Sri B.L. Boolani vs M/s. Shah Polymers

A.N. Venugopala Gowda

The Trial Court has convicted the accused, in a case related to the dishonour of cheque/s, under S. 138 of the Negotiable Instruments Act, 1881 (for short, ''the Act'') and sentenced them to pay fine of Rs. 5,05,000/-. Out of the fine amount, when realised, Rs. 25,00,000/- was ordered to be paid to the complainant, under S. 357 Cr.P.C., as compensation. In case of default of payment of compensation amount, the accused were directed to undergo S.I. for 6 months. An appeal filed by the petitioner having been dismissed, this criminal revision petition has been filed. The allegations made in the complaint filed by the respondent against the petitioner and another - N. Bharath Shetty, i.e., the accused in the Trial Court, can be briefly stated as follows:

In connection with the supply of plastic raw materials, complainant raised a bill for Rs. 25,00,000/- and in respect of the same, the accused issued two cheques (Exs.P2 & P3), for payment of Rs. 25,00,000/-. The complainant presented the cheques for encashment. The cheques came to be dishonoured and returned with endorsements "account recalled" (Exs.P4 & P5). Complainant got issued legal notice demanding payment of the cheque amount (Ex.P6). The petitioner disowned the liability and sent reply (Exs.P7 & P8). Since the amount was not paid, a private complaint (Ex.P1), under S. 200 Cr.P.C., was filed.

The accused denied the charge. During trial, for the complainant, Ramegowda/PW-1 was examined, through whom, Exs.P1 to P8 was marked. Accused were examined under S. 313 Cr.P.C. Accused No. 1 - N. Bharath Shetty, got himself examined as DW-1. Petitioner -accused No. 2, got himself examined as DW-2. Son of the petitioner, Vijay Boolani, was examined as DW-3. Sri Somanna, Bank Manager deposed as CW-1. Exs.D1 to D23 and Ex.C1 - Accounts Statement was marked. Learned Trial Judge found that, "there existed a legally enforceable debt as on the date the cheques in question were issued and the cheques so issued having been returned unpaid due to non-availability of funds in the bank account of the Company of the accused, held that the complainant has proved beyond all shadow of doubt that the accused have committed the offence under S. 138 of the Act". As a result, the judgment of conviction and order of sentence, noticed supra, was passed.

Accused No. 2 - B.L. Boolani i.e., the present petitioner, questioned the said judgment of conviction, in Crl.A. No. 576/2011, in the Sessions Court, Bangalore City. It was pointed out that the basic allegation in the complaint being that the alleged transaction was between the complainant and the Company of the accused, the Company having not been made a party to the case, the complaint ought to have been dismissed. The Appellate Court, having found that the documents produced by the complainant go to show that the cheques in question were issued by the accused towards the payment of dues with regard to the supply of plastic raw materials to their Company, the impugned judgment of conviction was confirmed. Without any discussion and/or reasoning, it held that, "law is well settled that Company need not be made as a party to the proceedings under S. 138 of the Act". As a result, the appeal was dismissed.

Sri V.B. Shivakumar, learned advocate for the petitioner, after taking me through the record of the case and the impugned Judgments, by placing reliance on the decision in the case of Aneeta Hada Vs. M/s. Godfather Travels & Tours Pvt. Ltd. - 2012 AIR SCW 2693, contended that the offence, if any, having been committed by the "Company", without the Company also being arraigned as an accused in the case, the prosecution of the Director/s of the Company is impermissible. He submitted that the Courts below, without examining the defence putforth, by keeping in view the correct position of law, have found the petitioner guilty of the offence punishable under S.138 of the Act. He submitted that the impugned Judgments are perverse and illegal.

Appearing for the respondent, Sri K.A. Ariga, learned advocate, supported the impugned Judgments and submitted that the concurrent findings on the facts, arrived at by the Courts below are based on correct appreciation of evidence, which cannot, normally, be interfered with by this Court, in exercise of the revision jurisdiction under S. 397 Cr.P.C. He submitted that in view of the detailed appreciation and re-appreciation of the record of the case by the Courts below, the signatures appearing on the cheques in question having not been disputed and the presumption available under S. 139 of the Act having not been rebutted by the accused, there is no scope for interference. He further submitted that the decision of the Apex Court rendered in the case of Aneeta Hada is prospective in effect and cannot be applied to the instant case, since the complaint was filed on 11.04.2008 and the same was decided on 06.07.2011 and the appeal filed thereafter was also decided on 30.11.2011 i.e., much earlier to the date of decision in the case of ANEETA HADA.

Perused the record. It is unnecessary to take note of several grounds raised in the appeal memorandum filed in the Court below and in this revision and also the reference made by Sri K.A. Ariga to the record of the case i.e., with regard to the merits of the case, since the matter can be decided purely or, the short question of law, based on the authority of ''Aneeta Hada'' (supra). The legal question raised in the matter pertains to the maintainability of the complaint filed against N. Bharath Shetty and B.L. Boolani, Managing Director and Director respectively of ''the company - M/s Canara Polypack Ltd''. In the circumstances, the points for determination are:

(I) Whether the petitioner, a Director of the Company, could have been prosecuted for the offences punishable under the provisions of the Act, without the Company also being arraigned as an accused?

(II) Whether the judgment of the Apex Court in the case of ANEETA HADA (supra) is prospective in effect and cannot be applied to the instant case?

