T. Raghavendra vs K.H. Mumbaraddi

K.N. Phaneendra, J.—The common question of law is raised in all the above said cases. Therefore, all the cases are taken up together and common order is passed.

For the purpose of easy understanding and convenience, I would like to retain the ranks of the parties as per their ranks before the Trial Court i.e., II-JMFC, Bijapur.

One Mr. K.H. Mumbaraddi, Executive Officer, Managing Partner being Proprietor of M/s. Nisarga Vineyard Private Limited lodged seven complaints under Section 200 of Cr.P.C., for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881, (for short ''the Act'') against the accused-the Director, Alpine Wineries Private Limited, 33/1, Sapthagiri Arcade, 2nd Floor, 8th Cross, H.Siddaiah Road, Wilson Garden, Bangalore. The allegations made in the complaint are that, complainant was doing the business of wine manufacturing and the accused-a private limited company is authorized to store and sell the wine from fruits under the name and style of ''Alpine Wineries Private Limited'' situated at Holesalu village, T. Narasipur Taluka, Mysore District. The complainant is also one of the manufacturers of Carbernet Sauvignon Red bulk wine, Shairaz Red bulk wine and Sauvignon Blanc wine, Bulk wine etc. It is alleged that as per the discussion held between the complainant and the accused-company, the authorized signatory of accused-company has placed an order for supply of wines on respective dates. After placing the order, the General Manager by name V.G. Manjunath of Alpine Wineries Private Limited, has acknowledged by passing receipts for having receipt of wines from the complainant. After receiving the above said wines, the accused has issued post dated cheques drawn on Jammu and Kashmir Bank, Mission Road, Bangalore. It is further alleged that on the request of the accused, the complainant has presented said cheques and those cheques came to be dishonoured on ground of ''stop payment'' issued by the drawer of the cheques. The complainant has issued a legal notice on 26.06.2012 on the address of the accused calling upon him to comply with the notice within fifteen days. As there was no reply or compliance within the statutory period, complaints came to be lodged against the accused. The learned Magistrate, after recording the sworn statement of the complainant and after going through the materials on record, was of the opinion that the complainant has made out a case for issuance of summons. Therefore, the Court has issued summons and inspite of summons, as the accused did not appear, it appears, the Court has issued NBW against the accused. At this juncture, the present petitions are filed before this Court.

The main controversy between the parties is that the complaint is bad in law because the company in which the accused-director has been discharging his duties has not been made as a party.

The learned counsel appearing for the accused (petitioner herein) strenuously contends that the company shall be made as party, and unless and until company is made as party, no director is individually liable to answer the misdeeds of the company. Unless company is made as party/accused in the proceedings, the director alone cannot be individually made as party.

Per contra, the learned counsel appearing for the complainant (respondent herein) strenuously contends before the Court that the director who represents the company is made as party and actually, he was in the helm of affairs. He had all dealing with the complainant and in fact, he actually issued the said cheques on behalf of the company in favour of the complainant. All the cheques bears his signature. Though there is some discrepancy in describing the accused, but virtually on reading of the over all complaint averments and looking to the surrounding circumstances, it goes without saying that the said company is actually made as a party and the said company is represented by accused-director, who actually was in the helm of affairs. Therefore, too much technicalities should not be taken into consideration in order to overthrow the legal right of a person and in order to deny justice only on the ground of technicalities.

Replying to the above said arguments, learned counsel for the accused further submitted that unless the company is made as a party, the Trial Court may not be in a position to ascertain as to what exactly the role of the director and whether company is liable and ipso-facto by virtue of his position, the director who was managing the affairs of the company, is also vicariously liable. Therefore, distinctly, the director and the company should be made as parties i.e., to say company should be made as accused No. 1, the director or person who was looking after the affairs of the company or managing day to day affairs of the company or who is directly involved in the transaction between the company and the complainant, shall be made as one of the accused persons. Otherwise, the Trial Court may not be in a position to distinctly distinguish between the liability of the director and the company.

