Godrej-GE Appliances Ltd. v. Johnson John & State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MRS. JUSTICE C.S. SUDHA** **WEDNESDAY, THE 24[TH] DAY OF JULY 2024 / 2ND SRAVANA, 1946** **CRL.A NO. 1795 OF 2006** **AGAINST THE ORDER/JUDGMENT DATED 17.07.2006 IN Crl.L.P. NO.347 OF 2006 OF HIGH COURT OF KERALA ARISING OUT OF THE ORDER/JUDGMENT DATED 25.02.2006 IN CC NO.921 OF 2001 OF JUDICIAL MAGISTRATE OF FIRST CLASS-II, KOLLAM** ## **APPELLANT/COMPLAINANT:** **GODREJ-GE APPLIANCES LTD.,** **NOW KNOWN AS GODREJ AND BOYCE MANUFACTURING COMPANY LTD., 34/544 B, N.H.BYE PASS, PADIVATTOM, EDAPPILLY P.O., COCHIN, PRESENTLY SHIFTED TO DOOR NOS.IX/418, NEAR INFOPARK, KAKKANAD, COCHIN-682030** **BY ADV E.K.NANDAKUMAR (SR.)** ## **RESPONDENTS/2ND ACCUSED & STATE:** - **1 JOHNSON JOHN EXECUTIVE DIRECTOR, M/S. S.KODER LIMITED, T.C.4/227, KURAVANKONAM, KAWDIAR, TRIVANDRUM-3.** - **2 STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR.** **BY ADVS. SRI.MANU V. SRI.RAM MOHAN.G. SRI.G.P.SHINOD** ## **THIS CRIMINAL APPEAL HAVING COME UP FOR FINAL HEARING ON** **17.07.2024, THE COURT ON 24.07.2024 DELIVERED THE FOLLOWING:** 2 **Crl.Appeal No.1795 of 2006** ## **C.S.SUDHA, J.** **--------------------------------------------Crl.Appeal No.1795 of 2006 --------------------------------------------Dated this the 24th day of July 2024** ## **J U D G M E N T** This appeal under Section 378(4) Cr.P.C. has been filed by the complainant against the judgment dated 25/02/2006 in C.C.No.921/2001 on the file of the Judicial First Class Magistrate Court-II, Kollam, acquitting the second accused (hereinafter referred as 'the accused') under Section 255(1) Cr.P.C. for the offence punishable under Section 138 of the Negotiable Instruments Act (the Act). 2. The complainant is a Company carrying on the business of manufacture and sale of various home appliances. The 1[st] accused is also a Company and the 2[nd] accused, the Executive Director, who according to the complainant was in charge of the affairs of the Company at the time when the offence 3 ## **Crl.Appeal No.1795 of 2006** was committed. The accused purchased certain home appliances from the complainant on credit basis and to discharge the said debt, the accused issued Exts.P2 and P3 cheques dated 31/03/2000 drawn on the Bank of Madura Ltd., Kollam, for an amount of ₹4,32,294.46/- and ₹12,59,368.50/- in favour of the complainant. On 31/03/2000, the complainant presented the aforesaid cheques for collection to their bank, namely, the Citi Bank, Mumbai. The cheques were dishonoured as the account had been closed. The complainant received information regarding dishonour of the cheques through Citibank on 24/04/2000. The accused closed the account since they did not have sufficient funds to honour the cheques with the deliberate intention to cheat the complainant. Hence the complainant caused to issue a notice dated 03/05/2000 to the accused on 04/05/2000 and the said notice was served on the accused on 10/05/2000. The accused confirmed receipt of the notice by reply dated 25/05/2000. They took up a contention that the cheques were issued only as a 4 ## **Crl.Appeal No.1795 of 2006** security. Even after receipt of the notice, the accused failed to pay the cheque amounts within 15 days thereof and hence has committed the offence punishable under Section 138 of the Act. 3. The 1[st] accused is represented by the 2[nd] accused. When the 2[nd] accused appeared before the trial court, he was furnished with copies of all the records relied on by the complainant. The particulars of the offence was read over and explained to the accused to which he pleaded not guilty. PW1 was examined and Exts.P1 to P12 were marked on the side of the complainant. After the evidence of the complainant was closed, the accused was questioned under Section 313 (1)(b) Cr.P.C. He denied the case of the complainant. No oral or documentary evidence was adduced by the accused. The trial court on a consideration of the oral and documentary evidence and after hearing both sides found the 1[st] accused guilty of the offence punishable under Section 138 of the Act and hence, convicted and sentenced the first accused Company to a fine of ₹5,000/- 5 ## **Crl.Appeal No.1795 of 2006** and in default of payment of fine to undergo simple imprisonment for a period of two months. The 2[nd] accused has been acquitted under Section 255(1) Cr.P.C. Aggrieved, the complainant has come up in appeal. 