Crl.R.P. No.1363/2011 (Mohanan M. & K.P. Nazeer v. Bal U.S., State of Kerala and others)

## `IN THE HIGH COURT OF KERALA AT ERNAKULAM` ## `PRESENT` ## `THE HONOURABLE MR.JUSTICE C.S.DIAS` ``` WEDNESDAY, THE 6[TH] DAY OF DECEMBER 2023 / 15TH AGRAHAYANA, 1945 ``` ``` CRL.REV.PET NO. 1363 OF 2011 AGAINST THE JUDGMENT DATED 05.08.2010 IN CRA 299/2004 OF ADDITIONAL DISTRICT COURT (ADHOC)-III, THALASSERY ``` ``` AGAINST THE JUDGMENT DATED 31.03.2004 IN CC NO.20/2004 OF JUDICIAL MAGISTRATE OF FIRST CLASS -III,KANNUR ``` ## `REVISION PETITIONERS/APPELLANTS/ACCUSED:` ``` 1MOHANAN.M, S/O. LATE C.H. KUNHAPPE NAIR, SRUTHILAYAM, PILATHARA PO, PILATHARA, PIN 670 501, KANNUR DISTRICT. 2K.P.NAZEER, S/O.LATE HAMSA, K.P.HOUSE, PILATHARA PO, PILATHARA, PIN 670 501, KANNUR DISTRICT. ``` ``` BY ADV SRI.ABRAHAM GEORGE JACOB ``` ## `RESPONDENTS/RESPONDENTS/COMPLAINANT & STATE:` ``` 1BALU.S, CITY HAIRDRESSERS, PILATHARA P.O., PILATHARA, PIN 670 501, KANNUR DISTRICT 2THE STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM PIN 682 031. ADDL.R3M.PRASANNA, AGED ABOUT 60 YEARS, WIFE OF LATE MOHANAN M., RESIDING AT "SRUTHILAYAM", KAIRALY NAGAR-2, PILATHARA P.O., PILATHARA, PIN 670504, KANNUR DISTRICT. (IMPLEADED AS PER ORDER DATED 31.10.2023 IN CRL.M.A.1/2023 IN CRL.R.P.1363/2011) ``` ``` Crl.R.P.No.1363/2011 ``` ``` -:2:- ``` ``` ADDL.R4SRUTHY MOHANAN, AGED ABOUT 30 YEARS, DAUGHTER OF LATE MOHANAN M., RESIDING AT "SRUTHILAYAM", KAIRALY NAGAR-2, PILATHARA P.O., PILATHARA, PIN 670504, KANNUR DISTRICT (IMPLEADED AS PER ORDER DATED 31.10.2023 IN CRL.M.A.1/2023 IN CRL.R.P.1363/2011) ADDL.R5SILPA MOHANAN, AGED ABOUT 24 YEARS, DAUGHTER OF LATE MOHANAN M., RESIDING AT "SRUTHILAYAM", KAIRALY NAGAR-2, PILATHARA P.O., PILATHARA, PIN 670504, KANNUR DISTRICT (IMPLEADED AS PER ORDER DATED 31.10.2023 IN CRL.M.A.1/2023 IN CRL.R.P 1363/2011)) ``` ``` BY ADVS.SRI.M.SASINDRAN P.S.BINU K.SEENA ``` ## `OTHER PRESENT:` ``` SR PP SMT SEETHA S ``` ``` THIS CRIMINAL REVISION PETITION HAVING COME UP FOR ADMISSION ON 06.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` Crl.R.P.No.1363/2011 ``` ``` -:3:- ``` Dated this the 6[th] day of December,2023 ## **O R D E R** The revision petition is filed questioning the legality and correctness of the judgment in Crl.A. No.299/2004 of the Court of Session, Thalassery (Appellate Court), confirming the judgment in C.C.No.20/2004 of the Court of the Judicial First Class Magistrate-III, Kannur (Trial Court), holding the revision petitioners guilty, and convicting and sentencing them for the offence under Section 138 of the Negotiable Instruments Act, 1988 (for brevity, ‘N.I. Act’). The revision petitioners are the accused and the first respondent is the complainant. During the pendency of the revision petition, the first respondent died and his legal representatives have been impleaded as the additional respondents 3 to 5. The second respondent is the State of Kerala, a formal party. For ``` Crl.R.P.No.1363/2011 ``` ``` -:4:- ``` convenience, the parties are referred to as per the status before the Trial Court. ## **Facts in brief:** 2. The complaint was filed, inter-alia, alleging that, in the year 2000, the accused while holding the post of President and Secretary of the Vyapari Vyavasayi Ekopana Samithi of Pilathara Unit (in short, ‘Samithi’) had floated a mutual benefit scheme (‘scheme’, for short) for the petty Traders of the Pilathara area. As per the scheme, the subscribers have to remit Rs.3,000/- per month for 35 months. The complainant got enrolled in the scheme and he deposited a total amount of Rs.57,200/- as subscription under the scheme. Later, the accused informed the complainant that, as many subscribers had failed to deposit their monthly subscriptions, the Samithi has decided to wind up the scheme and return the amounts received from its subscribers. Accordingly, the accused ``` Crl.R.P.No.1363/2011 ``` ``` -:5:- ``` executed Ext P1 cheque of the Samithi for Rs.28,600/drawn on the Madai Co Operative Rural Bank, Pilathara branch, in favour of the complainant. The accused assured the complainant