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Judgment
N.A. Britto, J.—This revision is filed by accused no. 3 in C. C. No. 981/OA/2001/D, and is directed against Judgment dated 6-1-2008 of the learned Additional Sessions Judge, Panaji, upholding the Judgment dated 30-4-2007 of the learned J.M.F.C., Panaji, convicting and sentencing all the accused u/s 138 of the Negotiable Instruments Act, 1881. The facts are hardly in dispute. The complainant(Respondent No. 1 herein) is a Government Company registered under the Companies Act, 1956, which had advanced to accused no.1, a registered firm, of which the said accused nos. 2 and 3 were the partners, under one of their financial schemes a loan and towards the repayment of the said loan, six cheques were issued.
Cheques dated 28-5-2001, 10-6-2001 and 16-7-2001 in the total sum of Rs. 17,36,916/-were signed by the Petitioner/A-3 alone and were drawn on the account of the firm maintained in Canara Bank. Cheques dated 7-6-2001 and 28-9-2001 in the sum of Rs. 15,24,730/-were signed by both the partners and drawn on the account of the firm with Goa State Co-operative Bank.
The cheques were presented for payment by the complainant on or about 30-10-1991, and they were returned dishonoured for want of funds whereupon the complainant sent a demand statutory notice dated 31-10-2001.
The said notice was replied to, by accused no.2 stating that they were ready and willing to clear off the dues and since the amount involved was huge it was not possible to repay 50% of the amount immediately. The complainant was requested to allow the accused some more time to clear off the dues.
The notice was also replied to by the Petitioner/A-3 by his letter dated 10-11-2001. The Petitioner/A-3 in the said reply stated that the letter dated 31-1-2001 was erroneously sent to him and that he was no longer a partner of the firm M/s. Waman Industries and that vide a Deed of Retirement cum Admission Deed of Partnership dated 1-10-2001 he had retired from the partnership and Mrs. Jayashree K. Kulkarni and the continuing partner Shri K.K. Kulkarni had taken over all the assets and liabilities of the firm(both past and present) as per the terms of the said deed, and this fact was already intimated to the complainant and the Banks, and, therefore the cheques bearing his signature and presented after 1-10-2001 will have to be re-validated from M/s Waman Industries as his name was struck off from the records of the Bank. The Petitioner/A-3 also stated that he had contacted the Managing Partner Shri K. K. Kulkarni to bring to his notice the contents of the letter and that the said Shri Kulkarni had informed him that he was negotiating with the complainant for the repayment of his dues, and in fact he had even given a letter undertaking for repayment of their dues. It was also mentioned that he was informed that the said Shri K. K. Kulkarni was sanctioned a personal loan and from those proceeds, he intended to clear a part of the complainant''s amount and that the cheques referred to by the complainant in their letter were submitted to the complainant as per the requirements of the complainant at the time of availing of the funds, and it was expressly intimated and understood that the cheques would not be presented to the Bank without his consent and approval for availability of funds in the Bank. It was further stated that the said Shri Kulkarni had informed the complainant that the cheques should not be deposited, as the required funds were not arranged, and, therefore the intention of the complainant in presenting the cheques were mala fide knowing fully well that the said Shri Kulkarni was making all efforts to clear their dues. At the end of it, the Petitioner/A-3 requested the complainant to contact the said Shri K. K. Kulkarni and Mrs. Jayashree Kulkarni on the stated address. Along with it, the Petitioner-A-3 enclosed a copy of the entries made by the Registrar of Registrar of Firms and also a copy of the Retirement cum Admission Deed of Partnership.
Inspite of the said reply dated 10-11-2001 sent by the Petitioner/A-3, the complainant filed the complaint and in support of it examined their Branch Manager Shri Umesh Pasad Thakur. None of the accused stepped in the witness box. On the contrary, the said Shri K. K. Kulkarni in his statement recorded u/s 313 of the Code stated that he was not liable to pay the amount since according to him, it was advanced by way of tripartite agreement between the firm, complainant and M/s Armour Pharmaceuticals Ltd. He also stated that the subject cheques were issued in blank. At the same time, he stated that he would pay the amount due to the complainant after he recovers it from the Liquidator of M/s Armour Pharmaceuticals Ltd.
The Petitioner/A-3 in his statement u/s 313 of the Code, stated that he had not issued the cheques. He also stated that he retired from the firm on 1-10-2001 and further stated that he was not even aware that the loans were taken by the firm.
