Madras High Court
M/S.Durairaj Mills Ltd vs M/S.Siruvanee Clothing Company on 3 October, 2013
Author: M.Venugopal
Bench: M.Venugopal
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:03.10.2013 C O R A M THE HONOURABLE Mr.JUSTICE M.VENUGOPAL Criminal Appeal No.931 of 2004 M/s.Durairaj Mills Ltd., represented by its Managing Director P.D.Damodaran Pethanaickenpalayam, Pongalur Post,Avinashi Taluk, Coimbatore District. (Amended as per the order of this court dated 19.08.2013 in M.P.No.1/12) ... Appellant/Complainant Vs 1.M/s.Siruvanee Clothing Company rep. By its Partner R.Mohanasundaram, No.66-A, Raja Annamalai Road, Saibaba Colony, Coimbatore-11. 2.R.Mohanasundaram Partner, M/s.Siruvanee Clothing Company No.B2-307, Jasmine, Srivasta Gardern, Mettupalayam Road, Coimbatore 641 034. 3.V.R.Soundararaj, Partner, M/s.Siruvanee Clothing Company, No.3/47, Railway Station Road, Vijayamangalam, Erode District 638 056. ... Respondents Prayer: Criminal Appeal filed under Section 378 of Cr.P.C., to call for the records and set aside the judgment dated 06.04.2004 made in C.C.No.624 of 2002 on the file of the Judicial Magistrate No.1, Coimbatore and convict the respondents. For Appellant : Mr.P.M.Duraiswamy For Respondents : Mr.R.Karthikeyan for M/s.Krishnamoorthy ORDER
The Appellant/Complainant has preferred the instant Criminal Appeal as against the judgment of Acquittal dated, 06.04.2004 passed in C.C.No.624 of 2002 by the Learned Judicial Magistrate No.1, Coimbatore.
2.The Learned Judicial Magistrate No.1, Coimbatore, while delivering the judgment in C.C.No.624 of 2002 on 06.04.2004, has acquitted the Respondents 1 to 3/A1 to A3 under Section 255(1) of Cr.P.C., in respect of an offence under Section 138 of the Negotiable Instrument Act.
3.The case of the Appellant/Complainant is that it was a Textile Mill registered under the Indian Companies Act and carried on business at Pethanaickenpalayam, Pongalur Post, Avinashi Taluk, Coimbatorte District. The first Respondent/A1 was a Partnership Firm and the Respondents 2 and 3/A2 and A3 were its Partners. The Respondents 2 and 3/A2 and A3 were looking after the day-to-day affairs of the First Respondent/A1 Company and carried on all its business transactions. The Respondents 2 and 3/A2 and A3 were signatories of the cheques issued in respect of the First Respondent/A1 Company. The Appellant/Complainant and the Respondents/Accused had business transactions till the year 2001. The Appellant/Complainant was maintaining true and proper account under the head M/s.Siruvanee Clothing Company.
4.According to the Appellant/Complainant, the Respondents/Accused used to purchase yarn from it. The Appellant/Complainant used to supply yarn as per the order and delivered it as per the directions of the Respondents/Accused. The Respondents/Accused used to issue cheques in favour of the Appellant/Complainant for the transactions. As per the books of accounts of the Appellant/Complainant as on 11.01.2001, a sum of Rs.8,25,092/- was outstanding from the Respondents/Accused.
5.The stand of the Appellant/Complainant is that it demanded the Respondents/Accused to clear the outstanding dues and the Respondents 2 and 3/Accused 2 and 3 issued two cheques on behalf of the first Respondent/A1 Company for Rs.5,00,000/- and Rs.3,25,902 each totalling for Rs.8,25,902/- in its favour to discharge the legal liability. The details of the cheques are given below:
Sl.No Date Number Drawn on Amount
1. 15.04.2001 186587 State Bank of India, Industrial Finance Branch, Coimbatore.
Rs.3,25,902
2. 20.04.2001 186588 State Bank of India, Industrial Finance Branch, Coimbatore.
Rs.5,00,000
6.Later the aforesaid two cheques were revalidated by the Respondents/Accused as follows:
Sl.No Date Number Drawn on Amount
1. 15.11.2001 186587 State Bank of India, Industrial Finance Branch, Coimbatore.
Rs.3,25,902
2. 20.11.2001 186588 State Bank of India, Industrial Finance Branch, Coimbatore.
Rs.5,00,000
7.The Appellant/Complainant presented the aforesaid two cheques to its banker, State Bank of India, Industrial Financial Branch, Trichy Road, Coimbatore for collection on 11.05.2002. However, the two cheques were returned unpaid by the bank through their memo dated 11.05.2002 for the reason 'Account Closed'. The banker informed the Appellant/Complainant as regards the dishonour cheques on the same day.
