K. Balachandran v. State of Kerala & Ors.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** **THURSDAY, THE 22ND DAY OF JUNE 2017/1ST ASHADHA, 1939** ## **CRL.A.No. 552 of 2015 (A)** **--------------------------** **CRA.407/2014 of ADDL. SESSIONS COURT - VII, ERNAKULAM CC.1668/2009 of JUDICIAL FIRST CLASS MAGISTRATE COURT-I, ERNAKULAM** ## **APPELLANT(S)/RESPONDENT/COMPLAINANT:** **-----------------------------------** **K.BALACHANDRAN, 35/327 B SUBALA, POTTAKKUZHY, MAAMANGALAM ROAD, PALARIVATTOM P.O., COCHIN 25.** ## **BY ADV. SRI.R.PUSHPANGATHAN PILLAI** ## **RESPONDENT(S)/APPELLANT/ACCUSED:** **--------------------------------** **1. STATE OF KERALA,** - **REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.** **2. RADHAKRISHNAN PARAPPURATH,** **AGED 54 YEARS, S/O.LATE P.K. NARAYANAN, MANAGING DIRECTOR, PARAPPURATH CHITTIES PVT. LTD., 40/7873, LAKSHMI BUILDING, PULLEPPADY ROAD, PADMA JUNCTION, ERNAKULAM.** **3. M/S PARAPPURATH CHITTIES PVT. LTD., 40/7873, LAKSHMI BUILDING, PULLEPPADY ROAD, PADMA JUNCTION, ERNAKULAM, COCHIN 35, REPRESENTED BY ITS MANAGING DIRECTOR, RADHAKRISHNAN PARAPPURATH.** **R1 BY GOVERNMENT PLEADER SRI. SAIGI JACOB PALETTY R2-R3 BY ADV. SRI.T.N.HAREENDRAN** **THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 10.04.2017, ALONG WITH CRA. 553/2015, CRA. 555/2015, THE COURT ON 22.06.2017 DELIVERED THE FOLLOWING:** **EL** **“C.R”** ALEXANDER THOMAS, J. ----------------------------- Crl.A.Nos.552, 553 & 555 Of 2015 --------------------------------- Dated this the 22nd day of June, 2017. ## J U D G M E N T The appellant in Crl.A.No.552/2015 is the complainant in C.C.No.1668/2009 on the file of the Judicial First Class Magistrate Court-I, Ernakulam, alleging offence punishable under Sec.138 of the N.I.Act, in which the 2[nd] respondent was originally arrayed as the sole accused therein. The cheque amount in that case is for Rs.65,230/(Rupees Sixtyfive thousand two hundred and thirty only). The trial court had initially convicted the accused for the above said offence and had sentenced him to pay a fine with a default clause. This was challenged by the accused in Criminal Appeal and the appellate Sessions Court has confirmed the verdict of the trial court. The appellant in Crl.A.No.553/2015 is the complainant in C.C.No.1667/2009 on the file of the above said court alleging the same offence in which the 2[nd] respondent herein was originally arrayed as the sole accused therein. The trial court has convicted and sentenced the accused to pay fine which was also confirmed in appeal. The ::2:: Crl.A.Nos.552, 553 & 555 Of 2015 appellant in Crl.A.No.555/2015 is the complainant in C.C.No.1669/2009 before the same court alleging the same offence in which the 2[nd] respondent herein was originally arrayed as the sole accused. Here also the trial court had convicted and sentenced the accused to pay fine with default clause, which was confirmed in appeal. The complainant in all these cases are the same person and the original accused is also the same person in all these matters. 2. The confirmation of the conviction and sentence as mentioned above was challenged by the 2[nd] respondent herein by filing Crl.R.P.Nos.1704, 1705 and 1706 of 2012 before this Court by taking recourse to the remedy under Sec.397 r/w Sec.401 of the Cr.P.C. Before this Court it was pointed out by the accused that it has clearly come out in evidence that the dishonoured cheque in question was issued from an account maintained by the company concerned and it was not a personal account held by the sole accused and the sole accused happened to be the Managing Director of the said chit company and that it was accordingly contended that since the drawer of the cheques happened to be the company and as the company, which is the principal offender has not been arrayed as accused in these cases, the complaints are not maintainable and that the accused is entitled for ::3:: Crl.A.Nos.552, 553 & 555 Of 2015 acquittal. It was contended by the complainant that earlier as per the judgment dated 26.11.1999 passed by the Apex Court in Anil Hada v. Indian Acrylic Ltd. reported in (2000) 1 SCC 1, the Apex Court had held that even if the dishonoured cheque has been drawn from an account maintained by a company, prosecution would lie against an individual Director of the company even without arraying the company as accused in such complaints. It was pointed out that the sole accused was the Managing Director of the company, who was also the signatory in all the 3 cheques. Later, as per the judgment dated 27.4.2012 of the Supreme Court in the case Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., reported in (2012) 5 SCC 661, a