Karnataka High Court
Sarathi Leasing Finance Limited vs Sri B. Narayana Shetty on 16 February, 2006
Equivalent citations: II(2007)BC1, [2006]131COMPCAS798(KAR), ILR2006KAR1929, 2006(3)KARLJ397, 2006 (3) AIR KAR R 445
Author: A.C. Kabbin
Bench: A.C. Kabbin
ORDER A.C. Kabbin, J.
1. This revision petition is directed against the judgment dated 27.12.2003 passed by the Learned III Additional Sessions Judge, Dakshina Kannada District, Mangalore in Criminal Appeal No. 42/ 2001, by which the conviction of the respondent in Judgment dated 27.2.2001 recorded by the Learned JMFC (IV Court) Mangalore in C.C. No. 215/2000 for the offence punishable under Section 138 of the Negotiable Instruments Act and consequent sentence have been set aside. The revision petitioner/complainant prays for resorting the conviction and sentence imposed by the Learned Trial Judge.
2. The revision petitioner is a company represented by its Managing Director. In the complaint filed on behalf of the said Company, it was alleged that one Vasanthkumar had borrowed a sum of Rs. 65,000/- from the revision petitioner and for repayment of the balance of the said amount with interest thereon he, (the respondent/ accused), as co-obligant, had issued a cheque for Rs. 65,200/-. The said cheque was dishonoured when it was presented for encashment. The complainant/company claimed that despite service of notice of dishonour of cheque, the respondent having failed to pay the amount, the latter had committed an offence punishable under Section 138 of the Negotiable Instruments Act.
3. A contention was taken on behalf of the respondent/accused in the Trial Court that though his signature was on the cheque, contents of the cheque had not been filled by him and that he had not stood surety for repayment of any loan taken by Vasanthkumar. On consideration of the evidence, the Learned Trial Judge held that issuance of cheque for repayment had been proved and that ingredients of the offence under Section 138 of the Negotiable Instruments Act having been disclosed, the accused/respondent was liable to be convicted of the offence punishable under Section 138 of the Negotiable Instruments Act. Consequently, he convicted the respondent and imposed a sentence of simple imprisonment for 3 months and a fine of Rs. 500/- in default to undergo simple imprisonment for one month. It was further directed that if the fine amount was realized, an amount of Rs. 80,000/- be paid to the complainant as compensation.
4. That judgment of conviction and sentence was challenged by the respondent in Criminal Appeal No. 42/2001. In appeal, the accused sought for cross-examination of the complainant and also permission to adduce evidence. That prayer was allowed by the Learned Appellate Judge. After cross-examining the complainant, the accused examined himself as D. W. 1. A vague contention was taken by the respondent before the Appellate Court that he had kept certain signed blank cheques in his office and that one of such cheques, might have been taken by Vasathkumar. In effect his contention was that the said Vasanthkumar has stolen the cheque and had given it to the complainant. It was also contended by him in his evidence before the appellate Court that when he asked Vasanthkumar about cheque leaves, the latter told that nothing would happen. Rejecting his contention, the Learned Sessions Judge, held that the cheque had been issued for discharge of the loan.
5. There was another contention taken by the respondent. It was that there was no proper authorization by the company empowering the Managing Director to file the complaint and to conduct the case. That contention was upheld by the Learned Sessions Judge relying on the observation of this High Court in Dr. Uma Gangadhar v. Classic Coffee and Spices Pvt. Ltd. Chikmagalur 2001 (6) Karnataka Law Journal 193 to the effect that in order to launch prosection or any legal proceedings on behalf of the company, it is just and necessary that there should be a valid sanction and authorisation by the company and merely by designation of a Manager, it would be impermissible in law to lauch the prosecution without a specific authorisation.
6. In the result, holding that there was no proper authorization, the Learned Appellate Judge allowed the appeal and setting aside the conviction and sentence, he acquitted the accused of the offence punishable under Section 138 of the Negotiable Instruments Act. He further directed that the fine amount, if had been deposited, be refunded. That order has been challenged in the present revision petition.
