Andhra HC (Pre-Telangana)
Waterbase Ltd. vs Karuturu Ravendra, Proprietor, ... on 27 February, 2002
Equivalent citations: 2002(1)ALD(CRI)689, 2002(2)ALT(CRI)68, [2003]115COMPCAS752(AP), 2003CRILJ967
JUDGMENT D.S.R. Varma, J.
1. This criminal appeal is filed challenging the judgment dated 2.4.1997 passed by the Court of Judicial First Class Magistrate, Kakinada in C.C, No. 321 of 1995.
2. The complainant filed the complaint against the accused for the offence punishable under Section 138 of the Negotiable Instruments Act (for short "the N.I. Act"). The Court below, on evidence, found the accused not guilty of the said offence and accordingly acquitted him. Challenging the order of acquittal, the complainant had preferred this appeal.
3. The facts of the case in brief are that the appellant is a company and it has been carrying on with the business of manufacturing and selling of prawn feed under the brand name "Luxe Water Base" and the accused is the distributor of the appellant in East Godavari District. During the said transaction, the accused fell due to a sum of Rs. 1,55,87,952/- and in due discharge of the said liability, the accused issued a cheque dated 26.1.1995 drawn on the Corporation Bank, Kakinada for a sum of Rs. 6,00,000/- in favour of the complainant. The complainant presented the said cheque on 27.1.1995 and the same was returned for want of sufficient funds and this fact was intimated to the accused. At the request of the accused, the said cheque was represented on three more occasions i.e., on 2.2.1995, 8.2.1995 and on 6.7.1995. Even on these three occasions also, the said cheque met with the same situation. Therefore, the complainant got issued a registered notice dated 12.7.1995 and the accused received the same on 15.7.1997, but he failed to reply. Hence Sri S. Santhanaraman, Assistant Manager, Credit Control, representing the company, filed the present complaint.
4. In order to prove its case the complainant examined P. Ws. 1 to 4 and got marked Exs. P-l to P-7. On behalf of the accused, no witness was examined, except marking Exs. D-l to D-7.
5. The Trial Court on appreciation of evidence while ordering acquittal gave three findings in favour of the accused viz., that the complainant failed to prove the legally enforceable debt or liability on the part of the accused; that the notice issued to the accused is not a valid notice; and that the Assistant Manager, Credit Control who filed the complaint representing the company has no valid authorization as contemplated under Section 141 of N.I. Act to file the complaint.
6. The learned Counsel appearing for the complainant-appellant raised four contentions : Firstly, that the Trial Court is in error in holding that the complainant did not discharge his burden in proving that there was legally enforceable debt. Secondly, that the Trial Court is in error in holding that the notice sent to the accused is not a valid service. Thirdly, that the Assistant Manager who filed the present complaint was authorized by the Chief Executive of the company under Ex. P-7 and basing on such authorization, the Assistant Manager, Credit Control Sri S. Santhanaraman (P. W.I) filed the present complaint. He submitted that even otherwise since P.W.I is connected with the affairs of the company, without the authorization he can file the complaint. He further submitted that even assuming that there is no authorization, the Assistant Manager being the employee of the company is entitled to file the complaint on behalf of the company as an agent since the cheque issued by the debtor to discharge his liability to the company, when presented, was returned owing to lack of sufficient funds.
7. Lastly he contended that even assuming that accused paid certain amounts under Exs. D-3 to D-6 to the company, since the accused was indebted to the company to a total sum of Rs. 1,55,87,922/- and since under the said documents, no details were given by the accused i.e., to which account those amounts should be appropriated, it amounts to open payment and that when the payment is open, as stipulated under Section 60 of the Contract Act, the creditor can appropriate it to any lawful debt actually due.
