NEPC Agro Foods Ltd. vs Nandagopal Prop. Nandagopal Traders

M. Thanikachalam, J.—The complainant, having failed in its attempt to get a conviction against the accused in C.C.No.1439/1993 u/s 138

of the Negotiable Instruments Act (hereinafter called ''the Act''), has preferred this appeal.

The facts leading to criminal case and acquittal:

(a) The accused/respondent in the course of the business transaction, approached the complainant for financial assistance of Rs.27,00,000/-, to

purchase 6000 bags of wheat at the rate of Rs.450/- per bag, as per the conditions agreed in the letter dated 10.8.1992. Accordingly, a sum of

Rs.27,00,000/- was advanced by bankers cheque dated 11.8.1992. The accused agreed to pay the financial charge of Rs.15 per bag for 15 days

and 50 paise per bag for 15 days as godown rent. In pursuance of the agreement, the accused stored only 5930 bags of wheat and issued 3 bills

also. The accused unable to sell the above said 5930 bags of wheat, requested the complainant to purchase the same at Rs.445/- per quintal, as

per the market rate prevailed in the last week of August 1992. He also further assured, that he would pay the difference of Rs.5/- between the sale

price per bag of Rs.445/- and the price quoted in the bills viz., Rs.450/- along with the financial charges and godown rent, as agreed. In this way,

accounts were verified and it was found that a sum of Rs.1,20,466/- was due, for which the accused issued a cheque bearing No.569611 dated

8.9.1992, drawn on Punjab National Bank, Madras-1, to discharge the sum of Rs.1,20,466/- due and payable by the accused to the complainant.

(b) The complainant presented the cheque for collection through their bank, which was returned unpaid on 12.9.1992 with an endorsement

Insufficient funds"" by the accused bank, which was informed to the accused also. After the information given by the complainant, the accused

instructed the complainant to present the cheque once again and accordingly, the cheque was presented for collection on 9.10.1992, which was

returned once again, for the reason of ""insufficient funds"", thereby showing, the accused had deliberately issued the cheque, knowing fully well, that

he did not have sufficient funds in the bank and also failed to provide sufficient funds in his bank account, to honour the cheque, which is liable to

be dealt with u/s 138 of the Act.

(c) The complainant issued a statutory notice on 13.10.1992, which was received and acknowledged by the accused on 23.10.1992. As per the

notice, the accused ought to have paid the amount, but failed to do so, thereby attracting the penal provisions of Section 138 of the Act. In this

way, a private complaint was lodged before the VII Metropolitan Magistrate, George Town, Madras.

(d) The accused, upon appearance, on questioning, denied the averments, thereby invited a trial, compelling the complainant to make out a case

for punishment. The complainant, to establish the allegations in the complaint, aiming conviction, examined one Natarajan, the Manager, as P.W.1,

seeking support from 16 documents. To eclipse the above materials, neither the accused has been examined nor any documents have been

marked.

(e) The learned Magistrate, weighing the above materials, came to the conclusion, that the complainant failed to prove the legal liability, that the

statutory notice issued was not in accordance with law and that the resolution authorising the manager to sign the complaint was not proper, since

there was violation of Section 193(1)(b) of the Companies Act, 1956. Thus, concluding the complaint came to be dismissed, acquitting the

accused on 13.6.1995, which is challenged in this criminal appeal.

Heard the learned counsel for the appellant, Mr. S.R. Rajagopal and the learned counsel for the respondent, Mr. Abudu Kumar Rajarathinam.

The learned counsel for the appellant submitted that the trial Court had committed a patent error in coming to the conclusion, that there was no

enforceable liability, ignoring the admitted facts as well as the presumption available legally. It is the further submission of the learned counsel for

the appellant, that the trial Court has also failed to appreciate the notice, which had given the cause of action for lodging the complaint, ignoring the

previous information, which is not the base for laying the complaint, giving cause of action. The further submission of the learned counsel for the

appellant, is that the effect of Section 193 of the Companies Act was not properly considered and in this way, committing error, the trial Court had

reached an erroneous conclusion as if P.W.1 had no authority to represent the complainant. On these grounds, conviction is sought for.

The learned counsel for the respondent, opposing the above submissions mainly urged, that there is no valid notice, which was rightly held by the

trial Court and that P.W.1 is not the competent person to prefer a complaint. On these two grounds alone, the acquittal should deserve

acceptance, was the submission on behalf of the respondent/accused.