7. Sri G. Balakrishna Shastry, Learned Counsel for the revision petitioner submits that the judgment of the Appellate Court is mainly based on the principles laid down by this Court in Dr. Uma Gangadhar v. Classic Coffee and Spices Private Limited, Chickmagalur 2001(6) Karnataka Law Journal 193, but that the principles laid down in the said decision have been misapplied by the Learned Appellate Judge.
He submits that the observation of this Court in the said case of Dr. Uma Gangadhar was with regard to an Assistant Manager and an Assistant Manager cannot be equated with the Managing Director of the Company. Since the respondent-Company had been represented by the Managing Director of the Company, the question of authorization did not arise. It is further submitted by him that even otherwise also this contention that there was no proper authorization to file the complaint had not been taken during trial and before conviction and not even in the appeal memo, but that it was taken only later and that therefore the Learned Appellate Judge ought not to have taken into consideration that belated plea of the respondent.
8. Replying to this, the Learned Counsel for the respondent submits that the observations of the High Court in Dr. Uma Gangadhar's case apply to the present case also and that since it is a question of law, it could have been raised at the belated stage also.
9. On a perusal of the said decision relied upon by the Learned Counsel for the respondent it is seen that those observations had been made taking into consideration the fact that in that case the complaint had been filed by an Assistant Manager. In the present case, the complaint has been filed by the Managing Director and as per the articles of association, the Managing Director had been empowered by Article 159(15) to represent the Company in legal proceedings. Besides, the revision petitioner has also placed the copy of the resolution dated 30-5-1987 empowering the Managing Director to file the complaint or to represent the company in legal proceedings by or against the Company.
10. The more crucial point that is noticed, apart from the plea of the respondent being hallow, is that since such a contention of the competency of the Managing Director to file the complaint having not been taken by the respondent during trial before the Trial Court, it should not been allowed by the Appellate Court at the appellate stage.
11. Sri G Balakrishna Shastry, Learned Counsel for the revision petitioner has cited two decisions of the Supreme Court which show that the law laid down by this Court in Dr. Uma Gangadhar's case is no longer good law. In Vishwa Mitter of Vijaybharat Cigarette Stores, Dalhousie Road, Pathankot v. O.P. Poddar and Ors. a question had been raised as to whether a dealer who was not the holder of trade mark was competent to lodge a complaint for offences punishable under Sections 78 and 79 of the Trade and Merchandise Marks Act, and Section 420 of the IPC. It was held as under:
On a combined reading of Sections 4(2) and 190 CrPC 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 under Section 190 and no Court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. But where any special statute prescribes offences and makes any special provision for taking cognizance of such offences under the statute, the complainant requesting the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the statute.
12. In a later decision of the Supreme Court in M.M.T.C. Ltd. and Anr. v. Medchl Chemicals and Pharma (P) Ltd., and Anr. maintainability of a complaint by Company for an offence punishable under Section 138 of the Negotiable Instruments Act has been considered and the following principles has been laid down:
Pursuant to a memorandum of understanding, the respondent Company issued two cheques, one dated 31.10.1994 and another dated 10.11.1994, in favour of the appellant Company. Both the cheques when presented for payment were returned with the endorsement "payment stopped by drawer". After issuing notices, the appellant lodged two complaints under Section 138 of the Negotiable Instruments Act through one L, the Manager of its regional office. The respondent filed two petitions for quashing of the said complaints. Allowing the petitions the High Court held that the complaints were not maintainable. The High Court further held that the Manager (who had lodged the complaints) and the Deputy General Manager (who was substituted), were merely paid employees of the appellant Company and had not been authorised by the Board of Directors to sign and file the complaint on behalf of the Company or to prosecute the same. It further held that the authorisation in favour of the Deputy General Manager could not cure the defect. Since in the complaint there was no specific allegation of existence of any debt or liability, the High Court further held that the cheques were issued as security and not for any debt or liability existing on the date of issuance. Opposing the appeals, the respondent contended inter alia, that the cheque having bounced on account of stoppage of payment by the drawer and not on account of insufficiency of funds, Section 138 was not attracted. Setting aside the High Court's judgment, the Supreme Court.
