Kerala High Court
M/S.Kasaragod Self Employees ... vs Smt.Mamtha Rathnakara Shetty on 8 November, 2024
CRL.A NO. 2186 OF 2008 1 2024:KER:83620
CR
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MRS. JUSTICE SOPHY THOMAS
FRIDAY, THE 8TH DAY OF NOVEMBER 2024 / 17TH KARTHIKA, 1946
CRL.A NO. 2186 OF 2008
AGAINST THE JUDGMENT DATED 02.06.2008 IN CRL.A NO.372 OF
2004 OF ADDITIONAL SESSIONS JUDGE (ADHOC)I, KASARAGOD (C.C.NO.351
OF 2001 OF CHIEF JUDICIAL MAGISTRATE COURT, KASARAGOD)
APPELLANT/1ST RESPONDENT/COMPLAINANT:
M/S.KASARAGOD SELF EMPLOYEES FINANCING COMPANY(R),
REP BY ITS GENERAL POWER OF ATTORNEY HOLDER
SATHEESHAN.K (46 YEARS),S/O.KRISHNA KOMERA, RESIDING AT
"EAGLES WEST", KUDLU, P.O RAMADASNAGAR, KASARAGOD TALUK
BY ADVS.
SRI.BRIJESH MOHAN
SMT.M.U.VIJAYALAKSHMI
RESPONDENTS/APPELLANT/ACCUSED AND STATE:
1 SMT.MAMTHA RATHNAKARA SHETTY
AGED 37 YEARS, W/O.RATHNAKARA SHETTY, RAJ SHIVAM,,
FLAT NO.306-B-WING, ASHOK VAN, DAISAL EAST., MUMBAI-68.
2 STATE OF KERALA,REPRESENTED BY PUBLIC
PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.
R1 BY SMT.N.S.HASNAMOL - AMICUS CURIAE
R2 BY SRI.M.C.ASHI, PUBLIC PROSECUTOR
THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 08.11.2024,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
CRL.A NO. 2186 OF 2008 2 2024:KER:83620
CR
JUDGMENT
This appeal is at the instance of the complainant in C.C.No.351 of 2001 on the file of Chief Judicial Magistrate Court, Kasaragod, impugning the judgment in Crl.A No.372 of 2004, by which the trial court judgment was set aside, and the accused was acquitted under Section 138 of the Negotiable Instruments Act (for short, 'the NI Act').
2. The complainant-M/s.Kasaragod Self Employees Financing Company(R), represented by its General Power of Attorney holder, filed a complaint under Section 138 of the NI Act against the accused, alleging that the accused, towards discharge of the amount borrowed by her from the complainant firm, issued Ext.P2 cheque dated 15/5/2001 for an amount of Rs.19,78,000/-, assuring that it would be honoured on presentation before the bank, and the complainant presented the cheque before the bank for encashment, but it was returned CRL.A NO. 2186 OF 2008 3 2024:KER:83620 dishonoured for the reason 'insufficient funds'. Though statutory notice was sent to the accused in her correct address, it was returned unclaimed, and the amount was not repaid. Hence, the complaint.
3. After taking cognizance and on appearance of the accused before the trial court, particulars of offence were read over and explained, to which she pleaded not guilty and claimed to be tried.
4. Thereupon, PWs 1 to 3 were examined, and Exts.P1 to P7 were marked from the side of the complainant.
5. On closure of complainant's evidence, accused was questioned under Section 313 of Cr.P.C. She denied all the incriminating circumstances brought on record, and stated that she is a housewife, and she never issued any cheque in favour of the complainant, and Ext.P2 cheque was not drawn from her account. The transaction was between her husband and one Mr.T.V Gangadharan. Her address shown in the notice was not CRL.A NO. 2186 OF 2008 4 2024:KER:83620 correct.
6. DWs 1 to 3 were examined and Exts.D1 and D2 were marked from the side of the accused. Exts.X1 to X3 were marked as witness exhibits.
7. On analyzing the facts and evidence, and on hearing the rival contentions from either side, learned trial court found that, an offence under Section 138 of the NI Act was made out against the accused, and so she was convicted and sentenced under Section 138 of the NI Act, to undergo simple imprisonment for six months and to pay compensation of Rs.15 lakh, with a default sentence of simple imprisonment for three months.