Ex.P.3 is the cheque dated 8.9.1992 issued by the accused respondent in favour of the appellant/complainant for a sum of Rs.1,20,466/-.

When this cheque was presented for collection, it was returned unpaid on 12.9.1992 with an endorsement ""insufficient funds"" by the accused bank

as evidenced by Ex.P.4. This matter was informed to the respondent/accused by a telegram (Ex.P.5), followed by written communication, which

was also acknowledged by the accused under Ex.P.6. It is the case of the complainant, that on the basis of the instruction by the accused, once

again the cheque was represented on 9.10.1992 for collection and once again the cheque was returned with an endorsement dated 10.10.1992 for

the reason of insufficient funds. As far as the above facts are concerned, there is no dispute.

The cheque belongs to the accused is an admitted one. It is also admitted that he had issued the cheque for a sum of Rs.1,20,466/- favouring

the complainant. Thus, the complainant, being the holder of the cheque in due course, is entitled to certain presumption, also as contemplated u/s

139 of the Act, that the holder of the cheque received the cheque, for the discharge in whole or in part, or any debt or other liability, as mentioned

in Section 138 of the Act. In view of the admitted position, as far as Ex.P.3 cheque is concerned, the appellant/complainant is entitled to a

presumption, unless the contrary is proved. Therefore, it is the duty of the accused/respondent to prove, that there is no legally enforceable debt or

the cheque was not issued for the discharge of any legally enforceable liability.

To prove the above aspect, practically, I should say, there is no evidence of any kind. As said above, the accused has not let in any evidence

and he has also not examined himself as witness. This being the position, certainly the Court has to accept the oral evidence of P.W.1, supported

by the presumption, unless the rebuttal evidence is available in the evidence let in by the prosecution itself, for which there is no material at all.

Unfortunately, the trial Court, in my considered opinion, has proceeded, as if the burden is only upon the complainant to prove about the existence

of the legally enforceable debt, forgetting Section 139 of the Act and committed a grave mistake, which should be rectified by this Court. Even

assuming, that the preliminary responsibility is upon the complainant, in this case, it should be held, by going through the oral evidence of P.W.1,

supported by documents, that the initial burden was fully discharged.

The manager of the complainant company as P.W.1 has categorically deposed about the financial help sought by the accused, entrusting of

5930 bags of wheat and the payment of Rs.27,00,000/- also by the bankers cheque, not disputed. It is the further case of P.W.1, that the accused

respondent had agreed to pay the financial charge of Rs.15 per bag for 15 days and 50 paise per bag for 15 days as godown rent, not challenged.

It is also an admitted position, since not challenged, that the accused was unable to sell the wheat bags and discharge the debt and therefore, he

approached the complainant, who agreed to purchase the wheat at the rate of Rs.445/- per bag, agreeing to pay the difference for Rs.5/- between

the sale price per bag of Rs.445/- and the price quoted in the bills at Rs.450/- along with financial charges as well as rent. In this way alone, the

amount was deduced at Rs.1,20,466.25/-. From the facts spoken by P.W.1, I am unable to find any answer elicited from him, eclipsing the liability

or making the complainant as the person liable to pay any amount to the accused, though a casual suggestion was thrown to P.W.1. If really the

complainant had to pay a sum of Rs.36,348.50, as suggested to P.W.1, nothing would have prevented the accused/respondent to go into the box

and explain, supported by the documents, which he has not done in this case. Therefore, it should be concluded, accepting the oral evidence of

P.W.1, supported by certain admitted facts, that there was legally enforceable liability and only in order to discharge the said liability, the accused

had issued the cheque in question viz., Ex.P.3. This conclusion should have the support of Section 139 of the Act. The trial Court, without

approaching the case properly on the admitted facts, unnecessarily entertained a doubt, which had not arisen spontaneously, had given the benefits

of that unnecessary doubt to the accused, which should be extinguished or erased.

Section 138 of the Act contemplates punishment not for mere return of the cheque or dishonour. It contemplates punishment, if the drawer of

the cheque, after the return of the same, fails to make the payment of the said amount to the payee, within 15 days from the date of the notice, as

contemplated u/s 138(b) of the Act, on the issue of notice demanding for the payment of the cheque amount and it further says, that non payment

of the cheque amount alone gives cause of action to file a criminal complaint and not otherwise. In this way, it is a settled proposition of law, unless

a valid notice has been issued successfully, prosecution could not be maintained.