In view of the above said rival contentions, this Court has to ascertain whether company has to be made as a party to the proceedings or director in his individual capacity, can be made as a party to the proceedings and whether the discrepancy as narrated by the learned counsel would go to the root of the case so as to throw out the complaint of the complainant itself.

The learned counsel for the petitioner/accused drawn my attention to the pronouncement of three Judges bench of the Apex Court reported in Aneeta Hada Vs. Godfather Travels and Tours Pvt. Ltd., with other connected matters, wherein it is categorically held in the following manner:

"Negotiable Instruments Act, 1881 under Sections 141 , 138 , 7 , 139 , 118 and 140 , Criminal liability for dishonour of cheque drawn by the company, officers of company when may be implicated, extent of deeming fiction in Section 141 , mandatory requirement of impleading company as one of the accused, director or authorized signatory of cheque, prosecution against, without arraigning of company as accused, held, not maintainable. However it is stated in exceptional cases, company would lie in cases where some legal snag, company cannot be proceeded against without obtaining sanction of a Court of law or other authority, trial as against the other accused may be proceeded against if ingredients of Section 138 as also Section 141 are otherwise fulfilled. In such an event, clarified that it would not be a case where company had not been made an accused but would be one where company cannot be proceeded against due to existence of legal bar. A distinction must be borne in mind between cases where a company has not been made an accused and the one where despite making it an accused, it cannot be proceeded against because of a legal bar."

On careful understanding of the above said ruling, it is crystal clear that company is a juristic person therefore, somebody should be there to answer the responsibility of the company. Therefore, it is made clear that the person who has been looking after the day to day affairs of the company or who is having main dealings with the company and who knows the transaction between the complainant and the company can be made as party to answer the liability of the company. The juristic person cannot be sentenced to undergo imprisonment. Therefore, in the event of violation of the judgment of conviction passed by the Trial Court by means of non-payment of any amount, somebody should be there to take responsibility. Therefore, in that context, it is categorically stated that primary liability has to be fastened on the company, thereafter, the other person who is responsible to answer the liability of the company, shall be made as an accused. Therefore, absolutely no distinction can be made with regard to the above said judgment.

The learned counsel for the respondent/complainant has also drawn my attention to another ruling of the Apex Court reported in Gunmala Sales Private Ltd. Vs. Anu Mehta, with other connected matters, wherein certain principles are laid down.

The main principle laid down by the Hon''ble Apex Court is that, if the complaint under Section 138 of the Negotiable Instruments Act is filed against a company and its directors and if a petition is filed for quashing of the proceedings under Section 482 of Cr.P.C., by the director, the High Court may on the facts and circumstances of a particular case, on over all reading of the complaint, may refuse to quash the complaint, because the complaint contain basic averments which are sufficient to make out case against the director.

At Paragraphs-34.3 and 34.4, the Apex Court has observed in the following manner:

"In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of Court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed.

No restriction can be placed on the High Court''s power under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial and roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director."

On reading of the above said two decisions and looking to the cause-title of the said case, it is very clear that in the said case company was made as party as an accused and some of the directors were also made as parties. But there are only certain bald allegations against the directors, that directors were incharge of responsibility of the company. At that relevant time, nothing has been elucidated in the complaint about the involvement of the directors with regard to the day to day affairs of the company. In that context, the Apex Court has observed that while dealing with such matters, the Court has to look into the entire gamut of the case of the complainant. On reading of complaint averments, documents produced and materials available to the Court, the Court has to find out whether the allegations made against the director are sufficient to cover the offence under Section 141 of the Act. Even though there is no detail averments with regard to the liability of the director, in that context, the Apex Court has held that the director has to show that he has no business with the company particularly, with reference to the said transaction. Therefore, ultimately, the Court holding that against some of the directors, the complainant has made out a ground to proceed against and consequently, quashed the proceedings against some directors.