8. Aggrieved by the conviction and sentence, the accused preferred Crl.A No.372 of 2004 before the Additional Sessions Judge (Adhoc)-I Kasaragod. Learned appellate court allowed the appeal, setting aside her conviction and sentence, finding that PW1 had no authority to file the complaint, and the address CRL.A NO. 2186 OF 2008 5 2024:KER:83620 in which the statutory notice was sent, was not the correct address of the accused. Moreover, being an unregistered firm, the complainant company could not have initiated prosecution against the accused, under Section 138 of the NI Act. Aggrieved by the judgment of the appellate court, the complainant has preferred the present appeal.
9. Heard learned counsel for the appellant/complainant and learned Amicus Curiae for the 1st respondent/accused.
10. For the purpose of convenience, the appellant, and 1st respondent shall be referred as the complainant and accused respectively.
11. The complainant is assailing the impugned judgment in Crl.A No.372 of 2004, mainly on three grounds. Firstly, that the appellate court failed to note that, there was a validly executed power of attorney by the managing partner of the complainant firm, in favour of PW1, for filing the complaint. Moreover, PW1 was a partner cum accountant of that firm, and so he was CRL.A NO. 2186 OF 2008 6 2024:KER:83620 familiar with the transaction involved in this case.
12. Secondly, the appellate court did not realise the fact that, though the accused was disputing her address in the statutory notice sent by the complainant, her vakalath shows the very same address as in the notice sent by the complainant. The evidence adduced by PW3-the postman was also there, to show that the statutory notice was sent in the correct address of the accused. The appellate court failed to appreciate the evidence of PW3 in its correct perspective.
13. Thirdly, regarding prosecution under Section 138 of the NI Act by an unregistered firm, the bar under Section 69(2) of the Partnership Act, 1932, (hereinafter referred as 'the Partnership Act') was not applicable, and that fact also was conveniently ignored by the appellate court.
14. The case of the complainant is that, the accused had borrowed Rs.15 lakh from the complainant firm, and towards discharge of that debt with interest, she issued Ext.P2 cheque CRL.A NO. 2186 OF 2008 7 2024:KER:83620 drawn from her bank account. Though the accused was disputing Ext.P2 cheque, the evidence given by PW2 Bank Manager was sufficient enough to show that, it was a cheque drawn from the account maintained by her, in North Malabar Gramin Bank, Kasaragod Branch. The complainant had complied with all the statutory formalities in order to attract an offence punishable under Section 138 of the NI Act, against the accused. Moreover, the presumptions under Sections 118 and 139 of the NI Act will come to the aid of the complainant, to show that Ext.P2 cheque was issued towards discharge of a legally enforceable debt. So, in any view of the matter, the impugned judgment will not stand in the eye of law, and according to him, it has to be set aside, restoring the trial court judgment.
15. Learned Amicus Curiae asserted her argument with respect to lack of authority of PW1 to file the complaint, wrong address shown in the statutory notice, and non-maintainability of CRL.A NO. 2186 OF 2008 8 2024:KER:83620 the prosecution under Section 138 of the NI Act, by an unregistered firm.
16. Let us take up the contentions one by one:-
Regarding the first contention as to the power of PW1, to file the complaint and to give evidence, learned counsel for the accused would contend that, Ext.P1 power of attorney allegedly executed by the Managing Partner of the complainant firm, without the concurrence of other partners, cannot confer any authority on PW1, even though he was a partner of that firm. Moreover, in Ext.P1 power of attorney, the seal of the firm was not seen affixed, and so, it is doubtful whether the power of attorney was executed on behalf of the firm. Learned counsel for the complainant would contend that, Ext.P6 certified copy of the partnership deed will show that Mrs.M.Jayasheela was the managing partner of that firm, and PW1 Mr.K.Satheesan was a partner of that firm. He would further argue that, partner is an agent of the firm for the purpose of its business, and the act of CRL.A NO. 2186 OF 2008 9 2024:KER:83620 the partner would bind the firm. He invited attention of this Court, to the definition of an 'act of a firm' as defined in Section 2(a) of the Indian Partnership Act, which reads as follows:-
"2. Definitions.
xxx
(a) an "act of a firm" means any act or
omission by all the partners, or by any partner or agent of the firm, which gives rise to a right enforceable by or against the firm;"
16. Sections 18,19 and 22 of the Partnership Act are also worth quoting, in this context, which read thus:-
"18. Partner to be agent of the firm.
Subject to the provisions of this Act, a partner is the agent of the firm, for the purpose of the business of the firm.
