M/s. Senthil Kumaran Tea Industries and 3 Others vs N. Rajkumar

Pratap Singh, J.—Accused 1 to 4 in C.C. No. 10/93 on the file of the Judicial Magistrate, Coonoor, have filed this petition under S.482, Cr.P.C, praying to call for the records in the above case and quash the same.

Short facts are:

The respondent has filed the private complaint against the petitioners for offence under S.138, of the Negotiable Instruments Act (which I shall hereafter refer to as ''the Act'').

The allegations in it are briefly as follows:

The first accused is a partnership firm. The second accused is the Managing Partner and accused 3 and 4 are partners of the first accused firm. The accused owed a sum of Rs. 42,50,000/-. When, demand was made, the second accused, in his capacity as Managing Partner of the first accused, issued a cheque dated 6.7.92 in favour of the complainant for Rs. 2,50,000/-. The complainant presented the cheque for encashment through his bankers, but it was returned with a memo dated 8.7.92 with an endorsement ''limit exceeds''. The complainant approached the accused and apprised him of the dishonor of the cheque whereupon he was requested by the accused to represent the said cheque after 20.11.92. Accordingly, the complainant presented the cheque for encashment once again. But then again, the cheque was returned with memo dated 27.11.92 with endorsement ''exceeds arrangements''. The complainant issued the statutory notice dated 1.12.92, calling upon the accused to pay the cheque amount within IS days of the date of the notice. Accused 1, 2 and 4 have received the notice on 5.12.92 and the third accused had refused to receive the notice. The first accused is a firm and accused No. 2 is the Managing Partner, representing accused No. 1, and accused 3 and 4 are partners of the firm and hence all the accused are jointly and severally liable to pay the amount to the complainant. Hence the complaint.

Mr. V. Nicholas, the learned counsel appearing for the petitioners, would submit that accused 3 and 4 are partners of the first accused firm, that offence was committed by the first accused firm and that no allegations are in the complaint, as required under S.141 of the Act to fasten criminal liability on accused 3 and 4. In this regard, he pointed out the relevant allegations in the complaint which are in paras 3 and 7. In para 3, it is alleged as follows:

The complainant states that the accused owed him a sum of Rs. 2,50,000/- and when he demanded the repayment of the said amount from the accused the second accused in his capacity as the Managing Partner of accused No. 1, viz., M/s Senthil Kumaran Tea Industries, Sales, Katery Post in the District of Nilgiris had issued a cheque dated 6.7.92 in favour of the complaint for the aforesaid sum of Rs. 2,50,000/-

In para 7, it is alleged as follows:

Accused No. 1, is the firm and accused No. 2 is the Managing partner representing accused No. 1, in his capacity as the Managing Partner. Accused No. 3, and 4 are the partners of the firm and hence all the accused are jointly and severally liable to pay the amount.

Section 141(1) of the Act reads as follows:

Offenses by companies-.(1) If the person committing an offence under S. 138 is a company, every person who, at the time the offence was committed, was incharge 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....

In the Explanation (b) it is stated as follows:

Explantuion. For the purpose of this section-

(b) ''director'' in relation to a firm, means a partner in the Firm

Mr. V. Nicholas, learned counsel for the petitioners, would rely upon a decision of this court in C. Balasundaram v. Prakash, M/s. Rasi Financing Corporation (Crl.M.P. No. 13898 of 1989, order dated 27.11.1990) in which Padmini Jesudurai, J. had an occasion to consider a similar point and the learned Judge has held as follows:

It is obvious therefore, that this petitioner has not signed the cheque. To be made liable, the complaint must first show that the petitioner was incharge of and responsible to the firm at the time when the offence was committed. In the complaint, this averment is lacking. It is merely stated that the accused are liable to pay the dues towards the amount borrowed by them. Chapter XVII of the Act does not deal with the liabillity of the accused to pay the dues. Whatever be the liability of this petitioner to pay the amounts under the cheque, in the absence of any averment in the complaint, that this petitioner was incharge of and responsible to the partnership firm at the time when the offence was committed the complaint cannot be legally sustained as against the present petitioner.

With respect, I am in total agreement with the view of the learned judge. The allegations in paragraph 7 of the complaint, which have extracted above almost similar to the allegations in the case cited above.

Mr. M. Karpagavinayam, learned counsel appearing for the respondent, would submit that considering the totality of the materials available before the court as against petitioners 3 and 4, the complaint can be sustained. He referred to first portion of paragraph 7 of the complaint, which reads as follows:

The complainant states that the accused had issued the said cheque in favour of him with the full knowledge that they had paucity of funds in the account maintained by them with their bankers.

This passage falls short of the requirement of S.141 of the Act. Mr. M. Karpagavinayagam learned counsel, would further rely upon the sworn statement made by the complainant in which he has stated that accused 2 to 4 are brothers, that they are conducting the first accused firm and that would bring the case within the ambit of S. 141 (1) of the Act. He also relied upon the decision m Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi and Others, . in which the criminal liability under the Food Adulteration Act against the directors of the company was considered by the Supreme Court and it has been held as follows:

Reliance has been placed on the words "as such " in order to argue that because the complaint does not attribute any criminal responsibility to accused Nos. 4 to 7 except that they were in charge of and responsible for the conduct of the business of the company. It is true that there is no clear averment of the fact that directors were really in charge of the manufacture and responsible for the conduct of business but the words "as such" indicate that the complainant has merely presumed that the directors of the company must be guilty because they are holding a particular office. This argument found favour with the High Court which quashed the proceedings against the directors as also against the Manager, respondent No. 1

Further, it is observed as follows:

So far as the directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the directors(accused Nos. 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed

The Apex Court made emphasis on the allegations made in the complaint and held that accused 4 to 7 who are directors are not responsible but the third accused working as manager is responsible for the conduct of the business and quashed the proceedings as against accused 4 to 7.

In the instant case, there is no averment whatsover to implicate them by invoking S.141(1) of the Act. It is clear from the sworn statement that accused 2 to 4 are conducting the first accused firm and that it would not be sufficient to bring the case within S.141(1) of the Act. Hence, I am unable to accept the submissions, made by Mr. M. Karpagavinayagam, learned counsel for respondent.

In view of the above, this petition is allowed in part. The proceedings against petitioners 3 and 4 who are accused 3 and 4 in C.C. No. 10 of 1993 pending on the File of the Judicial Magistrate, Coonoor, shall stand quashed and the proceedings against accused 1 and 2 who are petitioners 1 and 2 herein shall continue and the learned Magistrate shall dispose it of in accordance with law.