V.K. Prabhakaran v. C.P. Muhammed Nellikkal House, Unnikulam, Kozhikode and The State of Kerala represented by the Public Prosecutor

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MRS. JUSTICE SOPHY THOMAS`** ``` THURSDAY, THE 16[TH] DAY OF NOVEMBER 2023 / 25TH KARTHIKA, 1945 ``` ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` AGAINST THE ORDER/JUDGMENT IN CRA 478/2005 OF ADDITIONAL DISTRICT AND SESSIONS COURT, FAST TRACK (ADHOC)-II, KOZHIKODE AGAINST THE ORDER/JUDGMENT IN ST 2893/2002 OF JUDICIAL MAGISTRATE ``` ``` OF FIRST CLASS-I,KOZHIKODE ``` ## **`REVISION PETITIONER/APPELLANT/ACCUSED:`** ``` V.K. PRABHAKARAN VALLIKUNNUMMAL, UNNIKULAM, KOZHIKODE. ``` ``` BY ADV SRI.K.M.FIROZ ``` ## **`RESPONDENTS/RESPONDENTS/COMPLAINANT:`** - **`1 C.P. MUHAMMED NELLIKKAL HOUSE, UNNIKULAM, KOZHIKODE.`** - **`2 THE STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA,, ERNAKULAM.`** ``` BY ADVS. PUBLIC PROSECUTOR SRI.JACOB ABRAHAM ``` ## **`OTHER PRESENT:`** ``` SMT. NIMA JACOB- P.P. ``` ``` THIS CRIMINAL REVISION PETITION HAVING COME UP FOR ADMISSION ``` ``` ON 16.11.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 2 ``` ## **O R D E R** The short question that arises in this revision is that, when a firm is found not guilty and acquitted of the offence alleged under Section 138 of the Negotiable Instrument Act (hereinafter referred as 'the N.I Act'), whether the conviction and sentence against the Managing Partner will sustain. 2. The revision petitioner was the 2[nd] accused in S.T. No.2893 of 2002 on the file of the Judicial First Class Magistrate Court-I, Kozhikode. It was based on a complaint filed by the complainant/1[st] respondent on dishonour of Ext.P1 cheque issued by the revision petitioner as the Managing Partner of M/s Soccer Polymers, a partnership firm represented by its Managing Partner. 3. The complaint was filed making the firm as the 1[st] accused, and its Managing Partner as the 2[nd] accused. 4. Before the trial court, PW1 was examined and Exts.P1 to P4 were marked from the side of the complainant/1[st] respondent, to prove his case. ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 3 ``` 5. On closure of complainant’s evidence, the accused persons were questioned under Section 313 of Cr.P.C. and they denied all the incriminating circumstances brought on record. They adduced defence evidence by examining DWs.1 and 2 and marking Exts.D1 to D10 documents. 6. On hearing the rival contentions from either side and on analysing the facts and evidence, the trial court found the 1[st] accused-partnership firm not guilty of the offence under Section 138 of the N.I Act, and acquitted it under Section 255(1) of Cr.P.C. The 2[nd] accused/revision petitioner was found guilty of the offence punishable under Section 138 of the N.I Act, and he was convicted and sentenced to undergo simple imprisonment for six months and compensation of Rs.1,75,000/- with a default sentence of simple imprisonment for a further period of two months. 7. Aggrieved by the conviction and sentence, the revision petitioner/2[nd] accused preferred Crl.Appeal ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 4 ``` No.478 of 2005, and the appellate court upheld the conviction, but modified and reduced the substantive sentence into imprisonment for one day till rising of the court, and the compensation amount was reduced to Rs.1,50,000/- with a default sentence of simple imprisonment for two months, against which, he has come up with this revision. 8. Now this Court is called upon to verify the legality, propriety and correctness of the impugned judgment which upheld his conviction though the sentence was modified. 9. Heard learned counsel for the revision petitioner and learned Public Prosecutor. 10. Learned counsel for the revision petitioner pointed out that, the amount was borrowed from the 1[st] respondent/complainant by the 1[st] accused/partnership firm and the revision petitioner/2[nd] accused was only the Managing Partner of that firm. The case of the complainant/1[st] respondent was to the effect that, the ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 5 ``` revision petitioner/2[nd] accused borrowed the amount for and on behalf of the firm, as its Managing Partner. He drew the attention of this Court to paragraph 6 of the complaint, which reads as follows: “1[st] accused being the partnership firm represented by the Managing Partner, and the 2[nd] accused being the Managing Partner of the 1[st] accused firm, both the accused are liable to be prosecuted for the offence committed by them”. 