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2012 DIGILAW 778 (KAR)

Y. Eswarappa v. R. Chandramouli

2012-09-14

K.N.KESHAVANARAYANA

body2012
JUDGMENT K.N. KESHAVANARAYANA, J.—This appeal is by the complainant in C.C. No. 594 of 2006 on the file of the Principal Civil Judge and JMFC and he is aggrieved by the judgment dated 15.12.2011 passed in the said case acquitting the respondents-accused of the charge levelled against them for the offence punishable under Section 138 of the Negotiable Instruments Act (for short, N.I. Act’). 2. The appellant filed complaint alleging the offence punishable under Section 138 of the N.I. Act against the respondents inter alia contending that the two accused as partners of M/s. S.S. Computers, Hosur, had availed soft loan from KSFC, Davangere Brnach and failed to repay the said amount; that they were due in a sum of Rs. 6,30,000/- to KSFC and since in spite of notices issued by KSFC, they failed to repay the amount, the KSFC published an auction notice in the newspaper intimating auction of assets of the firm; that pursuant to such notification, the assets were sold in auction; that thereafter, in the year 2000, Accused No. 1 went to abroad and later the accused approached the complainant requesting him to clear the balance loan due to KSFC promising to repay the same to the complainant some time later; that accordingly, the complainant discharged the entire loan due to KSFC on behalf of the firm of which the accused were partners and for the discharge of the said liability, the cheque in question dated 27.03.2006 was issued duly signed by Accused No. 1 in a sum of Rs. 4,05,500/-; that when the said cheque was presented for encashment, the same was returned unpaid as ‘Account Closed’ and in spite of service of notice, the respondents/accused have failed to repay the said amount. 3. Upon appearance before the learned Magistrate, Accused Nos. 1 & 2 pleaded not guilty for the accusation made against them and claimed to be tried. 4. In support of his case, the complainant examined himself as PW.1 and examined one witness as PW.2-Maltesh G. Bhandari and relied on documentary evidence-Exs.P.1 to P.35. Accused No. 1 examined himself as DW.1 while one Parameshwara Shastri was examined as DW.2 and Exs. D1 to D11 were marked on behalf of the accused. 5. 4. In support of his case, the complainant examined himself as PW.1 and examined one witness as PW.2-Maltesh G. Bhandari and relied on documentary evidence-Exs.P.1 to P.35. Accused No. 1 examined himself as DW.1 while one Parameshwara Shastri was examined as DW.2 and Exs. D1 to D11 were marked on behalf of the accused. 5. The learned Magistrate after hearing the learned counsel appearing on both sides and on assessment of oral as well as documentary evidence, by the judgment under appeal held that the cheque in question relates to the account held by a Partnership Firm-M/s. S.S. Computers and it is shown to have been signed by Accused No. 1, who at the relevant point of time was not an active partner of the firm and that long prior to the purported date of the cheque, the bank account had been closed, therefore, the accused could not be held guilty for offence punishable under Section 138 of the N.I. Act. In that view of the matter, the learned Magistrate acquitted the accused persons. Aggrieved by the said judgment, the complainant is in appeal before this Court. 6. I have heard Sri. G. Balakrishna Shastry, learned counsel appearing for the appellant. 7. Having heard the learned counsel, I find that the judgment of conviction does not warrant interference for the reason that the matter is covered by the latest judgment of the Apex Court in Aneeta Hada vs. M/s. Godfather Travels & Tours Pvt. Ltd. reported in 2012 AIR SCW 2693. 8. As noticed supra, it is also not in dispute that the cheque in question relates to the account in the name of Partnership Firm-M/s. S.S. Computers with the Banker. The prosecution was launched against the two accused persons who were described as partners of the said firm. Of course, the cheque was shown to have been signed by Accused No. 1 as partner of the firm. Thus, from the above it is clear that M/s. S.S. Computers, the partnership firm on whose account the cheque appears to have been issued, has not been arraigned as accused. Therefore, the question is as to ‘Whether the prosecution launched only against the partners of the firm without impleading the firm as a party to the proceedings is maintainable’? 9. Section 141 of the N.I. Act deals with the offence by Companies. Therefore, the question is as to ‘Whether the prosecution launched only against the partners of the firm without impleading the firm as a party to the proceedings is maintainable’? 9. Section 141 of the N.I. Act deals with the offence by Companies. As per Sub-section (1) of Section 141 of the N.I. Act, ‘if the person committing an offence under Section 138 of the N.I. Act is a company, every person who, at the time of the offence was committed, was incharge of, and was responsible to the Company for 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’. Sub-Section (2) of Section 141 of the N.I. Act deals with certain other categories of persons in connection with the company and they are also made liable to prosecute under certain circumstances. According to the explanation to Section 141 of the N.I. Act, for the purposes of this section, “company” means any body corporate and includes a firm or other association of individuals and director in relation to a firm includes its partners. Therefore, even in relation to a Partnership Firm, Section 141 of the N.I. Act is applicable. 10. In Aneeta Hada’s case referred to supra, the Apex Court had an occasion to consider the very question of maintainability of prosecution against the functionaries of a company when the company itself not being arraigned as a party. 11. As could be seen from the said decision, the proposition of law raised for consideration was, “Whether the authorised signatory of a Company would be liable for prosecution under Section 138 of the N.I. Act, when the company not being arraigned as accused”. After referring to several decisions on the point and also an earlier judgment of three Judges Bench in the case of State of Madras vs. C.V. Parekh, reported in AIR 1971 SC 447 , their Lordships ultimately concluded in Paras 42 and 43 of the Judgment as under: “42. ……….. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. ……….. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted. 43. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. ………….” 12. Thus from the above, it is clear that a prosecution initiated against the functionaries of a company or a firm without impleading the company or the firm, is not maintainable. In the case on hand, since the partnership firm which appears to be the principal offender has not been impleaded as a party, the prosecution brought only against its two partners is not maintainable in the light of the law laid down by the Apex Court in the aforesaid decision. In this view of the matter, the learned Magistrate is justified in acquitting the respondents/accused. 13. Hence, I find no grounds to grant special leave as sought, as such, the appeal lacks merit. Accordingly the appeal as well as the I.A. I/2012 filed for Special Leave are rejected.