8.The Appellant/Complainant caused a legal notice to the Respondents/Accused on 21.05.2002, calling upon them to pay the entire amount within 15 days of the receipt of the legal notice. The first Respondent/A1 received the notice on 27.05.2002. The second Respondent/A2 received the notice on 24.05.2002. The third Respondent/A3 returned the notice and sent a reply notice dated 05.06.2002, admitting the issue of cheques, but with false averments.
9.The prime stand taken behalf of the Appellant/Complainant is that the cheques in its favour were issued by the Respondents/Accused in order to discharge their legal liability. As a matter of fact, they issued cheques and revalidated the same and later closed the account, with an intention to cheat and defraud it. Therefore, the Respondent/Accused had committed an offence punishable under Section 138 of the Negotiable Instrument Act.
10.Further, the Respondents/Accused were taking part in the day to day business of the first Respondent/first Accused and Respondents 2 and 3/A2 and A3 were signatories of the cheqeus issued on behalf of the first Respondent/A1 Company. Under these circumstances, the Appellant/Complainant had prayed the Trial Court to take cognizance of the complaint and to issue summons to the Respondent/Accused.
11.The Trial Court took the sworn statement of the Appellant/Complainant's Sales Manager and questioned the Respondents/Accused, who pleaded that they were not guilty of the charge under Section 138 of the Negotiable Instrument Act, levelled against them.
12.On the side of the Appellant/Complainant, witnesses P.Ws.1 and 2 were examined and Exs.P1 to 12 were marked. On the side of the Respondents/Accused, D.W.1 was examined and Exs.D1 to D5 were marked.
13.When the Respondents/Accused were questioned under Section 313 of Cr.P.C. in regard to the incriminating circumstances appearing in evidence against them, they denied their complicity in the offence.
14.The Trial Court, on an appreciation of both oral and documentary evidence, interalia came to the conclusion in the concerned Cheque relating to the first Respondent/A1, second Respondent/A2 and third Respondent/A3 (Partners) had to affix their signatures in the revalidated Cheques and only if they sign like that the same would be valid. Further it opined that for the alteration made on behalf of the second Respondent/A2, no document was filed to show that the alteration was made with the consent of third Respondent/A3. Moreover, inasmuch as the third Respondent/A3's signature was not to be found in Exs.P2 and 3 (Cheques), it was to be construed as 'Material Alteration' and resultantly, held that two cheques were not valid and based on the same, a case could not be filed and consequently, acquitted the Respondents 1 to 3/A12 to A3 under Section 255(1) of Cr.P.C.
15.Being dissatisfied with the judgment of Acquittal dated 06.045.2004 in C.C.No.624 of 2002 passed by the learned Judicial Magistrate No.1, Coimbatore, the Appellant/Complainant, as an aggrieved person, has focussed the present Appeal before this Court.
16.The Learned counsel for the Appellant/ Complainant contends that the Trial Court had committed an error in acquitting the accused without properly scrutinizing the oral and material evidence on record.
17.The Learned counsel for the Appellant/Complainant urges before this Court that the Trial Court has failed to appreciate that the Complainant and the first Respondent/A1 Firm had business transactions and in order to discharge the liability, the first Respondent/A1, admittedly issued two cheques for Rs.5,00,000/- and Rs.3,25,902/- respectively signed by the second Respondent/A2 and third Respondent/A3 as Partners and signatories of the Company of the first Accused Company. Indeed, the cheques were dishonoured for the reason 'Account Closed'.
18.The grievance of the Appellant is that in view of the fact that the issuance of the cheques was admitted by the Accused in the letter to the Bank dated 15.10.2001 and also in the reply notice dated 05.06.2002, the presumption under Section 139 of the Negotiable Instrument Act, 1881, gets attracted and also that the Accused had failed to rebut the presumption during the course of the trial of the main case.
19.The Learned counsel for the Appellant/Company projects an argument that the Respondents/Accused had taken a defence that blank cheques were issued for security purpose, which was misused by the Appellant/Complainant and the contention of the Respondents/Accused in this regard is liable to be turned down because of the reason that the issuance of cheques were admitted by the Respondent/Accused and also the write-ups in the body of the cheques were disputed by the Accused.
20.That apart, it is the submission of the learned counsel for the Appellant/Complainant that the Respondents/Accused had not taken steps to get back the cheques from the Appellant/Complainant, even after informing the bank not to validate the cheques.
21.The Learned counsel for the Appellant/Company contends that the Cheques in issue were issued on behalf of the first Respondent/A1 (who is the account holder in the bank) and the second Respondent/A2, as a Partner endorsed the correction effect in the cheques on behalf of the first Respondent/A1. Further, the third Respondent/A3 acted in collusion with the second Respondent/A2 and took a plea that he had not authenticated in alteration of date in the cheques. Unfortunately, these aspects were not taken into consideration by the Trial Court, while acquitting the Respondents 1 to 3/Accused.
22.The Learned counsel for the Appellant/Company contends that the alteration of date in the cheques were made on 25.09.2001 before the expiry of six months validity period and the cheques were presented for collection on 11.05.2002 and in this regard, the third Respondent/A3 was very much aware of the alteration of the date made in the cheques as early as on 15.10.2001.
