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IN THE HIGH COURT OF JHARKHAND AT RANCHI
Acquittal Appeal (S.J.) No.88 of 2019
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M/s One Up Mineral and Infrastructure Private Limited through its Director Vivek Kumar, aged about 34 years, son of sri Pushkar Dutt Sharma, having its registered Office at 603, 6thFloor, Rear Block, Panchwati Tower, P.O- Harmu, P.S. Kotwali, District-Ranchi, Jharkhand … … Appellant
Versus
1. The State of Jharkhand
2. Anupam Fauladia, wife of Raj Kumar Fauladia, R/o D- 1, Club Apartment, 2ndby Lane, P.O-G.P.O, P.S.- Lalpur, District Ranchi. . … Opposite Parties
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CORAM : HON'BLE MR. JUSTICE DEEPAK ROSHAN
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For the Appellant : Mr. Kumar Harsh, Adv. For the O.P : Mr. Akhouri Awinash Kumar, Adv. -------
CAV on:- 05/07/2024 Pronounced on:- 25/10/2024
Heard learned counsel for the parties.
2. Present acquittal appeal is preferred against the judgment and order of acquittal dated 27.03.2018 passed by learned Judicial Magistrate First Class at Ranchi in connection with the Complaint Case No. 2336 of 2015; whereby and whereunder the Opposite Party No. 2-Anupam Fauladia has been acquitted of the charges made against her under Section 138 of Negotiable Instruments Act, 1881 (hereinafter to be referred as N.I. Act).
3. The facts, in brief, giving rise to the present appeal are that M/s One Up Minerals and Infrastructure Private Limited, the complainant/appellant in the present case is a company registered under the Companies Act, 1956 and is engaged in business of coal trading. There was cordial relationship between the complainant and accused persons Anupam Fauladia and Raj Kumar Fauladia named in the complaint petition as Accused No.
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1 & 2. The Accused No. 1 in connivance with Accused No. 2 had impressed the complainant indicating the fact that the Accused No. 2 being an employee of Central Coalfields Limited (A public Undertaking) would facilitate between the company (CCL) and the complainant in buying of coal. Pursuant thereto, the complainant entered into various business transactions and dealings with both accused. On various occasions, the Accused No. 1 had been placing verbal order for supply of coal upon the complainant which was successfully executed by the complainant. Thereafter, a telephonic order for supply of coal was placed upon complainant by the Accused No. 1 and she promised to make the payment against the supply within due date. The complainant had successfully supplied the coal and when he requested for payment, it was deferred by the Accused No. 1 on various occasions. Finally, after much efforts, the Accused No. 1 issued a cheque bearing no. 381471 dated 03.08.2015 amounting to Rs.1,49,00,000/- (Rs. One Crore Forty- Nine Lakhs only) and presenting the cheque for payment, the same was returned unpaid due to insufficient balance in the account through a cheque return memo dated 05.08.2015. Thereafter, a legal notice demanding the cheque amount was sent through speed post on 19.08.2015 which was delivered to the accused on 21.08.2015 as per the track record of the postal department. The accused person neither paid the cheque amount nor replied to the legal notice. Hence, the complaint was instituted.
4. Learned counsel on behalf of the complainant/appellant has contended that the Opposite patry No.2 had issued the cheque in favour of the complainant for discharge of a legal debt that is the
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payment of Rs.1,49,00,000/- which was dishonoured due to insufficient fund and even after serving of notice, Opposite Party No. 2 has neither replied to the notice nor repaid the amount. Learned counsel further submits that the learned Court of J.M.F.C has failed to appreciate the fact that the cheque in question was drawn by Opposite Party No. 2 and not by company of which the Opposite Party No. 2 is the Director thereby wrongly concluded that the company has not been arrayed as a principal accused and hence, for this reason the Director, that is, Opposite Party No. 2 cannot be held liable as held by the learned Court below. Therefore, the order of acquittal is bad in law and should be set aside by this Court and further convict the Opposite Party No. 2 for charges levelled against her under Section 138 of Negotiable Instruments Act, 1881.
5. The learned counsel appearing on behalf of the Opposite Party No. 2 has argued that the cheques were issued as a security which has been misused by the complainant and thus the complainant has brought a false complaint against the accused person as there was no liability to be discharged by the accused person in favour of the complainant.
6. Upon having heard the contentions of the rival parties and perusal of the lower court records, the main point for determination is that whether the learned Court of J.M.F.C. was correct in passing the order of acquittal dated 27.03.2018 and does the rationale behind the judgment of the trial court stands good in law?
7. Before delving into the merits of the contentions raised, it is crucial to analyze the fundamental provisions which establishes the criminal liability upon the defaulter. Section 141 of NI Act deals
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with offences by companies while extending the liability to every individual, who when the offence was committed was responsible for the conduct of the business. Section 141 reads as under: -
(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 sub-section 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 that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
(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 purposes of this section, --
(a) "company" means anybody corporate and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm."