8. With the above submissions, he sought for dismissal of the impugned judgment and for allowing of the appeal.
9. On the other hand, the learned Senior Counsel Mr. C, Padmanabha Reddy submitted that since the appellant was not able to establish the subsisting legally enforceable debt from the accused with supporting documents, the Court below has rightly held his issue in favour of the accused. He nextly submitted that the Assistant Manager who lodged the complaint on behalf of the company has no valid authorization. He further submitted that the Chief Executive who authorized the Assistant Manager, himself has no valid authorization, since no document like resolution of the company or any articles of association was filed tracing the authority of the Chief Executive to authorize the Assistant Manager. In support of these contentions, he relied on the judgment of this Court in Nayagam Lourd Prakash v. Standard Chartered Bank, II (2001) BC 554=2001(1) ALT (Crl.) 97.
10. With the above contentions, he submitted that the impugned order does not warrant any interference and accordingly sought for dismissal of the criminal appeal.
11. In the light of the above contentions the following points would emerge for my consideration :
(1) Whether the burden of proving the legally enforceable debt is on the complainant and if the same is not satisfactorily discharged, whether the accused is entitled for an acquittal and what is the effect of presumptions under Section 139 of the N.I. Act?
(2) Whether the notice sent on the name of the proprietary concern can be treated as notice sent to the proprietor ?
(3) Whether the Assistant Manager, Credit Control who filed the present complaint has valid authorization ?
12. Point No. 1 : In the decision reported in Maruti Udyog Ltd. v. Narender, , the Hon'ble Supreme Court held that in view of the express provision of Section 139 of the N.I. Act, a presumption must be drawn that the holder of the cheque received the cheque, of the nature referred to in Section 138, for the discharge of any debt or other liability unless the contrary is proved.
13. Further in Hiten P. Dalai v. Bratindranath Banerjee, II (2001) EC 773=V (2001) SLT 179 = III (2001) CCR 43 (SC)=2001 SCC (Crl.) 960, the Apex Court while dealing with Sections 138 and 139 of the N.I. Act observed that it is obligatory on the Court to raise this presumption in every case where the factual basis for raising of the presumption had been established. It further observed that Section 139 is introduced as an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused. In this judgment, the Apex Court distinguished a "presumption of law" and "presumption of fact". It also held that the obligation on the prosecution may be discharged with the help of presumptions of law or fact, unless the accused adduces evidence showing the reasonable possibility of the non-existence of the presumed fact. It further observed at paragraph No. 23 as under:
"xxx xxx xxx Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the Court in support of the defence that the Court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of a 'prudent man'."
The above principle was reiterated by the Apex Court in the recent judgment in MM. T. C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd., .
14. Therefore, from the above decisions of the Supreme Court the ratio decidendi laid down is that the Court has to draw a presumption that the drawer of the cheque has issued the same for legally enforceable debt or liability unless the contrary is proved.
15. In this legal backdrop, it is necessary for this Court to look into the evidence both oral and documentary on record in order to examine whether the accused could successfully prove that there is no existing legally enforceable debt and that presumption has to be drawn in favour of the complainant-holder in due course.
16. In order to meet this issue, it is necessary to look into the relevant evidence on record. P.W. 1 is the Assistant Manager, Credit Control of the appellant-company and he is the person who issued the statutory notice to the accused under Ex. P-5. He deposed that their company used to supply the prawn feed on credit; that the accused is the proprietor of M/s. Butterfly Aquatech in Kakinada; that he fell due a total sum of Rs. 1,55,87,952/-; the statements of commission rent (?) by the accused for the business done by him are Exs. P-l and P-2 that towards the discharge of the said due, the accused issued a cheque for Rs. 6,00,000/- drawn on Corporation Bank, Kakinada on 26.1.1995; that the cheque is Ex.P-3; that the said cheque was presented on different occasions at CanaraBank, Kakinada; that it was bounced; that they issued Ex. P-5 registered notice to the accused; that Ex. P-6 is the postal acknowledgement and; that he was the complainant on behalf of the company.
17. In the cross-examination he stated that he does not know who is the person to represent the company as per Memorandum of Articles; that he has no power to lodge this complaint; that the Chief Executive has given G.P.A. that except Exs. P-1 and P-2 he did not file any documents to show that the accused has liability to pay; that it is true that Exs. P-l and P-2 do not show that the accused was liable to pay any amount to the company and; that their company had the accounts, but he did not produce them.
