Suresh P.G. v. Leads Advertising and State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** **THURSDAY, THE 27TH DAY OF JULY 2017/5TH SRAVANA, 1939** ## **Crl.MC.No. 2085 of 2017 ()** **--------------------------CC.NO. 328/2013 OF JUDICIAL FIRST CLASS MAGISTRATE COURT-III, KOCHI** **------------------** ## **PETITIONER/ACCUSED NO.3:** **-------------------------------------------** **SURESH P.G., FORMER CEO, LEELAJ HERBAL KARE, HB-92, CROSS ROAD, PANAMPILLY NAGAR, ERNAKULAM, PIN -682 036** ## **BY ADV. SRI.RAJESH NAIR** **RESPONDENT(S)/COMPLAINANT AND STATE: ------------------------------------------------------------------** ## **1. M/S.LEADS ADVERTISING,** - **38/606,"SULAKSHANA", THRIPTHI LANE, S.A ROAD, NEAR MANORAMA JUNCTION, ERNAKULAM, KOCHI -682 016, REPRESENTED BY ITS PARTNER, K.V.KRISHNA KUMAR.** **2. STATE OF KERALA, REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA,ERNAKULAM.** **R1 BY SRI.K.RAMAKUMAR,SENIOR ADVOCATE ADVS. SRI.T.RAMPRASAD UNNI SRI.S.M.PRASANTH SRI.SAJEEV R MENON SMT.ASHA BABU SMT.R.S.ASWINI SANKAR R2 BY PUBLIC PROSECUTOR SRI.JESTIN MATHEW** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 25-07-2017, THE COURT ON 27-07-2017 PASSED THE FOLLOWING:** **sts** **Crl.MC.No. 2085 of 2017 ()** **--------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' ANNEXURES:** **--------------------------------------------** **ANNEXURE A1 TRUE COPY OF THE COMPLAINT IN C.C NO 328 OF 2013 ON THE FILE OF JUDICIAL MAGISTRATE OF 1 CLASS III, KOCHI** **ANNEXURE A2 CERTIFIED COPY OF THE CHEQUE (NO. 582730 DATED 10-03-2012) ALLEGEDLY ISSUED BY THE ACCUSED FILED BY THE COMPLAINANT ALONG WITH THE COMPLAINT BEFORE THE JUDICIAL MAGISTRATE OF I CLASS-III,KOCHI** **RESPONDENT(S)' ANNEXURES: NIL** **-----------------------------------------------** **/TRUE COPY/** **P.A.TO JUDGE** **sts** ## ALEXANDER THOMAS, J. ----------------------------- Crl.M.C.No.2085 Of 2017 --------------------------------- Dated this the 27th day of July, 2017. ## O R D E R The petitioner is arrayed as accused No.3 for offence punishable under Sec.138 of the Negotiable Instruments Act, in C.C.No.328/2013 on the file of the Judicial First Class Magistrate Court-II, Kochi, instituted on the basis of a complaint preferred by R-1. The dishonoured cheque dated 10.3.2012 is for an amount of Rs.9 lakhs. The petitioner seeks quashment of the impugned Anx.A-1 complaint, which led to the institution of the above said C.C.No.328/2013, to the limited extent the petitioner has been arrayed as accused No.3 therein. 2. Heard Sri.Rajesh Nair, learned counsel appearing for the petitioner, Sri.K.Ramkumar, learned Senior Counsel, instructed by Sri.S.M.Prasanth, learned counsel appearing for R-1 and Sri.Jestin Mathew, learned Prosecutor appearing for R-2 State. 3. Anx.A-1 is the copy of the impugned complaint dated 20.8.2012 in C.C.No.328/2013 and Anx.A-1(6) is the affidavit dated 20.8.2012, which appears to have been tendered at Sec.200 ::2:: Crl.M.C.No.2085 Of 2017 preliminary enquiry stage. From a reading of the impugned Anx.A-1 complaint and A-1(6) affidavit, it appears that the dishonoured cheque in question has been drawn from an account maintained by “Leelaj Herbal Kare”. But it is not clear from a reading of Anx.A-1 complaint as to whether the said drawer of the dishonoured cheque is a company or a partnership firm. Para 3 of the Anx.A-1(6) affidavit makes a reference to the effect that the petitioner (accused No.3) was the Chief Executive Officer (CEO) of the said concern and was in charge of the management and administration of the company and that accused No.3 is vicariously liable for payment of the money due to the complainant as legal liability for which the cheque had been issued from the accused company. Therefore due to inclusion of the said averments in para 3 of Anx.A-1(6) affidavit, it shows, the drawer of the cheque is a company. Paras 3, 4 & 5 of Anx.A-1(6) affidavit also makes a reference as if the drawer of the cheque is a company. However, the cause title of the complaint describes the accused 1 & 2 as the Managing Partner and Partner of “Leelaj Herbal Kare” and this gives the impression as if the case of the complainant is that the drawer of the cheque is a partnership firm. There are no averments in the complaint that M/s.Leelaj Herbal Kare is a proprietary concern. Therefore, the ::3:: Crl.M.C.No.2085 Of 2017 complaint and the accompanying affidavit proceed on the premise as if the drawer of the cheque is a body corporate like company or partnership firm and that the specific case set up in para 3 of Anx.A-1 complaint is that the petitioner (A-3) being the CEO of the concern is sought to be roped in on account of the vicarious liability. Therefore, the complaint proceeds on the premise as if the drawer of the cheque is a body corporate like partnership firm or company and that the petitioner sought to be prosecuted on account of the vicarious liability as envisaged in Sec.141 of the N.I. Act. But the above said drawer of the cheque, viz., partnership firm or company has not been arrayed as an accused. The