4. The only point that arises for consideration in this appeal is whether impugned judgment of acquittal requires any interference by this Court. 5. Heard both sides. 6. The learned counsel for the complainant/appellant relying on the dictum in **National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330** , submitted that the trial court has grossly erred in acquitting the 2[nd] accused. After having found the first accused Company guilty and that the second accused was in charge of the affairs of the Company, the conclusion ought to have been that the second accused is also guilty of the offence. However, the trial court on an erroneous appreciation of the law on the point, acquitted the accused and 6 ## **Crl.Appeal No.1795 of 2006** hence the impugned judgment needs to be reversed. 7. _Per contra_ , the following arguments were advanced by the learned counsel for the respondent/accused challenging the appeal:- (i) the appeal itself is not maintainable as the 1[st] accused company has not been made a party; (ii) Ext.P8 notice is not a statutory notice as contemplated under the Act; (iii) PW1, the power of attorney examined on behalf of the complainant has no direct knowledge of the transaction; (iv) the civil suit filed by the complainant has been dismissed and (v) the 1[st] accused company was found guilty and convicted and sentenced to a fine of ₹5,000/- and hence fine, if any, imposed against the 2[nd] accused cannot exceed the amount of ₹5,000/-. 8. The first argument advanced by the learned counsel for the accused/respondent that the appeal itself is not maintainable without the Company being made a party does not seem to be correct. When the cheque is issued by a Company, arraigning of a Company as an accused is imperative in a 7 **Crl.Appeal No.1795 of 2006** prosecution for the offence under Section 138 of the Act against the directors of the **Aneeta Hada v.** Company (see **M/s.Godfather Tours and Travels, AIR 2012 SC 2795** ). Admittedly, the complaint alleging the offence under Section 138 of the Act was filed by arraying the Company as the 1[st] accused, who is in the complaint has been described thus:- “1. _M/s. S.Koder Limited, A Company incorporated under the Companies Act having its Regd., Office at P.B. No.7, M.G. Road, Trivandrum, represented by its Executive Director, Johnson John_ .” The 2[nd] accused in the complaint has been described thus:“2. _Johnson John, Executive Director, M/s. S.Koder Limited, T.C.4/227, Kuravankonam, Kowdiar, Trivandrum-3_ ”. The trial court found the 1[st] accused guilty of having committed the offence under Section 138 of the Act and hence sentenced the Company to a fine of ₹5,000/- and in default of payment of fine to undergo simple imprisonment for a period of two months. It was submitted by the learned counsel for the 8 **Crl.Appeal No.1795 of 2006** complainant/appellant that the complainant has no grievance against the finding of the trial court relating to the 1[st] accused Company and hence no appeal has been filed. The grievance is because the 2[nd] accused has been acquitted wrongly and hence the appeal. As noticed earlier, the 1[st] accused Company has already been found guilty and sentenced, so there was no necessity for the complainant to make the Company also a party in the appeal as the grievance of the complainant is only against the 2[nd] accused who has been acquitted. 9. It would be apposite to refer to Section 141 of the Act which reads thus:- _“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:_ 9 ## **Crl.Appeal No.1795 of 2006** _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:_ _Proviso xxxxxxxxxxxxxxxxxxxxx_ _(2) xxxxxxxxxxxxxxxxxxxxxxxxxx”_ (Emphasis supplied) 10. The Apex Court in **S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, AIR 2005 SC 3512** and **National Small Industries Corporation Ltd.