Bangalore District Court
Tommy Hilfiger Arvind vs M/S Primus Retail Private Limited on 15 April, 2019
IN THE COURT OF THE XV ADDL.JUDGE, & 23rd ACMM,
COURT OF SMALL CAUSES, MAYO HALL UNIT,
BENGALURU
Dated this the 15th day of April 2019
Present: Sri. DYAVAPPA. S.B.,
B.A., LL.B.,
XV Addl. Small Causes Judge &
XXIII A.C.M.M., Member, M.A.C.T.,
Bengaluru.
CC.No.26215/ 2012
COMPLAINANT: Tommy Hilfiger Arvind
Fashions Private limited,
(Erstwhile Arvind Murjani
Brands Private Limited)
(A company incorporated under the
provisions of the companies Act,
1956)
Having its registered office at,
The Arvind Mills Premises,
Naroda Road, Railwaypura Post,
Ahmedbad-380 025
And having its registered office at:
No.4, Brunton 1st cross road,
Near Old Passport Office,
Bangalore 560 025.
Represented herein by its
Authorized Signatory:
Mr. Dhruvaraj
(Manager Commercial)
(By M/s Indus Law, advocates)
2 SCCH-19
CC No.26215/2012
V/s
ACCUSED: 1. M/s Primus Retail Private Limited,
(A Company incorporated under the
companies Act, 1956)
Having its registered office at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
Represented herein by its
Managing Director.
2. Mr.S. Jayakumar
Chief operating officer,
M/s Primus Retail Private Limited,
Having its office at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
And also at
Mr.S. Jayakumar,
#158, 2nd floor, 29th cross,
17th Main, Banashankari Stage II,
Bangalore-560 070.
3. Mr. Palepu Sudhir Rao,
C/o M/s Primus Retail Private
Limited,
Having offices at:
#7, 1st Cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047
3 SCCH-19
CC No.26215/2012
And also at:
Mr. Palepu Sudhir Rao,
12F, Regalia, No.3,
Sardar Patel Road, Taramani,
Chennai 600113, Tamil Nadu.
4. Mr. Balaji Venugopal Bhat,
Managing Director,
M/s Primus Retail Private Limited,
Having offices at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
And also at:
Mr. Balaji Venugopal Bhat,
#302, Embassy Orchid,
8th Main, RMV Extension,
Bangalore-560 080.
5. Mr. Ajay Mittal,
C/o M/s Primus Retail Private
Limited,
Having offices at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
And also at:
Mr. Ajay Mittal,
Flat No.343, 3rd Block, 4th floor,
Ranka Park Apartments,
Lalbagh Road, Bangalore-560 027
4 SCCH-19
CC No.26215/2012
6. Mr. Raju Mohandas Mahtaney,
C/o M/s Primus Retail Private
Limited,
Having offices at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
And also at:
Mr. Raju Mohandas Mahtaney,
#31, Epsilon, Yemlur Main Road,
Off Airport Road,
Bangalore-560 037.
7. Mrs. Pooja Mathane
C/o M/s Primus Retail Private
Limited,
Having offices at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
And also at
Mrs. Pooja R Mathaney
#31, Epsilon, Yemlur Main Road,
Off Airport Road,
Bangalore-560037
8. Mr. K.E.C Raja Kumar
C/o M/s Primus Retail Private
Limited,
Having offices at:
#7, 1st cross, 3rd Main,
Ashwini Layout, Ejipura,
Bangalore-560 047.
5 SCCH-19
CC No.26215/2012
(Proceeding against A7 and 8 was
Quashed)
(By ATV legal Advocates for A2
and A3)
(By K.S.V. Advocate for A4, 5
and 8)
(By Sreevatsa Associates for A6 and 7)
+++++++
Date of offence : 30.09.2011
Date of report of offence : 27.12.2011
Date of arrest of the accused : -
Date of recording of evidence : 24.04.2018
Date of closing of evidence : 04.01.2019
Offence complained of : U/sec. 138 and 141
of N.I Act
Judgment : Convicted
JUDGMENT
The complainant has filed this complaint against the accused under Section 200 of Cr.P.C for the offence punishable under Section 138 of N.I. Act.
6 SCCH-19 CC No.26215/2012
2. The brief contents of the complaint stated as under:
The complainant is a company incorporated under the provisions of companies Act and engaged in the business of retailing the World renowned apparel brand " Tommy Hilfiger" in India. The complainant company had executed a national sub franchisee agreement dated 07.05.2007 with one Aryan Life style Pvt. Ltd., for opening and operating Tommy Hilfiger franchisee stores in India. Thereafter, by a deed of assignment dated 27.04.2009, the accused No.1 company assumed all the rights and liabilities of the said Aryan Life style Pvt. Ltd., under the national sub franchise agreement dated 07.05.2007. Pursuant to his assignment the accused no.1 company was liable for performance of all the obligation of the said Aryan Lifestyle Pvt. Ltd., under the said National sub franchisee agreement.
3. Further stated that the accused No1 Company was unable to fulfill its obligations under the National sub franchisee agreement and it consistently breached its obligations of making timely payments to the complainant company against the supply of goods and 7 SCCH-19 CC No.26215/2012 merchandise as made from time to time by the complainant company. The complainant company was constrained to issue several letters calling upon the accused No.1 Company to clear the outstanding accounts due, but the accused No.1 Company failed to make the payments. In view of these defaults the disputes arose between the parties. At the request of all the accused the complainant Company agreed to entering into a settlement agreement with the accused No.1 on 24.09.2010. As per the agreement the consensus of the parties on such matters, inter alia as the formal closure and termination of the National sub franchisee agreement for Mono-Brand retailing for apparel stores dated 07.05.2007 with Aryan Life Style Pvt. Ltd., and also discharge of the accused No.1 Company outstanding dues to the complainant. The accused No.1 Company had therein acknowledged its liability to pay a sum of Rs.5,02,49,008-00 to the complainant Company towards settlement. Further stating that in view of the failure of the accused No.1 Company to comply with the settlement agreement within the time period specified and further request of all the accused an addendum settlement agreement was signed by the complainant with the 8 SCCH-19 CC No.26215/2012 accused No.1 Company on 24.03.2011, in terms thereof the accused no.1 Company has acknowledged an outstanding liability to the complainant Company in a sum of Rs.2,95,38,603/- and undertaken to make the said amount by making inter-alia payments to the complainant under Six cheques. All the accused generally assured the complainant that all the said cheques would be honoured upon presentation for payment on the respective dates. The accused No.1 Company under signature of the accused no.2 have issued the Cheque bearing No.595409 for a sum of Rs.1,43,84,023/- on dated: 30.09.2011 drawn on Axis Bank Ltd.., M.G. Road branch, Bengaluru in favour of the complainant. The said cheque was presented for encashment on 9-11-2011 through their Banker S.B.I Bank, Bangalore, but the said cheque was returned for the reason of "Account Blocked."
4. The accused No.2 is the Chief Operating Officer of the accused No.1 company, Accused No.3 to 8 are the Directors of the said company, hence they are jointly incharge of its operations day to day managements and financially affairs. Accused have issued aforesaid cheque 9 SCCH-19 CC No.26215/2012 with despite fully aware that they were liable to be dishonoured on account of the fact that the accused no.1 Company did not have sufficient funds in its aforesaid account with a deliberately malafide view to avoid making the payments accused have issued cheque to the complainant. All the accused persons were at all relevant time were aware that if the cheque were issued by accused Company was to be presented for payment by complainant Company and that would be refused and returned on account of insufficient funds of funds in the said account. The Complainant was issued statutory notice to the accused on 15-11-2011 through their counsel and the notice went to the accused were duly served and also intimation delivered. However the payment was not made within the time framed and none of the accused have dishonest to even reply to the legal notice thereby all the accused are guilty of offence punishable under section 138 and 141 of N.I. Act. Therefore complainant prays for convict the accused and grant compensation to the complainant equivalent to the amount under the said cheque and also interest @ 18% p.a. 10 SCCH-19 CC No.26215/2012
5. After presenting this complaint, this Court has took cognizance of the offence under section 138 of N.I Act and registered the case as P.C.R.No.54/2012. There after the court has recorded the sworn statement of the complainant. After perusing the sworn statement with other documents and materials available on hand, this Court has registered the case against the accused by issuing process against the accused.
