating the `facts' constituting and disclosing any kind of incriminating circumstances or inculpating acts or omission indicating involvement and culpability of the accused, does not disclose the offence. "Facts' are the material fabric on which allegations are made out and laid down. What is requisite in a private complaint is narration of the `facts' containing incriminating circumstances and inculpating acts or omission indicating involvement and culpability of the accused, which constitute and disclose the offence alleged against the accused. The facts containing `acts' are the inputs to be used in the process of `trial' and without such facts, trial would be a futile exercise and the purpose of the trial will be defeated. The narration of `facts' containing acts is intended to pull and cull out truth in the process of trial and also intended to give an opportunity to the accused to disprove the allegation against him, so as to establish his innocence. 23. When an offence under Section 138 is alleged against a partner who has not signed the cheque and who allegedly consented and connived to issue the cheque, to make that partner vicariously liable for the acts of the firm, it is obligatory on the part of the complainant to make specific allegation of `acts' or conduct, neglect and omission constituting the offence. How that partner is responsible for the dishonour of the cheque must be stated in the complaint. The averment must also contain specific allegation of his acts or deeds as to how and in what manner that partner was responsible for the conduct of the business of the firm? How and in what manner the accused connived with the partner who issued the cheque. In short, the partner against whom the allegations are made should be made to know what kind of his actor omission constitutes the offence alleged against him. 24. Besides, on going by the partnership deed, it could be seen that 1st and 2nd petitioners are not partners of the partnership firm and there is no positive averments in the complaint incriminating them to the offence contrary to the exclusion clause of the partnership deed. Therefore complaint against 1st and 2nd petitioners are liable to be quashed in limine in the absence of averments in conformity with Section 141(1) or 141(2). Therefore complaint against 1st and 2nd petitioners are liable to be quashed in limine in the absence of averments in conformity with Section 141(1) or 141(2). Moreover in partnership deed clause 6 specifically states that partners, except managing partner Korah John and another partner Mathew John, are not responsible for the day to day administration of the firm. When silent partners are specifically excluded from the day to day responsibility, they are not liable to be proceeded against, in the absence of positive averments indicating their involvement in the commission of offence contravening the exclusion clause of the partnership deed. In this count also the complaint is liable to be quashed against these petitioners. 25. In the light of the above discussion, I find that the averments in the complaint against these petitioners do not satisfy the statutory requirements under Section 141 of the N.I. Act. The allegation hardly confined in one sentence with words `consent' and `connivance' adopted from the section alone does not constitute or disclose offence alleged against them in the absence of other `facts' constituting the offence. Here, the allegation does not contain facts constituting the offence. Even if the allegations are accepted at its entirety, that do not constitute an offence against these petitioners. In the result, Annexure A complaint, against these petitioners, who are the accused No. 3 to 5 is quashed and this Crl. M.C. will stand allowed to that extent. Cri. M.C. allowed.