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2017 DIGILAW 403 (KER)

Babu v. State of Kerala

2017-02-23

B.SUDHEENDRA KUMAR

body2017
ORDER : 1. The revision petitioner is the second accused before the trial court. 2. The revision petitioner was convicted and sentenced by the courts below under Section 138 of the Negotiable Instruments Act (in short, the ‘Act’). 3. The allegation in the complaint is that the accused persons were conducting a jewellery shop under the name and style ‘Surya Jewel Park’ at Vaikom. The first accused was the Managing Partner and accused Nos.2 and 3 were the partners of the said firm. Towards the discharge of the amount due to the complainant, Ext.P1 cheque was issued by the accused. The said cheque was signed by accused Nos.1 and 2. When Ext.P1 cheque was presented for encashment, it was dishonoured due to two reasons, which are (i) refer to drawer and (ii) account closed. After complying with the statutory formalities, the complaint was filed before the trial court by the complainant. 4. The second respondent herein, who is the complainant before the trial court, has no appearance before this Court, despite having served the notice. Heard the learned counsel for the revision petitioner and the learned Public Prosecutor. 5. The learned counsel for the revision petitioner has argued that even though it is alleged that the cheque was issued by the firm, the firm was not made as an accused and in the said circumstances, no conviction against the revision petitioner can be sustained. 6. Before adverting to the above argument, it will be profitable to refer to Section 141 of the Act which deals with the offences by the companies, which is extracted hereunder:- “141. 6. Before adverting to the above argument, it will be profitable to refer to Section 141 of the Act which deals with the offences by the companies, which is extracted hereunder:- “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: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (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. (1) Explanation.- For the purposes of this section,- (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.” 7. On a reading of the above provisions, it is clear that if the person who commits the offence under Section 138 of the Act is a company, the company as well as every person in charge of and responsible to the company for the conduct of the business of the company at the time of commission of the offence is deemed to be guilty of the offence. 8. 8. Explanation (a) to Section 141 of the Act provides that for the purpose of Section 141, “company” means any body corporate and includes a firm or other association of individuals. Explanation (b) to Section 141 of the Act provides that for the purpose of Section 141, “director”, in relation to a firm, means a partner in the firm. 9. The Apex Court in Aneeta Hada v. Godfather Travels & Tours Pvt.Ltd. ( 2012 (2) KLT 736 (SC)) quoted the ratio in State of Madras v. C.V.Parekh and Another ( (1970) 3 SCC 491 ) with approval and held thus; “In view of our aforesaid analysis, we arrive at the irresistable 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”. 10. It is clear from the ratio laid down by the Apex Court in Aneeta Hada (supra) that for maintaining a prosecution under Section 138 of the Act, the company must be arrayed as an accused in the complaint. 11. It is true that the company is a juristic person, whereas, partnership firm is not a legal entity like a company. The conclusions in Aneeta Hada (supra) were done by the Hon’ble Apex Court, not merely on the basis of the fact that the company is a juristic person. The Apex Court also considered the fact that Section 141 of the Act deals with vicarious liability. 12. Even though partnership firm is not a legal entity, a legal fiction had been created under Section 141 of the Act bringing the firm or association of individuals within the term “company” in Section 141 of the Act. The Explanation (b) would make it more clear that the Director in relation to a firm means a partner in the firm. It is thus very much evident that a fiction had been created whereby if the person committing the offence is a firm, the firm as well as the categories of persons in charge and responsible for the conduct of the business of the firm shall be deemed to be guilty of the offence under Section 138 of the Act. It is thus very much evident that a fiction had been created whereby if the person committing the offence is a firm, the firm as well as the categories of persons in charge and responsible for the conduct of the business of the firm shall be deemed to be guilty of the offence under Section 138 of the Act. It is only because of the deeming provision that the vicarious liability is fixed on the company as well as the persons in charge and responsible for the conduct of the company. In view of the legal fiction brought in under Section 141 of the Act, it has to be held that if a firm commits the offence under Section 138 of the Act, the firm as well as the persons referred to in Section 141 shall be deemed to be guilty of the offence. Therefore, for maintaining the prosecution under Section 141 of the Act, the arraigning of the firm as an accused is imperative. 13. In the case on hand, the averments in the complaint and the evidence adduced would clearly show that the transaction in this case was made for the partnership firm. Ext.P1 cheque was also drawn from the account of the firm. However, the firm was not made as an accused. In the said circumstances, the conviction and sentence passed by the courts below against the petitioner cannot be sustained. In the result, this revision petition stands allowed, setting aside the conviction and sentence passed by the courts below under Section 138 of the Negotiable Instruments Act and the revision petitioner stands acquitted for the said offence. The bail bond of the revision petitioner stands discharged.