Re:Point No. (I):

PW-1 has stated that the cheques, Exs.P2 and P3, were issued by the accused, in respect of the outstanding amount, for supply of plastic raw materials to the Company of the accused. The cheques - Exs.P2 and P3 were returned vide Exs.P4 & P5, for the reason ''account recalled''. Demand notice Ex.P6 was issued, to which replies vide Exs.P7 & P8 was sent by the Company, on the instructions of its Chairman B.L. Boolani, the petitioner herein. The cheque amount having not been paid, complaint (Ex.P1) was filed.

From the allegations made in the complaint, it is clear that the plastic raw material was supplied by the complainant, to the Company, in which, the accused were the Managing Director and Director respectively. The cheques - Exs.P2 & P3, signed by the accused, was issued on behalf of ''the Company''. The Company to which the raw material was supplied by the complainant and towards the discharge of whose liability, the cheques Exs.P2 & P3 was issued, was not arraigned as an accused in the complaint. Only the signatories to the cheques Exs.P2 and P3 were called upon to pay the amount payable under the two cheques i.e., by issue of a demand notice Ex.P6 and on the failure to pay the amount, complaint (Ex.P1) was filed.

The defence of the petitioner that, ''the complaint is not maintainable in the absence of the prosecution of the company'' was neither taken note of nor answered by the learned Trial Court Judge. The contention when reiterated in the appeal, the learned Appellate Judge has negated the same, without any consideration and reasoning. There is a mechanical or slip-shod approach. Both the Courts below have failed to lawfully address the moot contention relating to the maintainability of the complaint, which goes to the root of the matter.

In the case of Aneeta Hada (supra), the material facts are that, she was an authorized signatory of a company registered under the Companies Act, 1956 and had issued a cheque in favour of the respondent therein, which cheque was dishonoured, as a consequence of which, the respondent filed a complaint against Aneeta Hada, under S. 138 of the Act. In the complaint petition, the company was not arraigned as an accused. However, the Magistrate took cognizance of the offence against the accused - Aneeta Hada and the said order was questioned in the High Court, by filing a petition filed under S. 482 Cr.P.C. The petition having been dismissed, Apex Court was approached for relief, by contending that, as the company was not arraigned as an accused, the legal fiction created by the Legislature in S. 141 of the Act would not get attracted. In view of the difference of opinion between the two learned Judges of the Bench, in the matter of interpretation of Ss. 138 and 141 of the Act, Aneeta Hada Vs. Godfather Travels and Tours Pvt. Ltd., , the matter was referred to the larger Bench. The larger Bench found the gravamen of the controversy was that, whether any person who has been mentioned in S. 141 of the Act can be prosecuted without the company being impleaded as an accused? After noticing the relevant provisions of the Act and after survey of earlier decisions, wherein, legal position concerning Ss. 138 and 141 of the Act, on the issue was considered, it was held as follows:

42.... Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that company is a juristic person and it has its own respectability. If a finding is recoded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicated.

In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution u/s 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in State of Madras Vs. C.V. Parekh and Another, which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal and Another Vs. State of Madhya Pradesh, does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada Vs. Indian Acrylic Limited, is overruled with the qualifier as stated in paragraph 37 The decision in Modi Distilleries, ( AIR 1988 SC 1128) (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove.

(Emphasis supplied by me)

It is to be observed that, in the instant case, both the Courts below have not lawfully considered the material contention relating to the non-maintainability of the complaint, in the absence of ''the company'', in which, the accused were the Managing Director and the Director respectively. The Courts below were expected to lawfully consider the moot contention. The Appellate Judge though has noticed the ground raised in the appeal memorandum relating to the non-maintainability of the criminal complaint, negated the same in a slip-shod manner, noticed supra. The Appellate Judge was dealing with an appeal against judgment of conviction. He was required to deal with all the moot contentions. Since the ground relating to maintainability of the case goes to the root of the matter, the same ought to have been considered meticulously. Learned Judge has not done so.

Having considered the moot contention relating to the maintainability of the complaint, in my opinion, the Judgment rendered by the Apex Court in the case of Aneeta Hada (supra), applies to this case in its entirety.

Re: Point No. (II):

Normally, the law declared by the Apex Court is presumed to be the law at all times. The decision of the Apex Court enunciating a principle of law is applicable to all cases irrespective of the stage of pendency, because it is presumed that what was enunciated is, the law from the inception. There can be no prospective operation, unless it is so indicated in the particular decision itself. In the case of M.A. Murthy Vs. State of Karnataka and Others, , it has been held as follows:

8.......In other words, there shall be no prospective over-ruling, unless it is so indicated in the particular decision. It is not open to be held that the decision in a particular case will be prospective in its application by application of the doctrine of prospective overruling...

In the case of P.V. George and Others Vs. State of Kerala and Others, , Apex Court has held as follows:

The law declared by a Court will have a retrospective effect, if not otherwise stated to be so specifically.

It is to be stated that, in the case of Aneeta Hada (supra), the Apex Court has not declared that the Judgment will have prospective effect. In the absence of such a declaration, it has to be held that the law declared is having retrospective effect and can be applied to all the pending cases, irrespective of the stage of pendency. Point No. (II) is answered against the respondent.

In the result, the revision petition is allowed and the impugned Judgments passed by the Courts below are hereby set aside.