M/s Elgi Finance Limited v. R.Prabakaran2.Ms.R.P.Sudha3.C.Dhanasekaran
Case at a glance
Outcome
Dismissed
In the result, the appeal is dismissed confirming thejudgment in C
Provisions considered
- Code of Criminal Procedure, 1973 ss. 200, 207
- Negotiable Instruments Act, 1881 ss. 138, 141
- Companies Act, 2013
Key paragraphs
- Para 88. The Point:-8(a) Against the conviction against them, A1 and A3 havepreferred an appeal in C.A.No.70/1999 before the Additional SessionsJudge, Coimbatore, but the same was dismissed on 1.10.1999. Againstthat no appeal was preferred. 8(b) The learned counsel appearing for the appellantwould contend that A2, A4…
Judgment
IN THE HIGH COURT OF JUDICATURE AT MADRASDATE : 22.01.2007CORAM:THE HONOURABLE MR.JUSTICE A.C.ARUMUGAPERUMAL ADITYANCrl.A.No.134 of 2000M/s Elgi Finance Limited, rep by its Asst. Manager – Legal and Authorised Representative Mr.P.N.Krishnamoorthy .. Appellant/Complainantvs.
R.Prabakaran2.Ms.R.P.Sudha3.C.Dhanasekaran .. Respondents/Accused 2, 4 & 5Prayer: This criminal appeal has been filed against the judgment ofacquittal in so far as the respondents/accused 2, 4 & 5 areconcerned, dated 29.1.1999 made in C.C.no.448 of 1996 on the file ofthe Judicial Magistrate No.VI, Coimbatore. For Appellant : Mr.T.S.RamarathinamFor Respondents : Mr.AR.L.Sundaresan, Senior Cousel, for Mrs. A.L.Gandhimathi JUDGMENTThis appeal has been preferred by the complainant in C.C.No.448of 1996 on the file of the Court of Judicial Magistrate No.VI,Coimbatore, against A2, A4 & A5. The private complaint waspreferred by the defacto-complainant, P.W.1, on behalf of the dejure complainant viz. M/s ELGI Finance Limited.
The short facts as narrated in the private complaint which waspreferred against the accused under Section 200 of Cr.P.C for anoffence punishable under Section 138 of the NI Act relevant for thepurpose of deciding this appeal are as follows:-The Assistant Manager of the de jure Complainant has preferredthis complaint. The de jure complainant viz. M/s ELGI FinanceLimited, is a finance company carrying on business such as hirepurchase, Leasing, Bill Discounting, Merchant Banking and CollectingFixed Deposits from their customers. The accused introduced https://hcservices.ecourts.gov.in/hcservices/ themselves to the complainant and requested the complainant toextend revolving purchase bill discounting facility. A2 to A5 arethe Directors of A1-company. As per the requisition made by theaccused the complainant had extended revolving purchase billdiscounting facility to the accused vide hundi Nos.11, 12, 13 & 14amounting to Rs.1,00,00,849/-. As per the said bill discountingfacility, if the accused fails to make the repayment on the duedate, the accused will be liable to pay 42% penal interest.
Thematurity date of hundi Nos.11, 12, 13 & 14 was on 25.06.1996. Theaccused are liable to pay an additional factoring charge ofRs.5,75,391.31 as on 13.08.1996. The accused issued three cheques, dated 14.08.1996, bearing cheque No.119413 for a sum ofRs.24,99,219/-, cheque No.119416 for a sum of Rs.25,02,231/-,cheque No.119415 for a sum of Rs.24,99,855/-, drawn in favour of thecomplainant in Tamilnadu Mercantile Bank Limited, towards repaymentof bills discounted and towards part payment of additional factoringcharges. The accused had requested the complainant to present theaforementioned three cheques for encashment on 14.08.1996. As perthe requisition made by the accued, the complainant presented theaforementioned three cheques for encashment on 14.08.1996 throughthe banker of the complainant, Canara Bank, Alagapuram, Salem. Onpresentation, the cheques were dishonoured by the banker of theaccsued due to "Funds Insufficient" and the complainant was inreceipt of the memorandum dated 14.08.1996 issued by the banker ofthe accused through the banker of the complainant along with thedebit advice datd 16.08.1996 issued by the banker of thecomplainant.
