Kerala High Court
Mulammoottil Consumer Credit Ltd. vs Sreenivasan on 5 June, 2006
Equivalent citations: [2007]139COMPCAS347(KER), 2006(4)KLT543, AIR 2007 (DOC) 207 (KER.), 2007 (3) AKAR (NOC) 420 (KER.) = 2006 (4) KLT 543
Author: K.A. Abdul Gafoor
Bench: K.A. Abdul Gafoor
JUDGMENT K.A. Abdul Gafoor, J.
1. The unsuccessful complainant is the appellant. His complaint alleging offence punishable under Section 138 of the N.I. Act against the first respondent did not succeed. Therefore this appeal.
2. The appellant company is engaged in advancing loan for purchase of house hold articles. The respondent/accused borrowed Rs. 21,300/- for purchase of house hold articles. Thereafter, towards the borrowal so made, Ext. P2 cheque dated 10.12.1997 was handed over to the company. It was presented to the bank on the next day. It bounced for want of sufficient fund in the bank account maintained by the accused. This is evidenced by Ext. P3 memo dated 19.12.97. Thereupon the amount covered by Ext. P2 was demanded back by issuing a written demand in the form of a lawyer notice, Ext. P5 dated 1.1.1996. This was within the time prescribed in Clause (b) of proviso to Section 138. Ext. P5 was duly acknowledged as is revealed by Ext. P7 by the accused; but it was not responded. Therefore the appellant filed a complaint. The accused raised several contentions including that the company was not properly represented in the case. PW1 did not have authorisation to depose on behalf of the company with regard to the transaction centered around Ext. P2 cheque, it was contended. The accused had also a case that the signature on the cheque was not his. The court below found force in the contention. The complaint was dismissed acquitting the accused. Therefore, this appeal.
3. It is submitted on behalf of the appellant that Ext. P9 resolution passed by the company authorised its Executive Director Vijayan Eapen to represent the company in all its legal action. The said resolution also enabled the said Vijayan Eapen, in case he could not represent in different courts, to delegate that duty to any one of his choice. Accordingly the said Vijayan Eapen executed Ext. P1 authorisation in favour of PW 1 Pius to represent the, company and to depose on behalf of the company. Therefore, there was proper representation and the witness PW 1 was competent enough to give evidence about the transaction on behalf of the company in the proceedings, it is submitted. It is further submitted that, there was no suggestion during the cross examination of PW1 that the signature appearing in Ext. P2 cheque was not that of the accused. But the suggestion was that it was given to somebody else and was procured by the complainant to foist this accusation on the accused. Of course in the statement under Section 313 of the Criminal Procedure Code, the accused has taken a varied stand that the signature on Ext. P2 was not that of his. Had that case been put forward by the accused during the cross examination, appropriate steps could have been taken by the appellant/complainant to prove that the signature on Ext. P2 was that of the accused. Therefore the finding in that regard is also not justified, it is contended.
4. The accused reiterated the contention taken before the court below, at the time of hearing of this appeal as well. It is submitted that Ext. P9 resolution adopted by the company on circulation to its Directors did not contain the signature of one of the directors either assenting to the resolution or dissenting therefrom. Thus it is not even passed on to one among the directors. Therefore it cannot be taken that, that resolution was one duly passed in terms of Section 289 of the Companies Act, to be acted upon in a proceedings like this. When Ext. P9 looses its significance there is no power legally conferred on Vijayan Eapen, the Executive Director to sub delegate the duty enjoined on him to any other person to represent the company in its legal proceedings. So the authorisation in favour of PW1 as per Ext. P1 was without authority. So PW 1 could not have deposed on behalf of the company.
5. It is further submitted that the accused is entitled to take inconsistent stand, in order to defend himself. When in the statement under Section 313 he had categorically stated that he did not sign the cheque, it was incumbent upon the appellant/complainant to let in evidence to prove the signature on Ext. P2 as that of the accused. In the absence of such proof, the finding on that point also cannot be stated to be unjustified. This was the case of the accused.