that there would be sufficient funds in the bank account of the Samithi. However, there were no funds in the bank account. The complainant waited till 1st October, 2002, and, then, presented the cheque for collection. The cheque got dishonoured by Ext P2 memorandum for want of sufficient funds in the bank account of the Samithi. The complainant issued Ext P3 statutory lawyer notice to the accused, which was served on them. The accused sent Ext P6 reply notice raising all untenable conditions, inter-alia, that as they were only the President and Secretary of the Samithi from 25.05.1999 to 29.05.2001, they have no personal liability. The above contention is untenable because the scheme was started during the tenure of the accused, ``` Crl.R.P.No.1363/2011 ``` ``` -:6:- ``` who were the office bearers of the Samithi and they have a personal responsibility in the matter. The accused were in charge and responsible for the affairs of the Samithi. Hence, they have committed the offence under Section 138 of the N.I. Act. 3. On receipt of summons from the Trial Court, the accused entered appearance and pleaded not guilty to the substance of accusation read over to them. In the trial, the complainant was examined as PW1 and Exts.P1 to P6 were marked through him in evidence. The accused denied the incriminating circumstances put to them in the questioning under Section 313 of the Code of Criminal Procedure, 1973(in short, ‘Code’). The accused examined a witness as DW1, who deposed that he was the mediator in the dispute between the parties and the Samithi had paid a substantial amount in discharge of its liability. Therefore, the complaint is not maintainable as against the accused. ``` Crl.R.P.No.1363/2011 ``` ``` -:7:- ``` ## **Trial Court judgment:** 4. The Trial Court, after analysing the materials placed on record, found the accused guilty and convicted them for the offence under Section 138 of the N.I. Act, and sentenced them to undergo simple imprisonment for a period of one year each and jointly pay Rs.35,000/- as compensation to the complainant, and in default to undergo simple imprisonment for a further period of three months. 5. Aggrieved by the said judgment, the accused preferred Crl.A.No.299/2004 before the Appellate Court. ## **Appellate Court judgment:** 6. The Appellate Court, after re-appreciating the materials placed on record, by the impugned judgment, confirmed the conviction and sentence passed by the Trial Court. 7. It is assailing the concurrent conviction and ``` Crl.R.P.No.1363/2011 ``` ``` -:8:- ``` sentence passed by the court below; the revision petition is filed. 8. Heard; Sri. Abraham George Jacob, the learned counsel appearing for the revision petitioners, Sri. M. Sasindran, the learned counsel appearing for the first respondent and Sri. P.S. Binu, the learned counsel appearing for the respondents 3 & 4. 9. The learned Counsel for the revision petitioners strenuously argued that the courts below have misread the law and the records. He contended that the courts below have failed to take note of the fact that the Samithi was not made an accused in the proceedings. Going by the averments in the complaint, Ext P1 cheque was that of the Samithi and the accused were only the President and Secretary who executed the cheque for and on behalf of the Samithi. Therefore, the principles under Section 141 of the N.I. Act stand attracted. In **Aneeta Hada & Others v. M/s.** ``` Crl.R.P.No.1363/2011 ``` ``` -:9:- ``` **Godfather Travels** [2012 KHC 4244] the Hon'ble Supreme Court has categorically held that to attract the offence under Section 138 read with Section 141 of the N.I. Act, it is imperative to arraign the company as an accused. He also placed reliance on the decisions of the Hon'ble Supreme Court in **Pawan Kumar Goel v. State of U.P.** [2022 (7) KHC 377] and that of this Court in **Afsal Hussain v. K.S. Muhammed Ismail** [2023 KHC Online 784] to reinforce his contention that the prosecution has to fail due to the non-impleadment of the Samithi as an accused in the proceeding. He prayed that the revision petition be allowed and the judgments of the courts below be set aside. 