main contention of the petitioner is that it is well settled law that where the drawer of the dishonoured cheque is a body corporate like company/partnership firm, then necessarily the said body corporate (company/partnership firm as the case may be) should necessarily be arrayed as an accused, failing which the complaint is not maintainable as the offence under Sec.138 of the N.I.Act is committed by the drawer of the cheque. It is only on account of the vicarious liability as envisaged in sec.141 of the N.I. Act that the Directors/Partners/ officials of the company/partnership firm, who are in charge of the affairs of the business of the company/firm could also ::4:: Crl.M.C.No.2085 Of 2017 be arrayed as co-accused by imputing vicarious liability of such coaccused persons as well, apart from the principal offender. Earlier, a Two-Judge Bench of the Apex Court in the judgment dated 26.11.1999 in the case in Anil Hada v. Indian Acrylic Ltd., reported in (2000) 1 SCC 1, has held that even if the dishonoured cheque has been drawn from an account maintained by the company, prosecution for offence under Sec.138 of the N.I. Act would lie against an individual director even without arraying the company as accused. Later, the Three-Judge Bench of the Apex Court in the judgment dated 27.4.2012 in the case Aneeta Hada v. Godfather Travels and Tours (P) Ltd reported in (2012) 5 SCC 661, has 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 for their vicarious liability as conceived in Sec.141 of the N.I.Act, could also be arrayed as co-accused. Accordingly, the aforesaid Three-Judge Bench ::5:: Crl.M.C.No.2085 Of 2017 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. 4. 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 , 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 proviso (b) 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 ::6:: Crl.M.C.No.2085 Of 2017 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 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. 5. 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 reported in (2015) 8 SCC 28, the indisputable legal position that emerges is that where the drawer of the dishonoured cheque is 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 ::7:: Crl.M.C.No.2085 Of 2017 such complaint. Further that even if the principal offender company is arrayed as an accused in such complaint, the same would be maintainable only if 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 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 an individual, etc. 6. Now coming to the facts of this case, as noticed hereinabove, the complaint proceeds on the premise as if the dishonoured cheque in question has been drawn from the account of a company/partnership firm. However, the drawer of the cheque, viz., company/partnership firm, who is the principal offender in this case has not been arrayed as an accused. Therefore, going by the above said legal principles settled by the Apex Court, prosecution against the petitioner is illegal and impermissible. The petitioner has sought quashment of the impugned complaint only on the ground that drawer company/partnership firm has not been arrayed as an accused. The ::8:: Crl.M.C.No.2085 Of 2017 petitioner has not raised any contention that he was not in charge of and responsible for the affairs of the business of the company, etc. Therefore, it is not necessary for this Court to examine any such issues. 7. Learned Senior Counsel appearing for the 1st respondent complainant has placed reliance on the judgment of the Apex Court in Charanjit Pal Jindal v. L.N.Metalics reported in (2015) 15 SCC 768, para 13. In the said case, the dishonoured cheque in question was issued from the account of a company. Only the individual director of the company was arrayed as an accused. The drawer of the company was not arrayed as an accused in that complaint. The Apex Court, after placing reliance on the legal principles settled by the Three-Judge Bench decision in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd. reported in (2012) 5 SCC 661, has held that the impugned conviction imposed on the petitioner therein is illegal inasmuch as the drawer company has not been arrayed as an accused. Accordingly, the Apex Court set aside the impugned judgment rendered by the trial court as well as the impugned orders of the appellate court and revisional court and the appellant was ordered to be acquitted. It will be profitable to refer to paras 10 to 14 of the said judgment Charanjit Pal Jindal's case (see SCC report) which read as follows: ::9:: Crl.M.C.No.2085 Of 2017 '10. In Aneeta Hada's case the question that arose for determination by this Court was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Act without the company being arraigned as an accused. As there was a difference of opinion between the two learned Judges regarding the interpretation of Sections 138 and 141 of the Act reference was made to the larger Bench of three Judges. In the said case, this Court noticed the ratio laid down in C.V. Parekh case and the view expressed in Sheoratan Agarwal case while interpreting Sections 138 and 141 of the Act, this Court observed as follows: (Aneeta Hada case, SCC pp. 687 & 688, paras 53 and 58-59). _“53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant._ _* * *_ _58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words ‘as well as the company’ appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted._ _59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 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 which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove.”