Crl.MC.No.3572 of 2005 (B)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 9TH SEPTEMBER, 2008 / 18TH BHADRA, 1930 **Crl.MC.No. 3572 of 2005 (B)** (ST.3218/2003 of JUDL. MAGISTRTE OF FIRST CLASS COURT-III, THRISSUR) .................... PETITIONERS/ACCUSED 3 & 4: ------------------------------------- 1. SREEKUMAR, S/O.SASI, ERAMBULLY HOUSE, KANNOTHUMCHAL P.O., CHOVVA, KANNUR. 2. SREENI.M., S/O.M.K.MANI, MADATHIL HOUSE, P.O.VELIYANOOR, KOTTAYAM. 3. PRASANTH, S/O.KUNJIRAMAN, KADEKARA, NEAR VANIVILASAM U.P.SCHOOL, VAIDARMUKKU, P.O.CHOVVA, KANNUR-6. BY ADV. SRI.RAJESH NAMBIAR RESPONDENTS: - ------------------- 1. STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA. 2. VALAPPILA COMMUNICATIONS PRIVATE LTD., REGISTERED OFFICE: BASILICA BUILDING, CHURCH SQUARE, TRICHUR-680 001, A REGISTERED PRIVATE LIMITED COMPANY, REPRESENTED BY LITIGATION CLERK P.A.THOMAS, AGED 48 YEARS, S/O.PYNADAN AUGUSTHY, NELLIKUNNU DESOM, OLLUKARA VILLAGE, THRISSUR. BY ADV. SRI.V.R.KESAVA KAIMAL FOR R2 SRI.N.M.MADHU FOR R2 PUBLIC PROSECUTOR THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 05/09/2008, THE COURT ON 09/09/2008 PASSED THE FOLLOWING: ## **V.K.MOHANAN, J. --------------------------------------------Crl.M.C.No.3572 of 2005 - B --------------------------------------------Dated this the 9[th] day of September, 2008** ## **O R D E R** Accused Nos.3,6 and 4 are the petitioners herein who seek an order to quash Annexure A complaint and the proceedings pending before the Judicial First Class Magistrate-III, Thrissur to the extent it is against the petitioners. S.T.No.3218 of 2003 is a case instituted against the accused including the petitioners upon Annexure A which is a private complaint filed under Section 190(1)(a) of the Code of Criminal Procedure and Section 142 of the Negotiable Instruments Act (for short 'the N.I.Act'), alleging offence punishable under Section 138 of the N.I.Act. 2. The case of the petitioners is that they have been unnecessarily implicated as accused in the above case and they are in no way connected with the alleged offence as they are not partners of the first accusedpartnership firm. It is also the case of the petitioners that no offence is disclosed against them even going by Annexure-A complaint and therefore, the court below has ## **Crl.M.C. NO.3572 of 2005** ## **:-2-:** committed wrong in taking cognizance against the petitioners. Second respondent is the complainant in Annexure-A complaint where Kelnet India Service, Super Bazar Complex, Kannur-I, a Partnership Firm represented by partner Sri.M.P.Prasad is shown as the first accused and accused Nos.2 to 6 are the partners of the first accused- firm. According to the complainant, as disclosed from the averments contained in paragraph 2 of the complaint, the first accused is a partnership firm and 2[nd] to 6[th] accused are the partners of it who are in charge of and responsible to the first accused for the conduct of the business of the first accused. It is also stated that Kerala State Couriers and Parcels Cooperative Limited (KELCONET) is a business associate of the first accused. It is the further case of the complainant that it published the advertisement of the said KELCONET in various newspaper dailies on credit and towards the repayment of the said advertising charges, the second accused for and on behalf of the first accused issued to the complainant a cheque bearing ## **Crl.M.C. NO.3572 of 2005** ## **:-3-:** No.275223 dated 27.01.2003 for an amount of Rs.23,100/- drawn on Indian Bank, Kannur Branch. It is stated that the complainant presented the cheque for collection on 5.6.2003 through the Dhanalakshmi Bank Limited, Puthur Branch, Trichur and the same was returned back to the complainant from the Bank on 14.6.2003 as unpaid due to insufficiency of funds in the Bank's account of the first accused to honour the cheque with a memorandum containing endorsement 'Funds Insufficient'. Consequently, the complainant on 27.6.2003 caused to send a lawyer's notice to the 1[st] to 5[th] accused and for the 6[th] accused, on 28.6.2003 calling upon the accused to pay the amount due on the said dishonoured cheque within the time limit. According to the complainant, Accused Nos.1,3,4 and 5 received the said notices and accused Nos.2 and 6 deliberately evaded the service of notice. Only the 4[th] accused sent the reply notice. Therefore, it is averred that the first accused failed to make payment of the amount due with the consent, connivance and neglect of the second to ## **Crl.M.C. NO.3572 of 2005** ## **:-4-:** sixth accused and therefore, stated that all the accused have committed the offence punishable under Section 138 read with 141 of the N.I.Act. On the basis of Annexure-A complaint, the court below took cognizance and instituted S.T.No.3218 of 2003. It is the above complaint and the case challenged in this petition. 3. I have heard Mr.Rajesh Nambiar, learned counsel appearing for the petitioners, Sri.V.R.Kesava Kaimal, learned counsel appearing for 2[nd] respondent and also the learned Public Prosecutor. 