** (supra) has held that under Section 141 of the Act, it is necessary to specifically aver in a complaint that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of the business of the Company. This averment is an essential requirement of Section 141 and without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. Merely being a director of a Company is not sufficient to make the person liable under Section 141 of the Act. A director 10 ## **Crl.Appeal No.1795 of 2006** in a Company cannot be deemed to be in charge of and responsible to the Company for conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the Company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141 of the Act. 11. The 2[nd] paragraph of the complaint reads thus:- “ _2. The first accused is a company and 2[nd] accused is the Executive Director who was in charge of the affairs of the company at the time when the offence was committed_ .” Thus the complaint contains necessary pleadings that the accused, the Executive Director of the 1[st] accused Company was in charge of the affairs of the Company at the time when the offence was committed. 11 ## **Crl.Appeal No.1795 of 2006** The fact that Exts.P2 and P3 cheques were issued by the accused and that he is the signatory in both the cheques is admitted. In the reply notice issued by the accused, that is, in Exts.P9 and P10, the issuance of the cheques are admitted. The only ground taken up is that they were issued as security and that no amount is due from the accused. The fact that the amounts as stated in the complaint were due from the accused is clear from Exts.P11 and P12 bills, which have not been discredited in any way. Exts.P2 and P3 cheques were dishonoured as the account had been closed and the same is established by Exts.P4 to P7 dishonour memos and intimation memos respectively. Exts.P8 and P8(a) are the copies of the notice sent to the accused and Exts.P9 and P10 are the reply notices issued. 12. Relying on the decision of the Apex Court in **Upasana Mishra v. Trek Technology India Pvt. Ltd.** (Special Leave Petition (Crl.) No.9062/2023) dated 12/12/2023, it was submitted by the learned counsel for the accused/respondent that 12 ## **Crl.Appeal No.1795 of 2006** Exts.P8 and P8(a) notices issued by the complainant are not statutory notices as contemplated under the Act and hence there is non compliance of an essential provision of the Act. The argument is that in the notice, a demand has to be made for the cheque amount. In the notice issued by the complainant, there is no such demand and hence Exts.P8 and P8(a) notices fall short of the and are not notices as legal requirement statutory contemplated under the Act, goes the argument. 12.1. In **Upasana Mishra** (supra), notice was issued demanding an omnibus amount of ₹6,50,000/- which included interest, damages and notice charges. The demand for ₹6,50,000/admittedly was not the cheque amount. In such circumstances, it was held that the demand notice issued was defective and not a statutory notice as contemplated under the Act. 12.2. Exts.P8 and P8(a) notices admittedly issued by the complainant to the accused reads thus:- _“Sub: Notice of Dishonour of cheque No.647923/_ 13 **Crl.Appeal No.1795 of 2006** ## _31.03.2000 for_ _**Rs.1259368.50**_ _We take reference to the communication received from our H.O /bankers Citi Bank vide their ref. No. YDBCHQRTD/4061 Dt.27.04.2000 informing us about the dishonour of your cheque No.647923/31.03.2000 For_ _**Rs.1259368.50** drawn on Bank of Madura Limited. Kollam._ _This cheque was issued by you against our Bills 142187/31.7.99; 142261/31.7.99; 142262/31.7.99: 142324/31.7.99; 142336/31.7.99; 142337/31.7.99; 142403/10.8.99; 142404/10.8.99; 142405/10.8.99; 142406/10.8.99; 142810/22.8.99; 142811/22.8.99; 142844/22.8.99; 142845/22.8.99; 143021/30.8.99; 143022/30.8.99; 143147/31.8.99; 143229/31.8.99 vide Receipt 409849/31.3.2000._ _You are aware that such dishonour of cheque spoils our good business relationship and is not in keeping with our business practices and traditions. Such bouncing is looked down amongst trade and commercial circles, and is a punishable offence under the Negotiable Instruments Act and Criminal Procedure Code. Our Head Office takes a very serious view of this matter._ _In view of the above, we request you to kindly make . payment, within 15 days of receipt of this Notice Intimation_ 14 ## **Crl.Appeal No.1795 of 2006** _This letter/Notice may please be treated as Notice/Intimation under Section 138 of the Negotiable Instruments Act. 1881._ _Yours faithfully,_ _For Godrej-GE Appliances Ltd:”_ _“Sub: Notice of Dishonour of cheque No.647924 / 31.03.2000 for_ _**Rs.432294.46**_ _We take reference to the communication received from our H.O /bankers Citi Bank vide their ref. No. YDBCHQRTD/4062 Dt.27.04.2000 informing us about the dishonour of your cheque