23.Lastly, the submission of the Learned counsel for the Appellant/Company is that both the Respondents 2 and 3/A2 and A3 were Partners of the first Respondent/A1 and they were looking after the day-to-day affairs of the Company.
24.Per contra, it is the submission of the Learned counsel for the Respondents that the Trial Court had analysed the oral and documentary evidence available on record in a threadbare fashion and also that the Trial Court had rightly observed that the third Respondent/A3's signature was not found in Exs.P2 and P3 cheques and as such, it should be construed as 'Material Alteration' and consequently, held that the cheques were not valid one and therefore, on that basis, a case could not be filed and acquitted the Respondents 1 to 3/A1 to A3, which need not be disturbed by this Court at this distant point of time in Appeal.
25.The Learned counsel appearing for the Respondents/Accused forcefully contends that no invoices were produced by the Appellant/Company to prove a legal enforceable debt and in fact, as per Ex.D2 Deed of Partnership dated 16.09.1996 clause 9, banking accounts shall be opened in the name of Firm in such bank or bank and it shall be operated by any one of the two Partners jointly. Also, in Ex.D3, Retirement Deed of Partnership dated 01.04.1998, it was mentioned that the third Partner 'S.Gunasundari' wanted to retire from the Firm as on 31.03.1998 and on 01.04.1998 onwards, the one and second Partners mentioned in the deed had agreed to constitute themselves into the Partnership to carry on the business with terms and conditions mentioned therein.
26.The Learned counsel for the Respondents submits that the account of the first Respondent/A1 Company was closed at the instance of the bank. However, the core contention advanced on behalf of the Respondent/Accused is that in the two cheques in Exs.A2 and A3 dated 15.11.2001 and 20.11.2001, the date at the right hand side viz., 15.04.2001 was scored out and the date was put as 15.11.2001, which was initialled by the second Respondent/A2 (although in the bottom of the cheque leaf second Respondent/A2 and third Respondent/A3 had affixed the signatures) and the mere signature of the second Respondent/A2 in Ex.P2 after scoring out the original date was nothing but 'Material Alteration' under Section 87 of the Negotiable Instrument Act and as such, Ex.P2 was a void document in the eye of law.
27.Likewise, the Learned counsel for the Respondents/Accused drew the attention of this Court to Ex.P3, cheque, where, originally, the date 20.04.2001 was written, later scored out and 20.11.2011, the date was written by the second Respondent/A2 (Partner of A1) and the second Respondent/A2 had affixed his signature on the left hand side of the cheque. Ex.P3 also according to the learned counsel for the Respondents was a void document because of the 'Material Alteration' made as per Section 87 of the Negotiable Instrument Act, inasmuch as the other Partners' signatures required as per Partnership Deed was not there in the said cheque/cheques.
28.The learned counsel for the Respondents/Accused in support of the contention that Exs.P2 and P3 cheques are void documents because of 'Material Alteration' made therein and in this regard, he relies on the decision of the Hon'ble Supreme Court in Veera Exports Vs. T.Kalavathy reported in (2002) 1 SCC 97 wherein, on the following facts, it is observed and held as follows:
A number of cheques issued to the appellant by the respondent bearing various dates from 9.4.1995 to 30.4.1995, bounced. According to the appellant, requesting for more time to pay the respondent changed the dates of the cheques from 1995 to 1996. The cheques were again presented and dishonoured on 18.7.1996. A legal notice was served on the respondent, who in her reply stated that she had been forced to change the dates against her will. The appellant filed a complaint under Section 138 of the Negotiable Instruments Act. The respondent filed a writ petition in the High Court for quashing the complaint. The High Court held that the six months' validity period of the cheques having expired in October 1995, the cheques could not be revalidated by altering the dates. The High Court further held that the respondent not being a willing party to the said alteration, the cheques were void as contemplated by Section 87. therefore, the High Court quashed the complaint. Allowing the appeal, the Supreme Court.
There is no provision in the Negotiable Instruments Act or in any other law which stipulates that a drawer of a negotiable instrument cannot revalidate it. It is always open to a drawer to voluntarily revalidate a negotiable instrument, including a cheque.
29.Also, he seeks in aid of the decision of this Court in Amirtham Pillay Vs. Nanjah Gownden and Another reported in 1914 (1) Law Weekly 243 and at Page 244, whereby and where under, it is held as follows:
Where it was agreed that a promissory note should be executed by two persons A and B; and that both of them should be jointly liable thereunder, but A alone executed the note.
Held: that the note was not binding even upon A, as he agreed to be liable only if B was also jointly made liable with him.
Sivasami Chetti V. Sevugan Chetti (1) : Followed.
When a material portion of a promissory note is a forgery, the whole note is invalid. There is no difference in principle between alteration alter execution and the creation of a forged note in the first instance.
