M/s.Balaji DieselSales Mart v. M/s.Dalton Ceramic Industries

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 31.01.2008C O R A MTHE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR Crl.A.No.1139 of 2002M/s.Balaji DieselSales Mart represented byits Manager Gnanasoundari...Appellant/RespondentVs.M/s.Dalton Ceramic IndustriesRep. by partner Subramanian... Respondent/Appellant/AccusedThis Criminal Appeal has been filed under Section 378(4)Cr.P.C. as against the judgment dated 08.02.1999 passed inCrl.A.No.35/1994 on the file of the Addl. District Judge cum ChiefJudicial Magistrate, Vellore to set aside the same.For Appellant: Mr.P.RajamanickamFor Respondent: M/s.T.S.Gopalan & CoJ U D G M E N TAs against the judgment of the lower appellate Court(Additional District and Sessions Judge-cum-Chief JudicialMagistrate, Vellore) dated 08.02.1999 made in C.A.No.35 of 1994,reversing the judgment of conviction of the trial court (JudicialMagistrate No.3, Vellore), dated 31.03.1994 made in C.C.No.21 of1993, the present Criminal Appeal has been preferred under Section378(4) Cr.P.C.2. The complainant before the trial Court/the respondentbefore the lower appellate Court is the appellant herein. He hadpreferred a private complaint under Section 200 Cr.P.C. allegingcommission of an offence punishable under Section 138 of theNegotiable Instruments Act by the respondent herein. Following theprocedure prescribed for taking cognizance of offences on privatecomplaint, the learned Judicial Magistrate No.3, Vellore, took thesame on file as C.C.No.21 of 1993. On appearance of the accusedand on the plea of not guilty made by the accused, the accused (therespondent herein) was tried for an offence punishable underSection 138 of the Negotiable Instruments Act. https://hcservices.ecourts.gov.in/hcservices/

3. In the trial, four witnesses were examined as P.Ws.1 to 4and 15 documents were marked as Ex.P1 to P15 on the side of thecomplainant/prosecution. No witness was examined, however onedocument was marked as Ex.D1 on the side of the accused. Ex.C1 wasmarked as Court document. At the conclusion of trial, the learnedJudicial Magistrate No.3, Vellore held the accused (the respondentherein) guilty of an offence punishable under Section 138 of theNegotiable Instruments Act, convicted the accused and imposed asentence of six months simple imprisonment and a fine of Rs.3,000/-along with a default sentence of three months simple imprisonmentto be undergone in case of default of payment of fine. It was alsodirected therein that out of the fine amount, Rs.2,000/- should bepaid to the complainant as compensation.4. Challenging the correctness and legality of the convictionrecorded and sentence imposed by the trial Court, the accused (therespondent herein) filed an appeal in C.A.No.35 of 1994 on the fileof the learned Additional District and Sessions Judge-cum-ChiefJudicial Magistrate, Vellore. The learned lower appellate judgeallowed the appeal, set aside the conviction recorded by the trialCourt and acquitted the accused/respondent herein with a directionthat the fine collected from the accused/respondent herein shouldbe refunded to him. As against the said judgment of the learnedAdditional District and Sessions Judge-cum-Chief JudicialMagistrate, Vellore, the present appeal has been filed by thecomplainant/appellant herein on various grounds set out in theappeal petition.4. This court heard the submissions made by Mr.P.Rajamanickam,learned counsel appearing for the appellant and by M/s.T.S.Gopalan& Co, learned counsel appearing for the respondent. The judgmentsof the Courts below and other material records were also perused.This Court paid it anxious consideration to each and every pointraised on either side and the materials available on record.5. The complainant/appellant herein is a proprietary concerncalled 'M/s.Balaji Diesel Virpanai Koodam' and it is represented byits Manager Gnana Soundari for presenting the complaint in questionand also the present appeal. According to the complainant, abusiness concern called 'M/s.Dalton Ceramic Industries, which isshown to be the accused/respondent represented by its partnerSubramanian, purchased diesel on a bulk quantity and issued threecheques dated 17.08.1992, 15.12.1992 and 30.12.1992 respectivelydrawn on the State Bank of India, Small Industries Branch, Vellorebearing cheque Nos.942509, 942552 and 942553 for Rs.13,000/-,Rs.15,000/- and Rs.15,000/- respectively towards the payment of thecost of the diesel purchased from the above said petrol bunk. Onpresentation for payment, all those cheques were returned 'unpaid'with endorsements 'exceeds arrangement'. After a statutory noticecalling upon the accused/respondent herein to make payment of theamount covered by the cheques was given, the accused/respondentherein, instead of making payment chose to give a false reply andhence, the accused/respondent committed an offence punishable underSection 138 of the Negotiable Instruments Act. https://hcservices.ecourts.gov.in/hcservices/