The factum of dishonouring of the cheques wasimmediately informed to the accused to a registered notice dated23.8.1996 demanding the accused to pay the total amount of thecheques thereon, within 15 days from the date of receipt of the saidnotice by the accused. The A1 to A5 were in receipt of the saidnotice on 24.08.1996 and after receipt of the said notice, theaccused has not cared to pay the amount demanded by the complainantwithin the stipulated time given. The accused were fully aware thatthey have no funds in their account with their banker at the time ofissuing the said cheques and then requested the complainant topresent the same for encashment. Hence the complaint.
After taking the sworn statement of the defacto complainant,P.W.1, the learned Judicial Magistrate has taken the complaint onfile in C.C.No.448 of 1996. On appearance of the accused copiesunder Section 207 of Cr.P.C were furnished to the accused. When theoffence under Section 138 of NI Act charge against the accused wasexplained to the accused, they pleaded not guilty. On the side ofthe complainant, P.W.1 was examined and Exs.P.1 to P.12 were marked. On the side of the accused neither oral nor documentary evidence waslet in. https://hcservices.ecourts.gov.in/hcservices/
P.W.1, defacto complainant, in his evidence would deposethat Ex.P.1 is the power of attorney deed executed in favour of himby the de jure complainant viz. M/s ELGI Finance Limited and that heis working as an Assistant Manager under the De jure complainant. The first accused is a private limited company and A2 to A5 are the Directors of A1-company. A2 to A5 are looking after the day to dayaffairs of the company. De jure Complainant had offered billdiscounting fecility to the first accused-company to the tune ofRs.1,00,00,849/-. For the purpose of availing the said billdiscounting fecility the accused had executed hundi Nos.11, 12, 13 &14 and the said amount under the respective hundials are to be paidto the de jure complainant on or before 20.6.1996. Since no paymentwas made towards the above debt by the accused in spite of severaldemands, third accused on behalf of the first accused has executedthree cheques dated 14.08.1996 drawn from Tamil Nadu MercantileBank, Salem Branch, for a sum of Rs.24,99,219/-, for a sum ofRs.25,02,231/- and for a sum of Rs.24,99,855/-. The said chequesare exhibited as Exs.P.2 to 4. When the above said cheques werepresented in Canara Bank for encashment they were returned with anendorsement "insufficient funds" and Ex.P.3 is the memo issued bythe Bank to that effect. Debit advice is Ex.P.6. Ex.P.7 is thenotice sent to the accused, wherein the accused were requested torepay the debt amount within 15 days from the date of receipt ofthe said notice. The accused have received the said notice on24.08.1996. Ex.P.8(series) is the first acknowlegments.
When the incriminating circumstances were put to theaccused, the accused denied their complicity with the crime. Onthe basis of the available evidence, the learned Judicial Magistratehas come to the conclusion that Ex.A1 and the signatory in Ex.P.2-cheque dated 14.08.1996 i.e. Ex.A.3 alone are guilty of the offenceunder section 138 of the NI Act and consequently convicted andsentenced A1 & A3 to pay the fine of Rs2,500/- each with defaultsentence and acquitted A2, A4 & A5. Aggrieved by the findings ofthe learned trial Judge against A2, A4 & A5 this appeal has beenpreferred by the complainant.