6. After service of summons, the accused have appeared through counsel and got released on bail. The proceeding against accused No. 7 and 8 was pleased to quashed by the Hon'ble High Court. As the case is summons trial, accusation read over and explained to the accused in their language for which, the accused have pleaded not guilty and claimed to be tried. Hence the matter is posted for trial.
7. In order to prove the case, the complainant side two witnesses examined as PW.1 and 2, they have produced in all 24 documents marked as Ex.P.1 to P.24. After completion of oral evidence of the complainant, the statement under Section 313 of Cr.P.C was recorded in which, accused denied all the incriminating evidence 11 SCCH-19 CC No.26215/2012 appearing against them and claims the defence evidence. Defence side examined three witnesses as Dw.1 to 3. They have produced in all 20 documents marked as Ex.D.1 to D.20.
8. After completion of the oral evidence, I have heard the arguments and perused the materials available on record. Therefore the following points arise for my consideration:
1. Whether the complainant proves that the accused No.2 is being the Chief Operative Officer and accused No.3 to 6 are the Directors of the Accused No.1 company have issued total Six cheques in favour of the Complainant towards discharging of settlement agreement. Out of the said Six Cheques the Cheque bearing No.595409 for a sum of Rs.1,43,84,023/- on dated: 30.09.2011 drawn on Axis Bank Ltd.., M.G. Road branch, Bengaluru in favour of the complainant towards discharge of their legal liability and when the said cheque was presented for realization through their Banker S.B.I Bank, Bangalore, which was dishonored for the reasons of 'Account Blocked" and even after issued the legal notice, the accused were failed to repay the said amount and thereby accused have committed an offence punishable under Section 138 of N.I. Act?
12 SCCH-19 CC No.26215/2012
2. Whether the complainant is entitled to claim the compensation amount under section 357 of Cr.P.C. from the accused?
3. What order?
9. My findings to the above raised points are as under:
Point No. 1: In the Partly Affirmative Point No. 2: In the Partly Affirmative Point No. 3: As per final order For the following REASONS
10. POINT No.1 and 2:- It is specific case of the complainant is that, the accused No.1 is the company, Accused No.2 is the authorized Signatory and Accused No.3 to 6 are the Directors of the Accused No.1 company. The complainant company had executed a National Sub Franchise agreement on 7-5-2007 with one Aryan Life style Private ltd., for opening and operating Tommy Hilfiger Franchise stores. As per the deed of assignment dt:27-04-2009 the accused No.1 company assumed all the rights and liabilities of the said Aryan Life style Pvt., ltd., and agreed to fulfill all the obligations under the National sub franchise agreement of the complainant including payments and also the accused No.1 company 13 SCCH-19 CC No.26215/2012 with all the accused have requested for settlement of Addendum Settlement agreement on dt:24-03-2011 and applied on out standing liability to the complainant in a sum of Rs.2,95,38,603/- and issued Six Cheques in favour of the complainant towards the payment under the agreement. Out of the said Six Cheques the accused have issued the Cheque bearing No.595409 for a sum of Rs.1,43,84,023/- on dated: 30.09.2011 drawn on Axis Bank Ltd.., M.G. Road branch, Bengaluru in favour of the complainant towards discharge of their legal liability and when the said cheque was presented for realization through their Banker S.B.I Bank, Bangalore, which was dishonored for the reasons of 'Account Blocked". Inspite of issued the legal notice, accused has failed to pay the cheque amount and the complainant has complained U/Sec. 142 of N.I. Act, hence they prays for punish the accused in accordance with law and also direct the accused to pay the compensation.
11. The representative of the Complainant Mr.Dhruvaraj examined as PW.1 and filed the affidavit in lieu of chief examination. In his chief affidavit he has repeated the averments of the complaint and further 14 SCCH-19 CC No.26215/2012 produced one Certified copy of Resolution marked as Ex.P.1, Produced one Cheque marked as Ex.P.2, produced Bank Endorsement marked as Ex.P.3, produced one Settlement agreement marked as Ex.P.4, Produced one Addendum Agreement marked as Ex.P.5, produced office copy of the legal notice marked as Ex.P.6, Produced 11 Acknowledgments marked as Ex.P7 to 17, produced Certified true copy of the Extract-Resolution, marked as Ex.P18. In the cross examination the defence counsels have specifically taken the defence that the accused no.1 company has not given proper authorization to file this case and also given evidence and proceed the case against the accused with respect to allege cheques and further taken defence that the Accused No.2 to 6 are not liable to dishonour of the cheques and also they have not proper parties in the case, but same is denied. Further taken defence that all the accused are not jointly liable to the offence and liability of the accused no.1 and accused no.6 is not involved in the transaction of the complainant and the accused no.1, but same is denied.
15 SCCH-19 CC No.26215/2012
12. One witness Sri.Mr.Ravi Rao examined as Pw.2 and filed his examination in chief affidavit. In his chief examination he has repeated the averments of complaint and Produced one Power of Attorney holder marked as Ex.P19, produced four form No.32 marked as Ex.P20 to 23 and also produced form 20B marked as Ex.P24. In the cross examination defence counsel have specifically suggesting that there is no resolution passed by the accused no.1 company to authorize the present case against the accused and said resolution and authorization letters are get for the purpose of filing this case, but same is denied. Further suggesting that before issuance of the cheques and before filing of this case the accused No.5 has resigned to his Directorship with the accused no.1 and also accused No.6 is not concerned to the transaction and also he is not the Executive Director of the accused No.1 and all the accused are not liable to the dishonour of the cheque, but same is denied.