18. He further denied that the complainant-company used to take cheques, hundies, negotiable instruments with an understanding that they would not be presented for collection and that they would not be enforced. He further stated that unless he verified the accounts of the company, he cannot say whether the company received the amounts under Exs. D-3 to D-5 and whether they were towards the discharge of Ex. P-3 cheque. He further stated that the accused fiied a suit for the amount due to him.
19. P.W. 2 is the Regional Sales Executive of the complainant-company. Hedeposed that the accused is their dealer; that he also collected monies from the sale of goods; that the accused owned (owed ?) to the company about Rs. 1,55,00,000/-; that he defended for the payment of the same and; that the accused owed huge amounts to the company and there are transactions.
20. In the cross-examination he admitted that Exs. D-3 to D-5 are given subsequent to Ex. P-3 and; that he does not know whether the amount under Exs. D-l to D-5 have been appropriated towards the cheque (Ex. P-3) amount or not, unless he verifies the accounts of the company. He further denied that all the payments made by the accused subsequent to Ex. P-3 are towards the amount covered by Ex. P3 and that all the credit notes given by the company, are also towards Ex. P-3 and that if the complainant maintains the correct amount, no amount is due to the complainant by the accused.
21. Basing on the above evidence, the learned Senior Counsel appearing for the respondent-accused submitted that P.W; 1 himself admitted that he did not know who was the person to represent the company as per the Memorandum of Articles. Further Exs. P-1 and P-2 do not show that the accused is liable to pay any amount. He further argued that P.W.I has not produced any account books showing that the accused is liable to pay any amount. He submitted that in the absence of any material to show that the accused is liable to by any amount, an inference can be drawn in favour of the accused that he is not liable to pay any amount. While disputing the aspect of presumption under Section 139 of the N.I. Act, he submitted that the accused had successfully rebutted the evidence, both oral and documentary adduced on behalf of the complainant, by producing the documentary evidence under Exs. D-l to D-6.
22. There is no dispute with regard to the question that initially a presumption on the basis of Ex. P-3 cheque has to be drawn in favour of the complainant unless the contrary is proved. But it has to be examined whether such presumption of fact has been successfully rebutted by the accused by marking Exs. D-1 to D-6. By marking the said documents, the defence of the accused appears to be that though the Ex. P-3 cheque was issued by the accused to the complainant, there were certain other transactions took place subsequent to the issuance of Ex. P-3 and those transactions pertain to the discharge of the amount covered under Ex. P-3. Except the suggestion made on behalf of the accused and marking Exs. D-l to D-3, no attempt was made by the defence to prove the said documents by examining any witness. No doubt a perusal of documents filed on behalf of the accused reveal that certain transactions subsequent to the date of issuance of the cheque had taken place, but in the absence of any positive oral evidence, Exs. D-1 to D-6 cannot be held to be proved and as such it is difficult to believe that the said payments made by the accused to the complainant, are only towards the discharge of the amount covered by Ex. P-3 cheque.
23. Here it is relevant to consider Seciion 60 of the Indian Contract Act, which reads as under:
"Application of payment where debt to be discharged is not indicated--Where the debtor has omitted to intimate and there are no other circumstances indicating, to which debt the payment is to be applied, the creditor may apply it at this discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits."
24. It has to be noted that the main case of the complainant is that in fact the accused owes a sum of Rs. 1,55,00,000/- and out of which for a sum of Rs. 6,00,000/- alone the accused issued the cheque. On the contrary the specific case of the accused appears to be that the cheque amount was covered by the payments made under Exs. D-3 to D5, subsequent to the issuance of the cheque. But when Exs. D-3 to D-5 were not proved by examining any witness, it is difficult to come to a positive conclusion that any amount paid, subsequent to the date of issuance of the cheque pertains to the discharge of the cheque amount only.