Now the point for determination in this appeal is whetherA2, A4 & A5 are also guilty under Section 138 of the NI Act?7. I have heard the submissions of Mr.T.S.Ramarathinam, learnedcounsel for the appellant and Mr.AR.L.Sundaresan, learned SeniorCousel, appearing for the respondents and considered theirrespective submissions. https://hcservices.ecourts.gov.in/hcservices/
The Point:-8(a) Against the conviction against them, A1 and A3 havepreferred an appeal in C.A.No.70/1999 before the Additional SessionsJudge, Coimbatore, but the same was dismissed on 1.10.1999. Againstthat no appeal was preferred. 8(b) The learned counsel appearing for the appellantwould contend that A2, A4 & A5 are all the other Directors of A1-company and only at their request they were given bill discountingfacility to the tune of Rs.1,00,00,849/- and after availing thesaid bill discounting facility, they have executed Ex.P.9 to P.12hundials and hence there are also to be held guilty under Section138 of NI Act. Section 138 of NI Act runs as follows:-"Dishonour of cheque for insufficiency, etc., offunds in the account -Where any cheque drawn by a person on an accountmaintained by him with a banker for payment of any amountof money to another person from out of that account forthe discharge, in whole or in part, of any debt or otherliability, is returned by the bank unpaid, either becauseof the amount of money standing to the credit of thataccount is insufficient to honour the cheque or that itexceeds the amount arranged to be paid from that accountby an agreement made with that bank, such person shall bedeemed to have committed an offence and shall, withoutprejudice to any other provision of this Act, be punishedwith imprisonment for a term which may extend to two year, or with fine which may extend to twice the amount of thecheque, or with both"Provided that nothing contained in this section shallapply unless -(a) the cheque has been presented to the bank withina period of six months from the date on which it is drawnor within the period of its validity, whichever isearlier; (b) the payee or the holder in due course of thecheque, as the case may be, makes a demand for the paymentof the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of thereceipt of information by him from the bank regarding thereturn of the cheque as unpaid; and (c) the drawer of such cheque fails to make thepayment of the said amount of money to the payee or, asthe case may be, to the holder in due course of the chequewithin fifteen days of the receipt of the said notice.
Explanation – For the purpose of this section, 'debtor other liability' means a legally enforceable debt orother liability. https://hcservices.ecourts.gov.in/hcservices/ The learned counsel also drawn the attention of this Court to Section 141 of the NI Act and contended that every person who, atthe time the offence was committed, was in charge of, and wasresponsible to the company for the conduct of the business of thecompany, as well as the company, shall be deemed to be guilty of theoffence and shall be liable to be proceeded against and punishedaccordingly.8(c) On the other hand learned senior counsel appearing for therespondents/accused 2, 4 & 5 would contend that even the complaintwas preferred against the accused only under Section 138 of the NIAct and except at para 2 of the complaint that A2, A4 & A5 aredirectors of the company, there is no specific averment in thecomplaint regarding the overtact of A2, A4 & A5.
The trial Courthas held that A3 guilty on the ground that he as one of the Directors who has signed in Ex.P.2 to 4-cheques dated 14.8.1996.The learned senior counsel for the respondent relying on 2005 SCC(Cri) 1975 (S.M.S. Pharamaceuticlas Ltd., Vs. Neeta Bhalla andanother), contended that it is necessary to aver in the complaintthat at the time the offence was committed the person accused was incharge of, and responsible for the conduct of business of thecompany and without averment being made in the complaint therequirements of Section141 cannot be said to be satisfied. Theexact observation in the above said judgment runs as follows:-"The normal rule in the cases involving criminalliability is against vicarious liability, that is, no oneis to be held criminally liable for an act of another. This normal rule is, however, subject to exception onaccount of specific provision being made in the statutesextending liability to others.
Section 141 of the Act isan instance of specific provision which in case an offenceunder Section 138 is committed by a company, extendscriminal liability for dishonour of a cheque to officersof the company. Section 141 contains conditions whichhave to be satisfied before the liability can be extendedto officers of a company. Since the provision createscriminal liability, the conditions have to be strictlycomplied with. The conditions are intended to ensure thata person who is sought to be made vicariously liable foran offence of which the principal accused is the company, had a role to play in relation to the incriminating actand further that such a person should know what isattributed to him to make him liable. In other words, persons who had nothing do do with the mater need not beroped in. A company being a juristic person, all itsdeeds and functions are the result of acts of others. https://hcservices.ecourts.gov.in/hcservices/ Therefore, officers of a company who are responsible foracts done in the name of the company are sought to be madepersonally liable for acts which result in criminal actionbeing taken against the company.