13. Accused No.5 Sri.Ajay Mittal examined himself as Dw.1 and filed the affidavit in lieu of chief examination. In his chief affidavit he has deposed that, he was working with Unit Trust of India as Asst.General Manager vide 16 SCCH-19 CC No.26215/2012 employment code No.2283 and he was deputed to Venture Capital Funds Division and promoted as Vice President of Unit Trust of India Venture Funds Management company ltd., and later he was submitted his resignation letter to the Unit Trust of India and same was accepted on 28-02-2002. Further deposed that the Venture Capital Funds managed by Unit Trust of India Venture fund Management company Pvt. Ltd., had invested money with the accused No.1 company and during the incorporation the accused company as per the provisions and governance of Security and exchange Board of India. Thereafter the Unit Trust of India Venture fund Management company Pvt., ltd., has appointed as Manager and taking care of investment rights with the accused company. Earlier one Mr.Raja Kumar K.E.C. written statement nominee Director of the accused No.1 company through Govt., Investment company and the said Raja Kumar was with drawn by the appointment authority and then he was appointed as Nominee Director in place of Raja Kumar on 12-12-2009 and subsequently in view of his resignation to the post of Director of accused no.1 company on 11-4-2011, he is not at all any type of Director under Accused No.1 17 SCCH-19 CC No.26215/2012 company. Further deposed that, he is an employee and he had issued letter to the C.E.O of accused no.1 company on 12-12-2009 stating that his appointment in respect of his earlier nominee Director of accused company wherein stating shall not incur any obligations or liability by reason of his being a Director or for anything done or committed to be done in good faith in discharge of his duties as Director or anything in relation thereto. Thereby he had appointed in the accused company as a Nominee Director for investment made by the Govt., Company and he was only a employee of the Unit Trust of India Venture fund Management company Pvt., ltd., and he was getting his salary and with other allowances as per admissible in the article of association of accused company. The accused company should not be paid any amount by way of any type of remuneration. The Unit Trust of India Venture fund Management company Pvt., ltd., was invested the venture funds money to the accused company and hence he is not aware connection with the any executive management of the company from day to day affairs. Further he is not aware of the business issues of accused company with third parties like Complainant herein. Further deposed 18 SCCH-19 CC No.26215/2012 that he is a Nominee Director of accused company and not aware of any business dealing with the complainant Company, hence he is not liable for any of the loan or liability on behalf of the accused company. Further produced one copy of the Office Order marked as Ex.D.1, produced one copy of letter of Appointment of Nominee dated 12-12-2009 marked as Ex.D2, produced copy of one letter issued by UTI Venture funds marked as Ex.D3, produced one copy of Memorandum of Association marked as Ex.D4, produced copy of Articles of Association marked as Ex.D5, produced details of Shareholders of the UTI Venture funds management marked as Ex.D6, produced copy of one Certificate issued by UTI Venture funds marked as Ex.D7. In the cross examination he has admitting that he has appointed as a Director on December 2009 in the accused No.1 company and also he was attending the Directors of board of Meeting of accused no.1 company. Further admitting that, at that time, Accused No.3- Sudhir Rao, Accused No.4-Balaji Bhat and Accused No.6- Raju Mohandas Mathaney are the Directors of the said company. Further admitting that all the said accused are attending the Board of Directors meeting and the 19 SCCH-19 CC No.26215/2012 accused No.4 is the Managing Director of the accused No.1 company. Further admitting that he was the Director up to March 2011 and on September 2010 he was the Director in the accused No.1 company. Further admitting that, may be accused No.4 as a Managing Director having authority to sign on the Cheques and agreement on behalf of the accused company and suggesting that Accused No.2 is the authority signatory of the Accused No.1 company. Further he is admitting that the accused No.1 Company is having liability to pay the amount to the other companies. Further deposed that after send the notice by the complainant company he was discussed with the other Directors for taking steps against the notice and also he discussed with the Accused No.4 -Balaji Bhat. Further admitting that at the time of the appointment as a Director in the accused No.1 company, same time he was also Director in the other companies. Further admitting that, he was discussed about said transaction with the other Directors.
14. The Accused No.2 Sri.Jayakumar.S. examined himself as Dw.2 and filed the affidavit in lieu of chief 20 SCCH-19 CC No.26215/2012 examination. In his chief affidavit he has deposed that, he was appointed as a Area Sales Manager-Chennai to the 1st accused company as per appointment letter 18-4- 2003 for a salary of Rs.3,00,000/- p.a. and joined duty at Chennai and informed the same to the Accounts Manager of 1st accused company on 1-5-2003, through letter dated 17-5-2003. Thereafter based on his performance the accused no.1 company has revised his salary to Rs.6,00,000/- p.a. with a designation of National Sales Manager with effect from 11-4-2005. Again from 5-10- 2005 his salary was revised to Rs.7,20,000/- along with designation of National Sales Manager with a Grade S-2. In the year 2006 accused No.1 company once again revised his salary to Rs.9,00,000/- p.a. and thereafter from the financial year 2007-08 his salary was increased to Rs.15,00,000/- p.a. w.e.f. 1-4-2007 and his designation has been changed as Business Head - Primus Factory Outlet with Grade S-3. Thereafter from financial year 2008-09 his salary was increased to Rs.18,75,000/- p.a. and promoted as Head / Sales with Grade D-1. Thereafter w.e.f 1-4-2010 his designation was changed to Chief Operating Officer with Grade D-1 and his salary was revised to Rs.28,00,000/- p.a. Further 21 SCCH-19 CC No.26215/2012 deposed that, he is only an employee under Accused No.1 company and he was never a Director nor a Board Member of the 1st accused company. Further deposed that accused no.1 company was undergoing severe financial crunches and hence he has resign from company in the year 2012 and sent an email dated 7-2- 2012. Further deposed that, he has signed the Settlement agreement executed with the Complainant company and as he was the Chief Operating Officer of accused No.1 company he was given authority to sign cheques for an amount lesser than Rs.10,00,000/- and not authorized to sign any cheques which is above Rs.10,00,000/-. Further deposed that he being representative of the accused No.1 Company he had no powers to do anything with respect to the settlement agreement and just followed the instructions given by the Board of Directors or his immediate authority. Further deposed that, he was not aware of the issuance of cheques in question to the Complainant company on behalf of Accused No.1 Company. Even though the cheque numbers were mentioned in the agreement since it was not presented to him along with the agreement and since it was not explicitly told to him by the C.F.O who 22 SCCH-19 CC No.26215/2012 prepared the cheques and he was not aware that cheques given to the complainant and where the same cheques that he has signed for emergency purposes. Hence he cannot construed as decision Maker of the 1st accused Company. However he was an employee who had followed the instructions of the Board of Directors and accordingly signed the settlement agreement and the blank cheques that were to be used for emergency purposes. Further deposed that, the issuance of the cheque was not at all within his knowledge and also signed cheques which were kept in the office of the 1st accused company were issued by the affixing another signature of one of the Director of the company. Hence with other contention prays for dismiss the complaint. Further produced one Offer of Appointment letter marked as Ex.D8, produced one Appointment letter marked as Ex.D9, produced ten letters marked as Ex.D10 to 19, produced one E.mail copy of Resignation letter marked as Ex.D20. In the cross examination he is admitting that he was appointed as a C.O.O in the accused company and after appointed he was attending the Board meetings and also he was communicated the discussions and resolution of the meeting to the Managing Director and 23 SCCH-19 CC No.26215/2012 also C.E.O. Further admitting that Balaji Bhat was the Managing Director and also C.E.O and he was doing work on the direction of the said Balaji Bhat. Further admitting that, accused No.4 Balaji Bhat and A-6 Raju Mahtaney and Accused No.3 Sudhir Rao were the Directors. Further deposed that he did not know that about 5th accused/Ajay Mittal was the Director in the Company. Further admitting that, earlier name of the accused Company was Geethanjali Life Style Products Pvt., ltd., and Board of Directors of the Company have not taken any action against him about misusing the power and further admitting his signature on the alleged cheques and another one signature is the Balaji Bhat. Further admitting that as a COO of company is given authority to sign on the Cheques on behalf of the accused no.1 Company and the Board of Directors were given authority to sign on the cheques and agreements on behalf of the accused Company. On the instructions of the Board of Directors he was signed on the settlement agreement dated 24-09-2010 and 24-03-2011. Further admitting that, after read out the contents of the agreement he was signed. Further admitting that any letters correspondence with the address is shown in the 24 SCCH-19 CC No.26215/2012 cause title of the complaint. Further admitting that the alleged cheques were belongs to the account of the accused No.1 company and he was signed on the cheques with respect of the company business transaction. Further admitting that he has not produced any document with respect of he had the authority signed on the cheques only less than Rs.10,00,000/-. Further admitting that even after issued legal notice by the complainant company he has not given any reply notice. Further admitting that the cheques here in produced was issued for repayment of the amount as mentioned in the settlement agreement dated 24-03- 2011 and as per the said Settlement agreement the accused company has not paid the amount to the complainant.