11. Admittedly, Ext.P1 cheque was issued by the Managing Partner for M/s Soccer Polymers. Ext.P3 notice also says that, for the business purpose of the firm, the 2[nd] accused-Managing Partner approached the 1[st] respondent/ complainant, and asked for a loan of Rs.1,50,000/-. It is further stated in the notice, that the cheque was issued from the account of the partnership firm, and it was signed by the revision petitioner in his capacity as its Managing Partner. So, learned counsel for the revision petitioner would say that, the 1[st] respondent/ complainant admitted in unequivocal terms that, the amount borrowed was for the business purposes of the ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 6 ``` partnership firm, and the cheque was issued from the account of the firm, and the revision petitioner signed the cheque, in his capacity as its Managing Partner. So, according to him, the revision petitioner had no personal liability to pay back the amount to the 1[st] respondent/ complainant. 12. Section 138 of the N.I Act clearly says that, in order to attract an offence punishable under Section 138 of the N.I Act, the cheque should have been drawn by a person on an account maintained by him, with a banker, for payment of any amount of money to another person from out of that account, for the discharge in whole or in part, of any debt or other liability. Here admittedly, the cheque was drawn from the account of the firm, though it was signed by the revision petitioner in his capacity as its Managing Partner. The cheque was not issued from an account maintained by the revision petitioner. So, prima facie, an offence under Section 138 of the N.I Act is not attracted. ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 7 ``` ## 13. Section 141 of the NI. Act 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 in charge 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: PROVIDED that nothing contained in this subsection 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: PROVIDED FURTHER xxxxxx (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act, has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation: For the purpose, of this section,- ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 8 ``` (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relating to a firm, means a partner in the firm.” 14. It is clear that the liability of any Director Manager, Secretary or other Officers of the company mentioned in Section 141 of the N.I Act is co-extensive with that of the company. When an offence under Section 138 of the N.I Act was committed by a company, the person in charge 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. But, when the company/firm is found not guilty of the offence under Section 138 of the N.I Act, the persons mentioned in Section 141 of the N.I Act who were responsible to the company for the conduct of the business of the company cannot have any liability. 15. In the case on hand, though the 1[st] accusedpartnership firm was found not guilty and acquitted under Section 138 of the N.I Act, that acquittal was never ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 9 ``` challenged by the complainant/1[st] respondent. So, the acquittal of the 1[st] accused-firm has become final. When the company/firm has not committed any offence, the Managing Partner or the persons responsible to the company for the conduct of its business, as referred to in Section 141 of the N.I Act cannot have any liability, beyond that of the company. 16. The Apex Court also fortified that position in **Siby Thomas v. Somany Ceramics Ltd** [2023 (5) KLT 844 (SC)], relying on the decision **Ashok Shewakramani and Others v. State of Andra Pradesh & Another** (2023 KLT Online 1834 SC). 17. Paragraphs 15 and 16 of the decision **Siby Thomas [2023 (5) KLT 844 (SC)]** read thus; “ 15. Paragraph 19 of the Ashok Shewakramani's case (supra) is also relevant for the purpose of the case and it, in so far as relevant, reads thus; 19. Section 141 is an exception to the normal rule that there cannot be any vicarious liability when it comes to a penal provision. The vicarious liability is ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 10 ``` attracted when the ingredients of subsection (1) of Section 141 are satisfied. The Section provides that every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of business of the company, as well as the company shall be deemed to be guilty of the offence under Section 138 of the NI Act. In the light of sub-section (1) of Section 141, we have perused the averments made in the complaints subject matter of these three appeals. The allegation in paragraph 1 of the complaints is that the appellants are managing the company and are busy with day to day affairs of the company. It is further averred that they are also in charge of the company and are jointly and severally liable for the acts of the accused No. 1 company. The requirement of sub-section (1) of Section 141 of the NI Act is something different and higher. Every person who is sought to be roped in by virtue of sub-section (1) of Section 141 NI Act must be a person who at the time