In this case, the submission of the learned counsel for the respondent/accused, that there was no valid notice appears to be an invalid defence,

which could be seen from the documents produced on behalf of the complainant. It is an admitted position, that the cheque was presented for

collection at the first instance on 8.9.1992, returned dishonouring on 12.9.1992, which was informed to the accused. The above facts are

evidenced by Exs.P4 to P6, not in dispute.

Ex.P.5 is the communication sent by Chandra Mouleeswaran, to the accused informing the dishonour of the cheque, demanding payment of

Rs.1,20,466/- with interest at 24% p.a. within 24 hours. If on the basis of Ex.P.5 alone, the complaint has been filed, certainly it must be an invalid

prosecution, since it failed to fulfill the ingredients required u/s 138 proviso (b) of the Act. On the basis of Ex.P.5, admittedly, the case has not

been filed, showing as if this alone gave cause of action to file the complaint. It is the case of P.W.1, as averred in the complaint itself, that at the

instruction of the drawer, the dishoured cheque was represented once again on 9.10.1992, which was also returned on account of ''insufficient

funds'' on 10.10.1992, which is evidenced by Ex.P.7 also. A cheque could be represented many times within the period of its validity. After

presentation and return, if a statutory notice has been issued, probably only thereafter, the representation and further cause of action on that basis

should be described as not maintainable, in view of the fact, the first notice itself has given cause of action for filing a criminal complaint. In this

case, the communication sent on behalf of the complainant, does not come within the ambit of Section 138(b) of the Act and therefore,

representation of the cheque is not barred. When P.W.1 has given evidence, as averred in the complaint also, upon the instruction given by the

drawer, the cheque was represented, the same was not challenged by the examination of the accused. In this way, it should be held, the second

representation of the cheque for collection, is valid in the eye of law. After the second representation also, the cheque was not honoured. After the

return, the complainant has issued a legal notice on 13.10.1992 as evidenced by Ex.P.2, which is in conformity with the provisions of law, no

dispute. It is the case of the prosecution that this notice was acknowledged by the accused respondent on 23.10.1992 under Ex.P.13, which was

confirmed by the communication from the Chief Post Master as seen from Ex.P.14. For this notice, no reply has been issued.

On the other hand, it is the case of the accused respondent, that he has not received the original of Ex.P.12., whereas, except Ex.P.5, he has

not received any other notice. Thus, admitting the acknowledgment of Ex.P.5, which is not in conformity with Section 138(b) of the Act, an

attempt was made to say that the notice is invalid. Further in the acknowledgment, the date is typed as 13.10.1992 i.e. the date of issue of the

notice, where the accused had acknowledged. For this, an explanation was given by P.W.1, which is quite acceptable, ignoring the mistake viz.,

that while preparing the acknowledgment, while sending the notice, the date was typed as 13.10.1992. To come to a definite conclusion that the

notice was received by the accused, there is ample evidence such as the certificate issued by the Postal Department. Not only that, as spoken by

P.W.1 under Ex.P.16, Ex.P.12 notice was sent to the accused giving the correct address also. Therefore, it should be presumed, that the

complainant has issued a notice to the accused in writing on 13.10.1992, which was received and acknowledged by the accused on 23.10.1992.

If really the accused has not received the original of Ex.P.12 under Ex.P.13, he should have produced the document received by him under

Ex.P.13, by examining himself also, as witness exposing that fact. Unfortunately, for the accused and fortunately for the complainant, he has not

gone into the box, to say that he has not received Ex.P.12 under Ex.P.13, whereas he has received some other communication. In this way,

accepting the oral evidence of P.W.1, P.W.13, P.W.14, and P.W.16, I should conclude that, there was a valid notice dated 13.10.1992, since it

is in conformity with Section 138(b) of the Act. It is not the case of the accused respondent that Ex.P.12 is invalid, since it is not in conformity with

the requirements of the Act. Unfortunately, the learned trial Judge, for the reasons best known to him, ignoring the acceptable materials available

on record, had entertained a doubt unnecessarily, as if the complainant has failed to prove the valid notice and the said mistake committed by the

trial Court should be erased, by allowing the appeal.

The main thrust of the learned counsel for the respondent was, that P.W.1 has no authority to represent the complainant and therefore, the very

filing of the complaint under his signature is invalid and in this view, the accused is entitled to an acquittal, as held by the trial Court, which is

countered. By going through the provisions of law, as well as the resolution passed by the complainant company, I am unable to subscribe my view

to the above said contention.