15. Accused No3 Sri.P.Sudhir Rao examined himself as Dw.3 and filed affidavit in lieu of chief examination. In his chief affidavit he has deposed that he was appointed as a Additional Director of accused No.1 company on 06- 09-2009 and earlier known as M/s Geetanjali Investments Pvt., ltd., and he has not signed any National Franchise Agreement or Settlement Agreement 25 SCCH-19 CC No.26215/2012 and Addendum to the Settlement Agreement and also to the cheque in question and he never involved in the transaction between the complainant company and accused company, hence he was not responsible for the day to day affairs and managements of the accused company. Further deposed that, he has neither signatory nor the signatory to any of the document executed between the complainant and accused no.1 company, hence he cannot be held liable for the offence punishable U/sec.138 of N.I. Act. In the cross examination he has admitted that after appointed as a Director until closed the accused company he was a Director in the said company. Further admitted that he has not claimed any remuneration from the accused Company as he was the Additional Director. Further admitted that after passed the resolution same was send to all the Directors through email and he was the member of the Board of Directors in the year 2007-08 and 2012-13 in the accused company. In that period accused No.4-Mr.Balaji Bhar, Accused No.5-Mr.Ajay Mittal and Accused No.6-Raju Mahtaney are also Directors of said company. Further admitted that the accused No.4 Balaji Bhat was Managing Diector and he 26 SCCH-19 CC No.26215/2012 was attending the Board of Directors of meeting as a Director and also he had the eligibility to discuss in the board meeting. The Balaji Bhat is having authority to sign the cheques, but he did not know about Sri.Jayakumar was having the authority to sign on the cheques on behalf of the company. Further admitting that due to loss of business accused company has failed to fulfill the Franchise Agreement. Further admitted that alleged cheques are belongs to accused company bank account. After issued notice with respect of the dishonour of the cheques he did not discussed with the accused company, but he was discussed with the other Directors along with Balaji Bhat. Further admitting that the accused company has not paid the amount to the complainant company.
16. The Complainant counsel has argued that accused No.2 and 4 were issued Chequs on behalf of the accused No.1 Company with respect of the settlement agreement and also Addendum to the Settlement Agreement about discharge of their liability and accused No.2 is the authorized signatory and others are the directors of accused No.1 Company, hence they are all liable for the 27 SCCH-19 CC No.26215/2012 offence and accused have not denied the transaction with the complainant Company and also not denied the issuance of Cheques in favour of the complainant. Hence presumption can be drawn against the accused for the offence punishable U/sec.138 of N.I. Act. Further argued that the accused have failed to rebut the presumption drawn U/sec.139 of N.I. Act. Accused No.3 to 6 are being Directors of the accused company and accused No2 is being the authorized signatory U/sec.141 of N.I. Act all are liable for the offence. Further argued that after issuance of cheques and presentation for encashment the company has fled a petition in Hon'ble High Court of Karnataka, Bengaluru and Order was passed after filing of this case in the year 2-12, hence the winding of order is not applicable to this case on hand. Further argued that this case was presented through proper authorized person as per board resolution passed by the company and produced the board resulation and Power of Attorney.
17. Counsel for the accused No.2 argued that accused no.2 is not a Director of the accused company and he was signed only on the direction of the Board of Directors 28 SCCH-19 CC No.26215/2012 and also Managing Director, hence he is not liable to the any offence by the accused company. Further argued that the complainant company has not passed any resolution to give authority to the representative one Dhruvaraj and in the said resolution Ravi Rao was authorized to file the case, but this complaint was presented by one Mr. Dhruvaraj, hence complaint is not maintainable. Further argued that copy of Resolution and also Power of Attorney was created and fabricated. Further Ex.P19 was created only in the year 2018. Hence at the time of filing of the case representative is not having the authority to present the complaint on behalf of the complainant company. This case was filed in the year 2011 and Power of Attorney is prepared in the year 2018, hence said documents are created. Further argued that cheque was returned for the reasons of "Account Blocked", hence U/sec.138 of N.I. Act could not be attracted. Further argued that in the year 2012 accused company was wind up as per the Order of Hon'ble High Court of Karnataka, Bengaluru, hence the proceeding U/sec.138 of N.I. Act is not maintainable against the accused company and after wind up one Official Liquidator was appointed, hence once winding up 29 SCCH-19 CC No.26215/2012 Order was passed no criminal proceedings against the winding up company. Further argued that accused No.2 is authorized to sign in the cheque only to extent within Rs.10,00,000/- and he was signed on the cheque only on the instructions of the Board of Directors. Therefore the accused no.2 is not liable for the offence. Even name of the complainant was changed in the year 2012, but the Complainant have not taken any steps for correction of the name of the complainant until the end of the proceedings, hence Complainant company is not entitled to proceed the case U/sec.138 of N.I. Act, against the accused company. When the Official Liquidator was appointed and as per Provision U/sec.141 of N.I. Act, the Official and other nominee Directors are not liable and misused the sec.141 of N.I. Act. In support of their arguments the counsel has relied the following Judgments:
1. Company Petition Nos., 1/2012 and 181/2011 and COP.No.30/2012,
2. (2014) 11 SCC 790,
3. 2007 Crl.J.3800,
4. 2017 SCC online Del.8280
5. 2009 ILR 1 Delhi 44,
6. 2012 (5) SCC 661.
30 SCCH-19 CC No.26215/2012
18. The counsel for the accused No.3 argued that, the said accused was not signed on any documents of the accused company and he is only Additional Director and there is no specific allegations against said accused hence the complaint is not maintainable against him and also accused No.3 is not aware of the board regulations and business transactions.
19. The counsel Accused No.5 has argued that the Accused No.5 is the nominee Director appointed by the Unit Trust of India in the accused company and before cause of action of this case and on the date of cheque, the Directorship of this Accused was seized hence the accused No.5 is not liable for the offence and he is an employee of the Unit Trust of India and he is not responsible for day to day transaction and management of the accused company, hence accused No.5 is not liable to discharge the liability of the accused company.
20. Counsel for the accused No.6 argued that there is no case against the accused No.6 and already Hon'ble High Court of Karnataka, Bengaluru was pleased to quashed the proceedings against accused No.7 and 8 and 31 SCCH-19 CC No.26215/2012 complaint failed to prove the responsibility of accused No.6 in the accused company and there is no specific allegations against the accused No.6 about involvement n the transaction. Further submits mere he is a Director is not liable to the offence.
21. The counsel for the accused no.4 has submit the written arguments wherein stating that complaint was not presented through authorized person and Mr.Dhruvaraj was not having authority to file the complaint, hence his evidence is not considerable. Further argued that legal notice was not served on the accused no.4 and Ex.P18 and 19 are created after completion of the trial.
22. I have perused the documents produced by the complainant and also evidence of the both side witnesses. As per Ex.P1 the Resolution passed in the meeting of the Board of Directors of complainant company. In the said Resolution authorized the Mr.Ravi Rao and Mr.Dhruvaraj on behalf of the company that the company shall present a Complaint under relevant provisions of the Negotiable Instruments Act before 32 SCCH-19 CC No.26215/2012 competent jurisdictional Magistrate in connection with the offence committed by the M/s Primus Retail Private Ltd., and all its Directors and Officers in default in connection with the unlawful dishonour of the cheques and also resolved for Mr.Ravi rao the Vice President has authorized to sign and execute any document pertaining to the complaint.
23. The Complainant have produced Ex.P18 and 19 which are disclose that the Board of Directors of Complainant company has passed the resolution to authorized the Managing Director Mr.Shailesh Chaturvedi and Chief Financial Officer Mr.Ravi Rao to sign the documents on behalf of the company as Resolution passed on 21-12-2011 and also Board of Directors have authorized to do all such acts, deeds, things and to delegate any of the above Powers to anyone or more officials of the company. As per Ex.P-19 Mr.Ravi Rao has executed the Power of Attorney and authorized Mr.Dhruvaraj and delegate powers on behalf of the complainant company has authorize in connection to the dishonour of the cheques and represent the company and proceed the case against the accused company as 33 SCCH-19 CC No.26215/2012 per the Power delegate in the Board of resolution 21-12- 2011. Therefore one thing is clear that before filing of this case the Board of Directors of the complainant compny has passed the resolution on 27-07-2011 and also passed the another one resolution on 21-12-2011 with respect to delegate the power and authorize to proceed the case against the accused with respect of the dishonour of the cheques. As per the Ex.P1 authorized the Mr.Ravi rao and also Dhruvaraj on behalf of the company. Therefore, mere representative has not produced Power of Attorney is not a ground to denial to authorize to file the case and proceed the case against the accused.