Three Judge Bench of the Apex Court had held that so long as the cheque is drawn from an account maintained by the company, the offence under Sec.138 of the N.I.Act is committed by the drawer of the cheque and so the company, being the drawer, is the principal offender to such an offence and that a criminal complaint alleging offence under Sec.138 of the N.I.Act can be maintained only by arraying the company, who is the drawer of the cheque, as an accused. That other Directors, who are in charge of and responsible for the affairs of the business of the company as conceived in Sec.141 of the N.I.Act, could also be arrayed as accused. Accordingly, ::4:: Crl.A.Nos.552, 553 & 555 Of 2015 the aforesaid Three Judge Bench of the Apex Court in the decision in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., reported in (2012) 5 SCC 661, has overruled the earlier view taken by the 2 Judge Bench decision as in Anil Hada v. Indian Acrylic Ltd., reported in (2000) 1 SCC 1. Therefore, in the light of the subsequent 3 Judge Bench decision of the Apex Court in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., reported in (2012) 5 SCC 661, it was contended by the sole accused before this Court in the above said revisions that the complaints itself are liable to be thrown out and the accused is entitled to the benefit of acquittal as the company, who is the drawer of the cheque, has not been arrayed as accused in the complaints. It was contended by the complainant that the complaint was instituted at a time when the earlier 2 Judge Bench decision of the Apex Court in Anil Hada v. Indian Acrylic Ltd., reported in (2000) 1 SCC 1, was in vogue and that the complainant should not be penalised as he could not foresee at the time of the institution of the complaints that the said 2 Judge Bench decision would be overruled, etc. Presumably, taking into note of this contention, this Court ordered that the complainant should be given another opportunity to continue the prosecution before the trail court after arraying the company also as accused in these 3 cases. ::5:: Crl.A.Nos.552, 553 & 555 Of 2015 Accordingly, this Court had remanded the matter to the trial court for fresh disposal of the above said complaints. It is also ordered that if the petitioners file applications for arraigning the company also as an accused in the three cases, the Magistrate shall consider and pass orders on the same day in accordance with law and continue the prosecution, etc. On this basis, this Court has finally disposed of all the Criminal Revision Petitions as per order dated 26.11.2012. The said common order dated 26.11.2012 passed by this Court in Cr.R.P.Nos.1704, 1705 7 1706 of 2012 reads as follows: “These three Criminal Revision Petitions are filed by the accused in three prosecutions under Section 138 of the Negotiable Instruments Act. The petitioner is the Managing Director of M/s. Parapurath Chitties (P) Ltd., who issued three cheques on behalf of the company as its authorised signatory, to the 2nd respondent each of which is the subject matter of these three Criminal Revision Petitions. Those cheques were dishonoured on presentation for want of sufficient funds in the account of the company. The complainant filed three complaints before the Judicial First Class Magistrate Court-I, Ernakulam, as C.C.Nos.1667, 1668 & 1669 of 2009. The Magistrate convicted the petitioner and directed the petitioner to pay the cheque amount as fine with a default sentence. The petitioner filed Criminal Appeal Nos. 718, 719 & 720 of 2011. The appeals were dismissed by the Additional Sessions Judge(AdHoc-I) Ernakulam. Against those judgments the petitioner has filed these three Criminal Revision Petitions. 2. The petitioner does not dispute the execution of the cheque or the liability of the company to pay the amounts covered by the cheques. The only contention raised by the petitioner is that a prosecution under Section 138 of the Negotiable Instruments Act would not lie against the Managing Director of the Company without arraigning the company also an accused, which has not been done in this case. The petitioner relies on the decision of the Supreme Court in Aneeta Hada Vs Godfather Travels & Tours Pvt. Ltd. [2012 (2) KLT 736 (SC)], in support of his contention. ::6:: Crl.A.Nos.552, 553 & 555 Of 2015 3. I have heard the learned Counsel for the 2nd respondent complainant also. His only contention is that having admitted that the petitioner signed and issued the cheque, he is responsible for the cheque and as such he is liable to be prosecuted for the offence under Section 138 of the Negotiable Instruments Act. 4. I have considered the rival contentions in detail. 