4. Learned counsel for the petitioners submits that there is no averment in the complaint so as to disclose the offence under Section 138 of the N.I.Act against the petitioners. The counsel reiterated that the petitioners are not partners of the first accused/firm. Even otherwise except the verbatim recital of Section 141 of the N.I.Act, there is no proper, legal and factual averment against the petitioners who are accused Nos.3,6 and 4 to attract the offence against them. Counsel for the petitioners further submitted that unless ## **Crl.M.C. NO.3572 of 2005** ## **:-5-:** there is factual averment so as to attract the statutory liability under Section 141 of the N.I.Act, no offence under Section 138 will lie against the petitioners, especially in the particular facts and circumstances involved in the case. 5. Per contra, Mr. Kesava Kaimal, learned counsel appearing for the second respondent/ complainant strenuously argued that going by Annexure A complaint, it can be seen that all requisite averments are raised in the complaint and the complainant is not bound to plead the evidence in the complaint. It is also the case of counsel for the second respondent that this Court will not be justified in interfering with the complaint at the threshold especially, on the basis of a disputable point as to whether the petitioners are partners of the first accused company. Thus, the learned counsel strongly defends the complaint and justifies the cognizance taken by the court upon Annexure-A complaint. 6. I have carefully considered the contentions ## **Crl.M.C. NO.3572 of 2005** ## **:-6-:** advanced by both the counsel and also examined Annexure A complaint. 7. Going by the complaint, it can be seen that even if the averments are admitted as true, the liability arose out of the service rendered by the complainant towards the advertisement made by them for the KELCONET which is an independent establishment. Therefore, the liability is on the said KELCONET to pay off the amount due to the complainant. But, according to the complainant, the said KELCONET is a business associate of the first accused. The factual averments are not sufficient to fix the liability upon the first accusedpartnership firm towards the complainant for the service rendered by them for the KELCONET. When the complainant admits that the KELCONET is a business associate of the first accused- firm, the first accused has no case that it is not a co-operative establishment formed under the provisions of the Kerala Co-operative Societies Act and Rules. There is no further averment as to the nature of the first accused-partnership firm and ## **Crl.M.C. NO.3572 of 2005** ## **:-7-:** its relationship with KELCONET. Suppose there is some contract between the first accused and the KELCONET and as part of such contract or business, at the instance of the first accused, the complainant had undertaken advertisement job with respect to the KELCONET, naturally one can realise the liability of the first accused--firm towards the complainant. But those detailed factual averments are absent. It is in this background the contention of the petitioners that they are not the partners of the first accused firm and they are the Directors of the said KELCONET, is to be appreciated. Therefore, the crucial question to be considered is whether the only averment contained in Annexure A complaint that ' **the Second to Sixth Accused** **are the partners of the First Accused/Persons who are in charge of and responsible to the First Accused for the conduct of the business of the First Accused'** , is sufficient to implicate the petitioners in the above case. 8. The learned counsel for the petitioners ## **Crl.M.C. NO.3572 of 2005** ## **:-8-:** submits that the complainant was fully aware of the fact that the petitioners are not partners of the first accusedfirm and that is the reason that no further factual averments are taken to connect the petitioners with the alleged offence. Therefore, according to counsel for the petitioners, in the complaint except just quoting the statutory terms contained in Section 141 of the N.I.Act, no factual allegations are made to implicate the petitioners in the alleged offence. Therefore, according to the counsel, merely for the reason that the words and terms of Section 141 are contained in the complaint, the court below ought not have taken cognizance against the petitioners. 9. On the other hand, on the strength of the decisions of the Apex Court and this Court reported in **Paresh.P.Rajda** v. **State of Maharashtra** (2008(2) KLT 983(SC)), **Green Sea Marine** v. **Anty** (2008(3) KLT 290), **Vijayakumar** v. **Lab & General Exports (P) Ltd.