24. In this regard counsel for the accused have relied one Judgment of Hon'ble Supreme Court of India reported in (2014) 11 SCC 790 wherein Hon'ble Supreme Court of India, it is held that:
The filing of Complaint Petition Under section 138 of NI Act through Power of Attorney holder is perfectly legally and competent. However such Power of Attorney holder or legal representative should have due knowledge about the transaction in question.
34 SCCH-19 CC No.26215/2012 Herein this case the PW.1 deposed about transaction held between the complainant company and the accused company. In the cross examination Pw.1 clearly admitting the transaction between both companies and defence counsel nothing has been eliciting about the no knowledge of the business transaction to the said witness as per Ex.P1 Resolution passed by the complainant company and as per the Ex.P.19 the Ravi Rao the chief financial Officer has executed the Power of Attorney in favour of Pw.1 on 23-05-2018 on the basis of the Board resolution dated 21-12-2011. The complaint was presented through its representative or employee with the authorization or without authorization, but the complaint is maintainable to proceed against the accused and the want of authorization can be rectified even at the stage of evidence. In this regard the complainant counsel has relied one Judgment passed by Hon'ble Supreme Court of India reported in (2002) 1 SCC 234, in the case of MMTC Ltd and another V/s Medchl Chemicals and Pharma (P) ltd., and another, it is held that :-
Complaint by company - maintainability - competence to file - complaint filed in the name 35 SCCH-19 CC No.26215/2012 and on behalf of the company by its employee without necessary authorization - such a complaint, held nonetheless maintainable -
want of authorization can be rectified even at a subsequent stage.
Herein this case the representative of the complainant has produced the Board of resolution passed by the Board of Directors and also produced the Power of Attorney executed by the authorized signatory Mr.Ravi Rao of the complainant company to authorized one Mr.Dhruvaraj to proceed the case on behalf of the company herein who is examined as Pw.1. Though in the said resolution not stating any other cheque numbers but authorized the representative to proceed the case against the accused company, hence it is proved that the Pw.1 ad 2 are proper representatives to proceed the case on behalf of the complainant company.
25. On perusal of cross examination of Pw.1 and also evidence of the Accused No.2 i.e., Dw.2 and cross examination of said accused one thing is clear that said accused has admitting the signature and also cheque which is marked as Ex.P2 belongs to the bank account of the accused company. Further after perusal of the entire 36 SCCH-19 CC No.26215/2012 cross examination of Pw.1 and 2 and also evidence of Dw.1 to 3 are disclose that there was a business transaction with the complainant and accused no.1 company. As per Ex.P4 i.e., Settlement agreement which is disclosed that an Agreement was between the Plaintiff company Arvind Murjani Brands Pvt., ltd., and Accused No.1 company Primus Retail Pvt., ltd., with respect of the National Franchise Agreement for Mono brand retailing for apparel stores on 7-5-2007 with Aryan Life style Pvt., ltd., detailing the terms and conditions to open operate and Sub franchise Tommy Hilfiger franchise stores in India. In the said agreement accused company has assumed all rights and obligations under the sub franchise agreement. Therefore, on 27-4-2009 and pursuant of which M/s Primus Retail Private Limited is liable for the performance of all the obligations under the Sub Franchise agreement and also the Complainant company and the accused company have entered another one agreement i.e., Addendum Agreement to the settlement agreement dated 24-09-2010 on 24-03-2011. In the said agreement also accused company and the complainant company had entered into settlement agreement to conclude and settled the following matters 37 SCCH-19 CC No.26215/2012 i.e., formal closure and termination of the National Franchise Agreement for Mono brand retailing for apparel stores, on 7-5-2007 with Aryan Life style Pvt., ltd., and discharge of out standing due as per the acknowledgment debt and handed over the delivery of stores to the complainant company as agreed in the agreement and also accused No.1 Company undertaking for transferring or assigning all rights under leases or licenses for the relevant store. In the said agreement signatory was signed on behalf of the accused company. The said signature was admitted by accused No.2 Sri.Jayakumar in his cross examination. In the cross examination accused No.2, 3 and 5 are admitted the said both agreements and also transactions with the complainant company. Further it is pertain to note that the accused No.2 and 5 are clearly admitted that as per the settlement agreement the accused company is liable to pay the due amount to the complainant company and also accused is admitting the National sub Franchise Agreement dated 7-5-2007. Therefore it is clear that there was a business transaction between the complainant company and accused company and the accused company was issued cheque in favour of the 38 SCCH-19 CC No.26215/2012 complainant company and accused No.2 and accused No.4 were signed on the said cheque as the authorized signatories. In the cross examination the accused No.2 has clearly admitting that he was signed on the said cheque as per the direction of the Board of Directors and also Managing Director. Further admitting that the accused no.4 Balaji Bhat is the Managing Director and other accused are Directors of the accused No.1 company. Therefore, it is pertain to note that the accused have admitting the business transaction with the complainant company and also admitting the cheque and signature then the initial burden is upon the complainant to prove the cheque was not issued in favour of the complainant for payment of the amount is discharged and automatically onus shifted upon the accused to prove their defence and it is for the accused to rebut the legal presumption enumerated under Section 139 of N.I. Act. As per Section 139 of N.I. Act there is a presumption that once the cheque and signature admitted, hence the said cheque was issued for discharging the legal liability and it is for the accused to rebut the said presumption by adducing cogent, 39 SCCH-19 CC No.26215/2012 convincing and acceptable evidence. It is held in a decision reported in ILR 2006 Karnataka 4642.
" NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 138 - OFFENCES UNDER- SECTIONS 139 - Presumption under-
Conviction-Appealed against-Conviction Confirmed- Revision Against-Mere denial of issuing cheques-whether is sufficient to discharge the initial burden-HELD, Mere denial of issuing cheques would not be sufficient as it is time and again noted that once the cheque is issued duly signed by the petitioner, the presumption goes against him as per section 139 of the Negotiable Instruments Act."
26. It is pertain to note that the accused No.2 Mr.Jayakumar entered in to the witness box and examined as Dw.2 and he has deposed that he was a salaried employee and he was directed to discharge his duty as per the terms and conditions of the said appointment. Further specifically deposed that he has signed the Settlement agreement executed with the complainant company and he was a Chief Operative Officer of the accused no.1 company and he was given an authority to sign the cheque for an amount lesser than Rs.10,00,000/- and he was not authorized to sign the 40 SCCH-19 CC No.26215/2012 cheques which is about Rs.10,00,000/-. Further deposed that he was working with the company and he used to travel frequently for office works for case of business he was always used to kept few signed cheques at the office, so that it can be used in his business and cheques which are used by the complainant in this case is also one of the blank cheques which was signed and kept in the office. Further in the cross examination he has admitting that the Board of Directors of accused company has given authority to sign on the cheques and also accused is having authority to sign on the cheques. Therefore it is clear that though the accused no.2 has deposed the evidence and denial of the issuance of cheque in favour of the complainant company and though he has given authority to sign the cheques for an amount lesser than Rs.10,00,000/- but in support of said contentions accused no.2 has not produced any documents and also for the purpose of using the blank cheques that filled amount by the complainant and other Directors, accused no.2 has not taken any action against the complainant company or other Directors of the accused company, hence it is presumption that accused no.2 has signed on the cheques on the direction of the 41 SCCH-19 CC No.26215/2012 Board of Directors. It is pertain to note that another one signatory Mr.Balaji Bhat who is accused No.4 was also signed on the said cheque. But the accused No.4 has not given any evidence to rebut the presumption and also he has not produced any single document to denial of the issuance of cheque in favour of the complainant. Except bare cross examination of the representative of the complainant company nothing has been elicited that the complainant company has misused the cheques and also cheques were not issued by the accused no.2 and 4 on behalf of the accuse company. Though the accused no.2 has produced some of the documents, but said documents are not helpful to denial of issuance of the cheques in favour of the complainant and also not helpful to rebut the presumption under section 139 of N.I. Act with respect of cheque was not issued for repayment of the legal liability. Hence mere denial of the issuance of cheque is not sufficient ground to disprove the case of the complainant about issuance of cheque. It is pertain to note that the except oral testimony evidence of the accused no.2, 3 and 5 they have not examined any other independent witnesses nor they have produced any piece of documentary evidence in order to substantiate 42 SCCH-19 CC No.26215/2012 their contentions with respect of the denial of the issuance of cheque in order to discharge their onus and in order to rebut the legal presumption and it is for the accused to prove that they have not issued the cheque and the complainant have misused the cheque of the accused and further nothing damaging the veracity of the evidence of the complainant witnesses as elicited through their cross examination Therefore mere denial in the cross examination is not a sufficient to disbelieve the misuse of the cheque. Therefore it is clear that there is a presumption that accused no.2 and 4 are signed on the alleged cheque and issued on behalf of the accused No.1 company in favour of the complainant for discharge of liability of the Addendum to the Settlement Agreement.