5. In view of the Supreme Court decision quoted by the petitioner, the Criminal Revision Petitions are liable to be allowed in so far as the Supreme Court has categorically held that the authorised signatory of a company cannot be made liable for prosecution u/s 138 of the Negotiable Instruments Act without the company being arraigned as an accused. Here, in these three cases admittedly, the Company in whose account the petitioner has issued the cheques, signing the same as the authorised signatory of the company has not been arraigned as an accused. The petitioner as the Managing Director of the Company alone has been made an accused. Therefore, the ratio of the decision of the Supreme Court is squarely applicable to the facts of this case. 6. In the above circumstances, the judgments of the courts below are liable to be set aside. Accordingly, the judgments of the courts below are set aside. 7. That doesn't mean that petitioner should be acquitted straight away. At the time when the 2nd respondent filed the complaint, the law prevailing was the one in Anil Hada Vs Indian Acrylic Ltd. 2000 (1) KLT 141 (SC), wherein the Supreme Court had held that a prosecution under Section 138 of the Negotiable Instruments Act would lie against the Director of the company, even without the company also as an accused. In fact, even before the Supreme Court, there were different opinions on the question by different Judges. That is why the matter was referred to a Larger Bench and the Larger Bench rendered the decision in Aneetha Hada's case (supra). In the above circumstances, I am of opinion that the 2nd respondent should be given another opportunity to continue the prosecution before the Magistrate, after arraigning the company also as an accused in the three cases. Accordingly, the matter is remanded to the Judicial First Class Magistrate's Court-I, Ernakulam for fresh disposal of C.C Nos. 1667, 1668 & 1669 of 2009. 8. If the 2nd respondent files applications for arraigning the company also as an accused in the three cases, the Magistrate shall consider and pass orders on the same in accordance with law and continue the prosecution. 9. The amounts already deposited by the petitioner before the Magistrate will continue to be in deposit until the C.Cs are disposed of afresh. 10. The Criminal Revision petitions are disposed of accordingly. “ 3. Later, the complainant filed applications to array the chit company also as an accused in the respective complaints, which was ::7:: Crl.A.Nos.552, 553 & 555 Of 2015 allowed by the trial court as per common order dated 9.5.2013. After due issuance of summons to the additional accused and after giving fresh opportunity to both sides, the trial court had passed separate judgment on 4.8.2014 in all the 3 complaints holding that the original accused as well as the additional accused will stand convicted of the above said offence and ordered that the accused will pay fine amount concerned, with the default sentence clause and that the fine amount so realized was directed to be disbursed to the complainant as compensation under Sec.357(1)(b) of the Cr.P.C. On these terms, the trial court had disposed of the complaints, as per the judgment dated 4.8.2014. Aggrieved thereby the accused had preferred the aforementioned Criminal Appeals before the appellate Sessions Court concerned. The appellate Sessions Court as per separate judgments dated 7.5.2015, had allowed the appeals, which resulted in the acquittal of the accused. The main ground on which the appellate court had acquitted the accused was that no statutory demand notice in terms of Sec.138 proviso (b) of the N.I.Act was issued to the additional accused chit company and that therefore the prosecution itself is not maintainable as the requisite statutory demand notice was never given to the drawer of the cheque. This is the main ground on which the ::8:: Crl.A.Nos.552, 553 & 555 Of 2015 appellate court has acquitted the accused in all the 3 appeals. It is these judgments of acquittal rendered by the appellate Sessions Court rendered on 7.5.2015 that are under challenge in these Criminal Appeals filed under Sec.378(4) of the Cr.P.C. 4. Heard Sri.R.Pushpangadan Pillai, learned counsel appearing for the appellant (complainant), Sri.T.N.Hareendran, learned counsel appearing for respondents 2 & 3 (accused) and Sri.Saigi Jacob Palatty, learned Prosecutor appearing for R-1 State. 