_ 11. From the aforesaid finding, we find that after analysing all the provisions and having noticed the different decisions rendered by this Court, the three-Judge Bench arrived at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning a company as an accused is imperative. Hence in this case, we find no reason to refer the matter to the larger Bench. 12. In the present case, only the appellant was impleaded as an accused. In that view of the matter, we are of the view that complaint with respect to the offence under Section 138 read with Section 141 of the Act was not maintainable following the decision in Aneeta Hada. We set aside the judgment dated 17-4-2010 passed by the trial court, the order dated 27-5-2011 passed by the appellate court and the impugned judgment dated 9-11-2012 passed by the High Court of Orissa, Cuttack in ::10:: Crl.M.C.No.2085 Of 2017 Charanjit Pal Jindal v. L.N. Metalics. The appellant stands acquitted. 13. However, it will be open for the complainant to move before the court of competent jurisdiction for appropriate relief and may file a petition under Section 14 of the Limitation Act, 1963 seeking exclusion of the period on the ground that the respondent was seeking remedy before the other forum. 14. The appeal is allowed with the aforesaid observations.' After acquitting the accused-appellant therein, their Lordships of the Supreme Court has observed in para 13 of the said judgment that it will be open for the complainant to move before the court of competent jurisdiction for appropriate relief and may file a petition under Sec.14 of the Limitation Act, 1963, seeking exclusion of the period on the ground that the respondent was seeking remedy before the other forum, etc. It appears that these directions may refer to the liberty that was granted to the complainant in that case to move the criminal court afresh with a complaint after arraying the drawer company as the principal accused and to seek condonation of delay under Sec.142(1)(b) of the N.I. Act and also to seek exclusion of time as envisaged in Sec.470 of the Cr.P.C and Sec.14 of the Limitation Act. In the facts of this case, it is not necessary to examine whether those directions are appropriate in the context of the limited plea made by the petitioner, who is one among the 3 accused. Accused Nos.1 & 2 have not sought quashment of the complaint. From a scanning of Anx.A-1 complaint and Anx.A-1(6) affidavit, it is seen that there are no specific averments that the statutory ::11:: Crl.M.C.No.2085 Of 2017 demand notice under Sec.138 proviso (b) of the N.I. Act has been duly issued to the drawer company as contemplated in the Act. The averments in the complaint are only to the effect that statutory demand notice in that regard were issued to the 3 accused in the case and that accused Nos.1 & 2 have not received the lawyer's notice though intimation was given by the postal authorities, which are evident from the returned envelopes, etc., and that though the 3rd accused received the notice, he did not send any reply, etc. This Court is now only called upon to decide the limited issue as to whether the complaint, to the limited extent to which it has arrayed the petitioner as accused No.3 therein is to be quashed. In the light of the legal principles well settled by the Three-Judge Bench decision in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd. reported in (2012) 5 SCC 661, this Court is constrained to take the view that the plea of the petitioner is to be allowed. Moreover, even if it is assumed that the business concern is only a proprietary concern and not a company/partnership firm, still no prosecution is maintainable against the petitioner (accused No.3) as there are no averments in the complaint that accused No.3 is the proprietor or signatory of the cheque. Accordingly, it is ::12:: Crl.M.C.No.2085 Of 2017 ordered that the impugned Anx.A-1 complaint, which led to the institution of C.C.No.328/2013 on the file of the Judicial First Class Magistrate Court-III, Kochi, to the limited extent the petitioner herein has been arrayed as accused No.3 therein and all further proceedings taken against the petitioner herein will stand quashed. It is made clear that the benefit of the findings and directions in this case would apply only to the petitioner (accused No.3) and not to accused Nos.1 & 2, who are not petitioners in this case. With these observations and directions, the Crl.M.C stands finally disposed of. ALEXANDER THOMAS, Judge. bkn/-