M/S. GEETHA BHAGWAN SOAPNUT & PERFUMERY WORKS Vs SRI K.N.PRAKASH @ K.N.JAYAPRAKASH

The judgment of acquittal passed by the Fast Track

Court-II, Bangalore City, in respect of 1st and 2nd

respondents reversing the judgment of conviction

recorded by the Trial Court in a proceeding under Section

138 of the Negotiable Instruments Act, 1881 (''the Act'' for

short) is under challenge in this revision petition.

Briefly stated, the revision petitioner (hereinafter

referred to as ''the complainant'') filed a private complaint

against the respondents herein (hereinafter referred to as

''the accused Nos.2 and 3'') and one K.N.Panduranga

Shetty along with their partnership as 4th accused in

respect of the offence under Section 138 of the Act. The

complaint was registered. Accused were procured. They

pleaded not guilty to the accusation. Evidence was

adduced by both sides. After giving its audience to both

parties, the respondents herein and accused No.1

K.N.Panduranga Shetty were convicted in respect of the

offence under Section 138 of the Act. They took the

matter in appeal before the Sessions Court challenging

their conviction. Complainant also filed a revision

petition for enhancement of the fine amount. Both the

cases were heard by the Fast Track Sessions Judge, Fast

Track Court-II, Bangalore City. The appeal filed by the

accused Nos.2 and 3 in Criminal Appeal No.326/2006

was allowed. They were acquitted of charges. The

revision petition filed by complainant was partly allowed

by modifying the judgment of conviction against first

accused viz., K.N.Panduranga Shetty. The fine amount

was enhanced. Thus, aggrieved complainant is before

this Court challenging the order of the Appellate Court in

acquitting the accused Nos.2 and 3.

Sri.K.R.Anantha Murthy, learned Counsel

appearing for the revision petitioner submits, fourth

accused is a Firm and accused Nos.1 to 3 are its

partners. But, accused Nos.2 and 3 (respondents herein)

had taken a stand that they were not the partners of the

fourth accused/firm. However, during the cross-

examination, they had admitted that they were the

partners of 4th accused/firm. The acquittal order

recorded by the Appellate Court without considering the

cross-examination admission of the accused is liable to

be set aside. The names of accused Nos.2 and 3 are

reflected in the records maintained by the Registrar of

Firms, which is marked as Ex.P28. The accused Nos.2

and 3 are liable to be punished for the offence of perjury.

When the Trial Court had found the accused Nos.2 and 3

guilty on proper appreciation of the evidentiary material,

the appellate court was not justified in acquitting the

accused Nos.2 and 3. The retirement of accused No.2

and 3 was during the pendency of the trial and they had

not complied the mandatory provisions of the Indian

Partnership Act in respect of the retirement of partners

from the firm. They continue to be the partners of the

firm even today. Hence, the judgment of acquittal passed

against accused Nos.2 and 3 has to be set aside and they

are liable to be convicted.

In reply, Sri.H.V.Devaraju, learned Counsel

appearing for respondent Nos.1 and 2/accused submits,

there was no averment in the legal notice or in the

complaint to the effect that the accused Nos.2 and 3 were

in-charge of and were responsible for the firm/4th

accused and its conduct of business at the time offence

was committed. In that view of the matter, as per the

established position of law, the liability of the offence

cannot be fastened against them. They are not the

drawers of the cheque and it is only the drawer of the

cheque, who has to be prosecuted. There was no

evidence to show their actual involvement in the alleged

offence. Retirement from the partnership of the firm is a

matter between the partners, by any stretch of

imagination, they cannot be vicariously held liable for the

offence proved against first accused. As held by the Apex

Court in Saroj Kumar Poddar -vs- State (NCT of Delhi)

and Another reported in (2007) 3 SCC 693, the specific

averment against the partners is a statutory requirement

in a complaint in respect of the offence committed by the

Company under the Act. Rightly the Appellate Court has

clinched the legal controversy and acquitted them and

the revision petition is liable to be rejected.

In the light of the above submission and also on

perusal of the judgment impugned and the LCR, the

moot question is about criminal liability of the

respondents/accused Nos.2 and 3, who claim to have

retired from partnership of fourth respondent/firm.

Very same contention raised before the Trial

Court was brushed aside on the ground that they had

not complied the mandatory requirement of Section 72 of

the Partnership Act by giving a public notice. Thus, they

were fastened with the liability of the offence.

