M/S Kunnath Finance Enterprises v. Jaimon Varghese

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR WEDNESDAY, THE 29TH DAY OF OCTOBER 2014/7TH KARTHIKA, 1936 CRL.A.No. 2012 of 2003 ( ) --------------------------AGAINST THE JUDGMENT IN CC 304/2000 of J.M.F.C.-II, CHERTHALA APPELLANT(S)/COMPLAINANT --------------------------------- M/S.KUNNATH FINANCE ENTERPRISES REPRESENTED BY MR.JOSEPH JOHN MANAGING DIRECTOR M/S.KUNNATH FINANCIAL ENTERPRISES KUNNATH TOWER, CHERTHALA BY ADV. SRI.JOBY CYRIAC RESPONDENT(S)/ACCUSED ---------------------------- - 1.JAIMON VARGHESE C.M.C-22, CHERTHALA. 2.STATE OF KERALA REP.BY PUBLIC PROSECUTOR HIGH COURT OF KERALA. R2 BY PUBLIC PROSECUTOR SMT.JASMINE V.H THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 29-10-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: CRL.A.2012/03 ## APPENDIX PETITIONER'S EXHIBITS: ANNEXURE A1:TRUE COPY OF THE ORIGINAL PARTNERSHIP DEED OF THE COMPLAINANT FIRM DATED 3.5.1996. RESPONDENTS' EXHIBITS:NIL //TRUE COPY// P.A.TO JUDGE ## **C.T. RAVIKUMAR, J. ==========================** ## **CRL.A. No.2012 OF 2003** ## **==========================** Dated this the 29[th] day of October, 2014 ## **JUDGMENT** The captioned appeal is directed against the judgment in C.C.No.304 of 2000 passed by the Court of Judicial First Class Magistrate-II, Cherthala whereby the respondent therein who was tried for the offence under section 138 of the Negotiable Instruments Act, was acquitted under section 255(1) of the Code of Criminal Procedure. The appellant herein was the complainant therein. The case of the appellant is that on 13.9.1999, the first respondent/accused came to the office of the appellant and borrowed an amount of `80850/- and issued Ext.P3 cheque dated 20.12.1999 for an amount of `80850/- in its favour, drawn on Lord Krishna Bank, Cherthala. On its presentation for encashment, it was dishonoured on the ground of insufficiency of funds. Thereupon, notice in tune with the statutory **Crl.A.2012/2003** 2 mandate was issued to the accused/first respondent intimating him regarding the dishonour of the cheque and calling upon him to effect the payment. However, within the statutorily permissible period, the first respondent/accused had not effected payment of the amount covered by the cheque. Hence, after complying with the statutory formalities, a complaint was filed through the power of attorney holder P.X.Martin. The case was then taken on file and upon notice the first respondent/accused appeared. After complying with the mandatory procedures, the particulars of the offence were read over to the respondent and thereupon he pleaded not guilty. Thereupon, to prove the offence against the first respondent on the side of the complainant, PWs 1 and 2 were examined and Exts.P1 to P9 were marked. On the closure of evidence of the complainant/appellant, the accused was questioned under section 313 Cr.P.C and he denied all the incriminating circumstances put to him. After considering the arguments advanced and appreciating the evidence, the trial court **Crl.A.2012/2003** 3 found that the appellant/complainant had failed to prove the commission of offence under section 138 of the N.I Act against the first respondent and accordingly, the first respondent/accused was found not guilty under section 138 of N.I Act and was acquitted under section 255(1) Cr.P.C. This appeal is filed in the said circumstances. 2. I have heard the learned counsel for the appellant. Though notice was served on the first respondent/accused, he has not chosen to enter appearance and resist the case. There cannot be any doubt with respect to the position that merely because the first respondent failed to enter appearance, the appellant cannot succeed and this Court is bound to consider whether the impugned judgment acquitting the first respondent/accused invites appellate interference. A close scrutiny of Annexure-A2 judgment would reveal that the trial court framed the following points for determination:- **Crl.A.2012/2003** 4 1.Whether accused has issued the cheque to the complainant in discharge of a legally enforceable debt or liability? 2.Whether accused has committed offence u/s.138 of the Negotiable Instruments Act? If so what is the proper punishment? 3.Sentence or order? 3. The court below considered points 1 and 2 jointly. Evidently, in this case, the complaint was filed through the power of attorney holder P.X Martin. Though the power of attorney issued in favour of P.X.Martin was produced along with the complaint, the same was not legally brought on record as prior to the trial stage, he left the firm and therefore, Ext.P1 power of attorney was produced and marked. Going by the same, one Thomas was appointed as the power of attorney holder of the complainant firm to conduct the case and he was examined as PW1. PW1 would depose that PW2, the managing partner of the firm, appointed him as the power of attorney **Crl.A.2012/2003** 5 holder to conduct the case. Ext.P2 was produced on the side of the appellant/complainant