2015 (6) TMI 1275 - HC - Indian Laws

Dishonour of Cheque - rebuttal of presumption raised u/s 139 NI Act - preponderance of possibilities - justification in giving stop payment instructions in relation to the cheque in question - Vicarious liability of accused no. 2 and accused no. 3 under Section 141 of the NI Act - HELD THAT - The accused firm claimed that it suffered losses due the inferior quality of the materials supplied. However, the accused did not produce any statements of accounts or other evidence to show the losses allegedly incurred by the firm on account of supply of defective or inferior goods. The accused have neither preferred a counter-claim in the suit of the complainant, nor preferred any other civil suit to claim the alleged losses from the complainant. The defence of the accused firm, that it suffered losses due to the inferior quality of materials is its mere ipse dixit. In absence of any credible evidence to prove the same, it cannot be accepted. Since the accused firm has brought no evidence on record to prove that Sanjay Sharma visited the accused firm to assess the quality of the material supplied, or that he acknowledged that the quality of the goods supplied was defective or inferior, the entry of visit of Sanjay Sharma relied upon is of no avail. The presumption under Section 139 NI Act arose in the facts of the present case. For the said presumption to be rebutted, the defence had to meet the standard of being probable upon preponderance of probabilities - the accused has not managed to rebut the said presumption. The defence taken by the accused was that the materials supplied were of inferior quality. Thus, it is established that the accused has not managed to show, even as probable, its defence that the complainant company supplied materials of inferior quality. Thus, the presumption under Section 139 NI Act is also not rebutted. The Supreme Court in S.M.S. Pharmaceuticals 2005 (9) TMI 304 - SUPREME COURT observed that only the persons who are responsible for the conduct of the business of the firm at the time the offence was committed will be vicariously liable, and not all the persons in the firm. It is an admitted position that accused no. 3 placed the orders on behalf of the accused firm between September, 2007 and February, 2008. The cheque dated 25.06.2008 was dishonoured, and a legal notice dated 05.07.2008 regarding the same was sent to the accused no. 3, as well as the accused firm. He left the accused firm only in January, 2009. Therefore, the accused no. 3 was a part of the accused firm when the offence was committed, upon dishonour of the cheque. Since the accused no. 3 was purchase manager, who placed the orders on behalf of the accused and was working in accused firm when the cheque was dishonoured, he was responsible for conduct of business of the accused firm at the time of commission of the offence - thus, it is established that accused no. 3 would be vicariously liable as he was responsible for conduct of the business of the accused firm at the relevant time. The impugned judgment of acquittal qua the accused firm and accused No.3 is, accordingly, set aside. The accused no. 2 stands acquitted. The accused no. 1 and accused no. 3 are found guilty of commission of the offence under Section 138 NI Act - Appeal allowed in part.

Summary

Issues Involved:
1. Validity of stop payment instructions for a cheque under Section 138 of the Negotiable Instruments Act (NI Act).
2. Vicarious liability of accused no. 2 and accused no. 3 under Section 141 of the NI Act.

Issue-wise Detailed Analysis:

1. Validity of Stop Payment Instructions:
The primary issue was whether the accused firm was justified in issuing stop payment instructions for the cheque in question, which was dishonoured. The accused claimed that the materials supplied by the complainant were of inferior quality, which justified stopping the payment. However, the court found that the accused failed to substantiate this claim. The accused did not provide any evidence, such as inspection reports or test results, to prove that the materials were defective. The court noted that the accused's defence was not communicated until after the cheque was dishonoured, and no prior complaints were recorded. The accused's reliance on an email to support their claim was dismissed as it lacked the necessary certification under Section 65B of the Indian Evidence Act. Consequently, the court held that the accused did not have a valid reason for stopping the payment, and the presumption under Section 139 of the NI Act was not rebutted.

2. Vicarious Liability of Accused No. 2 and Accused No. 3:
The court examined the vicarious liability of accused no. 2 and accused no. 3 under Section 141 of the NI Act. Accused no. 2 was acquitted as the court found no evidence to establish that he was a partner or responsible for the conduct of the business of the accused firm. The partnership deeds did not mention accused no. 2, and the complainant failed to prove his involvement.

For accused no. 3, the court considered the Supreme Court's interpretation in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, which states that vicarious liability arises for those in charge of and responsible for the conduct of the business at the time of the offence. Accused no. 3, being the purchase manager, was involved in placing orders and was part of the firm when the offence occurred. The court concluded that accused no. 3 was responsible for the conduct of the firm's business and thus vicariously liable under Section 141 of the NI Act.

Conclusion:
The judgment set aside the trial court's acquittal of the accused firm and accused no. 3, finding them guilty of the offence under Section 138 of the NI Act. The appeal was partially allowed, acquitting accused no. 2 but convicting the accused firm and accused no. 3.