Thereafter, the Petitioner/A-3 filed an application dated 7-4-2007 styled as an application u/s 91 r/w Section 254 of the Cr.P.C. and along with the application produced six documents, namely (a) a letter dated 28-2-2001 addressed by accused no.2 to accused no.3; (b) Retirement cum Admission Deed of Partnership dated 1-10-2001; (c) extract of registration certificate of the firms issued by the Registrar of Firms as on 13-10-2001; (d) affidavit dated 23-3-2002 of accused no.2 wherein accused no.2 had stated that upon execution of Deed of Partnership dated 24-7-1998 it was mutually agreed between him and the Petitioner/A-3 that though all the Bank accounts would be operated jointly as per Clause 10 of the Deed of Partnership only he would be operating the Bank accounts and for that purpose the Petitioner/A-3 had agreed to give him blank signed cheques as and when required and agreed, that he would not interfere in the operations of the Bank accounts and accordingly the Petitioner/A-3 had given him blank cheques duly signed by him to be used as and when the need arises and he had issued these cheques duly filled after affixing his signatures and that he had not given the said Petitioner/A-3 any details of the cheques drawn by him; (e) letter dated 27-3-2002 addressed to the Senior Manager of the complainant written by the Petitioner/A-3 by which the said affidavit was sent to the complainant; (f) reply letter dated 10-11-2001.
After hearing both the parties, the learned Magistrate granted the said application. The said application was filed u/s 91 r/w Section 254 of the Code.
The learned J.M.F.C. on the basis of the documents produced came to the conclusion that the Petitioner/A-3 had resigned as partner of accused no.1. At the same time, the learned J.M.F.C. held that the accused no.3 having been a signatory to the cheque and having not established by stepping in the witness box that he was not liable to make the payment of the said cheques he could not escape liability from payment of the amount due on the cheques.
The learned J.M.F.C. with reference to letter dated 28-2-2001 addressed by accused no.2 to the Petitioner/A-3 observed that all Bank accounts would have been operated by accused no.2 w.e.f. 1-3-2001 but the cheques in the present case were all dated 7-6-2001 and 28-9-2001 which were signed by the accused no.3. The learned J.M.F.C. also noted that accused no.3 had not disputed that he had signed the documents for the availment of the loan and since the loan was availed, the clauses of the documents signed by the borrowers made it clear that no change in the constitution of the firm could be made without the consent of the complainant. The learned J.M.F.C. further held that the documentary evidence produced by the Petitioner/A-3 was not sufficient to show that the Petitioner/A-3 was not liable to make the payment of the said cheques.
The learned Additional Sessions Judge decided the appeal primarily relying on Section 32(2) of the Indian Partnership Act, 1932, and placing reliance upon the Judgment of the Apex Court in Syndicate Bank Vs. R.S.R. Engineering Works and Others, wherein the Apex Court held that the liability of the retiring partner as against a third party would be discharged only if there is an agreement made by the retiring partner, with the third party, and the partners of the reconstituted firm, though an agreement could be implied in the course of dealings between such third party and the reconstituted firm, after retirement of a partner and therefore the Petitioner/A-3 would be bound by his liability and could not have been discharged.
Ms. Asha Dessai, learned Counsel on behalf of the Petitioner/A-3 has submitted that the Petitioner/A-3 could not have been held liable unless it was shown that the Petitioner/A-3 was in charge of and was responsible to the firm. It is further submitted that the Petitioner/A-3 had resigned w.e.f. 1-10-2001, a fact which was made clear to the complainant by way of reply to the notice of demand, and, therefore the Petitioner/A-3 had incurred no liability to pay the amount due on the cheques. In this context, Ms. Dessai has placed reliance on a Judgment of this Court in the case of N. N. Gaunekar v. Suresh Prabhu and others(2008 ALL MR(Cri) 238) and Skyline Aquatech Exports Ltd. and others v. M/s. Sachima Agro Industries Pvt. Ltd.(2007 ALL MR(Cri) 3314). In the first case, it was held that the accused having resigned even before the date of the statutory notice had ceased to be an employee of the company and since he was not an employee of the company on the date of commission of the offence, such an accused could not be convicted. It was further held that an accused was required to prove a fact in a criminal case by balance of probabilities and the evidence led by him was more than sufficient to conclude that he had ceased to be in the employment of the Company/A-8. It was thus held that the Petitioner in that case i.e. A-9 who was otherwise a signatory to the cheque at the time when the cheque was issued, he could not be held liable u/s 138 of the Act, since he was not in the employment of the said A-8, and was not required to comply with the statutory notice. In the second case, it was held that a Director would be liable only if at the time when the offence was committed he was in charge and was responsible to the Company for conduct of the business of the Company, and merely because he was a Director, that will not make him liable unless there is specific allegation as to the part played by him in the transaction.