Section 142 of the Act prescribes conditions for taking cognizance of the offence and they are; the complaint should be in writing made by the

payee or the holder in due course of the cheque. In this case, the cheque was drawn in favour of the complainant and he is the holder in due course

of the cheque also. Thus, the complainant comes within the meaning of payee as well as holder in due course of the cheque. The Section

contemplates, the complaint must be in writing made by the payee. Here, though the complainant is shown as the payee, the complaint was not

signed by the payee, whereas it was signed by P.W.1, the Manager of the complainant company under authorisation, as averred in the complaint

itself. The cause title of the complaint reads:

NEPC AGRO FOODS LTD, 36 Wallajah Road, MADRAS 600 002.

Therefore, it could be said, without contradiction, that the payee alone has filed the complaint in writing, whether it is signed by the person

authorised or not. In this way, in my considered opinion, the complaint comes within the meaning of Section of 142 of the Act and there is no

defect in the complaint also. Therefore, it may not be necessary to go into detail, whether Section 142 of the Act is complied with or not.

However, a doubt should arise whether it is a complaint presented by the payee in writing before the Court, since payee himself had not signed.

Only in this way, we have to see the authorisation or authority said to have been given to P.W.1 .

Ex.P.1 is the extract of the minutes of the meeting of the Board of Directors of the company held on 31.10.1992 at the Registered Office of

the Company, wherein it is resolved authorising Mr. Natarajan, the signatory to the complaint to sign the complaint to be filed against Mr.

Nandagopal, the accused before the concerned court. The Board of Directors are competent to resolve authorising a person to sign a complaint,

not challenged. P.W.1 has spoken about the resolution passed authorising him to file the complaint on behalf of the company. It appears, marking

of Ex.P.1 was objected to. By going through the cross examination, I am unable to find even any suggestion challenging the resolution passed by

the Board of Directors authorising P.W.1 to sign complaint and to present criminal complaint before the court concerned. Therefore, it could be

safely concluded, that the resolution passed by the Board of Directors of the Company on 31.10.1992 authorising Natarajan is not under

challenge. Thus, P.W.1 deriving authority on the basis of the resolution passed by the Board of Directors, is competent to sign the complaint on

behalf of the payee/complainant, thereby favouring the requirements of Section 142 of the Act also. Hence, I should conclude, the complaint filed

by the payee, signed by the authorised person on the basis of resolution, should be held as valid.

Section 193 of the Companies Act guides how minutes of all proceedings of every general meeting should be maintained, wherein it is said that

the minutes should be entered in books kept for that purpose with their pages consecutively numbered. Further 193(1-B) of the Companies Act

says, in no case, the minutes of proceedings of a meeting shall be attached to any such book as aforesaid by pasting or otherwise. In the case on

hand, the resolution passed is typed in the loose sheets and stitched as a bound book, thereby showing it is not entered in the book kept for that

purpose, with their pages consecutively numbered. Thus, it is seen there is some violation in maintaining the minutes of the proceedings of the

general meetings and of Board and other meetings. Taking advantage of this fact, a strenuous argument was made on behalf of the respondent that

on the basis of Ex.P.1, which was not in accordance with Section 193 of the Companies Act, it should be held that since the minutes are not

properly maintained, it will not confer any power upon P.W.1 to maintain a complaint. Though the argument was so attractive at the first instance,

deep consideration of Section 193 and the subsequent sections which give presumption to the resolution, fails to convince me, to affix my seal of

approval to the above said contention of the learned counsel for the accused.

In order to invalidate, if possible the resolution passed by the complainant company, as evidenced by Ex.P1, my attention was drawn to a

decision of this Court in V.J. Balasundaram v. New Theatres Carnatic Talkies 1993 Comp Cas (77) 324 and another decision in Micrometrics

Engineers Pvt. Ltd. v. S. Munusamy (Mad) 465. In both the cases, when the resolution passed by the Board of Directors was challenged on the

ground that Section 193 of the Companies Act is not complied with, it is held that no presumption is available u/s 195 of the Companies Act, when

the presumption is not available u/s 193 of the Companies Act, since the said Section was not complied with. It is also true, that in both the cases,

it is held, only if minutes book are maintained in accordance with the provisions of Section 193 and original minutes book is not produced, by

producing the copy alone, no presumption could be claimed either u/s 193 or u/s 195 of the Companies Act. In the case on hand, as rightly

submitted by the learned counsel for the appellant, the resolution passed by the Board of Directors, which is evidenced by Ex.P.1 spoken by

P.W.1, not challenged, in the sense, there was no such resolution or that resolution has not authorised P.W.1 to sign in the complaint, which was

filed as contemplated u/s 142 of the Act. Therefore, we have to see whether the non compliance of Section 193 is illegal, whether that itself would

invalidate the resolution passed by the Board of Directors, if it is otherwise proper.