30.The Learned counsel for the Respondents/Accused seeks an aid of the decision of this Court in Govindaraj & Co. and Another V. The Nedungadi Bank Ltd., etc. and others reported in 2003-2 L.W. 619 at Special Page 620, wherein, it is held thus:
A very reading of the provision of law (S.87 of the Negotiable Instruments Act) would make it clear that material alteration of the negotiable instrument would render the instrument void. In order to avoid the instrument, the alteration should be with regard to the material particulars and should be in such a way which would vary the rights, liabilities or the legal position of the parties ascertained by the deed in its original state or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally expressed. In the instant case, the material alteration was by way of insertion of all the above particulars by erasion and alteration.
31.At this stage, this Court makes a pertinent and useful reference to the evidence of witnesses P.Ws.1 and 2 and D.W.1 for fuller and better appreciation of the merits of the matter in issue.
32.It is the evidence of P.W.1 (Sales Manager of the Appellant) that the first Respondent/A1 had dealings with the Appellant/Complainant through purchase of yarn and this kind of business went on for several years and that the first Respondent/A1 had to pay the Appellant/Company, a sum of Rs.8,25,902/- and the first Respondent/A1's Partner viz., the second Respondent/A2 and the third Respondent/A3 with a view to settle the due amount in their capacity as Partners of the first Respondent/A1 had given two cheques and one cheque dated 15.04.2001 was issued for Rs.3,25,902/- at State Bank of India, Industrial Finance Branch and another cheque dated 20.04.2001 for Rs.5,00,000/- was given in favour of the Appellant/Company and that the Respondents/Accused informed the Appellant to deposit the said cheques into the bank and the Respondents/Accused also informed that they would alter the date of cheques.
33.Added further, P.W.1, in his evidence has added that in the cheque dated 15.04.2001, the date was corrected/altered as 15.11.2001 by the Respondents/Accused and the said cheque was Ex.P2 and the cheque dated 20.04.2001 was altered as 20.11.2001, which was marked as Ex.P3 and when the cheques were deposited for collection, the Appellant was informed that the Respondents'/Accused's bank account was closed on 11.05.2002 and Ex.P4 was the memo returned from the bank. Thereafter, Ex.A5 notice was issued to the Accused through an Advocate and the said notice was issued for all the three Accused and the first Respondent/A1 received the notice on 27.05.2002 and Ex.A6 was the acknowledgment card and the second Respondent/A2 received the notice on 24.05.2002 and the acknowledgment card was Ex.A7 and the third Respondent/A3 had not received the notice and returned cover was Ex.P8. Further, Ex.P9 was the reply sent on behalf of the Accused and Respondents/Accused had issued cheques without possessing sufficient money in their bank account and Ex.P10 was the resolution passed by the Appellant/Company to file a case and Ex.P11 was the statement of account, relating to the first Respondent/Accused.
34.P.W.1 (in his cross examination) had deposed that the case was not filed based on old date dated 15.04.2001 and 20.04.2001 and the case cheques were issued in respect of the balance amount pertaining to 4, 5 orders and they were issued by the first Respondent/Accused and the account was filed before the Court on 25.09.2000 and it was that the statement of account was not filed.
35.The evidence of P.W.2 (Deputy Manager of the Bank) is that the two cheques came for collection in their bank and the two cheques were returned since there were no sufficient funds in the bank account of the first Respondent/A1 and it transpired that since the first Respondent/A1's bank was closed, the cheques were returned and the cheque returned date was 11.05.2002 and the Accused bank account was closed on 22.11.2001.
36.P.W.2 (in his cross examination) had categorically stated that in the call summon, the documents mentioned therein would not be handed over to him and for submission of case documents, an employee was already sent from the Commercial Bank Branch and as per Banking Regulation Act, if an account was opened ordinarily, the same was to be kept for 10 years and if Controller passes any order before that period, the documents could be destroyed and since presently, he was serving in different branches of the bank, he could not say when the Controller had ordered for destruction of the documents.
37.D.W.1 (Assistant Branch Manager, State Bank of India, Commercial Bank Branch), in his evidence had deposed that whether the Accused at the time of their opening of bank account, had stated that only if the second and third Accused affixed their signatures in the cheques, they would have to be honoured, that would be answered by him after looking into the accounts and in a cheque, if date was altered, it would be construed as 'Material Alteration' and at the same time, if a person, who issues the cheques himself alters the date and mere that alteration, if he had put his signature, then, it could not be construed as 'Material Alteration' and in the cheques, who were all affixing their signatures even at the time of alteration of the date, they have to sign and in the cheques, if two persons had signed and if the date was to be altered, then the said two persons should affix their signatures and out of the two persons, if one person alone had affixed the signature in order to altered place, then a cheque would not be a valid one.
38.The evidence of D.W.1 also provides to the effect that on 05.11.2001, their bank informed the Respondents/Accused to close their bank accounts and further informed if they were not closing the bank accounts, the bank would close their accounts and therefore, the Respondents/Accused had closed their accounts and Ex.D1 was the letter issued by the bank in this regard and based on Ex.D1, the Respondents/Accused had closed their bank accounts.