Looking to the above said two decisions, it is clear that the Court has to in detail go through the materials on record and find out whether the company has been made as a party or without making the company as a party one of the director is extensively and individually made as party so as to claim individual liability against the director, without claiming any right against the company. On the basis of the entire materials on record, if the Court is of the opinion that the company is liable, as also stated in the complaint and for the purpose of representing the company, the director is made as a party, that company is not made as a separate party in that eventuality, the Court can consider that the company is made as party and the company is represented by its director, who has been looking after the day to day affairs of the company. If such conclusion can be drawn on the basis of the material on record, then quashing of the proceedings does not arise. Therefore, it goes without saying that principles that can be culled out from the above said two rulings are that it is the bounden duty of the Court to ascertain, for what purpose the legal fiction has been created under Section 141 of the Act. It is also the duty of the Court to imagine the fiction with all real consequences and instances, unless prohibited from doing so. That apart, use of the term ''deemed'' in Section 141 of N.I. Act has to be read in its context and further, the fullest logical purpose and import are to be understood. It is because, in modern legislation, the term used in the provision has been used for manifold purposes. The object of legislature has to be kept in mind for the purpose of advancement of substantial justice in respect of quashing the proceedings or terminating the proceedings only on technicalities.

Before adverting to the facts of this case, let me have cursory reading of Section 141 of the Act. Section 141 of the Act reads thus:

"141. Offences by companies.--(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge 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:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

[Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.--For the purposes of this section,--

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.]"

The above said provision, if meticulously read, it clearly indicates that if the person committing the offence is a company, then, every person who at the time offence was committed, was incharge of and was responsible to the company for the conduct of the business of the company, as well as company, shall be deemed to be guilty of the offences and shall be liable to be proceeded against and punished accordingly. Further interpretation of the provision is not necessary so far as this case is concerned. This provision imposes responsibility on the Court to first find out whether the company is liable and secondly, who is the person at the time of commission of offence was incharge and was responsible for the conduct and business of the company. Therefore, two aspects have to be considered by the Court that, company has committed offence and somebody is there to answer the liability of the company. Though in the said provision, it is not made clear that the company has to be made as an independent party, but it is imperative that the company shall be made as party to the criminal proceedings. If the company is made as party, somebody should be there to represent or answer the liability of the company. The answer to who were all the persons liable to answer on behalf of the company, is depending upon the facts and circumstances of each case. Particular person may be looking after the affairs of the company, any one of the director may be entrusted with the work to look after the affairs of the company, any one of the director may be having direct link with regard to the offences committed by the company, so far as the particular case is concerned. Therefore, the Court has to analyze the factual aspect to find out whether there was any liability fixed on the company and thereafter, one of the director who was root-cause for the offence being committed by the company, is also made as a party to the proceedings. Therefore, in this background, now let me consider the factual matrix of this case.

As I have already narrated, in the complaint it is categorically stated that the complainant has transaction with the company and on behalf of the company, Manager has placed orders and in fact, the present accused has issued post dated cheques for repayment of the alleged debt on behalf of the company. Therefore, it clearly establishes that the accused under his individual capacity has not issued those cheques, but it is on behalf of the company he has issued those cheques. Therefore, it goes without saying that the company is the principal offender and the director, who actually issued cheques was having knowledge of the transaction between the company and the complainant and knowing fully well that the company is liable to pay such amount to the complainant, has issued those cheques. By virtue of Section 139 of the Act, at the initial stages, the Court has to presume those cheques, unless presumption is rebutted, it is to be presumed that it was issued for repayment of any debt or partial debt in favour of the complainant. In view of the facts narrated in the complaint, it is clear that the accused-director has not issued cheques in his individual capacity, but only as a director to answer the liability of the company, those cheques have been issued. Prior to the issuance of such cheques, it is seen that notice was issued by the complainant in the similar passion i.e., under the nomenclature as "The Director, Alpine Wineries Private Limited, 33/1, Sapthagiri Arcade, 2nd Floor, 8th Cross, H.Siddaiah Road, Wilson Garden, Bangalore". Though it was addressed to the director in the body of the notice, it is categorically stated that the accused-company is "authorized to store and sell wines from fruits under the name and style of Alpine Wineries Private Limited situated at Holesalu village, T. Narasipur Taluk, Mysore District. It is also stated that cheques issued by the accused were dishonoured due to ''stop payment'' and after issuing notice, complaints were filed. In the notice also, transaction between the complainant and the company i.e., Alpine Wineries Private Limited has been extensively spoken to. In the complaint also primary liability has been fixed on the company and it is stated that on behalf of the company cheques were issued by the director. Therefore, it goes without saying that primary liability is fixed on the company and the director has been made as a person who is answerable on behalf of the company.