Shri A. R. Kantak, learned Counsel on behalf of the complainant, has submitted that the Petitioner/A-3 did not step in the witness box to prove the documents submitted by him and the burden of proving the said documents was on the Petitioner/A-3. Learned Counsel has further submitted that there was no evidence before the Court to come to the conclusion that the Petitioner/A-3 had resigned or not and as such there was no evidence that he was not liable. He further submits that the said documents were to be excluded. Learned Counsel has also placed reliance on the case of Monaben Ketanbhai Shah and Another Vs. State of Gujarat and Others, .
Admittedly, the Petitioner/A-3 was allowed to produce the said documents by Order dated 24-4-2007 of the learned trial Court and that Order was not challenged by the complainant. One of the documents produced along with it is a certificate issued by the Registrar of Firms which shows that the Petitioner/A-3 retired w.e.f. 1-10-2001 and Mrs. Jayashree K. Kulkarni was admitted as a new partner. The said certificate is a public document and can be relied upon in support of the facts stated therein. The Petitioner/A-3 had also written a letter to the complainant dated 27-3-2002 enclosing therewith an affidavit of the said Shri K. K. Kulkarni/A-2. When the complainant''s witness was asked about the reply dated 10-11-2001 sent by the Petitioner/A-3 to the complainant, the complainant''s witness stated that he was not aware whether any steps were taken by the complainant as regards what was stated in the said reply dated 10-11-2001. When the complainant''s witness was further asked that no steps were taken by the complainant in accordance with the said reply of accused no.3-Exh.41 the complainant''s witness stated that he was not aware of the same. The Petitioner/A-3 had abundantly proved that he had ceased to be a partner of the firm on 1-10-2001 even before the statutory demand notice was sent by the complainant on 30-10-1991. The matter of exhibiting documents is a matter of formality. In case, they were required to be exhibited, that was the function of the Court and not of the accused. In the case at hand, the documents were allowed to be produced by the Petitioner/A-3 u/s 354 of the Code which the Petitioner/A-3 was entitled to produce. The said documents show that the Petitioner/A-3 had resigned from the firm w.e.f. 1-10-2001 i.e. even before the statutory notice was sent.
The documents produced clearly show that the firm was reconstituted and the Petitioner-A-3 was discharged of his liability even towards the complainant. The same having been taken over by Smt. J. K. Kulkarni. The liability, if any, with reference to Section 32(2) of the I. P. Act, 1932 might have been a civil liability but was the Petitioner/A-3 criminally liable? The Petitioner/A-3 would have been criminally liable only in case he had committed the offence and no offence could be said to have been committed by him after his resignation on 1-10-2001. This is a fit case to follow the ratio of N. N. Gaunekar v. Suresh Prabhu and others(supra).
This Court in Shri William Rosario Fernandes v. M/s. Cabral & Co. and another by Judgment dated 15-9-2006 in Criminal Appeal No. 22 of 2005 after placing reliance on several decisions of the Apex Court has come to the conclusion that an offence u/s 138 of the Act is completed, on the failure of the drawer of the cheque to comply with the notice of demand as contemplated by proviso (b) of Section 138 of the Act. In other words, when the statutory demand notice was sent by the complainant on 30-10-1991 it was to be complied with by the firm and its partners, i.e. accused no. 2 and the said Smt. Kulkarni and not by the Petitioner/A-3 who had already ceased to become a partner of the firm to which the loan was advanced and for repayment of which the cheques were issued.
The principle as stated by the Apex Court in Syndicate Bank v. R.S.R. Engineering Works and others(supra) and its application to the facts of the case that the Petitioner/A-3''s liability towards the complainant would continue in the absence of an agreement between the complainant and the Petitioner/A-3 cannot be accepted to hold the Petitioner/A-3 guilty for commission of an offence u/s 138 of the Act. That may be a civil liability and not criminal.
In the case at hand, the Petitioner/A-3 had retired with an arrangement with A-2 pursuant to which the firm was reconstituted and the liabilities of the firm were taken over by accused no.2 along with the said Mrs. Jayashree Kulkarni. The complainant was posted with all these developments, and, therefore if at all anybody was liable for any amount on the said cheques which were signed by the accused no.3 also and which were otherwise signed under an arrangement with A-2 as disclosed in the said affidavit of A-2, A-3 would not be liable for an offence under the Act. In other words, the offence was committed by the firm and/or its partners on failure to comply with the demand notice, and, as on the date of completion of the offence the Petitioner/A-3 was not a partner of the firm he was not liable to comply with the notice.
Viewed thus, the Petitioner/A-3 could not have been convicted or sentenced and the conviction/sentence, imposed upon him deserves to be set aside. Consequently, the Criminal Revision Application filed by the Petitioner/A-3 is hereby allowed, and the Petitioner/A-3 is acquitted u/s 138 of the Negotiable Instruments Act, 1881. He shall be set to liberty forthwith in case he is not required in any other case. To that extent the Judgments of the Courts below would stand modified.