27. Further the defence counsel have taken specific contention that the statutory legal notice was not served on the accused, hence the complainant has failed to compliance of the offence U/sec.142 of N.I. Act. I have perused the document produced by the complainant it disclosed that as per the Ex.P6 complainant company has issued legal notice through their counsel to the accused on dated 15-11-2011 calling upon the accused 43 SCCH-19 CC No.26215/2012 to pay the alleged cheque amount. As per the Postal acknowledgements which disclose that the notice was served on the accused. In the cross examination accused No.2, 3 and 5 are admitting of issuance of notice by the complainant through their counsel, but they have not replied to the said notice and also the address of the accused company admitted as shown in the notice and also cause title of the complainant. Therefore it is clear that before filing of this complaint the complainant has issued legal notice to the accused. Hence mere taken contention that notice was not served is not a ground to denial of issuance of notice by complainant. Once notice was issued to the address of the accused and same was admitted by the accused it is sufficient to compliance U/sec.142 of N.I Act about issuance of notice to the accused. Therefore complaint was complained provision under the Negotiable Instruments Act
28. Counsel for the accused No.2 taken specific contention that he is only an employee in the accused company and he has signed on the cheque only on the instructions of the Managing Director and also Directors of the company, hence he is not liable for the offence and 44 SCCH-19 CC No.26215/2012 also taken contention that he was authorized to sign the cheque which were not more than Rs.10,00,000/-, hence he is not liable to the offence of the accused No.1 company. The counsel of the complainant submit that accused No.2 is being authorized signatory of the company hence he is also liable to the offence. I have perused the cheque Ex.P2 it disclosed that accused no.2 was signed on the said cheque and same was admitted in his cross examination. Accused No.2 has admitting that he was the Chief operating Officer of the accused company and signed on the cheque on the instructions of the Board of Directors of the company. In this regard I have relied the Judgment of our Hon'ble Supreme Court of India reported in (2005) 8, SCC 89 in the case of S.M.S. Pharmaceuticals ltd., V/s Neeta Bhalla and another, wherein it is held that:-
In the present case we are concerned with criminal liability on account of dishonour of a cheque. It primarily falls on the drawer company and is extended to officers of the company. The normal rule in the cases involving criminal liability is against vicarious liability, that is no one is to be held criminally liable for an act of another. This normal rule is however subject to exception on account of specific provision being made in the
45 SCCH-19 CC No.26215/2012 statues extending liability to others. Section 141 of the Act is an instance of specific provision which in case an offence under Section 138 is committed by a company extends criminal liability for dishonour of a cheque to officers of the company. Section 141 contains conditions which have to be satisfied before the liability can be extended to officers of a company. Since the provision creates criminal liability the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. In other words persons who had nothing to do with the matter need not be roped in. A company being a juristic person all its deeds and functions are the result of acts of others. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the company. It makes every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of business of the company as well as the company liable for the offence. The proviso to the sub section contains an escape route for persons who are able to prove that the offence was committed without their knowledge or that they had exercised all due diligence to prevent commission of the offence.
46 SCCH-19 CC No.26215/2012
29. Therefore, accused No.2 is being authorized signatory and he is failed to prove that he was authorized to sign the cheques only which were not more than Rs.10,00,000/-, hence he is liable to the offence along with the other accused as a Chief Operating Officer of the accused company. In the cross examination he has clearly admitting that "£Á£ÀÄ MAzÀ£Éà DgÉÆæ PÀA¥À¤AiÀÄ°è ¹.M.M DVzÀÝjAzÀ £À£ÀUÉ ZÉPÀÄÌUÀ¼À ªÉÄÃ¯É ¸À» ªÀiÁqÀ®Ä C¢üPÁgÀ PÉÆqÀ¯ÁVgÀÄvÀÛzÉ JAzÀgÉ ¸Àj. " Further admitted that, "MAzÀ£Éà DgÉÆæ DqÀ½vÀ ªÀÄAqÀ½AiÀĪÀgÀÄ £À£ÀUÉ PÀA¥À¤AiÀÄ ¥ÀgÀªÁV ZÉPÀÄÌUÀ¼À ªÉÄÃ¯É ¸À» ªÀiÁqÀ®Ä C¢üPÁgÀ PÉÆnÖgÀÄvÁÛgÉ JAzÀgÉ ¸Àj." Further admitted that, he has signed on the settlement agreement on 24-09-2010 on behalf of the accused company and Board of Directors meeting authority signed on the said Settlement agreement. Therefore it is clear that accused No.2 is the proper Authorized signatory of the accused company. Therefore mere he was an employee is not a ground to discharge his liability from the alleged offence. Under such circumstances it is proved that the accused No.2 also liable to the offence on behalf of the accused no.1 company.
47 SCCH-19 CC No.26215/2012
30. The counsel of the accused No.3 has taken specific contention that, he is the Additional Director and not having any responsibility of the accused no.1 company and also he is not the active director in the company business, hence he is not liable to the offence of the accused no.1 company. Further the accused No.6 has also taken the specific contention that in the complaint there is no specific allegation against him and also he was not signed on the any agreements of the accused no.1 company and also he is not the active director in the business of the accused no.1 company, hence he is not liable to the offence as alleged by the complainant. I have perused the cross examination of the accused No.3 it disclose that he is one of the director of the accused no.1 company and also admitting that after appointing as a Director until closed of said company he was the Director. Further admitting that from 2007-08 to 2012- 2013 he was a member of the Board of Directors of the accused company and also he was attending all the board of directors meeting and also communicated all the resolution passed in the board of directors meeting. But he has denied the settlement agreement between the Complainant and accused company. Further he has 48 SCCH-19 CC No.26215/2012 admitting that after dishonour of the cheque he was discussed with the other directors and also discussed with the Managing Director Sri.Balaji Bhat. Therefore, it is clear that the accused No.3 also one of the Director and he know every transaction of the accused company, but only he has denied the said transaction of the Settlement agreement with the complainant company. Further said accused has not produced any document with regarding denial of the liability of the accused company and also he has not produced any document about the discharge of his liability. Further it is pertain to note here that even after issuance of notice and also filing of this case the accused no.6 is not discussed with the other directors of the company and also they have not replied to the notice of the complainant company and also the accused No.6 has not adduced any defence evidence to rebut the presumption and denial of his active participation and liabilities of the accused no.1 company. It is further pertain to note that, the counsel of the accused No.6 nothing has been eliciting in the cross examination of the complainant's witness about the denial of Director of accused no.1 company. Mere suggestions are not sufficient to discharge the liability of 49 SCCH-19 CC No.26215/2012 the accused no.6. Mere there is no specific allegations in the complaint is not a ground to escape from the liability. The accused no.6 is being the director is also liable for the all the liabilities of the accused no.1 company along with the other directors. I have perused the form No.32 of the Accused No.1 company which are marked as Ex.P20 and 21 are disclosed that, accused no.6 Raju Mohandas Mahtaney was the Director of the company as per the resolutions dated 7-9-2011 and also he was appointed as Additional Director and also date of appointment or change in designation on 12-09-2011 as Promoter category and also he had the shares more than 500 which is about 19.76% of shares in the said accused company. Further, I have perused the form No.32 which is marked as Ex.P.22, it discloses that Accused No.3/Palepu Sudhir Rao is one of the Director of the accused company and also the form No.20-B of the accused company in the year 2011 discloses that, he had shares more than 500 which is about 16.99% of shares in the said accused company. Though he was stated that he is additional Director in the accused company, but as per the company records it disclosed that he is one of the Director of the company and also he was the 50 SCCH-19 CC No.26215/2012 Active member participated in the board of directors meeting and also he has communicated all the resolution passed in the company meeting. Therefore, the accused no.3 and 6 are also liable to the offence of the accused company as on the date of the issuance of the cheque.