** (2008(3) KLT 599), **Rangachari** v. **B.S.N.L. (** 2007 (2) KLT 1030(SC)), **Everest Advertising (P) Ltd** . v. ## **Crl.M.C. NO.3572 of 2005** **:-9-:** **State of N.C.T. Of Delhi** (2007(3) KLT 821 (SC)) and **S.M.S. Pharmaceuticals Ltd** . v. **Neeta Bhalla** (2005 (4) KLT 209(SC)), the learned counsel for second respondent Mr.V.R.K.Kaimal vehemently resisted the contentions advanced on behalf of the petitioners and submitted that no interference of this Court is warranted under Section 482 of Cr.P.C. especially in the light of Annexure A complaint. Mr.V.R.K.Kaimal took me through Annexure A complaint. After reading the averments contained in para 2 of the complaint, counsel for the second respondent submits that necessary averments under Section 141 as held by the Apex Court in **Paresh's case** (cited supra)have already been taken in the complaint and therefore, it cannot be said that there is no pleading. In the said decision, the Supreme Court had held that it is necessary to specifically aver in a complaint under Section 141 that at the time offence was committed, person accused was in charge of, and responsible for the conduct of business of company the complainant and such averment is essential and has to ## **Crl.M.C. NO.3572 of 2005** ## **:-10-:** be made in the complaint. When these averments are being made in the complaint, the requirement of Section 141 cannot be said to be satisfied. In para 5 of the said decision, the Supreme Court had pointed out that merely being a Director of the company is not sufficient to make the person liable under Section 141. It was also held by the Supreme Court that holders of post of Managing Director or Joint Managing Director in a company are person in charge of and responsible for the conduct of business of company and the signatory of cheque is clearly responsible for incriminating act and will be covered under Section 141(2). Thus it is crystal clear as clarified by the Apex Court that no director is deemed to be charge in the company. That itself is sufficient to show that apart from mere giving the designation of the accused and also the verbatim reproduction of the statutory terms, there must be specific and clear averment as to the role played in the commission of offence by the persons against whom the offence alleged. Another decision relied on by counsel for the ## **Crl.M.C. NO.3572 of 2005** ## **:-11-:** second respondent is the decision of the Supreme Court reported in 2005(4) KLT 209 (SC) [ **S.M.S.Pharmaceuticals Ltd** . v. **Neeta Bhalla** ]. The same decision is relied on by counsel for the petitioner also. On the strength of the above decision, counsel for the second respondent submits that in the complaint, it has been specifically pleaded that the averments were there in the complaint against the accused including the petitioners to the effect that they are in charge of and responsible for the conduct of the business of the company. On the basis of the above decision, counsel for the petitioners submits that a Director in a company cannot be deemed to be in charge and responsible to the company for the conduct of its business. Counsel for the petitioners further submits that there must be factual averments in terms of requirement of Section 141 of the N.I.Act. Counsel for the petitioners as well as the second respondent cited a decision of this Court in **Vijayakumar's case (cited supra)** . A learned Judge of this Court after elaborately considering the facts and ## **Crl.M.C. NO.3572 of 2005** ## **:-12-:** circumstances involved in that case and on application of the dictum laid down by the Supreme Court in various decisions including the one reported in **S.M.S.Pharmaceutical's case** (cited supra) held that “......... **A careful consideration of all these decisions appears to make it clear that in the complaint specific assertions must be made to attract the play of S.141 of the N.I.Act. It has to be pleaded as a fact that the indictees concerned are in charge of and responsible to the company for the conduct of its affairs. Once that allegation is specifically raised, it is for the complainant to adduce evidence in support of such assertion later. A ritualistic incantation of the words of the Statute may not be expected or insisted. But it has got to be effectively conveyed as a matter of fact that the accused persons were in charge of and responsible to the company for the conduct of its affairs on the date of the offence. Such averments, if they are there, they can be attempted to be supported later at the stage of enquiry under S.200/202 of** ## **Crl.M.C. NO.3572 of 2005** ## **:-13-:** **the Crl.P.C. Or at the later stages of the trial. It is trite in the law of pleadings that what is to be pleaded is the facts** ” **. and not evidence to be adduced in support of such facts** Referring to the averments contained in the complaint of the case in which that decision was rendered, the learned Judge had further held in para 15 as follows:- “15. Having so understood the law, the question is whether the relevant averments in the complaint which I have already extracted above are sufficient or not to justify issue of process under S.204 Crl.P.C. against the petitioners. The specific averments in paras 2 and 7 show that it was specifically averred that the petitioners herein are in charge of and responsible to the company for the conduct of its affairs. The other averments in the complaint which also I have extracted above do eloquently convey that it was not a ritualistic repetition of the words of the Statute in S.141 of the N.I.Act; but it was an effective plea of facts to attract the assertion that the indictees were in charge of and responsible to the company for the conduct of its affairs.” In the light of the above decisions, I am of the view that reproduction of the statutory words are not one the averment expected to be contained in a complaint to ## **Crl.M.C. NO.3572 