5. The main argument raised by Sri.T.N.Hareendran, learned counsel appearing for R-2 & R-3 (accused) is that it is the admitted case of the complainant that requisite statutory demand notice in terms of the mandatory provisions contained in Sec.138(b) of the N.I.Act, has never been issued to the 2nd respondent chit company, who is the drawer of the dishonoured cheque in question and that in the absence of due service of statutory demand notice, no complaints would lie as against the principal offender and if no offence would lie as against the principal offender, there is no question of implicating the other accused persons, who are Director or officials of the company, who is the drawer of the cheques. It is also pointed out by the learned counsel appearing for the appellants/accused that the company was never ::9:: Crl.A.Nos.552, 553 & 555 Of 2015 impleaded even in the aforementioned Crl.R.P.Nos.1704, 1705 & 1706 of 2012, which were disposed of on 26.11.2012 and that the said judgment was not passed after affording a reasonable opportunity of being heard to the accused company and that therefore the accused company is not bound by the findings and directions issued in those Criminal Revision Petitions. It is also pointed out that the company was for the first time arrayed as additional accused by the trial court only on 9.5.2013 and that the directions in the order of this Court in Crl.R.P.Nos.1704, 1705 & 1706 of 2012 will not in any manner legally preclude the company from raising a contention regarding the nonservice of statutory demand notice and that the complaints are not maintainable, etc. On this basis, it is contended by Sri..T.N.Hareendran, learned counsel appearing for the accused persons that the appellate court is fully right in arriving at the conclusion that the prosecution will not lie in view of the non-service of the mandatory demand notice on the principal offender, company, and that on this basis even the individual Director of the company is liable to get acquittal, etc. 6. Per contra, Sri.R.Pushapangadan Pillai, learned counsel appearing for the appellant (complainant), would urge that the complainant had proceeded to institute the complaint at a point of time ::10:: Crl.A.Nos.552, 553 & 555 Of 2015 when the dictum laid down by the 2 Judge Bench decision of the Apex Court in Anil Hada v. Indian Acrylic Ltd., reported in (2000) 1 SCC 1 was in vogue and that he should not be penalised for not foreseeing that the said 2 Judge Bench judgment will be overruled and it is only taking into account those equitable aspects that this Court has consciously dealt with that scenario by holding in the above said Criminal Revision Petitions that an additional opportunity should be certainly given to the accused to continue the prosecution before the Magistrate, after arraigning the company also as an accused in the three cases and for that purpose the matter was remitted to the trial court for fresh disposal of those complaints. It is also argued that even if the company was not impleaded as an additional respondent in those Criminal Revision Petitions and even if it is assumed for argument and that the said direction given in those Criminal Revision Petitions directing the petitioner to array the company as an additional accused is illegal and improper, still those directions have become final and conclusive inasmuch as the company has not challenged the said common order dated 26.11.2012 passed by this Court in those Criminal Revision Petitions. Since the said order of this Court in the Criminal Revision Petitions has become final and conclusive it is binding on all persons including both the accused, the trial court and appellate court and even this revisional court, etc., if the company had any ::11:: Crl.A.Nos.552, 553 & 555 Of 2015 grievance regarding the legality and correctness of the said directions given by this Court on 26.11.2012 in those revisions, the company ought to have challenged the same before the Apex Court and so long as the said judgment of this Court has not been altered in the manner known to law, it has become final and conclusive and binding on all parties in the proceedings and the courts concerned even if it is assumed that those directions are not in tune with the legal principles later enunciated by the 3 Judge Bench decision in Aneeta Hada v. Godfather Travels and Tours (P) Ltd reported in (2012) 5 SCC 661. 