Section 193 of the Companies Act gives guidelines how the proceedings of the General Meetings of and Board and other meetings should be

entered in the book, for which a book should be kept, with their pages consecutively numbered. As adverted supra, it also mandates no pasting or

attaching additional sheets should be done. In the case on hand, it is the not the question of attaching additional sheet or pasting in the book. From

the original resolution, it is seen, all the proceedings were fed in the computer and it seems after taking print outs, they were stitched together,

thereby showing original resolutions were typed in the loose sheets. The procedure adopted by the complainant company appears to be not in

accordance with Section 193 of the Companies Act. Therefore, if at all, if any presumption is sought u/s 194 or 195 of the Companies Act, it may

not be available to the complainant and nothing more.

Section 194 of the Companies Act says that the minutes of the meeting kept in accordance with Section 193 shall be evidence of the

proceedings recorded therein. It does not say, if the proceedings are not recorded as contemplated u/s 193, the resolution itself is invalid. In the

same way, in Section 195 also, when presumption is sought on the basis of Section 193, it is said that presumption to be drawn, where minutes

duly drawn and signed and kept in accordance with the provisions of Section 193. Here also, there is no negative provision invalidating the

resolution on the basis of violation of Section 193. For the violation of Section 193, there is a penal provision and if at all, for that non compliance

of Section 193, company could be prosecuted and nothing more. In this view of the matter, for the non compliance of Section 193, if at all, the

company could be prosecuted and the resolution passed by the company cannot be invalidated, that too especially when the resolution is not

challenged by the contesting party viz., in this case, the accused, who is also not entitled to challenge the same, since he is not in any way

connected with the company affairs. Therefore, the decision relied on by the learned counsel for the accused/respondent may not come to his aid

to non suit the complainant. In this context, we have to see the purpose of the resolution in terms of Section 142 as well as in terms of Section 141

of the Act.

Section 141 of the Act deals the offences committed by companies, wherein directions are given, who is liable to be dealt with in cases of

offences by companies. In Sub-section 2 of Section 141, it is said that if it is proved that the offence has been committed with the consent or

connivance, or is attributable to, any neglect on the part of, any director, Manager, secretary or other officer of the company, they shall also be

deemed to be guilty of that offence and shall be liable for punishment, thereby showing even in the case of company, a manager, who was

responsible for the company, should be dealt with. But at the same time, when the question comes, who is competent to prefer a complaint,

Section 142 says, the Court shall take cognizance of the offence only upon a complaint in writing made by the payee or the holder in due course of

the cheque. Here, we do not find any reference about the company, such as available in Section 141, thereby showing only the payee or the holder

in due course alone is competent to lodge a complaint in writing. In a case of company, the Board of Directors are competent to pass a resolution

and vest power in a person and that person takes the role of payee or holder in due course of the cheque, only for limited purpose, based upon the

resolution and in this way, P.W.1, who was authorised by the Board of Directors, has signed in the complaint, which was filed in the name of

payee or who is the holder of the cheque also. Therefore, there is no violation of Section 142 in this case. Unfortunately, the trial Court, without

considering the effect of resolution, taking the face value of Section 193 of the Companies Act, invalidated P.W.1 as if he is incompetent to

represent the company, which is in my considered opinion legally unsustainable. For the foregoing reasons, I conclude that the complaint filed,

signed by P.W.1, being the authority empowered under Ex.P.1 is well maintainable and the finding contra by the trial Court has to be erased. In

this view, the appeal deserves acceptance and the same is accepted, resulting the following order.

The appeal is allowed and the order of the acquittal of the respondent is set aside and the accused respondent is found guilty u/s 138 of the Act,

for which he is directed to undergo S.I. for six months, in addition to pay a compensation of Rs.50,000/-, failing which directed to undergo three

months.