Essem Garments and Others vs D. Balasubramaniam and Others

V. Bakthavatsalu, J.—The respondent in all these cases filed four separate complaints u/s 138 of the Negotiable Instruments Act 1881,

alleging that accused Nos. 2 and 3 are partners of the first accused and that the accused issued a cheque and that the cheque when presented for

collection was dishonoured and that after issuing statutory notice, the complaints are filed. Accused Nos. 1 and 2 filed a petition u/s 245 of the

Criminal Procedure Code, 1973, for discharge. The third accused has also filed a separate petition for discharge u/s 245 of the Criminal

Procedure Code. In the above petition, it is contended by the third accused that he did not participate in the day-to-day affairs of the firm and that

he was not in charge of the business of the firm and as such the complaint is not maintainable as against him. Accused Nos. 1 and 2 have stated in

the above petition that the complainant has not averred in the complaint that the second accused was in charge of and responsible for the acts of

the firm and that the complainant has demanded not only the cheque amount but he has also included other items of amount, which is not

sustainable. It is further alleged by accused Nos. 1 and 2 that the complainant has stated that he is the proprietor and that he has not filed any

document to prove the same and that the person who has filed the complaint has not filed any authorisation.

On a consideration of the materials on record, the trial court dismissed all the petitions. Aggrieved against that order, these revisions are filed.

C. R. C. No. 718 of 1998 relates to C. C. No. 188 of 1997 against the order passed in the discharge petition. Accused Nos. 1 and 2 have

filed C. R. C. No. 718 of 1998 and third accused has filed C. R. C. No. 787 of 1998. Similarly, against the order passed in C. C. No. 241 of

1997 accused Nos. 1 and 2 have filed C. R. C. No. 719 of 1998 and the third accused has filed C R. C. No. 785 of 1998. Against the order

passed in C. C No. 243 of 1997, accused Nos. 1 and 2 have filed C. R. C. No. 720 of 1998 and the third accused has filed C. R. C. 786 of

1998. Against the order passed in C. C. No. 179 of 1997, accused Nos. 1 and 2 have filed C. R. C. No. 721 of 1998 and the third accused has

filed C. R. C. No. 784 of 1998.

It is seen from the complaint, that the complaint is filed by D. Balasubramaniam, son of Dhandapani, proprietor of the financing company.

Learned counsel for the petitioner contended that according to Section 142 of the Negotiable Instruments Act, no court shall take cognizance of

any offence except upon a complaint in writing made by the payee or as the case may be the holder in due course of the cheque. It is contended

that in this case, the person who has signed in the complaint is not authorised to file the complaint. It is seen from the original file that the

complainant has filed the authorisation letter issued by the proprietor of the company dated March 19, 1997. It is seen that Pappathi, wife of

Dhandapani has authorised the manager, D. Balasubramaniam to lodge the complaint u/s 138 of the Negotiable Instruments Act. Therefore, it

cannot be contended that Balasubra-manian is not authorised to institute complaint against the accused. It is, however, open to the accused to

challenge the above authorisation letter as not valid during the course of trial. In any event, the contention of the petitioner that Balasubramanian

was not authorised to institute complaint cannot be a ground to discharge the accused at this stage. As there are prima facie materials to show that

D. Balasubramanian was authorised to represent the company in filing the complaint, I hold that the accused cannot be discharged on the ground

raised by the accused.

It is admitted that the second accused issued cheque in favour of the complainant. As the second accused has issued the cheque representing the

first accused, it would prima facie show that he was in charge of and in management of the affairs of the company. It is also admitted that second

accused is a partner of the firm. In view of the above facts, it cannot be said that the complainant cannot proceed against him is the absence of

other allegations in the complaint that the second accused was in charge of and responsible for the business of the company. As already stated, the

fact that the second accused issued the cheque on behalf of the first accused itself is sufficient to proceed against the second accused. Therefore,

the reason assigned by the trial court that the complaint against the second accused is maintainable does not suffer from any infirmity. Hence, I hold

that the second accused cannot be discharged from the case.

So far as the third accused is concerned, it is contended by learned counsel for the petitioner that there is no averment in the complaint that he

was in charge of and responsible to the company for the conduct of the business. Section 141 of the Negotiable Instruments Act reads thus :

Offences by companies.--(1) If the person committing an offence u/s 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 . . .

It is only alleged in the complaint that accused Nos. 2 and 3 are partners, but there is no specific averment in the complaint that the third

accused is responsible and was in charge of the business of the company. But, the trial court relying upon an unreported decision has come to the

conclusion that there is averment in the complaint to the effect that the third accused is also a partner and that, therefore, the contention now raised

by the petitioner can be decided only in a full-fledged trial. The above findings of the trial court are assailed by learned counsel for the third

accused by relying upon several reported judgments.