7. It is also pointed out that P.W-1 (complainant) had clearly deposed in his evidence before the trial court even prior to the remand that the statutory demand notice was not issued to the company, who is the drawer of the cheque and that this Court while disposing of the aforesaid revision petitions on 26.11.2012 was fully aware about the fact that notice was not given to the complainant, but had still given the direction that the petitioner should be given yet another opportunity to array the company as additional accused, etc. Therefore it is argued by the appellants that non service of notice on the accused company should be deemed to have been waived by this Court as per its revisional order rendered on 26.11.2012. ::12:: Crl.A.Nos.552, 553 & 555 Of 2015 8. It is relevant to note that it has been held by the Apex Court in the case Kirshna Texport & Capital Markets Ltd. v. Ila A. Agrawal, reported in (2015) 8 SCC 28, that Sec.141 of the N.I. Act states that if the person committing an offence under Sec.138 is a company, every Director of such company, who was in charge of and responsible to that company for conduct of its business shall also be deemed to be guilty and that the reason for creating vicarious liability is plainly that a juristic entity ie., a company would be run by living persons, who are in charge of its affairs and who guide the actions of the company and that if such juristic entity is guilty, those who were so responsible for its affairs and who guided the actions of such juristic entity must be held responsible and ought to be proceeded against. That Sec.141 again does not lay down any requirement that in such eventuality, the individual directors must individually be issued separate notices under Sec.138 and that the persons, who are in charge of the affairs of the company and running its affairs must naturally be aware of the notice of demand under Sec.138 of the Act issued to such company and that it is precisely for this reason that no notice is additionally contemplated to be given to such directors. That the opportunity to the “drawer” by issuing statutory demand notice is considered good enough for those who are in charge ::13:: Crl.A.Nos.552, 553 & 555 Of 2015 of the affairs of such company, etc. and if it is their case that the offence was committed without their knowledge or that they had exercised due diligence to prevent such commission, it would be a matter of defence to be considered at the appropriate stage, etc. Therefore, it is crystal clear that in a case, where the drawer of the dishonoured cheque is a company, then statutory demand notice should mandatorily be served on the drawer company but that separate individual notices to the individual directors and officials of the company is not mandatory. Therefore, going by the legal principles laid down by the Apex Court in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd. reported in (2012) 5 SCC 661, and in Kirshna Texport & Capital Markets Ltd.'s case supra, it is crystal clear that where the drawer of the dishonoured cheque in a case being a company, then the prosecution for offence under Sec.138 of the N.I. Act is not maintainable without arraying the principal offender (drawer of the cheque) as an accused in such complaint. Further that even if the principal offender company is arrayed as a accused in such complaint, the same would be maintainable only if all the other conditions for the valid institution of a complaint as envisaged in Sec.138 and its proviso are fulfilled. In other words, the fulfillment of the requirements of serving statutory demand ::14:: Crl.A.Nos.552, 553 & 555 Of 2015 notice to the company prior to the institution of the complaint in the manner prescribed in Sec.138 proviso, would be mandatory and without such notice, there is no question of maintaining any complaint as against an accused irrespective as to whether the drawer of the cheque is a company or a individual. This Court in the final order dated 26.11.2012 in Crl.R.P.No.1704/2012 and connected cases had ordered that another opportunity should be given to the complainant to continue the prosecution after arraying the company also as an accused and accordingly, remanded the matter to the trial court for fresh disposal of the case, with a further direction that if the petitioner files application for arraying the company also as an accused, the learned Magistrate shall consider and pass orders on the same in accordance with law and continue the prosecution. One of the arguments raised by the learned counsel for the complainant is that the said order of this Court has not been challenged by the company before the Apex Court and that the said directions have become final and conclusive and are binding all the parties thereto, as well as on the fora like the trial court, appellate court, revisional court, etc. who are concerned with such prosecution, which was ordered to continue by this Court. It is also not in dispute that the company was not a party to the said proceedings. ::15:: Crl.A.Nos.552, 553 & 555 Of 2015 Irrespective as to whether the company was a party to that proceedings or not, nothing in that order would legally