6. Mere perusal of the cause title of the complaint will showthat an industrial concern (a partnership firm) by name "M/s.DaltonCeramic Industries" represented by its partner Subramanian is shownto be the accused and the prosecution has been launched against theindustrial concern alone and not the above said Subramanian in hispersonal capacity. Section 141 of the Negotiable Instruments Act isan enabling provision to prosecute the persons responsible for themanagement or business of a company for an offence committed by thecompany under Section 138 of the Negotiable Instruments Act. It isto the effect that when such an offence is committed by a company,every person, who was in charge of and was responsible to thecompany for the conduct of its business as well as the company,shall be deemed to be guilty of the offence and shall be liable tobe proceeded against and punished accordingly. 7. The first proviso to Section 141(1) is to the effect thatany such person referred to in sub-clause (1) shall not be liableto punishment, if he proves that the offence was committed withouthis knowledge and that he had exercised all due diligence toprevent the commission of such offence. Sub-clause 2 of Section141 makes the officers of the company, like director, manager,secretary or other officers of the company liable to be prosecutedand punished for the offence under Section 138, if the offencecommitted by the company is proved to have been committed with theconsent or connivance of such officer or is attributable to anyneglect on the part of such officer. In the explanation, apartnership firm is also brought under the definition of a companyand a partner of a firm is equated with a director of a company forthe purpose of the said penal provision. 8. In the instant case, it is not the case of thecomplainant/appellant herein that Subramanian purchased diesel oncredit for himself. The admitted case of the complainant/appellantis that diesel was purchased on credit by Subramanian on behalf ofM/s.Dalton Ceramic Industries (partnership firm). It is also theadmitted case of the complainant/ appellant that the cheques werenot issued in respect of the personal account of Subramanian and onthe other hand, admittedly the firm's cheques signed by Subramanianas partner were issued. Though the industrial concern namedM/s.Dalton Ceramic Industries represented by its partnerSubramanian alone has been shown to be the accused in thecomplaint, it transpires, the learned Judicial Magistrate (trialCourt) proceeded on the assumption that the complaint was againstSubramanian as an individual. It is obvious from the concludingparagraph of the judgment of the trial Court (paragraph-24),wherein the trial Court has chosen to award a sentence of sixmonths simple imprisonment along with a fine of Rs.3,000/-.Technically speaking a corporate personality (company) or a firm towhich such a personality is sought to be extended under theexplanation to Section 141(2) cannot be put in prison and thisaspect was considered by the Hon'ble Supreme Court in M/s.StandardChartered Bank and Others vs. Directorate of Enforcement and othersreported in (2005) 4 SCC 530. The said judgment was pronounced by https://hcservices.ecourts.gov.in/hcservices/ a constitutional bench of the Hon'ble Supreme Court. As per themajority a company or corporation being a juristic person can beprosecuted for an offence for which mandatory punishment prescribedis imprisonment and fine. But since the artificial persons likecompany or corporation cannot be physically put in prison and thepunishment of imprisonment cannot be imposed on a company or acorporation, the punishment to such artificial persons can only bein the nature of fine. While considering the constitutionality ofSection 141, the Hon'ble supreme Court held that though it is quiteimpossible to put the corporate personality in prison, the sectionhas to be interpreted in such a way that only fine shall be imposedon such corporate personalities. 9. In this case, the learned Judicial Magistrate has chosen toaward a substantive sentence of six months simple imprisonmentwhich goes to show that the learned Judicial Magistrate wasproceeding on the assumption that the complaint was againstSubramanian as an individual and not against the partnership firmcoming under the definition of company as per the explanation foundunder Section 141.10. On the other hand, the learned Additional District andSessions Judge-cum-Chief Judicial Magistrate, Vellore, whiledealing with the appeal, also committed the very same mistake bymaking an observation that the company (partnership firm) was notprosecuted and on the other hand its partner alone as an individualwas prosecuted before the trial Court. The learned lower appellateJudge, relying on the judgment of this court in A.Jafferullah v.M/s.T.Stanes and Company Ltd. rep by its Legal Officer,K.P.Chandrasekaran reported in 1994(1) LW (Crl) 262, observed thata prosecution launched against a partner of the firm alone withoutarraying the firm as an accused, was not maintainable. The lowerappellate Judge held that a prosecution of one of the partnersalone, even on the ground that the said partner happened to be theperson who acted on behalf of the partnership firm in the dealingswith the complainant, without making the partnership firm and itsother partners as co-accused, was not maintainable. This court isnot in a position to countenance the above said observation made bythe learned lower appellate judge. 