39.It is to be noted that an alteration of a Negotiable Instrument is material, if it might easily affect a person's substantial right whether such result really follows or not and even though the change is abandoned by the person in whose favour it was intended to operate. Moreover, an alteration made before a Bill is completely issued, eg. the alteration by the drawer of a purported place of drawing inserted by an acceptor, who has accepted a Bill before it being signed by the drawer is not 'Material Alteration'. A formal alteration, which is insignificant or superfluous would not affect the instrument in any manner in the considered opinion of this Court.
40.After all, a 'Material Alteration' is one which varies the rights and liabilities, or legal position of the parties ascertained by the deed in its original state or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally expressed, as per the decision in AIR 1961 Madras 251 Rajagopala Iyer Vs. Arudai Velar.
41.If a party consenting to an alteration cannot at a later point of time turn around and say that the instrument suffers from material alteration. Any 'Material Alteration' of the negotiable instrument renders the same void against any one, who is a party thereto at the time of making alteration and does not consent thereto, unless, the alteration was made in order to carry out the common intention of original parties. It is to be borne in mind that the legally permissible completion of an inchoate instrument cannot be construed as 'Material Alteration' of a negotiable instrument, as per decision Hitenbhai Parekh, Proprietor Vs. State of Gujarat 2010 Cri L.J. NOC 455 (Gow.)
42.It is to be pointed out that as per Section 4 of the Indian Partnership Act, 1872 'Partnership' is the relation between persons, who have agreed to share the profits of a business carried on by all or any of them acting for all. As a matter of fact, persons, who have entered into Partnership with one another are called individually 'Partners' and collectively 'a firm' and the name under which their business is carried on is called the 'firm name'. Moreover, as per Section 9 of the Indian Partnership Act, Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things, affecting the firm to any Partner or his legal representative. Section 11 of the Indian Partnership Act, speaks of determination of rights and duties of Partners by contract between the Partners. In respect of ordinary issues/matters, before the majority can take a decision, who is binding on the minority, certain conditions will have to be satisfied. Section 13 of the Act, provides that Partners are entitled to share equally in the profits earned and shall contribute equally to the losses sustained by them. A firm has to indemnify a Partner as regards payments made and liabilities incurred by him in the ordinary and proper conduct of business and in doing such act, in an emergency, for the purpose of protecting the firm from any loss, as would be done by a person of ordinary prudence under similar circumstances. Besides this, a Partner has a duty to indemnify for any loss caused to the firm by its wilful neglect in the conduct of the business of the firm.
43.One cannot ignore a vital fact that as per Section 18 of the Indian Partnership Act, subject to the provision of the Act, a Partner is the agent of the firm for the purpose of business of the firm. To put it differently, the well settled proposition of law is that the Act of the Partner of the firm can very well be construed as an Act on behalf of all the Partners, if the circumstances warrant such conclusion. As per the decision AIR 1982 Mad 51 at Special page 55 Structee Mech India V. Bharat Kumar Pahlajrai and Others, as per Section 19 of the Act, authority of a Partner to bind the firm is enjoined by the Section, which is called 'implied authority'. Indeed, the Hon'ble Supreme Court in AIR 1992 SC 481 - Sanganer Dal and Flour Mills V FC and Others, has observed that it was not the case of Partners that the firm was not carrying the business of supply of dal. Another fact found by the Court was that the Partner was authorised to do business on behalf of the firm. In that factual background, the Hon'ble Supreme Court held that the contract for supply of dal, though entered into by only one of the Partners would be binding on the other Partners of the firm. In addition, the Court held that the subsequent conduct of the Partners also constituted ratification of the contract.
44.It cannot be gainsaid that Section 22 of the Indian Partnership Act, provides that in order to bind an act or instrument done or executed by a Partner on behalf of the firm, the act should be done or the instrument should be executed in the name of the firm, or in any other manner expressing or implying an intention to bind the firm, as per decision of the Hon'ble Supreme Court in AIR 1965 SC 139, special page 140 Devji v Magan Lal R Atharana. When once the act of a Partner is within the four corners of Section 19(1) of the Indian Partnership Act, a Partner can bind his firm and the rest of the Partners of the firm. At this stage, this Court aptly cites the following decisions:
(i) In the decision of the Hon'ble Supreme Court in (2000)1 SCC 1 Anil Hada Vs. Indian Acrylic Ltd. at Special pages 3 and 4, wherein, it is held as follows:
The offender in Section 138 of the Negotiable Instruments Act, 1881 is the drawer of the cheque. He alone would have been the offender thereunder if the Act did not contain other provisions. It is because of Section 141 of the Act that penal liability under Section 138 is cast on other persons connected with the company.
Three categories of persons are brought within the purview of the penal liability through the legal fiction envisaged in section 14. They are: (1) the company which committed the offence, (2) everyone who was in charge of and was responsible for the business of the company, and (3) any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence.