6. The complaint was filed on behalf of the company. There is no dispute on that point. The company being an incorporated body has to be represented by a corporeal person, any of the Director or a duly authorised agent or employee. The complaint has been signed by one Aniyankutty Varghese. There was no dispute as to his competency to sign the complaint, representing the company. It is probable that an officer of the company may quit the company or cease to be the employee/Director to represent the company on several reasons. The said Aniyankutty resigned and left the company. It was in that circumstances, and when there were other litigations, Ext. P9 resolution was adopted enabling its Executive Director, Vijayan Eapen to represent the company and also enabling him to sub delegate that function to any one else as and when occasion arises. It was in that regard Ext. P1 power of attorney in favour of PW1 was executed. All the directors, except one have signed Ext. P9 resolution. Therefore there is nothing illegal in it. It is in tune with Section 289 of the Companies Act, the appellant submitted.
7. Section 289 of the Companies Act reads as follows:
No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or to all the members of the committee, then in India (not being less in number than the quorum filed for a meeting of the Board or committee, as the case may be), and to all other directors or members at their usual address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the resolution.
8. This provision makes it clear that a resolution intended to be passed on circulation among the members of the committee or Board shall be circulated in draft together with necessary papers "to all the directors or to all the members of the committee, then in India" and that resolution shall be said to be passed when the majority of the Directors approved that resolution. Ext. P9, the photo copy of the resolution so circulated reveals that there were 9 Directors altogether and all except one had signed the resolution. One, Umman No. 6 therein, had not signed it either assenting the resolution or dissenting there from. If it had been circulated and if he did have any reservation to the resolution, necessarily he could have mentioned it so. Or else he would have approved it. Non signing by the said person indicates that Ext. P9 was never circulated to him.
9. In this regard the counsel for the appellant invites my attention to the parenthesis contained within brackets in Section 289 and submits that if the circulation of the resolution is to the members beyond the number forming the quorum, it does not matter whether one has signed or not or even not circulated to him. I am unable to agree.
10. Going by the said provision, for a resolution to be passed on circulation, at least the directors equal to the quorum shall be in India. Thus the parenthesis in bracket qualifies the members in India to be at least equal to the quorum fixed for the meeting of the board. Circulation shall be to all the Directors in India. Otherwise it will be very easy to oppress a minority group among the Directors and to avoid them from the governance concerning such matters sought to be carried out through a resolution circulated. It has not been also disclosed that the said Umman was not in India at the relevant point of time. Therefore Ext. P9 cannot be taken as a resolution properly passed in terms of Section 289 of the Companies Act, 1956. When the statute indicates a matter to be done in a particular manner, all the formalities so insisted by the statute have to be followed. Ext. P9 reveals that it has not been circulated at least to one of the Directors in India before it was duly passed. It cannot be therefore taken that it was duly approved by the Board of Directors or a committee as the case may be as enjoined in Section 289.
11. The counsel for the appellant also much relied on Section 290, which reads as follows:
Acts done by a person as a director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in this Act or in the articles.
Therefore the sub delegation to PW 1 made by Vijayan Eapen is saved for all purposes, it is contended.
12. Of course, any act done by a Director cannot be questioned because of any fault in authorisation empowering him to do so. But, for that purpose the Director concerned should be authorised legally to act so. The authorisation to Vijayan Eapen to sub delegate his function to PW 1 can exist only when Ext. P9 is found to be valid. When Ext. P9 is not valid, as found above, necessarily there is no authority for the action which could be taken as valid in terms of Section 290, on the part of said Vijayan Eapen.
13. But at the same time the counsel for the appellant is well footed to contend that PW1 had the authority and locus standi to represent the company, relying on the decisions reported in M.M.T.C. LTD. and Anr. v. Medchl Chemicals and Pharma (P) Ltd. and Anr. and in Associated Cement Co. Ltd. v. Keshvanand . The later has been referred to in the former. It has been held therein as follows:
This Court has, as far back as, in the case of Vishwa Mitter v. O.P. Poddar held that it is clear that anyone can set the criminal law in motion by filing a complaint of facts constituting an offence before a Magistrate entitled to take cognizance. It has been held that no court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. It has been held that if any special statute prescribes offences and makes any special provision for taking cognizance of such offences under the statute, then the complainant requesting the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the statute. In the present case, the only eligibility criteria prescribed by Section 142 is that the complaint must be by the payee or the holder in due course This criteria is satisfied as the complaint is in the name and on behalf of the appellant company.
