Leading Loans v. D.L. Walton, V.C. Sathish and State of Kerala

## IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.K.MOHANAN WEDNESDAY, THE 9TH DAY OF OCTOBER 2013/17TH ASWINA, 1935 CRL.A.No. 246 of 2008 (A) -------------------------- Crl.L.P. 1051/2007 of HIGH COURT OF KERALA DATED 17-10-2007 AGAINST THE ORDER/JUDGMENT IN CC 225/1994 of C.J.M.,THRISSUR DATED 19-06-2002 ## APPELLANT/COMPLAINANT: ------------------------- LEADING LOANS, GURUVAYUR ROAD, P.O.KUNNAMKULAM-680 503, REPRESENTED BY MANAGING PARTNER, VINU P.GEORGE. BY ADV. SRI.D.KRISHNA PRASAD RESPONDENTS/ACCUSED Nos.5, 7 & STATE: --------------------------------------- 1. D.L.WALTON, 1/662, KATHREEN HALL, QUERIOUS STREET, FORT KOCHI-682 001. 2. V.C.SATHISH, 'VIPANCHIKA', BEHIND PARTHAS, ERNAKULAM SOUTH. 3. STATE OF KERALA, REPRESENTED BY THE PUBLIC PROSECUTOR. R1 & 2 BY ADV. SRI.P.VIJAYA BHANU (Sr.) R1 BY ADV. SMT.P.MAYA R3 BY PUBLIC PROSECUTOR SMT.M.T.SHEEBA THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 09-10-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **V.K.MOHANAN, J. ----------------------------------Crl.A.No.246 of 2008 -----------------------------------Dated this the 09[th] day of October, 2013** ## **JUDGMENT** The appellant is the complainant in a prosecution for the offence punishable under section 138 of the NI Act and section 420 r/w 34 of IPC. The learned Magistrate by his judgment dated 19.6.2002 in C.C.No.225 of 1994 has found that out of the eight accused who faced the trial, A7 alone was found guilty under section 138 of the NI Act, whereas A5 is acquitted of all the charges levelled against him and accordingly he is acquitted. Case against A1 to A4, 6 & 8 is refiled as C.C.No.187 of 2012 as they are absconding. It is the above findings and order of acquittal, which is in favour of A5, challenged in this appeal. 2. The case of the appellant/complainant is that, the complainant is a partnership firm dealing with stock and shares of various companies, and A1 is a company engaged in the business of purchase and sale of stock and share of various companies and its registered office is at Coimbatore and with Crl.A.No.246 of 2008 :-2-: branches in Tamilnadu and Kerala State. A2 is the Chairman of the first accused/company, and A3 to A6 are the Directors and, A7 and A8 are the authorised signatories of A1 company. According to the complainant, though they sold shares of various companies to A1 company, an amount of `1,49,395.15 was due to the complainant and on demand, A1 issued cheque dated 25.6.1994 for the said amount, which when presented for encashment, dishonoured due to insufficiency of funds and since payment was stopped. According to the complainant, though notice was sent, the amount was not paid and thus the accused 8 in numbers have committed the offence punishable under section 138 of the NI Act and under section 420 r/w 34 of IPC. During the trial of the case Pws.1 and 2 were examined and Exts.P1 to P14 were marked. During the trial, only A5 and A7 faced the trial. The trial court has finally found that the complainant has failed to prove that A5 has committed the offence punishable under section 138 of the NI Act or under section 420 r/w 34 of IPC. Accordingly, A5 is acquitted for the said offences. While A7 is acquitted for the offence Crl.A.No.246 of 2008 :-3-: punishable under section 420 r/w 34 of IPC, he is convicted for the offence punishable under section 138 of the NI Act. The present appeal is filed against the acquittal of A5. 3. Heard the counsel for the appellant as well as the respondent. I have perused the impugned judgment and I have also perused the evidence and materials on record. 4. Learned counsel for the appellant strenuously submitted that, this Court as per order dated 13/3/2000 in Ext.P14 has specifically found that the complainant has made out a prima facie case against A5, but still then during the trial, A5 did not adduce any evidence to show that he was not in charge of the 1[st] accused company at the time of commission of the offence. But the learned Magistrate, ignoring the above fact, has acquitted A5. It is also the submission of the learned counsel for the appellant that, in the light of the decision of the Honourable Apex Court reported in **Rangachari Vs. B.S.N.L. [2007(2) KLT 1030 (SC)]** , the complainant need to only aver in the complaint, under section 141 that, the accused person in the present case, namely A5, was in charge of the affairs of the Crl.A.No.246 of 2008 :-4-: company at the time of commission of the offence. Learned counsel has also placed reliance upon the decision of the Honourable Apex Court reported in **K.K.Ahuja Vs. V.K.Vora and another [2009(10) SCC 48]** . 5. On the other hand, learned counsel for the respondent vehemently submitted that inspite of the observation and finding of this Court in order dated 13/3/2000 in Ext.P14, no positive evidence is adduced by the complainant to show that the 5[th] accused was in charge of A1 company at the time of the commission of the offence. According to the learned counsel, in the light of the decision of the Honourable Apex Court in **Central Bank of India Vs. Asian Global Limited and others [(2010) 11 SCC 203]** , which is a decision based upon a decision in **S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and another [(2005)8 SCC 89]** , the absence of plea in the complaint, and the evidence and materials to show that the 5[th] accused was in charge of the day-to-day affairs of A1 company, the findings of the learned Magistrate is fully justified and no interference is warranted. Crl.A.No.246 of 2008 :-5-: 6. I have carefully considered the submissions made by the learned counsel for the appellant as well as the respondent, and I have perused the judgment of the trial court and the materials and evidence on record. 