claiming it to be the copy of the partnership deed of the complainant firm. Ext.P3 is the cheque in question allegedly issued by the first respondent/accused for discharging the debt due to the complainant. Ext.P4 is the dishonour memo issued from the Lord Krishna Bank, Eramalloor Branch. Ext.P6 is the lawyer notice and Ext.P7 is the postal receipt therefor. Ext.P8 is the acknowledgment card revealing the receipt of the said notice by the first respondent. Essentially, it is the case of the appellant/complainant that despite the receipt of Ext.P6 lawyer notice, the first respondent had failed to pay the amount due within the statutorily permissible period. PW1 had deposed in tune with the case of the complainant in the complaint. PW2 is one among the Managing Partners of the firm. He would depose that the first respondent/accused borrowed an amount of `80,000/- and issued a cheque for `80,850/-. He deposed further that the aforesaid cheque was presented for **Crl.A.2012/2003** 6 enashment at Eramalloor branch of Lord Krishna Bank. Ext.P5 is the dishonour memo revealing that it was dishonoured for insufficiency of funds in the account maintained by the first respondent/accused. He would further depose that Ext.P6 lawyer notice was caused to be issued to the first respondent/accused and despite the receipt of the same and expiry of the time statutorily stipulated for repayment, the amount was not repaid. He would further depose that he is the 6[th] partner of the partnership firm and Ext.P2 is the copy of the partnership deed of the firm. Ext.P9 is the copy of the registration certificate in relation to Ext.P2. The trial court considered the contention taken up by the first respondent/accused that neither PW1 nor PW2 got any authority to give evidence on behalf of the complainant in the case. According to him, Ext.P1 is not the legally constituted power of attorney of the complainant firm. The trial court found that during the cross examination PW2 had deposed to the effect that he is one of the partners of the firm and therefore he got **Crl.A.2012/2003** 7 authority to give evidence and prosecute the matter. At the same time, he would admit during cross examination that one of the partners of the firm going by Ext.P2 is no more. Therefore, it was contended that PW2 could not claim that he is the 6[th] partner of the complainant firm. Ext.P2 produced by the complainant, claiming it to be the copy of the partnership deed, would reveal that it is, in fact, only a codicil and not a partnership deed. In such circumstances, the trial court considered the issue in the light of section 42 of the Indian Partnership Act and found that on the death of one of the partners, the firm would dissolve unless there is a contract to the contrary between the partners of the firm. Ext.P2 would reveal that there was no such contract to the contrary between the partners of the firm to escape the impact of the provision under section 42 of the Indian Partnership Act. It was also found that no evidence was adduced by the complainant to show that the partnership was reconstituted or that there was no automatic dissolution of the firm by the death of one of **Crl.A.2012/2003** 8 the partners in Ext.P2. Ext.P2 is only a codicil to the partnership deed and in Ext.P2 there is absolute absence of any provision which would reveal the existence of a contract to the contrary between the partners that even on the death of one of them, the partnership would not be dissolved. In the said context, the trial court considered Ext.P9 certificate of registration, as well. Ext.P9 reveals that it pertains to Kunnath Finance Enterprises, Thuravoor and the complainant firm is Kunnath Finance Enterprises, Cherthala. In such circumstances, it was further found that Ext.P9 certificate of registration got nothing to do with the case on hand. The trial court also took note of the fact that PW2 during cross examination admitted the fact that all the partners of the partnership firm are not surviving. It was ultimately held that there is lack of evidence regarding the authority of PWs 1 and 2 to prosecute the matter for and behalf of the firm and accordingly, it was found that the prosecution has to fail. PW2 has also deposed to the effect that promissory note as well as cheque were **Crl.A.2012/2003** 9 accepted during the transaction with the first respondent/accused. The trial court held that in such circumstances Ext.P3 could be considered only as a security and therefore, the provisions under section 138 of the NI Act would not be attracted in the light of the decision of this Court in **Sreenivasan v. State of Kerala** [ **1999 (3) KLT 849]** . In the light of the said decision, it was found that based on the dishonour of the cheque which was issued as security, no complaint under section 138 of the N.I Act would lie and if the promissory note was also accepted from the accused in addition to the cheque, a complaint under section 138 N.I Act would not lie going by the said decision. In view of