No.647924/31.03.2000 For_ _**Rs.432294.46** drawn on Bank of Madura Limited. Kollam._ _This cheque was issued by you against our Bills 142909/28.8.99; 142910/28.8.99; 142911/28.8.99; 143104/31.8.99; 143105/31.8.99; 143106/31.8.99; 143230/31.8.99; 143271/31.8.99; 143272/31.8.99; 143503/29.9.99; 143504/29.9.99 vide Receipt 409848/31.3.00._ _You are aware that such dishonour of cheque spoils our good business relationship and is not in keeping with our business practices and traditions. Such bouncing is looked down amongst trade and commercial circles, and is a_ 15 ## **Crl.Appeal No.1795 of 2006** _punishable offence under the Negotiable Instruments Act and Criminal Procedure Code. Our Head Office takes a very serious view of this matter._ _In view of the above, we request you to kindly make payment, within 15 days of receipt of this Notice Intimation._ _This letter/Notice may please be treated as Notice/Intimation under Section 138 of the Negotiable Instruments Act. 1881._ _Yours faithfully,_ _For Godrej-GE Appliances Ltd:”_ (Emphasis supplied) 13. The object of issuing a notice is to give a chance to the drawer of the cheque to rectify his omission and give him an opportunity to clear the cheque amount. (See **Central Bank of India v. M/s.Saxons Farms, (1999) 8 SCC 221** ). In **Suman Sethi v. Ajay K.Churiwal (2002) 2 SCC 380** , it has been held by the Apex Court that it is a well settled principle of law that the notice has to be read as a whole and that in the notice, demand has to be made for the cheque amount and if no such demand is made, the notice would fall short of its legal requirement. The 16 ## **Crl.Appeal No.1795 of 2006** question whether the notice is bad would depend on the language of the notice. 14. In Exts.P8 and P8(a) notices issued, the cheque amounts have been specifically referred to as ₹12,59,368.50/- and ₹4,32,294.46/- respectively. It has also been stated that the said cheques have been issued against the bills (Exts.P11 and P12), the details of which have also been specifically stated therein. Therefore, the cheque amounts have been clearly stated and also that the cheques have been dishonoured. The accused had also been informed that the cheque amounts are to be cleared within a period of 15 days from the date of receipt of the notice. The fact that the accused understood the purpose for which the notices were issued is clear from Exts.P9 and P10 replies given by them. In Ext.P9 reply, the subject reads thus:- _“Sub: Notice of Dishonour of cheque No.647924 dated 31.03.2000 for Rs.432294.46 and cheque No.647923 dated 31.03.2000 for Rs.1259368.50”._ In Ext.P10 reply, the subject reads thus:- _“Sub: Notice of dishonour of Cheque_ 17 ## **Crl.Appeal No.1795 of 2006** _Nos.647923 and 647924 for Rs.1259368.50 and Rs.432294.46 Ps._ _Dated 31.03.2000”._ Therefore, as held in **M/s.Saxons Farms** (supra), the object of the notice which is to give a chance to the drawer of the cheque to rectify his omission, has been satisfied or fulfilled in this case. Hence the argument that it does not satisfy the statutory requirement is only liable to be rejected. 15. It was further argued that PW1, the power of attorney holder has no direct knowledge about the incident and hence his testimony is not sufficient to prove the case of the complainant. As noticed earlier, admittedly, the complainant is a private limited Company and hence the Company will have to speak through somebody and here the Company has spoken through PW1, its power of attorney. PW1 speaks in support of the allegations in the complaint and Exts.P11 and P12 bills establish and corroborate the transaction referred to in the complaint. This evidence has to read along with the admission made by the accused in the reply notice admitting the issuance of the cheques, 18 ## **Crl.Appeal No.1795 of 2006** though as security. The signature in the cheques is also admitted. In such circumstances, the complainant cannot be asked to adduce any better evidence. 16. Another argument advanced on behalf of the accused is that the civil suit filed by the complainant has been dismissed and hence relying on the decision dated 02/04/2024 in **Prem Raj** **v. Poonamma Menon** , S.L.P. (Crl.) No.9778/2018, it was submitted that the accused is entitled to be acquitted. 