High Court · 2007

BAIL SLIP1. That the Second Petitioner/Second Petitioner (Accused 2)namely V.P. Subramaniam was directed to be released on bail in andby the order of this court dated 13.8.2002 and made inCRL.MP.No.6308 of 2002 in CRL.R.C.No.1303 of 2002.2. That the Third Petitioner (Accused 4) namely S.Rathinambalwas directed to be released on bail in and by the order of thiscourt dated 11.7.2002 and made in CRL.MP.No.6308 of 2002 inCRL.R.C.No.1303 of 2002. IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 28.03.2007 CORAM:THE HONOURABLE MR.JUSTICE A.C.ARUMUGAPERUMAL ADITYANCRL.R.C.NO.1303 OF 20021. M/s Bannari Amman Mills2. V.P.Subramaniam S/o Palanisamy Managing Partner M/s Bannari Amman Mills3. S.Rathinambal.. Petitioners(Accused 1,2 and 4)-vs-Fenner (India) Ltd.,Textiles Divisionrep. by Senior Officer-CommercialMadheswaran .. Respondent (Complainant)This Revision is filed under section 397 r/w 401 of Crl.Pcagainst the order passed by Additional Sessions Judge(Fast TrackCourt -2) Salem in C.A.No.175 of 2000 dated 26.6.2002 confirming theJudgment passed by the learned Judicial Magistrate No.2, Salem inC.C.No.55 of 1998 dated 13.10.2000.For petitioners : : Mr.R.Rajan and Mr.B.VasudevanFor respondent : : Mr.V.Srinivasan. https://hcservices.ecourts.gov.in/hcservices/ O R D E RThis revision has been preferred against the order passed inC.A.No.175 of 2000 on the file of the Court of Additional SessionsJudge(Fast Track Court-2) Salem. A private complaint under Section200 Cr.P.C. for an offence under Section 138 of the NegotiableInstruments Act,1881 was originally preferred by Fenner (India)Private Limited against four accused, A1 to A4. Pending trial A3 isdead.2. In the complaint, the complainant would allege that in A1Company A2,A3 and A4 are the Directors and the accused used topurchase cotton from the complainant and in the said dealing a sumof Rs.3,88,500/- was due to the complainant from the accused inconnection with the purchase of 70 bags of cotton and to dischargethe said amount, A3 as one of the partners of the first accusedCompany, had drawn a cheque for Rs.3,88,500/- in favour of thecomplainant and when the same was presented in Vijaya Bank, Tirupurfor collection, the same was returned with an endorsement that"there was no sufficient funds in the account of the drawer. Hencethe complaint.3. The said complaint was taken on file by the learedAdditional District Sessions Judge(Fast Track Court-2) Salem asC.C.No.55 of 1998 and on appearance of the accused on summons, thelearned trial Judge has furnished copies under Section 207Cr.P.C. tothe accused and when the offence was explained to the accused, theypleaded not guilty.4. Before the trial Court, P.Ws 1 to 3 were examined and Exs P1to P13 were marked. 4a)P.W.1 Thiru Madheswaran is the Commercial Officer of thecomplainant company which is situate in door No.7/54,Junction Road,I.T.L Garden Complex, III Floor, Salem-4. According to P.W.1, thecomplainant Company is producing cotton yarn and that the Directorsof the Company have given power of attorney to him to file thiscomplaint. Ex P1 is the power of attorney in favour of P.W.1. P.W.1would depose that A1 is a partnership company situate at 3/602Saithan Chettiar Garden, Tirupur and A2 ,A3 and A4 are the partnersof A1 Company and that, day to day affairs being looked after by A3and that A2 and A4 are looking after the administration of theCompany and on 14.2.1997 A3 had contacted him over phone and ordered70 bags of cotton yarn and accordingly the complainant haddespatched the consignment under invoice No.251. Ex P2 is the saidinvoice. On the very same day, the accused have taken delivery ofthe consignment. According to P.W1, the value of the consignmentdelivered to the accused is Rs.3,88,500/-. But inspite of repeated https://hcservices.ecourts.gov.in/hcservices/ demands, the accused have not settled the account. On 9.8.1997, A3had drawn a cheque in favour of the complainant Company forRs.3,88,500/- in Vijaya Bank,Tirupur Branch. As requested by A3,the said cheque was presented in State Bank of India, Tirupur Branchfor collection. But the said cheque was returned by Vijaya Bank,Tirupur Branch on 23.8.1997 on the ground that there was nosufficient funds in the drawer's account. When this was informed toA3, he had again requested the complainant to re-present the sameafter four weeks and as per his request, the said cheque was re-presented once again on 24.9.1997 for collection in the State Bankof India, Salem Branch. Again the cheque was met with the same fate.Ex P4 is a memo given by Vijaya Bank, Tirupur Branch to thecomplainant along with the dishonoured cheque. Under Ex P5, theState Bank of India, Salem Branch have deducted the commissioncharges for the dishonoured cheque from the account of thecomplainant. A lawyer's notice was issued by the complainant. A copyof the said notice is Ex P6. A1, A2 and A4 have received the noticeon 22.10.1997 under Exs P7,P8 and P9 acknowledgments. A3 has refusedto receive the notice. The returned cover containing the original ofEx P6 notice is Ex P10. Since the accused have not chosen