If the drawer of a cheque happens to be a juristic person like a body corporate it can be prosecuted for the offence under Section 138 of the Act. There is no scope for doubt regarding that aspect in view of the clear language employed in Section 141 of the Act. In the expanded ambit of the word company even firms or any other associations of persons are included and as a necessary adjunct thereof a partner of the firm is treated as director of that company.
When the drawer of the cheque who falls within the ambit of Section 138 of the Act is a human being or a body corporate or even firm, prosecution proceedings can be initiated against such drawer. In this context the phrase as well as used in sub-section (1) of Section 141 of the Act has some importance. The said phrase would embroil the persons mentioned in the first category within the tentacles of the offence on a par with the offending company. Similarly the words shall also in sub-section (2) are capable of bringing the third category persons additionally within the dragnet of the offence on an equal par. The effect of reading Section 141 is that when the company is the drawer of the cheque such company is the principal offender under Section 138 of the Act and the remaining persons are made offenders by virtue of the legal fiction created by the legislature as per the section. Hence the actual offence should have been committed by the company, and then alone the other two categories of persons can also become liable for the offence.
If the offence was committed by a company it can be punished only if the company is prosecuted. But instead of prosecuting the company if a payee opts to prosecute only the persons falling within the second or third category the payee can succeed in the case only if he succeeds in showing that the offence was actually committed by the company. In such a prosecution the accused can show that the company has not committed the offence, though such company is not made an accused, and hence the prosecuted accused is not liable to be punished. The provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who fall within the second and the third categories mentioned above. No doubt a finding that the offence was committed by the company is sine qua non for convicting those other persons. But if a company is not prosecuted due to any legal snag or otherwise, the other prosecuted persons cannot, on that score alone, escape from the penal liability created through the legal fiction envisaged in Section 141 of the Act.
(ii)In the decision of Hon'ble Supreme Court in (2010)11 Supreme Court Cases 441 Rangappa Vs. Sri Mohan at special page 442, it is held as follows:
Section 139 is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof.
The reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of preponderance of probabilities:. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. The accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.
(iii)In the decision of the Hon'ble Supreme Court in AIR 2007 Supreme Court 912 Saroj Kumar Poddar V. State (NCT of Delhi) and another, it is held that It is obligatory on part of complainant to make specific allegations as are required by law to make Director vicariously liable and further, it is observed that merely being described as Director is not sufficient.
(iv)In the decision of the Hon'ble Supreme Court in (2009)14 Supreme Court Cases 683 Jugesh Sehgal Vs. Shamsher Singh Gogi at special page 684, it is held as follows:
To constitute an offence under Section 138 Negotiable Instruments Act, 1881, the following ingredients are required to be fulfilled:
(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier;
(iv) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
(v) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act.
(v)In the decision of the Hon'ble Supreme Court in AIR 2004 Supreme Court 4274 Monaben Ketanbhai Shah and another V. State of Gujarat and others, it is held as follows:
Section 141 does not make all partners liable for the offence. Criminal liability has been fastened on those who, at the time of commission of offence, was in-charge of and was responsible to firm for conduct of business of firm. These may be sleeping partners. Primary responsibility is on complainant to make necessary averments in complaint so as to make accused vicariously liable. For fastening criminal liability, there is no presumption that every partner knows about the transaction. The obligation of appellants to prove that at the time the offence was committed they were not in charge of and were not responsible to the firm for conduct of business of firm, would arise only when complainant makes necessary averments in complaint and establishes that fact. The instant case is of total absence of requisite averments n complaint. Therefore, order of Magistrate directing discharge of accused persons, holding that there are no allegations in complaint making out offence against them is proper.
(vi)In the decision of Karnataka High Court in AIR 1982 Karnataka 227 N.Narayanaswamy Vs. Madanlal at special page 228, it is held as follows:
It is not any unsubstantial alteration that becomes material alteration but only such alterations as would adversely affect the interests of the other side can be called material alterations. Filling up the interest column initially left blank in the printed promissory note form was held to be material alteration rendering if void. AIR 1963 SC 746 and AIR 1940 PC 160, Followed.
45.That apart, it is to be noted that unless the condition set out in Section 138 of the negotiable instrument Act are satisfied, no criminal liability can be saddled on the Accused. If there is 'Material Alteration, in the cheque, which renders the instrument void, then in law, no criminal prosecution can be launched based on such claim.
46.Further, whether an instrument or if a bill, the acceptance thereon is materially altered without the assent of all parties liable on it, the instrument is avoided as regards all the parties except any one, who has himself made, authorised or assented to the alteration, and those who have become parties to the instrument subsequent to the 'Material Alteration'.
47.Continuing further, at this stage, this Court rightly points out that for cheque or other negotiable instrument to remain valid despite material alterations, the material alteration must be with the consent of other party and unless it was made towards furtherance of common intention. As a matter of fact, the effect of material alteration on negotiable instrument without the consent of party bound under it was exactly the same as that of cancelling of the instrument.