the aforesaid findings, points Nos.1 and 2 were found against the appellant/complainant and the accused/first respondent was not found guilty and consequently, acquitted under section 255(1) Cr.P.C. 4. The learned counsel for the appellant submitted that the **Crl.A.2012/2003** 10 court below wrongly applied the provisions of section 42 of the Indian Partnership Act as there was a contract to the contrary as is evident from the partnership deed to the effect that death of one of the partners would not automatically result in the dissolution of the firm. It is submitted that the finding of the trial court that Ext.P2 is only a codicil also could not have gone against the appellant's authority to prosecute the respondent as there was contract to the contrary in the original partnership deed of the firm. It is to canvass the said position that along with appeal photocopy of the partnership deed was produced. Later, the appellant filed Crl.M.A.No.6705 of 2014 in this appeal to accept Annexure-A3 partnership deed as additional evidence in the light of the provisions under section 391 r/w section 482 Cr.P.C. It is to be noted that even in the said application there is no prayer to accept Annexure- A1 as additional evidence in this appeal. As noticed hereinbefore, Annexure-A1 was produced along with appeal memorandum claiming it to be the photocopy of the original **Crl.A.2012/2003** 11 partnership deed of Kunnath Finance Enterprises, Cherthala. The learned counsel for the appellant contended that in the light of the provisions under section 391, Cr.P.C such documents could be admitted in evidence. Before considering the other contentions it is only apposite to consider the said question. It is true that the said section provides for taking of additional evidence or to direct the learned Magistrate to take such evidence in respect of additional documents. As noticed hereinbefore, evidently, before the trial court a copy of the partnership deed was produced and marked as Ext.P2. The trial court while considering the evidence found that it is not the copy of the original partnership deed whereas it is only a codicil. A perusal of section 42 of the Indian Partnership Act would reveal that in the absence of any contract contrary between the partners of a firm, death of one of the partners would result in dissolution of the firm. Section 42 of the Partnership Act reads thus:- “ **42.Dissolution on the happening of certain contingencies--** Subject to contract between the **Crl.A.2012/2003** 12 partners a firm is dissolved-- - (a)if constituted for a fixed term, by the expiry of that term; (b)if constituted to carry out one or more adventures or undertakings, by the completion thereof; - (c)by the death of a partner; and (d)by the adjudication of a partner as an insolvent. It is also to be noted that Ext.P2 is the codicil belonging to Kunnath Finance Enterprises Thuravoor. Along with the appeal, Annexure-A1 was produced claiming it to be the photocopy of the partnership deed pertaining to Kunnath Finance Enterprises, Cherthala. As noticed hereinbefore, along with Crl.M.A.No.6705 of 2014, deed of partnership allegedly executed on 17.10.2001 was produced and it is sought to be accepted as additional evidence under section 391 Cr.P.C. True that the petitioner also seeks for a direction to the learned Magistrate to reopen the evidence in respect of the said document. As noticed hereinbefore, section 391 Cr.P.C is not intended to enable the prosecution to fill up the lacuna. Evidently, in **Crl.A.2012/2003** 13 this case, the appellant did not produce copy of the partnership deed before the trial court and what was produced before the trial court claiming to be the copy of the partnership deed was only the codicil that too, only in respect of Kunnanth Finance Enterprises, Thuravoor whereas the name of the complainant is Kunnath Finance Enterprises, Cherthala. In the petition filed under section 391, there is absolute absence of any reason as to why the copy of the original partnership deed was not produced. It is to be noted that Annexure -A1 produced along with the appeal memorandum is the copy of the partnership deed pertaining to Kunnath Finance Enterprises, Cherthala. In that context, it is to be noted the trial court has specifically found in the judgment that Ext.P2 pertains to Kunnath Finance Enterprises, Thuravoor and not one belonging to Kunnath Finance Enterprises, Cherthala and therefore the attempt on the part of the petitioner is to fill up the lacuna that too, by producing a photocopy of a partnership deed of Kunnath Finance Enterprises, Cherthala. As regards **Crl.A.2012/2003** 14 Annexure-A3, it is sought to be produced as the additional evidence in the appeal on the ground that it is the deed of partnership after the reconstitution consequent to the demise of one of the partners of the Kunnath Finance Enterprises, Cherthala the constitution of which is evident from Exts.P2 and P9. It is to be noted that Ext.P9 is the certificate of registration and it would