31. Accused No.4 Balaji Venugopal Bhat is the Managing director of the accused company. Same is admitted by the accused no.2, 3 and 5 in their cross examination. Further accused No.4 was not adduced any defence evidence to rebut presumption that cheques were not issued in favour of the complainant company for discharge the liability of the accused no.1 company. It is pertain to note that the accused no.4 is signed on the cheque as a Managing Director and also all the relevant documents of the accused no.1 company. Accused No.4 is being the Managing director also one of the authorized person and responsible for the company liabilities. Therefore the accused no.4 is also liable to the offence of the accused company.
32. The accused no.5 Ajay Mittal taken specific contention that he is a nominee Director from the U.T.I 51 SCCH-19 CC No.26215/2012 for managing the shares of the U.T.I and he is not the active director in the course of the business transaction of the accused no.1 company. The said accused has entered into witness box and deposed that he is an employee in the Unit Trust of India Venture Funds Management company Pvt., ltd., has issued letter to the C.E.O of accused No.1 Company stating that he is appointed in the replacement of earlier nominee Director of accused no.1 company and he has deposed that he was appointed as a nominee Director of investment made by the Govt., company he was only employee of the Unit Trust of India Venture Funds Management company Pvt., ltd., In support of the said contention he was produced a letter issued by Unit Trust of India Venture Funds Management company Pvt., ltd., to the C.E.O of accused company and also Memorandum of Association and Article of Association of U.T.I and also letter issued by the said U.T.I company which are marked as Ex.D2 to 7. After perusal of the said documents, it disclose that the accused No.5 Sri.Ajay Mittal was appointed as a nominee director of the accused no.1 Company on behalf of the Unit Trust of India Venture Funds Management company Pvt., ltd., and also as per Ex.D.3 clear that the salary and 52 SCCH-19 CC No.26215/2012 also other allowances was fixed. In the letter which is marked as Ex.D7 it s clearly stating that Sri.Ajay Mittal is appointed as a nominee Director on the board of Prime Retail Private ltd., pursuant to the investment made by Unit Trust of India Investment advisory services ltd., A/c Ascent India fund which is a Securities and exchange board of India (SEBI) registered venture capital fund and said Ajay Mittal does not hold any executive / operational role in the Primus Retail Pvt., ltd.,
33. After perusal of the form 32 which is marked as Ex.P23 it disclose that the said Ajay Mittal was appointed as a Nominee Director and said form No.32 is disclose that said accused no.5 given resignation to the company and same was accepted and effect from 11-4-2011. Therefore considering all the documents produced by the accused himself and also complainant company one thing is clear that accused No.5 was a Nominee director appointed by the Unit Trust of India Venture Funds Management company Pvt., ltd., and he is not a Executive director of the accused no.1 Company. As per provision under section 141 of the N.I. Act and as per observations made by Hon'ble Supreme Court of India in 53 SCCH-19 CC No.26215/2012 the case of S.M.S. Pharmaceuticals Ltd., V/s Neeta Bhalla and another reported in (2007) 4 Supreme Court Cases 70, wherein it is held that, Dishonour of the cheque - offence by company - Vicarious liability of director - requirements under Section 141 in respect of - satisfaction of - necessary averments to be made in complaint and Director does not automatically vicariously liable for offence on behalf of the company which is to be averred in the complaint that person proceeds against was not change of his responsibility to the company for change of its business and also must show as to how and in what manner the accused was responsible for the conduct of business of the company or its functioning.
Here in this case the complainant have not shown any active participation and also responsibility of the accused No.5 in the accused No.1 company with respect of the business transaction about accused and Addendum to the Settlement Agreement with the complainant company. Accused no.5 is being nominee director and he is only appointed by Unit Trust of India Venture Funds Management company Pvt., ltd., is not a active Director of the accused no.1 company ad also he is not 54 SCCH-19 CC No.26215/2012 responsible for the business of the accused no.1 company with the complainant company.
34. Further counsel of the accused taken specific contention that the Hon'ble High court was pleased to passed the Winding Up Order against the accused No.1 company and also appointed the official liquidator and the official liquidator taken over the entire charge and property of the accused No.1 company hence once winding up Order passed no proceeding against the said winding up company. The counsel of the complainant has submit that before filing of the company Petition and also before passed the winding up order, the offence was committed by the accused and the cheque was issued before passed the winding up order hence the said order is not applicable to the complainant.
35. I have perused the winding up order passed by the Hon'ble High Court of Karnataka, Bengaluru in company Petition No.30/2012 clubbed with Petition No.1/2012 and 181/2011. It disclosed that the others company along with the complainant company herein have filed company Petitions against the accused No.1 company for 55 SCCH-19 CC No.26215/2012 seeking the winding up order and the Hon'ble High Court Bengaluru was pleased to pass the said order on 8-10- 2012. But herein this case the alleged cheque was issued on 30-09-2011 in favour of the Complainant company and same was dishonoured on 09-11-2011. Hence it is clear that before order passed by the Hon'ble High Court of Karnataka, Bengaluru, the cheque was issued and dishonored. Hence the winding up order is not applicable to the case on hand. In this regard, the complainant counsel has relied the judgment of Hon'ble High Court of Bombey in the case of Orkay Industries ltd., and others V/s The State of Maharashtra and others, it is held that, In all these matters till the end of period of 15 days there has been no order of winding up nor any order appointing provisional Liquidator. However in all these matters, Petition for winding up had been filed either before the cheques were issued (in some case) and in any event before the period of 15 days, after receipt of notice expired. Thus the question for consideration Whether merely by reason of a winding up Petition being presented there was a bar or legal liability in making payment.
36. Herein this case the complainant company has issued the legal notice to the accused on 15-11-2011 and 56 SCCH-19 CC No.26215/2012 same was served on the accused on 17-11-2011. The winding up order was passed on 08-10-2012. Therefore, it is clear that, before the period of 15 days of receipt of the notice the order was not passed and also the accused have failed to compliance of the said notice. Under such circumstances though the accused no.1 company was wound-up, but the said order is not applicable to the case on hand and the complaint is maintainable against the accused no.1 company. Therefore complainant case herein is not come under the purview of Section 446 of the companies Act and the complainant is entitled to proceed the case against the accused.
37. The defence counsels have taken the contention that the cheques in question have been returned for the reason of "Account blocked" due to accused no.1 company has committed a default in payment of tax to the income tax department account of the accused company was blocked based on the instance of the income tax department, hence offence U/sec.138 of N.I. Act is not attracted to the case of the complainant. I have perused the endorsement given by the bank it disclosed that the cheque returned for the reason of 57 SCCH-19 CC No.26215/2012 Account blocked and after returned the cheque the complainant company has issued legal notice to the accused and intimated about dishonoured of the cheque, but the accused have not replied to the notice and also they have not taken any steps to compliance of the notice. The complainant counsel has argued that the account blocked is also comes under the purview of Offence U/sec.138 of N.I. Act. In support of their arguments the complainant counsel has relied one judgment of Hon'ble Supreme Court of India in the case of Lakshmi Dyechem v/s State of Gujarath and others reported in (2012) 13 SCC 375, wherein it is held that, Dishonour of cheque under - two contingences require to constitute offence U/sec.138 - scope - first contingence either because of the amount of money standing to the credit to that account is sufficient to honour the cheque, held, is a genus and dishonour for reasons such "as account closed", "payment stopped", ":refer to the drawer", "signature do not match " or "image is not found," or only pieces of that genus - further held two contingences envisaged under sec.138 cannot be interpreted strictly or literally -so long as the change is brought about by a drawer of the cheque with a view to preventing the cheque from being honoured the honour would become an offence U/sec.138 subject to other conditions prescribed being satisfied.