19. Implied authority of partner as agent of the firm.
(1) Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds CRL.A NO. 2186 OF 2008 10 2024:KER:83620 the firm.
The authority of a partner to bind the firm conferred by this section is called his "implied authority".
(2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
(a) submit a dispute relating to the business of
the firm to arbitration,
(b) open a banking account on behalf of the
firm in his own name,
(c) compromise or relinquish any claim or
portion of a claim by the firm,
(d) withdraw a suit or proceeding filed on
behalf of the firm,
(e) admit any liability in a suit or proceeding
against the firm,
(f) acquire immovable property on behalf of
the firm,
(g) transfer immovable property belonging to
the firm, or
(h) enter into partnership on behalf of the firm.
CRL.A NO. 2186 OF 2008 11 2024:KER:83620
22. Mode of doing act to bind firm.--
In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm."
17. Learned counsel for the complainant, based on the statutory provisions aforestated, would argue that there was no need for concurrence of all the partners for executing Ext.P1 power of attorney, by the managing partner, and the act of the managing partner, authorising PW1 to file the complaint on the strength of the power of attorney, will bind the firm.
18. Learned counsel for the complainant would rely on the decision of the Hon'ble Apex court in Purushottam Umedbhai and Co. v. M/s.Manilal and sons [1961 KHC 506] to reaffirm his arguments in this context. In that case, the power of attorney executed by the Manager of a firm, authorizing the power of attorney holder, to sue for recovery of money due to the firm CRL.A NO. 2186 OF 2008 12 2024:KER:83620 was found perfectly maintainable, as Section 18 of the Partnership Act says that, a partner is an agent of the firm, for the purpose of the business of the firm.
19. In paragraph 10 of Purushottam's case cited supra, we read thus:-
"........ We have no doubt, on a perusal of the Power of Attorney, that it authorized Dunderdale to file the plaint on behalf of the firm Manilal & Sons and also to verify it. It was suggested that this was a Power of Attorney by Manubhai Maganbhai Amin for himself and not for the firm of Manilal & Sons. As we understand the Power of Attorney that is not so. No doubt the Power of Attorney is not signed by all the partners of Manilal & Sons but only by Manubhai Maganbhai Amin. In our opinion, it was not necessary that the Power should have been signed by all the partners of the firm because Manubhai Maganbhai Amin was the manager of the firm. Under S. 18 of the Act a partner is an agent of the firm for the purposes of the business of the firm. Manubhai Maganbhai Amin was therefore the agent of the firm as well as its manager. It is to be noticed that under S. 19(2) of the Act instances are stated where, in the absence of any usage or custom of CRL.A NO. 2186 OF 2008 13 2024:KER:83620 trade to the contrary, the implied authority of a partner does not empower him to do matters mentioned in cls. (a) to (h). It is significant that in these clauses there is no prohibition to a partner executing a Power of Attorney in favour of an individual authorizing him to institute a suit on behalf of the firm. In these circumstances, it cannot be said that at the time the plaint was filed it was defective because the Power of Attorney in favour of Dunderdale was not a Power of Attorney on behalf of the firm and its partners. As the High Court has pointed out, there is on the record now Powers of Attorney on behalf of all the partners of the firm."
20. In the case on hand, the managing partner of the complainant firm executed Ext.P1 power of attorney in favour of PW1, who was a partner cum accountant of that firm, authorising him to file the complaint, give evidence etc..., and PW1 deposed before court that, he was having personal knowledge also, about the transaction involved in this case. So, this Court cannot find any infirmity in the power of PW1, to file the complaint or to give evidence on the strength of Ext.P1 CRL.A NO. 2186 OF 2008 14 2024:KER:83620 power of attorney. Hence, the contention taken up by learned counsel for the accused, that PW1 had no authority to file the complaint or to give evidence, is liable to be turned down.
21. The second contention as to the correctness of address in the statutory notice sent by the complainant, though the accused contended that Ext.P5 notice was not sent in her correct address, as already stated, the vakalath filed by the accused was in the very same address. PW3-the postman categorically stated before court that, even prior to Ext.P5 notice, he had gone to the address shown in that notice, for delivering postal articles and so he was familiar with that address. Though accused produced Exts.D1 and D2 documents, it could be seen that, it was not related to the period of sending Ext.P5 notice. The address in the ration card was of the period, which pertains to five years prior to the sending of Ext.P5 notice, and the address in Ext.D2 was that of two years later to that notice. So, the accused failed to show that Ext.P5 CRL.A NO. 2186 OF 2008 15 2024:KER:83620 notice was not sent in her correct address. True that Ext.P5 notice was not directly served on the accused, and it was returned unclaimed after intimation. Since the complainant was able to show that he had sent registered notice to the accused in her correct address with acknowledgement due, service of notice can be presumed.
