Research › Search › Judgment

Karnataka High Court · body

2021 DIGILAW 823 (KAR)

RAJU v. SURESH

2021-08-23

SHIVASHANKAR AMARANNAVAR

body2021
JUDGMENT : Shivashankar Amarannavar, J. 1. Seeking quashing of the entire proceedings in C.C. No. 606/2016 on the file of Civil Judge and JMFC, Hukkeri registered or the offence punishable under Sec. 138 of Negotiable Instruments Act (for brevity 'N.I. Act'). 2. The brief facts of the case are that the respondent-complainant filed a private complaint in P.C. No. 800/2014 on the file of Civil Judge and JMFC, Hukkeri against the petitioners for the offence punishable under Sec. 138 of N.I. Act. In the said complaint, it is stated that the respondent-Shri. Adinath Multipurpose Souharda Sahakari Limited had opened fixed deposit Accounts with the Belagavi Liberal Credit Souharda Cooperative Limited, Belagavi (for short 'the society') on 15/2/2012 for a period of one year for a sum of Rs.5.00 lakhs each i.e., total of Rs.10.00 lakhs. Upon maturity of the said fixed deposit the said society was liable to the pay to the respondent-complainant matured amount of Rs.17,10,000.00. 3. Petitioner No. 1 on behalf of said society issued a cheque bearing No. 030124 for a sum of Rs.15.00 lakhs dtd. 12/12/2013 towards payment of maturity amount. Upon presentation of the said cheque by the respondent-complainant with its banker, the same was dishonoured with an endorsement stating "Insufficient Funds." 4. Though notice is served upon the petitioners, the petitioners have failed to pay the amount under the cheque and the respondent was constrained to file the complaint. Upon receipt of sworn statement by the respondent/complainant by way of affidavit, the trial court was pleased to take cognizance of the alleged offence punishable under Sec. 138 of the N.I. Act and directed for registration of a criminal case. Accordingly, the private complaint in P.C. No. 800/2014 was renumbered as C.C. No. 606/2016. 5. Heard the arguments of Learned counsel for the petitioners and learned counsel for the respondent. 6. Learned counsel for the petitioners contended that the cheque has been issued on the account of Belagavi Liberal Credit Souharda Cooperative Limited, Belagavi and it is signed by the petitioners as authorized signatory and the petitioners at the relevant point of time, were employees of the said society. 6. Learned counsel for the petitioners contended that the cheque has been issued on the account of Belagavi Liberal Credit Souharda Cooperative Limited, Belagavi and it is signed by the petitioners as authorized signatory and the petitioners at the relevant point of time, were employees of the said society. Learned counsel further contended that as per provisions of Sec. 141 of N.I. Act, 1881 if the person committed offence under Sec. 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 hence, in the instant case, the society (company) has not been served with the demand notice and not been made as party for the proceedings. On that point, he placed reliance on the Hon'ble Supreme Court in the case of Aneeta Hada vs. Godfather Travels and Tours Private Limited, (2012) 5 SCC 661 . 7. It is further contended that since society has not been arrayed as accused in the proceedings, solely on account of petitioners were the employees of the cooperative society is not maintainable and is liable to be quashed. He also placed reliance on the decision of Hon'ble Apex Court in the case of Himanshu vs. B. Shivamurthy and Another, (2019) 3 SCC 797 . 8. Per contra, learned counsel for respondent has contended that the petitioners were in charge of the business of the cooperative society and therefore, they are guilty of offence as they have issued the cheque in favour of the respondent/complainant. He further contended that the respondent be given liberty to amend the complaint to implead the cooperative society as accused. He further contended that seeking the amendment of the complaint is permissible. On that point he placed reliance on the following decisions: 1. U.P. Pollution Control Board vs. Modi Distillery and Others, AIR 1988 SC 1128 2. Manish Kalani and Others vs. Housing and Urban Development Corporation Ltd. and Others, decided on 30.1.2018 by Madhya Pradesh High Court 3. Usher Agro Ltd. and Others vs. State of U.P. and Others decided by Allahabad High Court on 9/7/2018 [ 2018 (2) ACR 2252 ]. 9. Manish Kalani and Others vs. Housing and Urban Development Corporation Ltd. and Others, decided on 30.1.2018 by Madhya Pradesh High Court 3. Usher Agro Ltd. and Others vs. State of U.P. and Others decided by Allahabad High Court on 9/7/2018 [ 2018 (2) ACR 2252 ]. 9. It is not in dispute that the cheque has been issued on the account of Belagavi Liberal Credit Souhard Co. Operative Ltd., in favour of respondent. The said society has not been impleaded as accused. The petitioners who were working as General Manger and Branch Manager respectively were arraigned as accused. Petitioner No. 1 is a General Manager of the said society had signed on the said cheque. Whether it is mandatory under Sec. 141 of N.I. Act impleaded company (society) as one of the accused, has been considered by the Hon'ble Apex court in the case of Aneeta Hada (Supra). Para Nos. 53, 56 and 59 reads thus: "53. It is to be borne in mind that Sec. 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 Sec. 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. 56. 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 Sec. 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 sec. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Sec. 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 sec. 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. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Sec. 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [State of Madras v. C.V. Parekh, (1970)3 SCC 491 ] which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [Sheoratan Agarwal v. State of M.P., (1984) 4 SCC 352 ]does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery [U.P. Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684 ] has to be treated to be restricted to its own facts as has been explained by us hereinabove." 10. The Hon'ble Apex Court in the said decision has held that for maintaining the prosecution under Sec. 141 of N.I. Act arraying of a company as the accused is imperative. The Hon'ble Apex Court in Himanshu (supra) has held as under: "15. In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director. A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused. 16. In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director. A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused. 16. The provisions of Sec. 141 postulate that if the person committing an offence under Sec. 138 is a company, every person, who at the time when the offence was committed was in charge of or 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. 17. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Sec. 138, the High Court was in error in holding that the company could now be arraigned as an accused." 11. As per provisions of Sec. 141 of N.I. Act, if the person committed offence under Sec. 138 is company, every person who at the time the offence is 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, shall be liable to be proceeded against and punished accordingly. In the absence of company (society) arraigned as accused, a complaint against the petitioners was therefore not maintainable. The petitioners being employed as General Manager and Branch Manager have signed the cheque, therefore, the proceedings against the petitioners are liable to be quashed. 12. The learned counsel for respondent sought liberty to file an application to add company (Society) as the accused. Whether such application if filed by the respondent, maintainable or not cannot be considered in the present petition. If such an application is filed, it is for the trial court to consider it on merits. Accordingly, the following order: ORDER: Petition is allowed. Whether such application if filed by the respondent, maintainable or not cannot be considered in the present petition. If such an application is filed, it is for the trial court to consider it on merits. Accordingly, the following order: ORDER: Petition is allowed. The proceedings in C.C. No. 606/2016 (P.C. No. 800/2014) on the file of Civil Judge and JMFC, Hukkeri for the offence punishable under Sec. 138 of N.I. Act are quashed so far as the petitioners/accused Nos.1 and 2 are concerned. The respondent is at liberty to file an application for amendment to implead the Belagavi Liberal Credit Souhard Co-Operative Ltd., Belagavi. If such an application is filed, the Civil Judge and JMFC, Hukkeri shall decide the said application on merits.