of 2005** ## **:-14-:** fasten liability under Section 141 of the N.I.Act. 9. The learned counsel for the second respondent very much relied on a decision of this Court reported in **Green Sea Marine's case** (cited supra) wherein this Court had held that partnership is consisting of two partners alone, and specific allegations as contemplated in Section 141 are not necessary. However, in the above two Supreme Court cases mentioned earlier, the Apex Court had held that it is necessary to specifically aver in a complaint under Section 141 that at the time offence was committed, the person accused was in charge of, and responsible for the conduct of the business of company. Facts and circumstances involved in the present case is entirely different from that of the case in **Green Sea Marine's case** (cited supra). In that case, it appears that there are only three accused upon which the first accused is a firm itself and the second and third accused are the partners of the first accused - firm. It was on the above factual basis, and after considering the various provisions contained in the Indian Partnership ## **Crl.M.C. NO.3572 of 2005** ## **:-15-:** Act, this Court had held that “......Therefore, in the light of S.4 of the I.P.Act and having in mind the manner in which the mutual rights and duties are determined qua the liability of every partner to attend diligently to his duties in the conduct of the business, it has to be that in so far as third party rights and liabilities arising out of transactions with third parties, are concerned, the responsibility to conduct the business of the firm which consists only of two partners is with both the partners of that firm. Any further contractual device by which such responsibility is confined only to one among the two partners, has to be treated as exclusively within the knowledge of the partners........” But, in the present case, even according to the complainant, the number of partners comes to 5 in numbers. There is no averment in the complaint regarding the partnership agreement and the liability of the partners. Therefore, the above decision is not applicable to the complainant/ respondent. On a reading of Section 141 of the N.I.Act, it is crystal clear that the ## **Crl.M.C. NO.3572 of 2005** ## **:-16-:** liability under Section 141 can be imposed only against the 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. It means the persons those who are not in charge and were not responsible to the company for the conduct of the business of the company at the time offence was committed are kept away from the liability in this regard. Therefore, it is incumbent upon the person or complainant who alleged the offence to specifically plead with necessary factual assertion that such and such persons are liable under Section 141 of the N.I.Act. The question of adducing evidence will arise only when there is pleading to that effect, otherwise, the mere pleading that all persons who are Directors or Partners of the accused-company or firm is sufficient and Section 141 need not have worded in such a manner. Hence in the complaint, the mere averment that the petitioners are partners of the first accused-firm who were in charge of and responsible to the first ## **Crl.M.C. NO.3572 of 2005** ## **:-17-:** accused for the conduct of the business of the first accused, is not sufficient to implicate the petitioners with the alleged offence. 10. It is relevant to note that in Annexure A complaint, the complainant has specifically averred that the second accused for and on behalf of the first accused issued to the complainant the cheque payable to the complainant assuring payment on presentation of the cheque in the bank. From the above averments itself, it is clear that the complainant was thought of making the specific and factual averment to implicate the second accused and thus, factual assertions are taken in the complaint, but in the case of the petitioners, no such averments are taken and there is no factual assertion against the petitioners. 11. In the light of the above discussion and in view of the above settled position of law and in view of the particular facts and circumstances involved in the case, I am of the view that the mere verbatim reproduction of the words from the statute is not ## **Crl.M.C. NO.3572 of 2005** ## **:-18-:** sufficient to attract the offence against the petitioners under Section 138 of the N.I.Act with the aid of Section 141 of the N.I.Act and therefore, the court below is not justified in taking cognizance upon Annexure A complaint against the petitioners. 12. In the result, Annexure A complaint, S.T.No.3218 of 2003 and all further proceedings thereon pending before the Judicial First Class Magistrate – III, Thrissur to the extent it is against the petitioners are quashed. The Crl.M.C. is allowed. There will be no order as to costs. 9[th] September, 2008. **V.K.Mohanan, Judge** MBS/ ## **Crl.M.C. NO.3572 of 2005** **:-19-:** **V.K.MOHANAN, J.** -------------------------------------------Crl.R.P.NO. OF 200 -------------------------------------------- O R D E R ## **Crl.M.C. NO.3572 of 2005** ## **:-20-:** DATED: -6-2008 ## **Crl.M.C. NO.3572 of 2005** **:-21-:**