In the case of Associated Cement Co. Ltd. v. Keshvanand it has been held by this Court that the complainant has to be a corporeal person who is capable of making a physical appearance in the court. It has been held that if a complaint is made in the name of an incorporeal person (like a company or corporation) it is necessary that a natural person represents such juristic person in the court. It is held that the court looks upon the natural person to be the complainant for all practical purposes. It is held that when the complainant is a body corporate it is the de jure complainant, and it must necessarily associate a human being as de facto complainant to represent the former in court proceedings. It has further been held that no Magistrate shall insist that the particular person, whose statement was taken on oath at the first instance, alone can continue to represent the company till the end of the proceedings. It has been held that there may be occasions when different persons can represent the company. It has been held that it is open to the dejure complainant company to seek permission of the court for sending any other person to represent the company in the court. Thus even presuming, that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company. The complaints could thus not have been quashed on this ground.
14. The proceedings sheet of the court below reveals that a petition had been filed on behalf of the complainant company by its advocate indicating that Aniyankutty who signed the complaint had left the service of the company and in place of him PW1 was to be substituted. It is also seen that, that request had been allowed by the court below on 25.11.2000. When the company can in the light of the decision quoted above substitute a person in place of the original person who represented the company and a request in that behalf has been accepted, it is not justified to hold that he did not have any competence to represent the company any more. Therefore PW1 did have all authority to represent the company not only based on the submission made on behalf of the company or the decision as mentioned above but also because of the order passed by the court below substituting the incorporeal person, PW 1 to represent the company and thus to depose on its behalf. Therefore the finding of the court below that PW 1 did not have authority to represent the company is not justified.
15. The court below while discussing the second point had stated in para 12 of the judgment that the accused denied his signature at the time of questioning under Section 313 Cr.P.C. The statement under Section 313 by the accused will indicate so. But, while PW1 was being examined, no suggestion is seen made to him that the accused did not issue Ext. P2 cheque. On the other hand, the definite suggestion indicating the line of the defence was that the accused had given Ext. P2 blank cheque to another institution as a security which the complainant obtained without the knowledge and consent of the accused and the complainant had put therein the amount and presented the cheque. There was no suggestion that the signature appearing on Ext. P2 cheque in question was not that of the accused. It was in spite of that after the complainant had closed his evidence that a different stand had been taken by the accused that he did not sign the cheque, thereby depriving the complainant an opportunity to let in evidence in that regard. Had a suggestion in that line been put to PW1, necessarily the complainant company could have very well proved or attempted to prove that the signature on Ext. P2 was that of the accused himself, by examining the bank officials.
16. Added to this is Ext. P3 memo issued by the bankers of the accused himself. The variation in the signature is not a reason for bouncing the cheque. On the other hand the definite reason for bouncing the cheque is "fund insufficient". That is the only reason for returning the cheque.
17. Necessarily, it has to be taken that the signature appearing in Ext. P2 cheque is that of the account holder himself. The accused does not have a case that Ext. P2 cheque was not one issued from his bankers to him towards the account maintained by him in that bank. Therefore the only probable conclusion, in such circumstances is that the signature appearing on Ext. P2 is that of the accused himself.
18. A mere suggestion in the cross examination that the cheque had been given to some other as blank cheque and the complainant had obtained it from him without the knowledge and consent of the accused and put the date and amount and presented to the bank is not sufficient to rebut the statutory presumption available against the accused under Section 139 of the Negotiable Instruments Act 1881. When the signature is found to be that of the accused the necessary presumption under Section 138 is that, that cheque had been given in due discharge of a legally enforceable debt. That presumption statutorily available is not in any way stand rebutted without letting in support evidence in any form. Therefore, the cheque cannot be stated to be one not issued by the complainant and that it was not towards discharge of a legally enforceable debt. That PW 1 employee did not have any direct knowledge about the transaction between the company and the accused centered around the cheque in question is not sufficient for such rebuttal.
19. The findings as aforesaid necessarily result in reversal of the acquittal; and the accused has to be found guilty of the offence punishable under Section 138. At this point of time the counsel for the accused pleaded that, he shall be shown maximum leniency as otherwise, it may affect his employment. Accepting this request, on finding him guilty, he is sentenced to pay a fine of Rs. 35,000/-, which if realised shall be paid to the complainant. Default in payment of fine shall result in simple imprisonment for 3 months. Accused is granted three months time to pay the fine.
Appeal is allowed.