the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company. Merely because somebody is ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 11 ``` managing the affairs of the company, per se, he does not become in charge of the conduct of the business of the company or the person responsible for the company for the conduct of the business of the company. For example, in a given case a manager of a company may be managing the business of the company. Only on the ground that he is managing the business of the company, he cannot be roped in based on sub-section (1) of Section 141 of the NI Act. The second allegation in the complaint is that the appellants are busy with the day-to-day affairs of the company This is hardly relevant in the context of sub-section (1) of Section 141 of the NI Act. The allegation that they are in charge of the company is neither here nor there and by no stretch of the imagination, on the basis of such averment, one cannot conclude that the allegation of the second respondent is that the appellants were also responsible to the company for the conduct of the business. Only by saying that a person was in charge of the company at the time when the offence was committed is not sufficient to attract sub-section (1) of Section 141 of the NI Act. 16. Thus, in the light of the dictum laid down in ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 12 ``` Ashok Shewakramani's case (supra) it is evident that a vicarious liability would be attracted only when the ingredients of S. 141(1) of the NI Act, are satisfied. It would also reveal that merely because somebody is managing the affairs of the company, per se, he would not become in charge of the conduct of the business of the company or the person responsible to the company for the conduct of the business of the company. A bare perusal of S. 141(1) of the NI Act, would reveal that only that person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company alone shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. In such circumstances, paragraph 20 in Ashok Shewakramani's case (supra) is also relevant. After referring to the S.141(1) of NI Act, in paragraph 20 it was further held thus: “20. On a plain reading, it is apparent that the words “was in charge of” and "was responsible to the company for the conduct of the business of the company” cannot be read disjunctively and the same ought be read conjunctively in view of use of the word "and" in between.” ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 13 ``` 18. In **Pramod v. Velayudhan** (2005 (4) KLT SN 96 Case No.128) this Court held that, to hold a person guilty of offence under Section 138 of the N.I Act by virtue of Section 141 of the N.I Act, the first and foremost requirement to be established is commission of the offence by another person i.e. a company, firm or association of individuals. Unless and until, it is established that such juristic person commits offence under Section 138 of the N.I Act, no person referred to in Section 141 of the N.I Act can be proceeded against, summoned, prosecuted or convicted for offence under Section 138 of the N.I Act. In other words, commission of offence under Section 138 of the N.I Act by a juristic person is an inevitable legal pre-requisite or the condition precedent to proceed against a person referred to under Section 141 of the N.I Act and to hold him guilty of the said offence. It is thus clear that a person referred to in Section 141 of the N.I Act can be prosecuted and convicted for an offence committed by another person. ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 14 ``` 19. Going by the facts as well as the decisions aforementioned, this Court is of the view that, when no offence is committed by the company/firm, no person referred to in Section 141 of the N.I Act can be proceeded against. The commission of offence under Section 138 of the N.I Act by a juristic person is an inevitable legal prerequisite or the condition precedent to proceed against a person referred to under Section 141 of the N.I Act, and to hold him guilty of the said offence. 20. In the case on hand, since the firm was found not guilty and was acquitted, and the acquittal has become final, its Managing Partner cannot be held liable for issuance of Ext.P1 cheque from the account of the firm, for and on behalf of the firm. So, the conviction and sentence of the revision petitioner by the trial court as well as the appellate court are liable to be set aside. 21. In the result, the impugned judgments are set aside, and the revision petitioner is found not guilty of the offence punishable under Section 138 of the N.I Act, and ``` CRL.REV.PET NO. 4109 OF 2007 ``` ``` 15 ``` he is acquitted thereunder. His bail bond is cancelled and he is set at liberty forthwith. The revision petition stands allowed accordingly. **Sd/-** **SOPHY THOMAS JUDGE** LU