Petitioner''s counsel is right in contending that the cause-title is not properly constituted. Though the cause-title contain in the manner,- "The Director, Alpine Wineries Private Limited, 33/1, Sapthagiri Arcade, 2nd Floor, 8th Cross, H.Siddaiah Road, Wilson Garden, Bangalore", he contends that director is made as individual party to the complaint. But I fail to understand that how a director is made as extensive party to the proceedings when the complaint averments categorically state that the company is liable for the said transaction. Therefore, it may be a minor mistake committed by the counsel who was appearing for the complainant before the Trial Court. Instead of putting the name of the company in the first line and putting the name of the director underneath the said company, nomenclature as ''director'' is mentioned in the first line and company''s name is mentioned in the second line. It is argued by the learned counsel that, on an overall looking of the transaction between the parties and allegations in the complaint as well as in the notice, it is crystal clear that liability is on the company. Therefore, the Court has to deem it proper and held it as correct that the company - Alpine Wineries Private Limited, is made as a party to the proceedings and because accused-director was looking after the affairs of the company, he actually issued cheques in favour of the complainant, therefore, he has been made as a representative of the company. It is in my opinion, is a very narrow technical defect in the complaint. It is a mistake committed by the learned counsel appearing for the complainant before the Trial Court. It is seen from the records that complaint was filed at Bijapur, it is in my opinion, a district Headquarter. Of-course, the advocates should be equipped themselves by reading the latest pronouncements of the Apex Court with regard to the point of law before drafting the complaint or before drafting the pleadings. Merely because, some mistake has been committed due to ignorance of such latest pronouncements, the entire case of the complainant should not be thrown out on such defect committed by his counsel. Under the above said circumstances, I am of the opinion that though there is some discrepancy in the array of the party in the complaint, it should be deemed that the company is made as party and the director who was in the helm of affairs of the management of the company can represent the company adequately.

If for any reason, at the time of disposing of the case, if the learned Magistrate comes to the conclusion that the director is liable, it should first fasten the liability on the company. The company is answerable to the judgment rendered by the Court and if only fine is imposed, the complainant can first proceed against the company''s assets and company and only thereafter, individual liability of the director comes into picture. Therefore, with these observations, I am of the opinion that petitioner has not made out substantial grounds to quash the proceedings except only on the particular technical ground. The Apex Court ruling as cited by the learned counsel is aptly applicable to the cases where company is not at all made as a party and only the director has been made as a party and even the company has been made as a party but the role of directors have not been specifically established in the complaint. Under these circumstances only the above said ruling is applicable. After analyzing the materials on record, if the Court is of the opinion that the company is virtually made as party, and one of the directors is representing the company, in that context, the above said rulings cannot be pressed into service. Therefore, for all the above said reasons, I am of the opinion that the above said petitions deserve to be dismissed.

Therefore, I pass the following:

ORDER

"The petitions filed under Section 482 of Cr.P.C., are hereby dismissed."