11. It has been repeatedly held by the Hon'ble Supreme Court,say for example, in Anil Hada v. Indian Acrylic Ltd. reported in2000 Cri.L.J. 373 (SC) equivalent to (2000) 1 SCC 1 that when anoffence under Section 138 of the Negotiable Instruments Act iscommitted by a firm, a partner of the firm can be prosecutedleaving out the firm. In the said judgment it has been held asfollows:-" Three categories of persons can be discerned fromthe said provision who are brought within the purview ofthe penal ability through the legal fiction envisaged inthe section. They are: (1) the company which committedthe offence, (2) everyone who was in charge of and wasresponsible for the business of the company, and (3) any https://hcservices.ecourts.gov.in/hcservices/ other person who is a director or a manager or a secretaryor officer of the company, with whose connivance or due towhose neglect the company has committed the offence"In the same judgment it has been observed in paragraph 13 asfollows:" If the offence was committed by a company it canbe punished only if the company is prosecuted. Butinstead of prosecuting the company if a payee opts toprosecute only the persons falling within the second orthird category the payee can succeed in the case only ifhe succeeds in showing that the offence was actuallycommitted by the company. In such a prosecution theaccused can show that the company has not committed theoffence, though such company is not made an accused, andhence the prosecuted accused is not liable to bepunished. The provisions do not contain a condition thatprosecution of the company is sine qua non forprosecution of the other persons who fall within thesecond and the third categories mentioned above. Nodoubt a finding that the offence was committed by thecompany is sine qua non for convicting those otherpersons. But if a company is not prosecuted due to anylegal snag or otherwise, the other prosecuted personscannot, on that score alone, escape from the penalliability created through the legal fiction envisaged inSection 141 of the Act."12. The said view was also followed by a subsequent judgmentin R.Rajagopal vs. S.S.Venkat reported in (2001) 10 SCC 91. In thatcase also it was clearly held that the prosecution of a partner ofa firm without arraying the firm as an accused was nonethelessmaintainable.13. Therefore, the above said conclusion arrived at by thelearned Judge of the lower appellate Court on the legal issue -whether a prosecution of a partner of a partnership firm for anoffence under Section 138 of the Negotiable Instruments Actcommitted by the firm shall be maintainable without the partnershipfirm and other partners being made as co-accused? - is not in tunewith the views expressed by the Hon'ble Supreme Court and hence,the same deserves disapproval.14. Apart from holding that the complaint against a partneralone without making the firm and other partners as co-accused wasnot maintainable, the learned Judge of the lower appellate Court onmerits has also held that, the charge made against the said partnerwas not substantiated. This court does not deem it fit to considerthe said question on merits, as the above said opinion wasexpressed on the assumption that the partner alone and not thepartnership firm was the accused, whereas in fact, the partnershipfirm and not the partner was the accused. This court alsoconsiders it unnecessary to go into the merits of the allegations, https://hcservices.ecourts.gov.in/hcservices/ as the case can be disposed of on other grounds. The pertinentquestion that arises for consideration is whether the appellantherein has properly initiated prosecution by complying themandatory condition for launching prosecution for an offence underSection 138 of the Negotiable Instruments Act, 1881.15. The statutory notice under Section 138 proviso (b) of theNegotiable Instruments Act informing the dishonour of the chequeand calling upon to make payment was issued to Subramanian as anindividual and not as a partner representing the partnership firm.Admittedly, notice was not issued to the partnership firm -M/s.Dalton Ceramic Industries. Of course, a notice issued to apartner of the firm shall be enough to prosecute the firm also, asit shall be deemed to be a notice issued to the partnership firm. 16. In Rajneesh Aggarwal v. Amit J.Bhalla reported in AIR 2001SC 518, it was held that notice for payment issued in the name ofthe director, who signed the cheque in question, is a notice to thedrawer company. But, such a notice shall indicate the fact thatthe cheque was issued on behalf of the company and that he was adirector/partner in the company/partnership firm. It has been heldas follows in the said judgment:- The object of issuing notice indicating the factumof dishonour of the cheques is to give an opportunity tothe drawer to make payment within 15 days, so that itwill not be necessary for the payee to proceed against inany criminal action, even though the bank dishonoured thecheques. It is also Amit Bhalla, who had signed thecheques as the Director of M/s.Bhalla Techtran IndustriesLtd. When the notice was issued to the said Shri.AmitBhalla, Director of M/s.Bhalla Techtran Industries Ltd.,it was incumbent upon Shri Bhalla, to see that thepayments are made within the stipulated period of 15days. It is not disputed (signature alleged) that ShriBhalla has not signed the cheques, nor is it disputedthat Shri Bhalla was not the Director of the company.Bearing in mind the object of issuance of such notice, itmust be held that the notices cannot be construed in anarrow technical way without examining the substance ofthe matter. We really fail to understand as to why thejudgment of this Court in Bilakchand Gyanchand Co., willhave no application. In that case also criminalproceedings had been initiated against A.Chinnaswami, whowas the Managing Director of the company and the chequesin question had been signed by him. In the aforesaidpremises, we have no hesitation to come to the conclusionthat the High Court committed an error in recording afinding that there was no notice to the drawer of thecheque as required under Section 138 of the NegotiableInstruments Act. In our opinion, after the cheques weredishonoured by the bank, the way the payee had served duenotice and yet there was a failure on the part of theaccused to pay who had signed the cheques as the directorof the company. https://hcservices.ecourts.gov.in/hcservices/