48.In this connection, this Court pertinently points out that before the Trial Court Ex.P11, Statement of Account copy relating to the first Respondent Company was filed. A perusal of the said documents shows that the same was signed by an Advocate and Notary of Coimbatore. Also, in the said document, it was mentioned True copy/Xerox copy verified with original and attested be me (viz., the Notary Public. Further, the Statement of Account in respect of the first Respondent/A1 Company from the State Bank of India, Commercial Branch, Coimbatore was marked as Ex.P12 before the Trial Court. The said document was signed by the Deputy General Manager, Commercial Branch, Coimbatore-18 of the State Bank of India. It is relevant for this Court to make a significant mention that Section 34 of the Indian Evidence Act speaks of 'Entries in books of account including those maintained in an electronic form when relevant'. An account presupposes the existence of two individuals viz., the Seller and a Purchaser, Creditor and Debtor. Section 34 of the Indian Evidence Act is in conformity with the Law of France and America, is a reproduction of the Roman Law, under which the production of a merchant's or tradesman's books of account regularly and fairly kept in the usual manner, was deemed presumptive evidence (semi pleno probatio) of the justice of his claim. As a matter of fact, Section 34 of the Act, prescribes two factors: (1) that all entries in books of account regularly kept in the course of business are relevant and therefore admissible whenever they refer to a matter into which the Court has to enqire. Such books are not inadmissible because they are not corroborated and (2) the entries in books of account are not evidence perse. The entries offered in evidence are to be in original, subject to the rule of production of secondary evidence when the original cannot be had. Ordinarily the original documents/books of accounts are to be produced/filed. A liability cannot be saddled only on the basis of sole statement of Accounts. If such a statement is produced and if the entries are proved by means of corroboration evidence, then a Court of Law may accept the same. Whether the Defendant/Respondent/Accused takes objection or not, the Plaintiff/Complainant relying on account books should prove (1) that the books are kept in regular course of business (2) the particular entries and (3) shall adduce some corroborative evidence. If it is sought to use the entries as substantive evidence under Section 32, sufficient evidence should be given for the purpose, as per decision Paramananda V. Deb Narayan, reported in 49 CWN 308.
49.Apart from the above, an entry in an account book is an admission by the maker thereof in his own favour. However, it is accepted as evidence only if it strictly complies with the requirements of being kept regularly and in the ordinary course of business, as per decision B.Siddalingappa V. M C Mohan, reported in A 1978 Knt 19.
50.The fact of the matter is that it must be established before the Trial Court that a particular book is a 'Book of Account' and that account should be regularly kept in the course of business. After all, Book implies of collective unity of sheets even at the time of entries come to be made. The entries in an account book written by the agents of a party are relevant as admission against that party (Nanilal V. Nutbehari, 38 CWN 86. Just because the accounts are kept in regular course of business and entries have been made therein, they cannot have any binding nature vis-a-vis, the opposite party against whom a person is now the claim.
51.As far as the present case is concerned, on going through the judgment of the Trial Court in C.C.No.624 of 2002 dated 06.04.2004, it transpires that no documents were produced on what date, the second Respondent/A2 made correction/alteration in the two cheques in issue. Furthermore, the Trial Court had categorically observed that in view of the fact that the third Respondent/A3's signature was not found in Exs.P2 and P3, it was to be construed as material alteration and therefore, the cheques were involved and on that basis, a case could not be filed.
52.In the instant case on hand, there is no dispute in regard to the fact in Exs.P2 and P3, the original dates were mentioned as '15.04.2001 and 20.04.2001' respectively. Later, in Ex.P2, the dated 14.04.2001 was scored out and instead of it 15.11.2001 was written. Likewise, in Ex.P3 the original date 20.04.2001 was scored out and another dated 20.11.2001 was written. In Exs.P2 and P3, on top of the right hand side of the cheques, the second Respondent/A2 had affixed his signature as to the correction/alteration made relating to the date. There is no evidence in the present case before the Trial Court whether the second Respondent/A2 (Partner) and another Partner viz., third Respondent/A3 had signed Exs.P2 and P3 prior to any correction/alteration of the date viz., on the original dates mentioned therein. Also, there is no evidence to show that the alteration of date mentioned in Exs.P2 and P3 were made by the second Respondent/A2 without the consent or concurrence of the third Respondent/A3. In fact, the second Respondent/A2 and third Respondent/A3 were not examined as witnesses before the Trial Court.
53.It is always a question of fact whether the correction/alteration was made by the drawer himself or themselves or whether it was made with the consent of drawer when these facts are disputed and to establish the same, oral and documentary evidence are required to be adduced, in the considered opinion of this Court. Moreover, there is no bar against the voluntary revalidation of a negotiable instrument (including of cheque) by the drawer after the lapse of its validity Period. In the instant case, the alterations of the dates in Ex.P2 and P3 cheques, assume a centre stage and the Respondents' claim that the alteration of the dates attract Section 87 of the negotiable instrument Act, 1881, which speaks of 'Material Alteration'.