preclude the company from contending that the prosecution is not maintainable on account of the non-service of the prior statutory demand notice. The order dated 26.11.2012 of this Court in the earlier round of Criminal Revision Petitions cannot be construed as if this Court has given licence to the complainant to lawfully maintain the prosecution even without the prior statutory demand notice. If the said contention of the appellant is conceded, then it would amount to re-writing the provisions of Sec.138 of the N.I. Act. Certainly this Court had ordered the continuance of the prosecution after arraying the company as an accused. But the issue as to whether such prosecution could be lawfully maintained even in the absence of the prior statutory demand notice, was never raised or decided by this Court in those revision petitions. If the accused company could successfully point out that the statutory demand notice was never served on the drawer of the dishonoured cheque, then certainly the trial court, appellate court and revisional court, etc. are bound to apply their judicial mind and decide that issue. For deciding that issue, it is common ground that P.W-1 has clearly admitted in his evidence that prior statutory demand notice has never been served on ::16:: Crl.A.Nos.552, 553 & 555 Of 2015 the drawer company. Therefore, the appellate court cannot be found fault with in any manner in rendering the impugned view. Since the prosecution is not maintainable as against the drawer company in view of this ground, then the prosecution against the individual director would also crumble to the ground as the offence under Sec.138 of the N.I. Act is essentially and primarily attracted as against the drawer of the cheque. If no offence is made out against the accused drawer company, then the question of convicting the individual Directors and officials of that company on the basis of vicarious liability under Sec.141 of the N.I.Act does not arise. For these reasons, the lower appellate court was fully right in holding that all the accused are entitled for acquittal. 9. There is yet another important aspect of the matter, which has not gained the attention of the lower appellate court. A mere reading of the statutory demand notice and the complaints would reveal that there are no averments either in the notices or in the complaints that the drawer of the dishonoured cheques in question is the chit company. On the other hand, the specific averment in the notice as well as in the complaint is that the dishonoured cheque in question has been issued by the individual director (Sri.Radhakrishnan ::17:: Crl.A.Nos.552, 553 & 555 Of 2015 Parappurath) and that even the liability is one which is owed by the said individual to the complainant. The notice is issued solely to the said individual (R-2 herein) and the sole accused in the complaint (prior to the subsequent arraying of the company as an additional accused in the original complaint) is that individual. So even after arraying the company as an additional accused, said averments have not been in any manner altered or amended. Therefore, without the basic averment in the complaint that the drawer of the dishonoured cheques in question is the company and not the individual director, it is not right and proper to convict the accused company for the abovesaid offence. That apart, in the facts and circumstances of a case like this, even if an application for amendment of averments in the complaint had been filed, it could not have been allowed as it could have caused serious prejudice to the accused company. Going by the legal principles laid down by this Court in the decisions of this Court as in Linda John Abraham v. Business India Group Company & ors. reported in 2011 (4) KLT 787 = 2011 (4) KHC 587, Apsa Rahman.P. v. State of Kerala & Ors., reported in 2017 (3) KHC 49, as well as the rulings of the Apex Court as in U.P Pollution Control Board v. M/s. Modi Distillery & ors. reported in (1987) 3 SCC 684, S.R.Sukumar v. S.Sunaad Raghuram reported in (2015) 9 SCC 609, etc. ::18:: Crl.A.Nos.552, 553 & 555 Of 2015 such a plea for amendment of the averments in the complaint could not have been entertained at all in the facts of this case. This is all the more so, inasmuch as in the facts of this case, any plea for such amendment was not brought forth before the issuance of summons to the accused company. For all these reasons, this Court is constrained to uphold the view taken by the appellate sessions court that the accused persons are entitled for acquittal. In view of these aspects, the aforecaptioned Criminal Appeals will stand dismissed. ALEXANDER THOMAS, Judge. bkn/sdk