17. In Bilakchand Gyanchand Co. vs. A.Chinnaswami reported in(1999) 5 SCC 693, it has been held has follows:-" It is evident that proceedings were initiated bythe appellant against A.Chinnaswami who happened to be theManaging Director of Shakti Spinners Ltd. The cheques inquestion which were dishonoured were signed by him. Theprocess was issued by the Judicial Magistrate in his name.We see no infirmity in the notice issued under Section 138addressed to A.Chinnaswami, who was a signatory of thesaid cheques. The High Court, in our opinion, clearlyfell in error in allowing the petition under Section 482Cr.P.C. and in quashing, the complaint and setting asidethe proceedings pending before the Judicial Magistrate."18. In the instant case, statutory notice was sent toR.P.Subramanian describing him to be the proprietor of DaltonCeramic Industries, thereby meaning that Dalton Ceramics Limitedwas a proprietary concern and R.P.Supramanian was its proprietor.However, while filing the complaint the said concern is shown to bea partnership firm. The description of the accused found in thecomplaint is as follows:"M/s.Dalton Ceramics Industry represented by its partner.Subramanian, aged 42s/o Perumal,27-E, Thennamaram St.,Vellore.1, N.A.A.Dt."It is unnecessary to cite all the judgments to say that it ismandatory to serve a notice on the drawer of the cheque forprosecuting for the offence under Section 138 r/w 141 of theNegotiable Instruments Act. When the drawer of the cheque happensto be a company, notice issued to a director who signed the chequeon behalf of the company shall be a proper ntoice to the company.The requirement of issuing the statutory notice shall be compliedwith if such a statutory notice is issued to the drawer company.In the case on hand, the statutory notice marked as Ex.P10 cannotbe construed to be a proper notice issued to the accusedpartnership firm. The notice contains a defect in the descriptionof the accused concern, which will definitely invalidate the saidnotice. Notice was issued to R.P.Subramanian as an individualdescribing him to be the proprietor of Dalton Ceramic Industries.Section 141 of the Negotiable Instruments Act does not contemplatethe inclusion of a proprietary concern in the definition ofcompany. Only partnership firms, societies and associations aredeemed to be companies for the purpose of prosecution for anoffence under Section 138 r/w 141 of the Negotiable InstrumentsAct. As notice was issued to an individual with a description thathe was the proprietor of a concern, the same cannot be construed tobe a valid notice to the accused partnership firm. Therefore, thecomplaint is bound to fail as the requirement of issuing astatutory notice was not properly complied with. The https://hcservices.ecourts.gov.in/hcservices/ appellant/complainant is not sure of the nature of composition ofthe accused concern. It is quite obvious from the fact that in thestatutory notice marked as Ex.P10, R.P.Subramanian has been shownto be the proprietor of 'Dalton Ceramic Industries", whereas in thecomplaint "Dalton Ceramics Industries" arrayed as the sole accusedis described to be a firm represented by its partnerR.P.Subramanian. The appellant/complainant was not sure as towhether the partnership firm was prosecuted or the partner who wasdeemed to be a director as per Section 141 was prosecuted. P.W.1,in her evidence, during cross-examination, gave an evasive answeras to whom the statutory notice was given. She also pleadedignorance as to how many persons were partners of Daltan CeramicsIndustries. Therefore, even the prosecution of the accusedpartnership firm is not proper as there was no proper statutorynotice issued to either the said firm or to its partner. Thenotice issued to the R.P.Subramanian as an individual describinghim to be the proprietor of Dalton Ceramics Industries shall not betaken as a proper statutory notice to the accused partnership firm.19. For all the reasons stated above, this court comes to theconclusion that, though not for the reasons assigned by the lowerappellate court, but for the reasons stated supra, the judgment ofthe lower appellate court setting aside the conviction ofR.P.Subramanian and acquitting the respondent/accused deserves tobe confirmed. Accordingly the appeal is dismissed.Asr/Sd/-Asst. Registrar//True Copy//Sub Asst. RegistrarTo1.The Addl. District Judge cum Chief Judicial Magistrate, Vellore2. Do Through The Principal District Judge, Vellore3. The Judicial Magistrate No.III, Vellore4. Do through The Chief Judicial Magistrate, Vellore.5. The Section Officer, Criminal Section, High Court, Madras.BV(CO)SR/3.9.2009JUDGMENT in Crl.A.No.1139/2002