disclose the fact that Kunnath Finance Enterprises consisted of eight partners. In Annexure-A3, it is stated that the reconstitution is based on the demise of one of the partners by name Joby John. But, in Annexure-A3 which is sought to be produced there are only three partners. Above all, it is dated 17.10.2001. I do not think it necessary to delve deep into the matter to consider whether the power under section 391, Cr.P.C is to be invoked or not as after arguing for some time for receiving the said documents viz., Annexure-A1 and A3 as additional documents in the light of the provisions under 391 Cr.P.C, the learned counsel for the appellant, on instructions, submitted that the appellant did not wish to **Crl.A.2012/2003** 15 pursue with the said prayer. Even otherwise, a perusal of section 391, Cr.P.C would make it clear that it is to be invoked only when the appellate court when dealing with an appeal thinks that it is necessary to take additional evidence lest failure of justice would occur. But, at the same time, the Hon'ble Apex Court had clearly sounded a word caution in the matter of exercise of the power under section 391, Cr.P.C. In the decision in **Rambhau v. State of Maharashtra [(2001) 4 SCC 759]** taking note of the decision in **Rajeswar Prasad Misra v. The State of W.B [AIR 1965 SC 1887]** it was held:- “2.A word of caution however, ought to be introduced for guidance, to wit: that this additional evidence cannot and ought not to be received in such a way so as to cause any prejudice to the accused. It is not a disguise for a retrial or to change the nature of the case against the accused. This Court in the case of Rajeswar Prasad Misra v. State of W.B in no uncertain terms observed that the order must not ordinarily be made if the prosecution has observed that the order must not ordinarily be made if the prosecution has had a fair opportunity and has not availed of it. This Court was candid enough to record however, **Crl.A.2012/2003** 16 that it is the concept of justice which ought to prevail and in the event, the same dictates exercise of power as conferred by the Code, there ought not to be any hesitation in that regard. 3. Be it noted that no set of principles can be set forth for such an exercise of power under Section 391, since the same is dependent upon the fact situation of the matter and having due regard to the concept of fair play and justice, well-being of the society. 4. Incidentally, Section 391 forms an exception to the general rule that an appeal must be decided on the evidence which was before the trial court and the powers being an exception shall always have to be exercised with caution and circumspection so as to meet the ends of justice. Be it noted further that the doctrine of finality of judicial proceedings does not stand annulled or affected in any way by reason of exercise of power under section 391 since the same avoids a de novo trial. It is not to fill up the lacuna but to subserve the ends of justice. Needless to record that on an analysis of the Civil Procedure Code, Section 391 is thus akin to Order 41 Rule 27 of the Civil Procedure Code. As noticed hereinbefore, Ext.P2 was produced and marked on the side of the prosecution claiming it to be the original of the partnership **Crl.A.2012/2003** 17 deed pertaining to the complainant firm namely Kunnath Finance Enterprises, Cherthala. In troth, what was produced before the trial court and marked as Ext.P2 on the side of the prosecution is only a codicil of the partnership deed pertaining to Kunnath Finance Enterprises, Thuravur. In Ext.P2, there was nothing which would reveal the existence of a contract between the partners of Kunnath Finance Enterprises, Cherthala to the effect that in the event of death of one of its partners there would be an automatic dissolution of the firm. In that context, it is to be noted that in the firm as is evident from Ext.P9, there were 8 partners. PW2 during cross examination admitted that one among them, namely, Joby John had passed away. However, it is not deposed as to when the death of the said partner occurred and when was the firm reconstituted pursuant to his death. In that context, it is to be noted that the learned Magistrate took note of the said aspects and also observed that the details as to when the firm ceased to exist and who was the managing partner of the firm and **Crl.A.2012/2003** 18 when Ext.P1 was executed are not brought on record. Ext.P1 was executed only on 31.1.2001. It is not evident from materials on record as to whether the said power of attorney was executed or issued in favour of PW1 pursuant to the death of one of the partners namely Joby John or thereafter and it is also not stated thereunder that whether it was executed as authorised by all the other surviving partners. In this context, it is relevant to refer to one another aspect. The fact that the complaint which ultimately culminated in AnnexureA2 judgment, was ultimately filed through power of attorney P.X Martin is not in