22. Learned counsel for the complainant would rely on the decision of the Hon'ble Apex court in M/s.Indo Automobiles v. M/s.Jai Durga Enterprises and others [2008 (3) KHC 815] which says that once notice has been sent by registered post with acknowledgement due in the correct address, it must be presumed that, the service of notice has been made effective. As we have already stated, Ext.P5 notice was sent in the correct address of the accused, and accused failed to show that, during that period, she was not residing in that address. Even if she was out of station for a short while, without giving any intimation to the postal authorities regarding change of address, we cannot CRL.A NO. 2186 OF 2008 16 2024:KER:83620 accept her contention that, notice was not sent in her correct address. So, that contention also will not hold good.
23. Regarding the third contention as to non-maintainability of prosecution under Section 138 of the NI Act, by the complainant firm, as it was an unregistered firm, learned counsel for the accused would contend that, there is clear bar under Section 69(2) of the Partnership Act. Admittedly the complainant firm is an unregistered partnership firm. So, let us consider the impact of the bar under Section 69(2) of the Partnership Act, on the complaint filed by the complainant.
24. Section 69(2) of the Partnership Act deals with the effect of non-registration, which reads thus:-
"69. Effect of non-registration.--
(1) xxx (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm."
CRL.A NO. 2186 OF 2008 17 2024:KER:83620
25. Obviously, that bar is for enforcing a right arising from a contract. Learned counsel for the complainant would rely on a decision of this Court in Abdul Gafoor v. Abdurahiman [1999 KHC 394 : MANU/KE/1020/1999], which says that, the effect of non-registration of the partnership firm under Section 69 of the Partnership Act is applicable only to cases involving civil rights, and it has no application to criminal cases. That was a case under Section 138 of the NI Act, and this Court found that, the prosecution under Section 138 of the NI Act by an unregistered partnership firm was not hit by Section 69(2) of the Partnership Act.
26. A three judge Bench of the High Court of Andhra Pradesh in the decision Dr.A V Ramanaiah and another v. M Shekhar and others [2007 SCC Online AP 1261] observed that Section 138 of the NI Act is a penal provision the commission of which entails prosecution and conviction on proving of guilt. Once the offence under Section 138 of the NI Act is completed, the CRL.A NO. 2186 OF 2008 18 2024:KER:83620 prosecution can be initiated for bringing the offender to penal liability. So there is no point in stretching the bar under Section 69(2) of the Partnership Act, which is in the nature of temporary bar to the suit, to the complaints under Section 138 of the NI Act, which is in the nature of penal provision, with the object, to inculcate faith in banking transactions. The term suit under Section 69(2) of the Partnership Act cannot be stretched for securing immunity from criminal prosecutions and the bar under Section 69(2) of the Partnership Act, is liable to be confined only to enforcement of contractual obligations. The bar under Section 69(2) of the Partnership Act is intended to prevent an unregistered partnership firm to enforce a right arising out of a contract against a third party, and it is not intended to create any such bar, for the purposes of enforcing rights arising out of statutes, or for invoking the protection available under any other statute. So, it has to be held that prosecution of an accused under Section 138 of the NI CRL.A NO. 2186 OF 2008 19 2024:KER:83620 Act by an unregistered firm is not hit by the bar created under Sub-section 2 of Section 69 of the Partnership Act.
27. Learned counsel for the complainant would rely on the decision of the Hon'ble Apex Court in Kamal Pushp Enterprises v D.R Construction Co. [2000 KHC 1295] to say that the bar under Section 69(2) of the Partnership Act, in relation to an unregistered firm, had no application even to the proceedings before an arbitrator. So according to him, that bar cannot have any effect in a criminal prosecution under Section 138 of the NI Act.