10. The learned counsel appearing for respondents 3 & 4 supported the impugned judgments of the courts below and contended that there is no necessity to implead the Samithi as an accused in the complaint because the Samithi is not a registered ``` Crl.R.P.No.1363/2011 ``` ``` -:10:- ``` society under the Societies Registration Act, 1860. He contended that the averments in the complaint establish that the accused had issued the cheque by taking the responsibility of the Samithi. Hence, there is no necessity to implead the Samithi. The courts below have rightly found the accused guilty. This Court may not interfere with judgments of the fact-finding courts in a revision petition. Hence, the revision petition may be dismissed. 11. Is there any illegality, impropriety or irregularity in the judgments. 12. The complainant’s case is that he was the subscriber to one ticket of the scheme floated by the Samithi. Since the other subscribers to the scheme had failed to pay their monthly subscriptions, the Samithi wound up the scheme and in the discharge of its liability the accused issued Ext P1 cheque of the Samithi, for an amount of Rs.28,600/-, in favour of the ``` Crl.R.P.No.1363/2011 ``` ``` -:11:- ``` complainant. But, the cheque got dishonoured due to insufficient funds in bank the account of the Samithi. Although they had issued a statutory lawyer notice, the accused failed to pay the demanded amount. Hence, they committed the offence. 13. Ext P1 cheque is admittedly that of the Samithi. The accused had signed and issued the cheque for and on behalf of Samithi in their status as President and Secretary of the Samithi. 14. Section 141 of the N.I. Act reads as follows: “141 Offences by companies. (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was incharge 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: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or ``` Crl.R.P.No.1363/2011 ``` ``` -:12:- ``` employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding 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 connivance 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 purposes of this section,— (a) “company” means any body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.” 15. Explanation (a) to Sub-Section (2) of Section 141 of the N.I. Act defines a company as any body corporate and includes a firm or other association of individuals. The word ‘company’ in the above definition is a very broad and expansive term even recognising an association of individuals to be falling with the meaning of Company. 16. Even though the complainant has stated that ``` Crl.R.P.No.1363/2011 ``` ``` -:13:- ``` the accused had taken up personal responsibility to manage the scheme and discharge the liability of the Samithi, the fact remains that Ext P1 cheque is that of the Samithi and the accused had signed the cheque for and on behalf of the Samithi acting as the officebearers of the Samithi and not in their individual capacity for their personal liability. 17. It is no res that in a longer integra, prosecution under Section 138 read with Section 141 of the N.I. Act, the impleadment of the company is imperative. The Hon'ble Supreme Court in **Aneeta Hada** (supra) has held as follows: “43. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under S.141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C. V. Parekh (supra) which is a three - Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the ``` Crl.R.P.No.1363/2011 ``` ``` -:14:- ``` law and, accordingly, is hereby overruled. The decision in Anil Hada (supra) is overruled with the qualifier as stated in paragraph 37. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove.” 18. The above legal position has been reiterated by the Hon'ble Supreme Court in **Pawan Kumar Goel** (supra). 