dispute. Therefore, the existence of a duly constituted power of attorney in favour of P.X.Martin cannot be disputed. In respect of any matter covered by a power of attorney duly constituted another person could be appointed as power of attorney pertaining to the same subject matter only after revocation or cancellation of the earlier power of attorney. In such circumstances, going by the admitted position that no material whatsoever was produced before the trial **Crl.A.2012/2003** 19 court showing the existence of a contract to the effect that on the death of one of the partners of the complainant firm it would not result in an automatic dissolution of the firm, this Court cannot find fault with the trial court in applying the provisions under section 42 of the Indian Partnership Act. For the reasons referred hereinbefore, Ext.P2 also could not have been taken as a document pertaining to the complainant firm as admittedly it is codicil pertaining to the partnership deed of Kunnath Finance Enterprises Thuravoor and indisputably, the name of the complainant is Kunnath Finance Enterprises, Cherthala. In the circumstances and the evidence on record, the finding of the trial court on the question whether PW1 and 2 can represent the complainant firm calls for no interference. At the same time, as noticed hereinbefore, the learned counsel for the petitioner attempted to canvass the position that merely because a complaint was filed by a firm through one of its employees as its power of attorney holder, it cannot be said that the said complaint **Crl.A.2012/2003** 20 cannot be prosecuted after that particular person ceases to be its employee by issuing fresh power of attorney. No doubt in such eventuality, it would be legally permissible for the firm to prosecute and pursue with the complaint through another power of attorney holder after executing such a power of attorney in accordance with law. However, the said position would not improve the case on hand. As stated earlier, in the absence of any materials on record it could not be contended that the firm continued to be in existence. Whether it is reconstituted and whether the reconstituted firm, if at all reconstituted, is a successor of the complainant firm, ought to have been legally established. 5. The contention of the learned counsel for the appellant that the finding of the trial court that a complaint under section 138 N.I Act would not lie based on the dishonour of a cheque which was entrusted with a complainant as a security in the light of the decision **Crl.A.2012/2003** 21 reported in **Sreenivasan** 's case (supra) cannot be the correct position of law. It is submitted that the said position was overruled by the Hon'ble Apex Court in **I.C.D.S Ltd. v. Beena Shabeer** [ **2002 (3) KLT 218]** . It is also submitted that the decision in **I.C.D.S Ltd's** case (supra) was followed by this Court in **Mohanachandran Nair** v. **Cheriyan** [ **2012(4) KLT SN 35 (C.No.34** )]. True that as law now stands after the judgment of the Hon'ble Apex Court in **I.C.D.S Ltd's** case (supra), it cannot be said that a complaint under section 138 N.I Act would not lie consequent to the dishonour of cheque which was entrusted as security subject of course to the satisfaction of the other statutory conditions. The impugned judgment was rendered on 28.6.2003 and ultimately by that time the decision in **Sreenivasan's case** (supra) stood overruled. Therefore, the learned counsel for the appellant would be justified in contending that a complaint under section 138 N.I Act based on the dishonour of a cheque entrusted as security could be the basis for a complaint subject of course to the **Crl.A.2012/2003** 22 satisfaction of the other statutory conditions under the N.I Act. But such a finding also would not improve the case on hand. In the light of the provisions under section 42 of the Indian Partnership Act, it cannot be said that PW2 is the managing partner or a partner of the complainant firm for the reasons referred above. As regards the evidence of PW1 who claims to be the power of attorney holder on the strength of Ext.P1 what he would depose during cross examination is that he is fully aware of the transaction between the complainant and the financiers and the amount was received after executing promissory note. Cheque issued along with promissory note is not one which is marked as Ext.P3 and Ext.P3 is in fact pertaining to another transaction and it was issued after settling the said transaction. Further during the cross examination he said with respect to the said transaction as hereunder: - “ÎæxÞøá ÉÃÎß¿ÉÞ¿í ®dÄ µÞÖßÈÞÃí ®KùßÏßÜï..” When that be the evidence of PW1 I do not find any reason to **Crl.A.2012/2003** 23 interfere with the finding of the trial court with respect to point Nos.1 and 2. In the result, this appeal is liable to fail and accordingly, it is dismissed. **Sd/C.T. RAVIKUMAR (JUDGE)** **spc/** **Crl.A.2012/2003** 24 ## **C.T. RAVIKUMAR, J.** **JUDGMENT September, 2010** # **Crl.A.2012/2003** 25