Held:
The only eligibility criterion prescribed by Section 142 for maintaining a complaint under Section 138 is that the complaint must be by the payee or the holder in due course. This criterion is satisfied as the complaint is in the name and on behalf of the appellant Company. Therefore, 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 that ground.
13. In Credential Finance Ltd. v. State of Maharashtra and Ors. 1999 Criminal Law Journal 1032 the High Court of Bombay has observed that neither the Negotiable Instruments Act nor the Companies Act imposes a pre-condition that there has to be an authorisation as per statutory provisions. When an artificial person like a Company has to file a complaint, it should be operated through one of its officials which may include even a Chairman or Managing Director.
14. In a case of complaint on behalf of a Company for an offence punishable under Section 138 of the Negotiable Instruments Act filed by one of its officers or the Managing Director, the question of authorisation to such person to file the complaint arises only if the accused takes up a specific plea that the Company did not intend to prosecute him for the offence or that there is some material before Court to indicate that the complainant-Company has no intention to prosecute the accused. Since a responsible officer or office bearer of the company can set the law into motion by filing a complaint on behalf of a company, disclosing an offence under Section 138 of the Negotiable Instrument Act against the Company, the question whether such officer had been specifically authorised to file the complaint on behalf of the Company does not arise at all. In that view of the matter, the Learned Sessions Judge was wholly in error in allowing the appeal and setting aside the conviction solely on the ground that the revision petitioner had not produced the proper authorization.
15. The next question that arises is whether the matter has to be remanded or it can be disposed of in this revision petition. The Appellate Court has considered the matter on merits. It has not accepted the contention of the respondent-accused that the blank signed cheques had been stolen by Vasantha Kumar and such stolen cheques could have been given to the complainant/revision petitioner.
16. The Learned Counsel for the respondent submits that the evidence discloses this possibility. On going through evidence, I find that the contention taken by the accused is apparently not true. In the evidence he contended that his cheque leaf had been taken by Vasanthkumar and Vasanthkumar had given that cheque leaf to the complainant. In other words, Vasanthkumar had deceived the complainant. The accused admits that in the Trial Court, Vasanthkumar stood surety for him. If Vasanthkumar had stolen the cheque leaf and had given it to the complainant leading to the prosecution of the accused, it is highly unlikely that the accused requests him to stand as surety for him in a case filed on the basis of a cheque leaf stolen by such person. So, on facts also, I do not find any ground to interfere in the conclusion of the Trial Judge and that of the Appellate Judge.
17. However taking into consideration the fact that the present case does not call for substantive sentence, to that extent the relief can be given to the accused by setting aside the substantive sentence and modifying the compensation into a fine with default sentence for non payment of the fine amount.
18. For the above said reasons, the revision petition is allowed. and setting aside the acquittal of the respondent by the Appellate Court i.e. the III Additional Sessions Judge, D.K., Mangalore, in Criminal Appeal No. 42/2001, the conviction of the respondent for the offence punishable under Section 138 of the Negotiable Instruments Act as recorded by the Learned JMFC, IV Court, Mangalore, in judgment dated 27-2-2001 passed in C.C. No. 215/2000 is resorted.
However, the sentence imposed by the Trial Court is set aside and instead, the respondent is sentenced to pay a fine of Rs. 80,500/- in default he shall undergo simple imprisonment for six months. If fine amount is realised, an amount of Rs. 80,000/- be paid to the revision petitioner as compensation.
Two months time is granted to the respondent to pay the said amount in the Trial Court, failing which the Trial Court is directed to secure the presence of the respondent and to send him to undergo the default sentence.