19. Recently, this Court in **Afsal Hussain** (supra) again relying on the decision in **Aneeta Hada** (supra) has gone on to hold that, once the company is acquitted in a prosecution under Section 138 read with Section 141 of the N.I. Act, then the case against the directors of the company will not lie. 20. Again this Court in **Balakrishna Prabhu v.** **V. Indira** [2023 KHC Online 802] has held as follows: “9. This Court has again considered the said issue in Moideen Kutty v. Abdul Rasheed, 2023 KLT OnLine 1693 and after referring to the judgment of the Apex Court in Aneeta Hada's case cited supra as well as the judgment of this Court in Babu's case cited supra held in paragraph 16 as follows: _"16. On evaluation of the legal position, the present complaint filed by the complainant against the accused / revision petitioner without arraying the firm as_ ``` Crl.R.P.No.1363/2011 ``` ``` -:15:- ``` _an accused would not sustain. Since the cheque was one belonged to the firm, the complainant should have arrayed the firm as an accused and the directors, if any, by disclosing their complicity in detail so as to warrant conviction and sentence provided under S.138 of the N.I. Act."_ _10. It is pertinent to note that the Apex Court has recently considered the issue as to whether a partner can be convicted and could be held vicariously liable when the partnership firm is not arraigned as an accused in_ _**Dilip Hariramani v. Bank of Baroda, 2022 SCC OnLine SC 579** , and the Apex Court has held as follows:_ _2. The issues raised in this appeal by the appellant, Dilip Hariramani, challenging his conviction under S.138 read with S.141 of the Negotiable Instruments Act, 1881, are covered by the decisions of this Court on the aspects of (i) vicarious criminal liability of a partner; and (ii) whether a partner can be convicted and held to be vicariously liable when the partnership firm is not an accused tried for the primary / substantive offence. xxxx xxxx xxxx_ _"16.The provisions of S.141 impose vicarious liability by deeming fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-section (1) or (2) would not be liable and convicted as vicariously liable. S.141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of S.141 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender. This view has been subsequently followed in Sharad Kumar Sanghi v. Sangita Rane 2015 (12) SCC 781, Himanshu v. B.Shivamurth 2019 (3) SCC 797, and Hindustan Unilever Limited v. State of Madhya Pradesh 2020 (10) SCC 751. The exception carved out in Aneeta Hada (supra) 2012 (5) SCC 661, which applies when there is a legal bar for prosecuting a company or a firm, is not felicitous for the present case. No such plea or assertion is made by the_ ``` Crl.R.P.No.1363/2011 ``` ``` -:16:- ``` _respondent.''_ (emphasis given) 21. In paragraph 11 of the impugned judgment, the Appellate Court has observed that even though the Samithi is a necessary party but since the Samithi was functioning through its office bearers namely, the accused, who were responsible for the conduct of the business of the Samithi, the non-impleadment of the Samithi does not vitiate the prosecution. 22. After bestowing my anxious consideration to the materials placed on record and the law referred to in the afore-cited decisions, particularly the decision in **Aneeta Hada** (supra), I am of the definite view that non-impleadment of the Samithi is fatal to the prosecution because Ext P1 is the cheque of the Samithi. Without the Samithi being on the party array, by no stretch of imagination can a prosecution be sustained against its office bearers on the ground of vicarious liability. Thus, non-impleadment of the ``` Crl.R.P.No.1363/2011 ``` ``` -:17:- ``` Samithi is fatal, which renders the complaint bad and warrants the exercise of the revisional powers of this Court, to correct the patent error of jurisdiction. 23. In the result: - (i) The revision petition is allowed. - (ii)The impugned judgments of the courts below are set aside. (iii)The revision petitioners are acquitted. - (iv)The bail bonds executed by the revision petitioners and their sureties are hereby cancelled. Sd/- ## **C.S.DIAS,JUDGE** DST/rkc/06.12.23. //True copy// P.A.To Judge