to sendeither reply or repaid the amount, the complainant has preferredthis complaint on 1.12.1997.4b) P.W.2 is the Manager of State Bank of India, Salem Branch.He would depose that Ex P3 cheque was presented by the complainantthrough State Bank of India, Fort Branch on 9.8.1997 forcollection. The said cheque forwarded to Vijaya Bank,Tirupur forcollection. But the same was returned with an endorsement that thedrawer of the Company had no sufficient funds in his account. Ex P4is the intimation memo received from Vijaya Bank,Tirupur Branchalong with dishonoured cheque. The said dishonoured cheque wasreturned to the complainant on 14.10.1997 along with Ex P5 memo.4c)P.W.3 is the Branch Manager of Vijaya Bank, Tirupur Branch.He would depose that the accused are having Current Account in theirBank and the Current Account Number is 1008. He would admit that ExP1 cheque was issued by their bank to the accused along with thecheque book and that Ex P1 cheque was received at their branch on23.8.1997 from State Bank of India, Salem for collection and thatthe said cheque was returned with an endorsement that there is nosufficient funds in the drawer's account and that Ex P11 is thestatement of account for Current Account No.1008 stands in the nameof the accused and as per the statement of account on the day ofdrawel of the cheque , there was only Rs.760/- remains in the creditof the said account in favour of the accused. Ex P12 is theapplication form given by the accused for opening the currentacccount in Vijaya Bank ,Tirupur Branch. P.W.3 would further saythat on 26.11.1997, the accused have closed the current account andto that effect an entry has been made in Ex P.11. https://hcservices.ecourts.gov.in/hcservices/

5. After going through the oral and documentary evidence, thelearned trial Judge has held that an offence under Section 138 ofthe Negotiable Instruments Act,1881 has been made out against theaccused and accordingly, he has convicted and sentenced A1, A2 andA4 to pay a fine of Rs.5000/- each with default sentence. Further A2and A4 have been sentenced to undergo one year rigorous imprisonmenteach. Aggrieved by the findings of the learned trial Judge, A1, A2and A4 have preferred this revision. Pending trial, A3 died. In theappeal, the learned Additional District Sessions Judge(Fast TrackCourt-2) Salem in C.A.No.175 of 2000, after scanning the entireevidence and also after giving due deliberation of the argumentsadvanced by the learned counsel on both sides, has held that thereis no ground made for interference with the Judgment of the trialJudge and accordingly dismissed the appeal preferred by A1,A2 and A4thereby confirming the Judgment of the learned trial Judge. Hencethe revision before this Court by the convicted accused.6. Now the point for determination in this revision is whetheran offence under Section 138 of the Negotiable Instruments Act,1881has been made out against the revision petitioners/A1, A2 and A4 towarrant conviction? or whether the findings of the learned firstappellate Judge/Fast track Court-2) in C.A.No.175 of 2000 is liableto be set aside the for the reasons stated in the memorandum ofrevision?7. The Point:Under Section 141(2) of the Negotiable Instruments Act,1881 if anoffence is said to have been committed by a company, the complainantis entitled to proceed against any Director, Manager , Secretary orother officer of the Company and they are guilty of that offence ifthe complainant proves that only with a consent or connivance withthe accused the offence under Section 138 of the NegotiableInstruments Act,1881 has been committed.Section 141(2) of the Negotiable Instruments Act 1881 reads asfollows:"Notwithstanding anything contained in sub-section (1), where any offence under this Act,has been committed by a company and it is provedthat the offence has been committed with theconsent or connivance of, or is attributable to,any neglect on the part of, any director,manager, secretary or other officer of thecompany, such director, manager, secretary orother officer shall also be deemed to be guiltyof that offence and shall be liable to beproceeded against and punished accordingly.Explanation:For the purpose of this section https://hcservices.ecourts.gov.in/hcservices/ (a)"company" means any body corporate andincludes a firm or other association ofindividuals; and(b)"director" in relating to a firm, means apartner in the firm."According to P.W.1, ExP3 dishonoured cheque was drawn forRs.3,88,500/- by the third accused as one of the partners of thefirst accused company and a notice under Ex P6 was issued to A1 toA4 and that A1,A2 and A4 have received a notice on 22.10.1997 underExs P7 ,P8 and P9 acknowledgements respectively and that A3 hasrefused to receive the notice and the returned cover containing theoriginal of Ex P6 notice is ExP10. 