25. It is no where indicated in the documents marked on behalf of the accused that the amounts so paid subsequent to the date of the cheque shall be appropriated only towards the discharge of the amount covered under Ex. P-3. Undisputedly the total outstanding amount was Rs. 1.55,00,0007- and odd. In the absence of any such clarification in the documents marked on behalf of the defence, it is highly difficult to hold that those amounts were paid only towards the discharge of the cheque amount to a tune of Rs. 6,00,000/-, and even if any amounts were paid, it is at the discretion of the creditor to appropriate such payments towards the lawful debt actually due and payable from the debtor, as envisaged under Section 60 of the Indian Contract Act.
26. Furthermore, it is on record that after the bouncing of the cheque, undisputedly Ex. P-5 statutory notice has been issued by the complainant and admittedly no reply has been given by the accused. Hence, this is another factor, which strengthens the case of the complainant and leads to drawing of an adverse inference against the accused.
27. Hence in my view" the accused failed to prove that he does not owe any legally enforceable debt to the complainant. In other words, he could only prove that he paid certain amounts to the complainant company subsequent to the date of issuance of the cheque, but could not prove that those payments were only towards the disputed cheque amount and in all probability those payments might be towards the total alleged outstanding amount of Rs. 1,55,00,0007- and odd or towards the subsequent transactions. Therefore, I am of the considered view that the presumption under Section 139 of file N.I. Act, which is in favour of the complainant still remained unrebutted.
28. In view of the above discussion, I answer this point in favour of the complainant.
29. Point No. 2 : Ex. P-5 is the statutory notice. A perusal of the said notice reveals that it was given by the complainant company and P.W. 1 the Assistant Manager, -Credit Control signed it only representing the said company. It further indicates that it was addressed to "M/s. Butterfly Aquatech, No. 4, Sree Complex, Main Road, Kakinada-533003". Further, a perusal of Ex. P-3 cheque and other documents marked on behalf of the accused also reveal that the transactions were between the Water Base Limited and the Butterfly Aquatech only and it also not in dispute that the sole proprietor of Butterfly Aquatech is the accused and further it is not the case of the accused that it is a partnership concern or a company.
30. The learned Counsel appearing for the accused has not pressed this issue and hence it is not necessary to express any further opinion on this point and I hold this point in favour of the complainant.
31. Point No. 3.: The learned Senior Counsel for the respondent strenuously contended Vol. Ill Waterbase Ltd. v. Karuturu Ravendra, Proprietor, M/s. Butterfly Aquatech, Kakinada that P.W. 1 is not competent to lodge the complaint representing the company, inasmuch as there is no proper authorization. It is further contented that the Chief Executive who gave authorization to P.W. 1 himself had no authorization from the complainant-company. In other words, the complainant being acompany, the authorization should be given only by the Board of Directors by way of resolution. Since no such resolution is brought on the record, the authorization given by the Chief Executive to P.W. 1 to lodge the complaint cannot be treated as a valid authorization and, therefore, the complaint lodged is not valid.
32. On this issue, the High Court of Madras in Sagayadurai and Ors. v. J.D. Electronics, II (1997) BC 21=1997 1 L.W. (Crl.) 297, relying its earlier judgment in M/s. Gopalakrishnan Trading Company rep. by its Manager P. Sivaramv. D. Baskaran, 1992(3) Crimes 1094, held at paragraph No. 5 as under:
.......The company, though it is a legal entity, does not have soul, mind, body and limbs to walk to the Court for preference of a complaint. The dictates of common sense, practical wisdom, prudence and expedience impels the Court in such a situation to allow the company to present a complaint before the Court represented by some person connected with the affairs of the company. The person connected with the affairs of the firm, the company, in the normal run of things may be either its manager, partner, managing partner or director or any other person authorized by the company...
33. In M.M.T.C. 's case (cited supra), Their Lordships of the Supreme Court held at paragraphs 11 and 12 that the only eligibility criterion prescribed by Section 142 of the N.I. Act 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.
34. In the same decision. Their Lordships while referring to an earlier judgment in Associated Cement Co. Ltd. v. Keshvanand, , recorded at paragraph No. 12 as under, :
In the case of Associated Cement Co, Ltd. v. Keshvanand (supra) 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 corporated 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. If 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 send a person who is competent to represent the company. The complaints could thus not have been quashed on this ground.