58 SCCH-19 CC No.26215/2012 Herein case the accused have not stating about why the account was blocked and in support of the contentions taken by the accused, they have not produced any documents. Mere the defence counsel has argued that, due to default in payment of tax the account of the accused no.1 company was blocked is not sufficient to disbelieving of the dishonour of the cheque due to insufficient funds. The accused have failed to prove that as on the date of the presentation of the cheque, in the account of the accused no.1 company having sufficient amount for honour of the said cheque. Therefore under such circumstances the reason account blocked is also comes under the purview of offence U/sec.138 Act.
38. This case was filed by the complainant company for the offence under section 138 of the Negotiable Instruments Act against the accused No.1 Company and its authorized signatories and Managing Director and also Other directors of the Company. Therefore, also held liable to face the prosecution under section 141 of the Negotiable Instruments Act. Further Section 291 of the Companies Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be 59 SCCH-19 CC No.26215/2012 entitled to exercise of all such powers, and to do all such acts and things, as the company is authorized to exercise and do. A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business.
39. Further the position under section 141 of the Negotiable Instruments Act as under:
(1) If the person committing an offence U/sec.138 is a company, every person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub section shall render any person liable to punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
60 SCCH-19 CC No.26215/2012 Provided further that, where a person is nominated as a director of a company by virtue of his holding any of his or employment in the central government or state government or a financial corporation owned or controlled by the central govt., or the State government, as the case may be, he shall not be liable for prosecution under this chapter.
(2) Not with standing anything contained in sub section (1) where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or convenience of or is attributable to, any neglect on the part of, any Director, Manager, Secretary or other Officer of the company, such Director, Manager, Secretary or other Officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation:- For the purpose of this section
-
a) "Company" - means any body corporate and includes a firm or other association of individuals.
b) "Director"- in relation to a firm, means a Partner in the firm.
61 SCCH-19 CC No.26215/2012 In this regard the Hon'ble Supreme Court held in the case of Sunil Bharati Mittal V/s CBI reported in (2015)4 Supreme Court Cases 609, it is held that:
"When the Company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is sec.141 of the Negotiable Instruments Act, 181. In Aneeta Hada, the court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company"
40. Herein case Accused No.2 is being the authorized signatory and accused 4 is Managing director have issued the cheque on behalf of accused No.1 company in 62 SCCH-19 CC No.26215/2012 favour of the complainant Company and accused No.3 and 6 are being the active director of the accused company and they are responsible to the Company for the conduct of business of the Company and also in charge of business of the Company. Therefore, considering all the materials available on hand it goes to show that the accused No.2 to 4 and 6 are utterly failed to discharge their onus and also they have failed to rebut the legal presumption under section 139 of NI Act that the cheque was issued in favour of the complainant for discharge of the legal liability and as it is time and again noted that once the cheque was issued and the notice issued by the complainant the presumption goes against accused under Section 139 of Negotiable Instrument Act, hence No.2 to 4 and 6 are liable for the offence punishable under Section 138 by virtue of section 141 of Negotiable Instruments Act. As discussed above the accused No.5 is being the nominee director and appointed by Unit Trust of India Venture fund Management company Pvt., ltd., hence he is not responsible for the acts committed by or on behalf of the accused company and liable for the offence under section 138 and 141 of Negotiable Instruments Act.
63 SCCH-19 CC No.26215/2012
41. Further this court is also empowered to award some compensation to the complainant if the facts and circumstances so exists. In this case accused company have issued the cheque for the amount of Rs.1,43,84,023/- to the complainant company in the year 2011 with respect of business transaction as per the settlement agreement dated 24-09-2010 and Addendum settlement Agreement dated 24-03-2011. Therefore considering the duration and also business transaction between complainant and accused company, I am of the view that if the Complainant is awarded a sum of Rs.2,00,00,000/- then that would definitely meets the ends of justice. Hence the complainant is entitled to claim the compensation under sec.357 of Cr.P.C. Therefore with these observations I answered to the Point No.1 and 2 in the partly Affirmative.
42. POINT NO. 3 :- For the foregoing reasons, I proceed to pass the following ORDER Accused No.5 is not found guilty and acting under Section 255(1) of Cr.P.C. I hereby acquitted for the offence punishable under Section 138 and 141 of N.I. 64 SCCH-19 CC No.26215/2012 Accused No.2 to 4 and 6 are found guilty for the offence punishable under Section 138 and 141 of N.I. Act.
Acting under Section 255(2) of Cr.P.C. I hereby convicted the Accused No.2 to 4 and 6 for the offence punishable under Section 138 of N.I. Act read with Section 141 of NI Act and sentenced them to undergo simple imprisonment for 6 months and shall pay fine of Rs.5,000/- each and in default of payment of fine, they shall further undergo simple imprisonment for 30 days.
Acting under Section 357 of Cr.P.C. I hereby direct the accused No.1 to 4 and 6 to pay compensation of Rs.2,00,00,000/- to the complainant within two months from the date of this order. Failing which, the Complainant is at liberty to recover the said amount as per Section 421 of Cr.P.C.
(Dictated to the Stenographer, transcribed and Computerized by him, then corrected and pronounced by me in open court on this the 15th day of April 2019.) (DYAVAPPA .S.B ) XV Addl. Small Causes Judge & XXIII A.C.M.M., Bengaluru.
ANNEXURE:
LIST OF WITNESSES EXAMINED FOR COMPLAINANT:
Pw.1 : Sri. Dhruvaraj.
Pw.2 : Sri.Ravi Rao,
65 SCCH-19
CC No.26215/2012
LIST OF DOCUMENTS EXHIBITED FOR
COMPLAINANT:
Ex.P.1 : Certified copy of Resolution,
Ex.P.2 : one Cheque,
Ex.P.3 : Bank Endorsement,
Ex.P.4 : Settlement agreement,
Ex.P.5 : Addendum Agreement,
Ex.P.6 : office copy of the legal notice,
Ex.P.7 to
Ex.P17 : 11 Postal Acknowledgments,
Ex.P18 : Extract-Resolution,
Ex.P19 : Power of Attorney
Ex.P20 to
P23 : Four form No.32,
Ex.P24 : Form 20B.
LIST OF WITNESSES EXAMINED FOR ACCUSED:
Dw.1 : Sri. Ajay Mittal, Dw.2 : Sri.Jayakumar. S. Dw.3 : P.Sudhir Rao.
LIST OF DOCUMENTS EXHIBITED FOR ACCUSED:
Ex.D1 : Copy of the Office Order
Ex.D2 : Copy of letter of Appointment of Nominee,
dated 12-12-2009
Ex.D3 : Copy of one letter issued by UTI Venture
funds,
Ex.D4 : Copy of Memorandum of Association
Ex.D5 : Copy of Articles of Association,
66 SCCH-19
CC No.26215/2012
Ex.D6 : Details of Shareholders of the UTI
Venture funds management
Ex.D7 : Copy of one Certificate issued by UTI
Venture funds
Ex.D8 : Offer of Appointment letter
Ex.D9 : Appointment letter
Ex.D10 to
D19 : Ten letters
Ex.D20 : one E.mail copy of Resignation letter.
(DYAVAPPA .S.B )
XV Addl. Small Causes Judge &
XXIII A.C.M.M., Bengaluru.