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Karnataka High Court · body

2020 DIGILAW 983 (KAR)

Vijayalakshmi v. Proprietor Of Ballari Agri

2020-06-05

B.A.PATIL

body2020
JUDGMENT B A Patil, J. - This appeal has been preferred by the complainant challenging the judgment passed by the learned II Addl. Civil Judge & JMFC, Ballari in C.C. No. 99/2017 dated 14.08.2018 whereunder the complaint filed u/s 138 of the Negotiable Instruments Act (for short 'N.I. Act') was dismissed by acquitting the accused. 2. I have heard the learned counsel for the appellant and perused the records. Learned counsel for the respondent is absent and there is no representation. 3. The brief facts of the case of the complainant are that, she filed a complaint u/s 200 of Cr.P.C. contending that the accused is the proprietor and Manager of Ballari Agro Gold Projects Pvt. Ltd., (for short 'firm). In pursuance of the advise of the accused, the complainant became member of the said firm and invested an amount of Rs.3,50,000/- on various dates. Subsequently, the accused deposited an amount of Rs.52,000/- on various dates towards benefits and interest to the complainant. Thereafter, he did not pay any amount towards investment made by the complainant. Subsequently, the complainant demanded the accused to pay back the invested amount for which the accused issued a cheque bearing No. 084526 dated 31.10.2011 for a sum of Rs.3,50,000/- drawn on HDFC Bank, Ballari. When the said cheque was presented on 10.12.2011 it was dishonoured with the sharah 'funds insufficient'. A legal notice was caused to be issued on 14.01.2012. Inspite of service of notice, the accused failed to pay the cheque amount. Hence, complaint was registered. 4. It is the contention of the learned counsel for the complainant that the impugned judgment of acquittal is contrary to the established principles of law, facts and circumstances of the case. The accused firm is an individual proprietory concern and that the proprietor is arrayed as an accused. Under such circumstances, the trial Court ought not to have dismissed the complaint by taking shelter u/s 141 of the N.I. Act. Further, the proprietory concern is only the business name where the person carries on the business and a case against properietory concern is by or against the proprietor of the business. Hence, the complaint is maintainable. In order to substantiate the said contention he relied upon a decision of the Hon'ble Apex Court in the case of Raghu Lakshminarayan Vs. M/s Fine Tubes, (2007) 5 SCC 103 . 5. Hence, the complaint is maintainable. In order to substantiate the said contention he relied upon a decision of the Hon'ble Apex Court in the case of Raghu Lakshminarayan Vs. M/s Fine Tubes, (2007) 5 SCC 103 . 5. It is his further submission that the definition of the term "Company" provided under the explanation to Section 141 of the N.I. Act has been interpreted in the above said decision and hence the trial Court ought not to have dismissed the complaint. Further, the accused has not denied the issuance of the cheque and also he has not replied to the notice issued in accordance with law. The trial Court by overlooking the material and circumstances has passed the impugned order. The same is liable to be set aside. On these grounds he prayed to allow the appeal and to set aside the impugned judgment of acquittal. 6. Though the learned counsel for the complainant has raised several contentions, the only point boiled out from his arguments is that whether the complaint is maintainable without arraying the firm or Company as an accused u/s 141 of the N.I. Act. For the purpose of brevity, I quote Section 141 of the N.I. Act, which reads as under: Section 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. 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 close reading of the above said provisions, it makes it clear that the term "Company" means any body corporate and includes a firm or other association of individuals and if any offence was committed by any of the persons responsible to the Company for the conduct of the business, then under such circumstances, the Company is deemed to be guilty of the offence and it shall be liable to be proceeded against any punishment in accordance with law. 8. Keeping in view the said provisions of law, the liability created is penal and it requires a strict construction. On close reading of the above said provisions it brings in the Company as well as the Director or any other officials who are responsible for the acts of the Company within its tentacles and prosecution against the Director or other officials is not taneble without making the Company as a party. It necessarily follows that maintaining of the prosecution u/s 141 of the Act arraying the Company as an accused is imperative, then other categories of offences can be brought by making Company liabile as the same is supported in the provision itself. 9. For the above said proposition of law, I would like to rely upon the decision in the case of Aneeta Hada v. M/s Godfather Travels & Tours Pvt. Ltd., (2012) AIR SC 2795 wherein at paragraph Nos.39 and 42 it is observed as under: 39. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant. 42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context. In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and others[44] it has been laid down that the entire statute must be first read as a whole, then section by section, clause by clause, phrase by phrase and word by word. The same principle has been reiterated in Deewan Singh and others v. Rajendra Prasad Ardevi and others[45] and Sarabjit Rick Singh v. Union of India[46]. 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. The same principle has been reiterated in Deewan Singh and others v. Rajendra Prasad Ardevi and others[45] and Sarabjit Rick Singh v. Union of India[46]. 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. - - - 10. Keeping in view the ratio laid down by the Hon'ble Supreme Court in the above said decision and on perusal of the records and the evidence of the complainant, it reveals that, in the examination-in-chief the complainant has deposed that the accused is the proprietor and Manager of the Firm and admittedly the Firm has not been arrayed as an accused. Only the proprietor has been arrayed as an accused. Even as could be seen from the contents of the notice, it is issued to the proprietor and not to the Firm. 11. Taking into consideration the above said provision of law, without making the firm as an accused in the complaint, if the complaint is made only against the proprietor, under such circumstances, the complaint itself is not maintainable. It is the trite of the law the Firm and the proprietor are going to be made vicariously liabile for the offences committed by the proprietor. 12. Though the learned counsel for the appellant has relied upon a decision in Raghu Lakshminarayanan case quoted supra, at paragraph no. 13 it has been observed as to what is the distinction between the proprietory concern owned by an individual and the Company. But, the said principle has been applied in a different context but the said ratio laid down in the said decision is not applicable to the present case on hand. 13. 13 it has been observed as to what is the distinction between the proprietory concern owned by an individual and the Company. But, the said principle has been applied in a different context but the said ratio laid down in the said decision is not applicable to the present case on hand. 13. Looking from any angle without making the Firm as an accused, proceedings is not justifiable. In that light, the trial Court after considering the said proposition of law and by applying the law elaborately discussed by the Hon'ble Apex Court, has come to a right conclusion. The judgment of the trial Court is neither illegal nor there is an irregularity. The appeal is devoid of merits and same is liable to be dismissed. Accordingly, it is dismissed. No order as to costs.