17. Admittedly, the complainant had filed O.S. No.187/2003 for realisation of the cheque amounts. The plaint was rejected for non payment of court fees. This order is stated to have become final. Here I refer to the Constitution Bench decision of the Apex Court in **Iqbal Singh Marwah v. Meenakshi Marwah, (2005) 4 SCC 370,** referred to in **Prem Raj** (supra) itself, the relevant portion of which reads- _“32. Coming to the last contention that an effort should be made to avoid conflict of findings between the_ 19 ## **Crl.Appeal No.1795 of 2006** _civil and criminal courts, it is necessary to point out that the standard of proof required in the two proceedings are entirely different. Civil cases are decided on the basis of preponderance of evidence, while in a criminal case, the entire burden lies on the prosecution, and proof beyond reasonable doubt has to be given. There is neither any statutory provision nor any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both the cases have to be decided on the basis of the evidence adduced therein. While examining a similar contention in an appeal against an order directing filing of a complaint under Section 476 of the old Code, the following observations made by a Constitution Bench in M.S. Sheriff v. State of Madras [1954 SCR 1144: AIR 1954 SC 397: 1954 Cri LJ 1019] give a complete answer to the problem posed: (AIR p. 399, paras 15-16)._ _15. As between the civil and the criminal proceedings, we are of the opinion that the criminal matters should be given precedence. There is some difference of opinion in the High Courts of India on this point. No hard-and-fast rule can be laid down but we do not consider that the possibility of conflicting decisions in the civil and criminal courts is a relevant consideration. The law envisages such an eventuality when it expressly refrains from making the_ 20 **Crl.Appeal No.1795 of 2006** _decision of one court binding on the other, or even relevant, except for certain limited purposes, such as sentence or damages. The only relevant consideration here is the likelihood of embarrassment.”_ (Emphasis supplied) That being the position, merely because an adverse order has been passed against the complainant in the civil proceedings is no ground to hold that the complaint alleging the offence under Section 138 of the Act has also to fail. Both cases will have to be decided on the basis of the evidence adduced therein. 18. Yet another argument advanced is that the fine amount imposed against the 1[st] accused Company is only ₹5,000/- and hence the 2[nd] accused cannot be found guilty for an amount more than the same. Section 141 of the Act makes it clear that apart from the 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 its business, shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. Section 141 of the Act raises a legal fiction. By 21 ## **Crl.Appeal No.1795 of 2006** reason of the said provision, a person although is not personally liable for commission of such an offence, would be vicariously liable. The accused was admittedly the Executive Director of the 1[st] accused Company when Exts.P2 and P3 cheques were issued. He is admittedly the signatory in both the cheques. Therefore, he is certainly liable under Section 141(1) of the Act. The presumption under Section 118 and 139 of the Act is clearly attracted. The accused has not been able to rebut the presumption contained therein. The trial court apparently went wrong in acquitting the accused. Not only that, a flea bite sentence has been awarded against the 1[st] accused Company. The trial court ought to have kept in mind that the apparent intention of the legislature was to ensure not only that the offender is punished, but also to ensure that the complainant receives the amount of the cheque by way of compensation under Section 357(1)(b) Cr.P.C. (See **R.Vijayan v. Baby** , MANU/SC/1245/2011). Hence, the 2[nd] accused/appellant is found guilty of the 22 ## **Crl.Appeal No.1795 of 2006** offence punishable under Section 138 of the Act and so is convicted and sentenced to a fine of ₹17 lakhs (the cheque amount of ₹16,91,662.96/- rounded to ₹17 lakhs) and in default of payment of fine to simple imprisonment for three months. The fine amount if realised shall be paid to the complainant under Section 357(1)(b) Cr.P.C. The appeal is allowed and the impugned judgment is set aside. Interlocutory applications, if any pending, shall stand closed. **Sd/-** **C.S.SUDHA JUDGE** NP