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8. The established settled law in this area stipulates that a specific allegation identifying the involvement of the person accused in the transaction must be included in the complaint in order to initiate a prosecution under Section 141 against the said person. Furthermore, there should be a clear and unequivocal allegation and explanation detailing how the persons referred to in sub-section (1) are in-charge of, and responsible for the conduct of the business of the company. The requirements of Section 141 were defined in the landmark decision of the three-Judge bench in
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Another reported as (2005) 8 SCC 89, the relevant para is quoted herein below:
" 19. In view of the above discussion, our answers to the questions posed in the reference are as under:
(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied…."
9. In the present case, the complainant has not made any averments in his complaint petition that the Opposite Party No. 2 was in charge of and responsible for conduct of business of the company at the time of commission of offence, as was necessary to be made to attract the provisions of Section 141 of N.I.Act and thereby sought the Opposite Party No. 2 to criminal process. For that reason, vicarious liability under Section
141 N.I.Act is not being attracted against the accused person, Anupam Fauladia.
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Upon the point of determination in the present acquittal appeal, so far as the rationale behind the judgement and order of acquittal dated 27.03.2018 is considered, the same stands good in law for the reason that arraigning of a company as an accused is of vital importance for maintaining the prosecution under Section 141 of NI Act.
In the judgment of S.M.S. Pharmaceuticals Ltd. (supra), it was held by the Hon'ble Apex Court that there is unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a Company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability and a clear case should be spelled out by the complainant against the accused. The relevant para is quoted herein below:
"18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable…."
In another judgment of Aneeta Hada v.
Godfather Travels and Tours (P) Ltd. reported as [(2012) 5 SCC 661], it has been held that by applying the doctrine of strict construction the commission of an offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words
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"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. The relevant para is quoted herein below:
"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…"
10. Thus, in view of the above-mentioned judgments, it can safely be concluded that prosecution of the company is a sine qua non for the prosecution of persons accused for offences committed by company. Hence, it is a requisite under Section 141 N.I.Act that the company is arraigned as the principal accused and only then a prosecution under the said Section can be maintained.
11. It is further evident from records that in the cross-examination of CW-1, Vivek Kumar, Director of M/s One Up Minerals and Infrastructure Private Limited, has deposed that the ledger account marked as Exhibit-1 is a computer-generated document which is in the name of Kartar Minerals Pvt. Ltd. and not in the name of accused person Anupam Fauladia. Further, in his cross-examination, he deposed that the complainant has not produced any document which states that the complainant was engaged in any business with Anupam Fauladia.
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12. Having stated that, it is peculiar to note that although the document of ledger account marked as Exhibit-1 is in the name of Kartar Minerals Pvt. Ltd. nonetheless, the said company has not been arraigned as an accused in the present case thereby not satisfying the essentials of Section 141 of N.I.Act as also held in the aforementioned cases. On this point of the contention of the appellant, the appeal is not maintainable as the same does not fulfil the cardinal requirements of Section 141 of the Act.
13. Furthermore, the cheque that is the subject- matter of the instant acquittal appeal that is cheque bearing no. 381471 dated 03.08.2015 amounting to Rs.1, 49,00,000/- (Rs. One Crore Forty-Nine Lakhs only) issued by the Opposite Party No. 2 was issued as a security. The Opposite Party No. 2, that is, Anupam Falaudia (DW-1), in her cross-examination has deposed that six blank cheques were issued as security cheque at the time of entering into agreement with complainant company for business transaction and that the payment of the company was done on the sayings of one Pawan.
14. Consequently, a cheque issued as a security does not attract the provisions of Section 138 N.I. Act as it does not qualify the requirement of debt or liability as specified in the said Section.
The same was also held in the case of M. S. Narayana Menon @ Mani VS. State of Kerala, (2006) 6 SCC 39 that if the defence is acceptable as probable the cheque therefor cannot be held to have been issued in discharge of the debt, the relevant para is quoted herein below:
"52. …. If the defence is acceptable as probable the cheque therefor cannot be held to have been issued in discharge of the debt as, for example, if a cheque is issued for security or
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for any other purpose the same would not come within the purview of Section 138 of the Act."
15. As deposed by the DW-1, that the payment was done on the sayings of Pawan thereupon, it can be construed that at the time the offence was committed, Opposite Party No. 2 was not in charge of, and was responsible to, the company for the conduct of the business of the company as per Section 141 of N.I. Act and thereby cannot be vicariously held liable for the offences done by the company and thereby she has been wrongly accused and prosecuted without arraigning the company as the principal accused.
16. The complainant has not established beyond reasonable doubts that the Opposite Party No. 2 was deemed to be guilty of an offence under Section 138 of N.I. Act nor has he proved that the cheque bearing no. 381471 dated 03.08.2015 was issued to him as a liability or debt. The complainant has failed in his case to fulfil the essential requirements of Section 141 and 138 of N.I. Act and thus this appeal deserves to be dismissed on the grounds of non- maintainability.
17. Considering all facts, circumstances, evidences and materials available on record, this Court upholds the judgement and order of acquittal dated 27.03.2018 passed by learned Judicial Magistrate First Class at Ranchi in connection with the Complaint Case No. 2336 of
2015.
18. Accordingly, this appeal is dismissed. (Deepak Roshan, J.)
Fahim/-AFR
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