As already stated, it is incumbent upon the complainant to aver in the complaint as to why the accused should be proceeded against for any

offence. Learned counsel for the petitioner relies upon the decision reported in [1998] 1 LW (Crl.) 24 wherein several judgments of the apex court

are relied upon. In the above judgment, it is held thus :

It is, therefore, necessary to add an emphatic note of caution in this regard. More often it is common that some of the partners of a firm may not

even be knowing what is going on day to day in the firm. There may be partners, better known as sleeping partners who are not required to take

part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partnership. They may not know anything

about the business of the firm. It would be travesty of justice to prosecute all partners and ask them to prove under the proviso to Sub-section (1)

that the offence was committed without their knowledge. It is significant to note that the obligation for the accused to prove under the proviso that

the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution

establishes that the requisite condition mentioned in Sub-section (1) is established. The requisite condition is that the partner was responsible for

carrying on the business and was during the relevant time in charge of the business. In the absence of any such proof, no partner could be

convicted. We, therefore, reject the contention urged by counsel for the State.

On considering several decisions of the apex court and other courts, this court has held thus :

In all these decisions it is held clearly that in the context, a person ''incharge'' must mean that the person should be in overall control of the day- to-

day affairs of the company or firm and so the complaint must contain allegations against those directors or partners to make out a prima facie case

against them.

In another decision of this court reported in M. Chockalingam v. Sunaram Finance Service Ltd. [2001] 106 Comp Cas 375; [2000] 1 LW

(Crl.) 16, this court has held thus (378 of Comp Cas) :

There is no averment in the complaint filed by the respondent herein that the petitioner herein, who was the fourth accused, as director of the

company was in charge of, and was responsible to the company for the conduct of the business of the company.

The court also relied upon Sham Sunder and Others Vs. State of Haryana, , wherein it is held thus :

It would be a travesty of justice to prosecute all the partners and ask them to prove under the proviso to Sub-section (1) that the offence was

committed without their knowledge. It is significant to note that the obligation for the accused to prove under the proviso that the offence took

place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the

requisite condition mentioned in Sub-section (1) is established. The requisite condition is that the partner was responsible for carrying on the

business and was during the relevant time in charge of the business. In the absence of any such proof, no partner could be convicted.

Following the above decision, the Supreme Court in State of Haryana v. Brij Lal Mittal [1998] 93 Comp Cas 329 ; [1998] 4 Sup 364 has

held thus (page 333) ;

Simply because a person is a director of the company it does not necessarily mean that he fulfils both the above requirements so as to make him

liable. Conversely, without being a director a person can be in charge of and responsible to the company for the conduct of its business. From the

complaint in question we, however, find that except a bald statement that the respondents were directors of the manufacturers, there is no other

allegation to indicate, even prima facie, that they were in charge of the company and also responsible to the company for the conduct of its

business.

It is, thus, clear from the above decisions that before proceeding against the partner, it must be specifically averred in the complaint that he was

in charge of and was responsible for the business of the company. Except a bare allegation in the complaint that the third accused is a partner,

there is no other averment to implicate the third accused with the offence.

But, learned counsel for the respondent contended that the complainant issued notice to the third accused and that the third accused issued a

reply and that the third accused has not stated in the reply notice that he was not in charge of the business of the company. I am unable to accept

the above contention in view of express language contained in Section 141 of the Negotiable Instruments Act. When a statute directs the

complainant to specifically aver and prove certain fact, the fact that the accused failed to deny the fact in the reply notice cannot be. a ground for

holding that the accused has waived his defence which is conferred on him u/s 141 of the Negotiable Instruments Act.

For the reasons stated above, I hold that the complaint cannot proceed against the third accused in the absence of specific averment in the

complaint that he was responsible and was in charge of business of''the company. The finding given by the trial court against the third accused

cannot be sustained. Therefore, I hold that the petitions filed by the third accused have to be allowed.

In the result, Crl. R. C. Nos. 784, 785, 786 and 787 of 1998 are allowed. The order of the trial court so far as the third accused is concerned

is set aside and the third accused is discharged from the cases Crl. R. C. Nos. 718, 719, 720 and 721 of 1998 filed by the accused Nos. 1 and 2

are dismissed. The order of the trial court so far as the accused Nos. 1 and 2 are concerned is confirmed. The interim stay granted under Crl. M.

Ps. 4807, 4809, 4811, 4813, 5402, 5404, 5406 and 5408 of 1998 are vacated. The trial court is directed to dispose of the above complaint

within two months from the date of receipt of this order. The Registry is directed to despatch the original records along with the copy of this order.