54.Added further, if the cheques Exs.P2 and P3 were issued in the ordinary course of business transaction, then it may bind the Partners in the eye of law. Another important fact is that when the Respondents 2 and 3/A2 and A3 (as Partners) when they looked after the day today affairs of the first Respondent/A1 Company and when they were signatories to Exs.P2 and P3 cheques for and on behalf of the first Respondent/A1, then it is not open to them to turn around and take a different/contrary stand.
55.It is to be remembered that both the cheques Exs.P2 and P3 were returned by the Banker not for the reason that only one Partner had affixed his signature in regard to the correction of date in Exs.P2 and P3. Per contra, the cheques were returned and paid by the banker, the State Bank of India, Industrial Finance Branch, Trichy road, Coimbatore, through memo dated 11.05.2002 only for the reason 'Accounts Closed'.
56.Besides the above, this Court is of the considered view that the Appellant/Complainant had marked Ex.P11 statement of accounts copy. There is no evidence in the present case before the Trial Court to come to the conclusion that original account book pertaining to the first Respondent/A1 (relating to Ex.P11 statement of account copy) was filed before the Trial Court. Equally, there is no evidence for Ex.P12, statement account of the first Respondent/A1 company produced by the State Bank of India to show that the original of Ex.P12 was produced, at the time of marking of the said document. Only if the original books of accounts maintained by the Appellant/Complainant in respect of A1 was produced before the Trial Court, then it would have provided an opportunity to the Trial Court to peruse the same and to arrive at a conclusion whether the same was kept in usual and ordinary course of the business dealings/transactions. Likewise, also in regard to Ex.P12, statement of account produced by the State Bank of India, Commercial Branch, Coimbatore, if really, the original Ledger/Accounts Book was produced before the Trial Court, then, the Trial Court would have had the possibility of coming to the conclusion that the original accounts book/ledger was a document which could be relied on under the Bankers Evidence Act. In short, this Court holds that there is no indication in the judgment of the Trial Court in C.C.No.624 of 2002 dated 06.04.2004 that the original Accounts/Ledger book was produced before the Trial Court in respect of Ex.P.12.
57.Be that as it may, on an overall assessment of the entire conspectus of the attendant facts and circumstances of the case in an encircling manner, this Court comes to an irresistible and inescapable conclusion that the trial Court in its judgment in C.C.No.624 of 2002 dated 06.04.2004 had not considered or dealt with the legal issues relating to Section 87 of the Negotiable Instrument Act, 1881, pertaining to 'Material Alteration' coupled with the salient features and relevant provisions of the Indian Partnership Act, 1932, in a proper and real perspective, which ultimately resulted in miscarriage of justice, whereby acquitted the Respondents 1 to 3/A1 to A3. Therefore, to prevent an aberration of justice and to promote substantial cause of justice, this Court interferes with the judgment dated 06.04.2004 made in C.C.No.624 of 2002 passed by the Trial court and sets aside the same. Consequently, the Criminal Appeal succeeds.
58.In the result, the Criminal Appeal is allowed and the judgment dated 06.04.2004 made in C.C.No.624 of 2002 on the file of the Judicial Magistrate No.1, Coimbatore is hereby set aside. The entire gamut of the subject matter in issue is remitted back to the Trial Court for fresh disposal in accordance with law and in the manner known to law. Liberty is given to the Appellant/Complainant and the Respondents/Accused to let in further oral and documentary evidence like examining the witnesses and producing original account books relating to Exs.P11 and P12 from the concerned authorities. The entries in the original account books relating to the first Respondent/A1 may be marked through proper person, who is to be examined in this regard. In this regard, the respective parties and the Trial Court has to bear in mind Section 34 of the Indian Evidence Act, 1872, coupled with the Bankers Book of Evidence Act, as the case may be. The Trial Court is directed to provide enough/adequate opportunities to the respective parties to project their version of their case in accordance with law. It is also open to the Respondents/Accused to examine R2 and R3 (Partners of the first Respondent/A1 Company) as witnesses especially with regard to Exs.P2 and P3, Cheques and other allied or incidental matters connected with the case, to examine other witnesses and also to mark necessary documents through them, if they so desire/if situation so warrants. Liberty is granted to the respective parties to raise all factual and legal pleas touching the case before the trial Court in the manner known to law and in accordance with law. In any event, since the Calender Case No.624 is of the year 2002 and nearly 11 years have been lapsed, in the interest of fair play, justice and even on equity, this Court directs the learned Judicial Magistrate No.1, Coimbatore, to dispose of the main case in C.C.No.624 of 2002, within a period of four months from the date of receipt of a copy of this order and to report compliance to this Court without fail.
03.10.2013
Index : Yes
Internet : Yes
Arul
To
1.The Judicial Magistrate No.1,
Coimbatore.
2.The Registrar (Judicial)
Madras High Court,
Chennai (To watch and report)
M.VENUGOPAL,J.
Arul
Crl.A.No.931 of 2004
03.10.2013