28. In paragraph 9 of Kamal Pushp Enterprises's case cited supra, Hon'ble Apex Court held thus:
" 9. The prohibition contained in S.69 is in respect of instituting a proceeding to enforce a right arising from a contract in any Court by an unregistered firm, and it had no application to the proceedings before an Arbitrator and that too when the reference to the Arbitrator was at the instance of the appellant itself. If the said bar engrafted in Section 69 is absolute in its terms and is destructive of any and every right arising CRL.A NO. 2186 OF 2008 20 2024:KER:83620 under the contract itself and not confined merely to enforcement of a right arising from a contract by an unregistered firm by instituting a suit or other proceedings in Court only, it would become a jurisdictional issue in respect of the arbitrator's power, authority and competency itself, undermining thereby the legal efficacy of the very award, and consequently furnish a ground by itself to challenge the award when it is sought to be made a rule of court."
29. Based on the above discussion, we can safely conclude that a prosecution under Section 138 of the NI Act, even by an unregistered firm, is not hit by the bar under Section 69(2) of the Partnership Act. So, the argument of non-maintainability of prosecution put forward by learned counsel for the accused, is liable to be rejected.
30. Coming to the merits of the case, PW1 would say that the accused had borrowed Rs.15 lakh from the complainant firm, and towards discharge of that debt with interest, Ext.P2 cheque was issued. But the case of the accused is that, she is a housewife CRL.A NO. 2186 OF 2008 21 2024:KER:83620 and she had no transaction with the complainant, and she never issued any cheque in his favour. Her husband was having a loan transaction, with the husband of the managing partner of the complainant firm and he had repaid Rs.14 lakh in that loan. DW2- the husband of the managing partner of the complainant firm was examined from the side of the accused. But he would say that, the accused had borrowed Rs.15 lakh from the complainant firm, and her husband had borrowed Rs.30 lakh from the private limited company, of which DW2 was the Managing Director. DW2 admitted that, DW1-the husband of the accused, had repaid some money towards the loan availed by him, from his company, and the balance is still outstanding. If the accused had not borrowed any amount from the complainant firm, she could have easily called for the registers if any, of the firm, especially when, registers will be kept in the firm for the loan sanctioned. But her attempt was to disown the cheque which was obviously issued from her account. Testimony of PW2 will clearly show that, Ext.P2 cheque was CRL.A NO. 2186 OF 2008 22 2024:KER:83620 issued from her bank account only. The presumptions available under Sections 118 and 139 of the NI Act also will come to the aid of the complainant to presume that Ext.P2 cheque was issued towards discharge of a legally enforceable debt.
31. Adverting to the facts and circumstances as aforementioned, this Court is of the view that acquittal of the accused under Section 138 of NI Act by the appellate court is liable to be set aside. Since an offence punishable under Section 138 of the NI Act was made out against the accused, she is liable to be convicted and sentenced thereunder.
32. The trial court convicted the accused to undergo simple imprisonment for six months and to pay compensation of Rs.15 lakh. That judgment was delivered as early as on 30.10.2004. 20 years elapsed since then. So, the sentence is liable for modification.
33. The Hon'ble Apex Court in the decision Kaushalya Devi Massand vs Roopkishore Khore [2011 KHC 281], held that the CRL.A NO. 2186 OF 2008 23 2024:KER:83620 gravity of a complaint under the NI Act cannot be equated with an offence under the provisions of the Indian Penal Code or other criminal offences. An offence under Section 138 of the NI Act, is almost in the nature of a civil wrong which has been given criminal overtones.
34. Taking into account the purpose and object of the enactment, and imbibing the spirit of Kaushalya Devi's case cited supra, this Court is inclined to give priority to the compensatory aspect of the remedy, over the punitive aspect. The accused being a lady, this Court is not inclined to send her behind the bars, after a long gap of 23 years, from the date of the cheque. But since the cheque amount was Rs.19,78,000/-, the compensation amount shall not be less than that amount. So, this Court is inclined to sentence the accused to undergo simple imprisonment for one day, till rising of court and to pay compensation of Rs.20 lakh to the complainant firm. In default of payment of CRL.A NO. 2186 OF 2008 24 2024:KER:83620 compensation, the accused shall undergo simple imprisonment for six months.
35. The accused shall appear before the trial court, to receive the sentence and to pay the compensation, on or before 31.12.2024. In default, the trial court has to take steps to execute the sentence without further delay.
36. Registry to forward a copy of this judgment along with the trial court records to reach the same before the trial court, before 31.12.2024.
With these directions, the appeal stands allowed.
Sd/-
SOPHY THOMAS JUDGE ska