8. Now we have to consider as to whether sufficent notice hasbeen served to A1, A2 and a4 as contemplated under Section 138(b)of the Negotiable Instruments Act,1881.9. The learned counsel appearing for the revision petitionerswould contend that there was no service of notice as contemplatedunder section 138 (b) of the Negotiable Instruments Act,1881 on therevision petitioners viz., A1, A2 and A4. A perusal of the copy ofthe notice under Ex P6 itself will go to show that the name of A1,A2 and A4 was not mentioned in Ex P6 notice. Both A2 and A4 havebeen addressed by their designation and not by their name .In Ex P6notice, A2 has been addressed as managing partner and A4 has beenaddressed as a partner of A1 company. On the other hand, A3's nameK.P.Muthukumar finds a place in Ex P6 notice. It is pertinent tonote further that in the acknowledgments in Exs P7,P8 and P9relating to A1,A2 and A4 also A3 has acknowledged for havingreceived the notice . So there is absolutely no evidence to showthat A2 and A4 have been served with a mandatory notice ascontemplated under Section 138(b) of the Negotiable InstrumentsAct,1881.10. The learned counsel appearing for the revision petitionerswould focus the attention of this Court to the recent judgmentdelivered by a Division Bench of this Court in B.Raman and twoothers-vs-M/s Shasun Chemicals and Drugs Ltd(2006-2 L.W.(crl.) 775).The question that was posed before the Division Bench was: " In theabsence of individual notice under Section 138(b) of the NegotiableInstruments Act,1881 to be served on the director of a company, canthe said director be prosecuted for the offence, committed by thecompany, under Section 138 of the Act? The said Judgment wasdelivered by the Honourable Justice M.Karpagavinayagam(then as hewas) present Chief Justice of High Court of Jhargand and I am also amember of the said Division Bench. At paragraph 22, It has beenobserved in the Judgment as follows which is relevant for thepurpose of deciding this revision: https://hcservices.ecourts.gov.in/hcservices/ " In the light of the above observation made bythe Supreme Court, out of five ingredients,which have to be established for creatingcriminal liability against the personsconcerned, fourth and fifth ingredients viz.,service of statutory notice on the person soughtto be made liable and non-compliance or non-payment in pursuance of the notice within 15days of the receipt of the notice, play animportant role. In other words, every person,connected with the company, shall not fallwithin the ambit of the provision. It is onlythose persons, who were in charge of andresponsible for the conduct of the business ofthe company at the time of commission of anoffence, who will be liable for criminal action.It follows from this that a director of acompany, who was not in charge of and was notresponsible for the conduct of the business ofthe company at the relevant time, will not beliable under the provision. Conversely, aperson not holding any office or designationmay be liable if the complainant satisfies thatthat person was in charge of and responsible forthe conduct of business of the company at therelevant time. To put it differently, liabilitydepends on the role one plays in the affairs ofa company and not on designation or status.Merely mentioning that he is a director ormanager or secretary would not be enough, tocause criminal liability. The legislature isaware that it is a case of criminal liabilitywhich means serious consequences so far as theperson sought to be made liable is concerned.Therefore, only persons who can be said to beconnected with the commission of a crime at therelevant time can be subjected to action."The purpose of the issuance of notice under Section 138(b) of theNegotiable Instruments Act,1881 to the director or manager orsecretary of the Company is to give an opportunity for him toexplain in what way he is connected with the cheque drawn by one ofthe directors managers or partners. This opportunity has been deniedin this case in respect of the revision petitioners because therewas no service of notice at all against the revision petitioners ascontemplated under section 138(b) of the Negotiable InstrumentsAct,1881 because all the notices have been received only by A3 asseen from Exs P7,P8 and P9. Under such circumstances, this Court isnecessarily to interfere with the findings of the learned first https://hcservices.ecourts.gov.in/hcservices/ appellate Judge in C.A.No.175 of 2000 on the file of the AdditionalDistrict Sessions Judge(Fast Track Court-2) Salem. Point is answeredaccordingly.11. In the result, the revision is allowed , Judgment inC.A.No.175 of 2000 on the file of the Court of Additional DistrictSessions Judge(Fast Track Court-2) Salem is set aside and therevision petitioners are acquitted from the charge levelled againstthem. The fine amount, if any, paid is to be refunded to therevision petitioners. sgSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Additional District Sessions Judge (Fast Track Court-2) Salem2. Do Through The Prl Sessions Judge, Salem.3. The Judicial Magistrate, NO.2, Salem 4. Do Thro' The Chief Judicial Magistrate, Salem.5. The Superintendent, Central Prison, Salem.6. The Public Prosecutor, High Court, Madras.+ 1 cc to Mr. B. Vasudevan, Advocate SR No. 19772+ 1 cc to Mr. S. Kalyanaraman, Advocate SR No. 20074SR/9.4.2007Crl.R.C.No.1303/2002