7. In the light of the above contentions and the evidence and materials on record, the question to be considered is whether the appellant has succeeded in making out a case to interfere with the findings of the court below and the order of acquittal recorded by it. It is now well settled position that, the accused merely being a Director, could not make him liable for the offence that may have committed by the company. For launching a prosecution against the Directors of the company under section 138 of the NI Act r/w 141 of 1881 Act, there must have a specific allegation in the complaint with regard to the part played by them in the transaction in question. It is laid down in the above decision that, “the allegations had to be clear and unambiguous showing that the Directors were in charge of, and responsible for the business of the company and the requirement of such pleading is to discourage Crl.A.No.246 of 2008 :-6-: frivolous litigation and to prevent abuse of the process of court and from embarking on a fishing expedition to try and unearth material against the Director concerned.” In this case, I have perused the complaint and the only averment against accused Nos.2 to 8 including the 5[th] accused was that, the cheque was issued in favour of the complainant in the usual course of business towards the discharge of a legally enforceable debt. The first sentence in para 6 starts by stating that, “the complainant submits that accused nos.7 and 8 have signed the cheque as authorised signatories, since they are the Managers or Officers of accused no.1 company”. Further it is stated that, “the cheque was issued with the mutual consent and connivance of all accused Nos.2 to 8 ”. So there is no averment in the complaint to the effect that the 5[th] accused was in charge of the affairs of the company at the time of commission of the offence. So there is no averment in the complaint in terms of the requirement settled through the decisions cited supra. It is true that, when the 5[th] accused approached this Court, order dated 13/3/2000 in Ext.P14 this Crl.A.No.246 of 2008 :-7-: Court has observed in para 6 that, “A broad consideration of the complaint and the sworn statement of the complainant when make out a prima facie case that will be sufficient.” Further in para 9 of the order dated 13/3/2000 in Ext.P14 it is observed that, “....it is evidently clear that a prima facie case is made out and however whether he was in charge or not at the time of commission of the offence is a matter to be enquired into at the time of trial ” (emphasis supplied). Thus it is clear that, this Court was also of the opinion that, “..... whether A5 was in charge or not at the time of commission of the offence is a matter to be enquired into at the time of trial ”. It is true that when PW1 was examined, he had deposed that, “ഒന�� പ�ത� കമന�യ�ട� ദ�ന���ന ഭരണത�ട� ച�മതല 2 മ�തല 8 വടര പ�ത�കള!�ണ”. PW1 was examined after the pronouncement of order dated 13/3/2000 in Ext.P14 and hence he deposed in such a manner. Therefore, in the absence of any averment in the complaint, the above part of deposition of PW1 is not helpful to attract any liability against A5-the respondent. In this juncture it is relevant to note that in order dated Crl.A.No.246 of 2008 :-8-: 13/3/2000 in Ext.P14, there is no finding to the effect that there is any averment in the complaint against A5 in terms of the requirement as laid down in the decisions cited supra. It is relevant to note that at the time of order dated 13/3/2000 in Ext.P14, the legal position is not settled with respect to the plea that is to be taken when the complaint is filed against the members of the Director Board of the company. Even in the decision in **Rangachari Vs. B.S.N.L. [2007(2) KLT 1030 (SC)]** , which is relied on by the counsel for the appellant, the Apex Court has reinstated the requirement of a pleading to the effect indicated above. Thus it can be seen that, in the complaint, there is no proper averment as held in the decisions cited supra and there is no evidence to show that the 5[th] accused was in charge of the affairs of the company at the time of the commission of the offence. The only averment was to the effect that the cheque was issued with the consent of the Directors 2 to 6, which is not sufficient to constitute the necessary averment and to establish the ingredients of section 138 of the NI Act. Thus on a consideration of the entire Crl.A.No.246 of 2008 :-9-: averments in the complaint and the materials and evidence on record, I am satisfied that the learned Magistrate is correct and legal in his finding that the complainant has failed to prove that A5 has committed the offences punishable under section 138 of the NI Act or section 420 r/w 34 of IPC. 8. In a recent decision reported in **State of Rajasthan v. Darshan Singh @ Darshan Lal (2012 (4) Supreme 72)** , the Apex Court has held about the circumstances under which the appellate court can interfere with the order of acquittal. In the present case, no exceptional or substantial reason is made out by the appellant to interfere with the findings of the court below and no case is made out to show that the judgment sought to be impugned is perverse. Therefore, the appeal fails as there is no merit. In the result, the appeal is dismissed accordingly. ## **V.K.MOHANAN, JUDGE** skj True copy P.A. to Judge