It makes every personwho, at the time the offence was committed, was in chargeof, and was responsible to the company for the conduct ofbusiness of the company, as well as the company, liablefor the offence. "So it is clear from the above said dictum that it is to be proved bythe complainant that every person who at the time when the offencewas committed was in charge of the company, and was responsible tothe company for the conduct of business of the company as well asthe company, to rope into the offence. Even a perusal of hundialsin the case on hand viz. Ex.P.9 to P.12, would go to show that A3has signed in each of those hundials and not the other Directorsviz. A2, A4 & A5. 8(d) The learned senior counsel for the respondents relied on2006(4) CTC 489 (Sabitha Ramamurthy and another Vs.R.B.S.Channabasavaradhya), and contended that the averments in thecomplaint must be to show that all the Directors are responsible toclear liability under dishonoured instrument and if the complainthas not satisfied the requirements of law, the complaint is to bequashed.
The exact observation in the above said judgment runs asfollows:-"Section 141 raises a legal fiction. By reason ofthe said provision, a person although is not personallyliable for commission of such an offence would bevicariously liable therefor. Such vicarious liability canbe inferred so far as a company registered or incorporatedunder the Companies Act, 1956 is concerned only if therequisite statements, which are required to be averred inthe Complaint Petition, are made so as to make the accusedtherein vicariously liable for the offence committed bythe company. Before a person can be made vicariouslyliable, strict compliance of the statutory requirementswould be insisted. "In the case on hand also there is absolutely no averment in thecomplaint against A2, A4 & A5 regarding their involvement in theoffence under Section 138 of the NI Act.8(e) While deciding an appeal against acquittal, as perthe ratio decidendi laid down in 2003 SCC (Cri) 161 (C.Antony Vs.K.g.Raghavannair), we have to see whether the findings of the trialCourt is perverse or contrary to the materials on record.
The exactobservation of the Honourable Apex Court in the above said dictumruns as follows:-"The High Court had lost sight of the fact that it https://hcservices.ecourts.gov.in/hcservices/ was sitting as an appellate court against a judgment ofacquittal passed by the trial Court, therefore, there wasan obligation on the part of the High Curt to come to adefinite conclusion that the findings of the trial Courtare either perverse or the same are contrary to thematerial on record because the High Court could not havesubstituted its finding merely because another contraryopinion was possible based on the material on record. Itwas the duty of the High Court to have firstcome to the conclusion that the conclusions arrived at bythe trial Court for good reasons are either unreasonableor as stated above, contrary to the material on record. In the absence of any such finding in our opinion, the High Court was in error in taking a contra-view merelybecause another view was possible on the material onrecord.
Operative part
"In view of the above discussion, I am of the considered opinion thatit cannot be said that A2, A4 & A5 are also guilty under Section 138of the NI Act. The learned trial Judge has considered all thosepoint and has come to a correct conclusion that the other Directorsexcept A3 are in no way connected with the offence and rightlydismissed the complaint against A2, A4 & A5, which does not warrantany interference from this Court. Point is answered accordingly.11. In the result, the appeal is dismissed confirming thejudgment in C.C.No.448 of 1996 on the file of the JudicialMagistrate No.VI, Coimbatore. SsvSd/Asst. Registrar/true copy/Sub Asst. RegistrarTo, The Judicial Magistrate No.VI, Coimbatore.2. - do – Thro The Chief Judicial Magistrate, Coimbatore+ one cc to Mrs. A.L. Gandhimathi, Advocate sr no. 4163NG(CO)nm(12.02.07)Crl.A.No.134 of 2000
Questions this judgment answers
What did the Court decide in this case?
The Court recorded the following disposition: In the result, the appeal is dismissed confirming thejudgment in C
Which statutory provisions did this judgment involve?
Code of Criminal Procedure, 1973 — ss. 200, 207; Negotiable Instruments Act, 1881 — ss. 138, 141; Companies Act, 2013.
Which court decided this case, and when?
Madras High Court, on 22 Jan 2007. The bench was A C ARUMUGAPERUMAL ADITYAN.
Precedent status how later indexed judgments have treated this case
No known negative treatment found in the Courts & Cases corpus.
This is a result about the indexed corpus, not a finding that the judgment remains good law. Coverage may be incomplete.