The learned Sessions Judge on a meticulous

analysis of the evidentiary material observes that there is

no documentary proof as to when accused Nos.2 and 3

retired from the Firm, however considers their contention

in the light of statutory provision of Section 32(3) and

Section 72 of the Partnership Act. It was observed that

Section 32(3) does not contemplate that retired partners

liability would continue until issue of public notice. It

was thus held by him that accused Nos.2 and 3, who

have not signed the cheque, cannot be held responsible

for the conduct and business of the company. There was

no averment in the complaint to the effect that accused

Nos.2 and 3 were incharge of day-to-day business of the

Firm. The complainant in support of his contention had

produced a Power of Attorney Deed executed by all the

four partners of the Firm in favour of accused Nos.2 and

3 to prosecute the business of accused No.4. The

learned Judge rightly draws inference that if accused

Nos.2 and 3 were looking after the business, there was

no necessity for the 1st accused to issue cheque on behalf

of the Firm and it was also evident from Ex.P18 that

accused Nos.2 and 3 had retired from the Firm before

July 1982.

The learned Sessions Judge was not inclined to

consider the prayer of the complainant to take action

against accused Nos.2 and 3 in respect of offence of

perjury since in their examination-in-chief evidence

though they had disputed the very fact of their

partnership of 4th accused. It was the opinion of the

learned Sessions Judge that though in the examination-

in-chief evidence filed by way of affidavit they had stated

that they were never partners of A-4, at the beginning of

the cross examination itself they had admitted that they

are the partners of the Firm and the liability for the same

was passed on to the previous Counsel, who represented

them earlier. On facts the learned Judge has found that

the respondents 2 and 3 were not vicariously liable for

bouncing of the cheque.

The cheque in question Ex.P3 bears the

signature of 1st accused Panduranga Shetty and is

signed as the partner of the Firm of Mahalakshmi

Perfumery Works. The legal notice is issued to the

respondents 1, 2 and 3. The complaint presented to the

Court was against three partners and the Firm. The

allegation was, the 1st respondent/accused issued the

cheque in question. The accused Nos.1 and 2 were served

with the legal notice and none of the accused sent reply

to the legal notice and knowing fully well about the

insufficient funds in their accounts, allowed the cheques

to bounce etc., The defence built up during the rebuttal

evidence was, accused Nos.2 and 3 were not at all the

partners of the Firm. However, during cross examination

they admitted that they were partners but retired

thereafter without issuing any public notice of

retirement.

The Apex Court way back in its judgment

reported in (2005) 8 SCC 89 in S.M.S.Pharmaceuticals

Limited Vs. Neeta Bhalla and Another stressed upon

the requirement of the averment in the complaint under

Section 141 of the N.I. Act, that accused was at the time

of offence in charge of and responsible for the conduct of

business of the company. It was observed that a Director

in a Company cannot be deemed to be in charge of and

responsible to the company for conduct of its business.

The principles in the above judgment was

followed in the case of Saroj Kumar Podder Vs State

(NCT of Delhi) & Another reported in (2007) 3 SCC

693.

In the subsequent judgment of the Apex Court

reported in AIR 2015 SC 675 in the case of Pooja

Ravinder Devidasani Vs State of Maharashtra, the

same principle was followed. It was observed at para 20

thus:

" In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the N.I.Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company."

The fourth accused being a Firm by virtue of

Explanation (a) and (b) of sub-section (2) of Section 141

of the Act, the Firm is a Company and its partners are

Directors thus engrossed by Section 141 of the Act.

In the absence of any definite case made out by

the complainant holding the respondents 2 and 3

responsible for the conduct and administration of the

company, the Appellate Court was justified in rejecting

the case against them. It is interesting to note that from

the lower court records the certified copy of an order

passed in Crl.R.P.No.274/2009 c/w Crl.R.P.No.275/2009

c/w Crl.R.P.No.276/2009 between the 1st accused K.N.

Panduranga Setty and the complainant M/s Sri Geeta

Bhagwan Soapnut and Perfumery Works ended in

confirming the judgment of the Sessions Court by scaling

down the fine amount from Rs.7,50,000/- to

Rs.7,40,000/-. That reflects, the other part of the story,

i.e., the 1st accused accepted his conviction in the

connected cases filed by the very same complainant.

In the light of the above, the judgment of the lower

Appellate Court both on facts and question of law cannot

be interfered with.

Hence, the revision petition is dismissed.