35. Another learned Single Judge of this Court in Pritama Reddy v. Charminar Co-Op. Urban Bank Ltd., II (2001) BC 505=2001(1) ALT (Crl.) 244 (A.P.), had an occasion to discuss about the aspect of authorization, in a case where, as per the bye-laws, the Chief Executive Officer who was no other than the Managing Director issued authorization to the Recovery Manager of the complainant Bank, held that such an authorization was valid. Of course, in the said case, bye-laws of the company empowering the Chief Executive Officer to authorize the Recovery Manager to file the complaint were made part of the record. But in the instant case no such material is pressed into service.
36. In the instant case, no doubt the Assistant Manager of Credit Control issued statutory notice under Ex. P-1 and the same person lodged the complaint. By virtue of his designation it is manifest that he is dealing with the credit transactions of the complainant-company with other. That means he has been acting on behalf of the company in the capacity of the Assistant Manager.
37. It is pertinent to consider Sections 186 and 187 of the Indian Contract Act. These provisions indicate that the authorization can be express or implied and the implicity has to be inferred from the circumstances of the case and the things spoken or written, or the ordinary course of dealing.
38. In the instant case, the complainant who is P.W. 1, as already noticed, has been associated with the credit transactions of the company. He was the person who gave the notice referring to various transactions and he was the person who got the authorization from the Chief Executive of the company. No doubt there is nothing on record to show that the Chief Executive has got authorization to authorize P.W. 1 to represent the company. I am of the view that going into this question amounts to going into the root of the issue. But from the circumstances, it can safely be inferred that he has the implied authorization to act on behalf of the company and after all he represented the company only to safeguard its interest i.e., his acts are not to the prejudice of the company, but on the contrary they are for the benefit of the company. Most importantly the Board of the appellant-company never expressly or implicitly, disrobed P.W. 1 from the capacity of the Assistant Manager-Credit Control of the company, nor has disowned his acts representing the company. Therefore, a comprehensive look at the whole circumstances Would only go to show that P.W. 1 had definite authorization to represent the company.
39. Further Section 196 of the Indian Contract Act provides for the ratification of the acts by the agents,
40. In the present case since the company never expressly objected to the acts of P.W. 1, such silence on the part of the company amounts to implied ratification or consent.
41. In the decision reported in Nayagam Lourd Prakash 's case (cited supra), relied on by the learned Senior Counsel for the accused, this Court relying on another judgment of the learned Single Judgeof this Court in Satish and Company v.S.R. Traders, 1991(1) ALT (Crl.) 696 (A.P.), held that the complaint filed by the company represented by the Manager, who is not authorized to file the complaint was not maintainable. Unfortunately the observations of the Supreme Court in Associated Cement Co. Ltd. 's case (cited supra) were not brought to the notice of the learned Single judge.
42. The Courts shall not be too technical in application of law to the set of facts in dispensing justice and any deviation in interpretation of law laid down by the Supreme Court in the above cited decisions (supra) would only result in travesty of justice.
43. Therefore, in the light of judgment of the Apex Court in M.M.T.C.'s case (cited supra), which reiterated the principle in Associated Cement Co. Ltd. 's case (cited supra), and also in view of the provisions of the Indian Contract Act, I hold that the judgments of this Court (cited supra) cannot be made applicable to the present case
44. For the foregoing reasons, I hold that the accused is guilty of the offence punishable under Section 138 of the N.I. Act and he is convicted for the said offence. Consequently, the impugned judgment is set aside.
45. So far as the sentence is concerned, both the Counsels represented that civil suits filed by both the parties against each other for recovery of money are pending.
46. Having regard to the facts and circumstances of the case and the submission of both Counsels, the accused is sentenced to pay a fine of Rs. 5,000/- (Rupees five thousand only). In default of payment of said fine of Rs. 5,000/- the accused shall undergo simple imprisonment for a period of three months.
47. In the result, the criminal appeal is allowed.