2025 (3) TMI 1445 - HC - Indian Laws

Dishonour of Cheque - legally recoverable debt or not - grant of leave to appeal against the acquittal of accused. Leave to Appeal Against Accused No. 4 Sumit. Provisions for grant of leave - HELD THAT - When there is judgment of acquittal Court should be slow in interfering. Because presumption of innocence is reinforced. When the acquittal judgment is challenged on certain grounds substance of those grounds is to be tested. However standard of inquiry (expected for testing those grounds) to be carried out at the stage of grant of leave and that inquiry carried out while deciding the appeal finally differs. Same standard of inquiry cannot be carried out at the stage of grant of leave. Meaning of the phrase in charge of and responsible to the company for conduct of business of the company - HELD THAT - There are certain other Acts which holds Company responsible or guilty. The list of few of the Acts given in para no. 19 of the said judgment. Such as the Prevention of Food Adulteration Act the Drugs and Cosmetics Act the Employees Provident Fund Act Payment of Gratuity Act and so on. But for understanding the meaning of the phrase we have to bank on the provisions of Companies Act. There is reference of the provisions of Sections 5 291 and few of the definition clauses in the Companies Act. The list of such persons is also enumerated therein. The Managing Director is such kind of post which falls in that category. Necessary averment in the complaint - HELD THAT - Mere bald statement is not sufficient. One cannot presume every director is supposed to know about the transaction. However category of Managing Director Joint Managing Director or a director who has signed the cheque stands excluded. They will certainly liable and there need not be specific pleading in charge of and responsible in the complaint. In Gunmala Sales Private Ltd. 2014 (12) TMI 1116 - SUPREME COURT this principle is further elaborated. Any particular director may produce incontrovertible or unimpeachable evidence to show his disconnection to the transaction. The High Court can quash such proceeding. That is why there is further necessity of pleading necessary averment with particular details - The complainant is supposed to know only generally as to who were in charge of the affairs of the company. Other administrative matters would be within the special knowledge of the company. When it can be said there is consent connivance or neglect - HELD THAT - In present case the evidence is already adduced. Every party has opened his cards. The principles are still applicable. But evidence has to be seen. Evidence - HELD THAT - Mere averments are not sufficient. It needs to be substantiated. There will be onus on the accused only when the complainant will discharge initial burden. It is for the complainant to prove accused no. 4 was involved in the transaction in either of the capacity. The Accused no. 4 is described as Vice President of Finance and Taxation. The correspondence which is referred above was in between the accused no. 4 and Morries. This correspondence relates to the previous cheques and not to the present 16 cheques. On the basis of that correspondence it can certainly be said that accused no. 4 is aware about some transaction. But this is not enough to hold him vicariously liable. Something more is required. The Complainant ought to have adduced certain evidence to show his complicity in the manner laid down under Sections 141 (1) and 141 (2) of the Negotiable Instruments Act. The learned Additional District Judge has correctly appreciated the evidence and he rightly acquitted the accused no. 4. So no case for grant of leave is made out. This is such type of acts wherein the detailed scrutiny is not required. But at the threshold we can decide the issue of vicarious liability. Leave to Appeal Against Accused No. 2 Anubhav It is true there are no documents showing incurring of expenses by Morries on account of professional expenses to advocates and other expenses (except debit note) but it is matter of record that rate of interest is subsequently enhanced by Debt Recovery Tribunal. It is very well true the evidence has to be appreciated on the basis of the documents produced and also on the basis of documents which could have been produced but not produced. The learned Appellate Judge has given more stress on the documents which are neither mentioned nor produced. The cross-examination of the witness also needs to be considered. It is admitted fact that accused has not given any evidence. This Court is required to ascertain the correctness of the findings by the Appellate Court while acquitting the accused no. 2. It needs to be seen whether the findings on the point non proof of the liability is correct or not. The documents which are already on record are to be given weightage or documents which are not produced are to be given weightage. This has to be considered in totality of the evidence on the basis of the cross-examination. No doubt the Complainant by examining the Chartered Account has offered an explanation for not showing the amount in income tax returns. It is also true that Constitutional Courts have opined in certain judgments that reflecting the amount in income tax returns has got different connotation and it cannot be the factor to disbelieve the claim of the Complainant. Conclusion - The evidence against Anubhav warranted further examination while the evidence against Sumit did not justify granting leave to appeal. Leave to prefer an appeal is refused against the accused no. 4-Sumit - Leave to prefer an appeal against accused no. 2-Anubhav is granted - appeal admitted.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Bombay High Court in this judgment were:

a) Whether the leave to appeal against the acquittal of accused No. 4, Sumit, should be granted.

b) Whether the leave to appeal against the acquittal of accused No. 2, Anubhav, should be granted.

2. ISSUE-WISE DETAILED ANALYSIS

a) Leave to Appeal Against Accused No. 4, Sumit

- Relevant Legal Framework and Precedents: The court considered the provisions of Section 138 and Section 142 of the Negotiable Instruments Act, which deal with the dishonor of cheques and the legal responsibilities of individuals associated with the company. The principles of vicarious liability under Section 141 were also examined.

- Court's Interpretation and Reasoning: The Court emphasized that mere correspondence or signing of documents is insufficient to establish liability under Section 141 unless the person is in charge of and responsible for the company's conduct of business. The Court referenced several judgments to underline that liability can only be established if the person is actively involved in the company's affairs.

- Key Evidence and Findings: The evidence presented included emails and correspondence involving Sumit, but the Court found that these related to previous transactions and not the current 16 cheques in question. The Court noted that Sumit was aware of some transactions but this did not suffice to establish vicarious liability.

- Application of Law to Facts: The Court applied the legal principles to the facts and concluded that the evidence did not demonstrate Sumit's involvement in the issuance of the current cheques. The Court found that Sumit was not in charge or responsible for the company's affairs in the context of the current cheques.

- Treatment of Competing Arguments: The Court considered arguments from both parties, including the assertion that Sumit's correspondence indicated complicity. However, it concluded that the correspondence did not establish the necessary legal responsibility.

- Conclusions: The Court decided not to grant leave to appeal against Sumit, as the evidence did not support the claim of vicarious liability.

b) Leave to Appeal Against Accused No. 2, Anubhav

- Relevant Legal Framework and Precedents: Similar legal provisions were considered, with a focus on the presumption of consideration under Section 138 and the responsibilities of signatories of cheques.

- Court's Interpretation and Reasoning: The Court examined the evidence, including the 16 cheques signed by Anubhav, and the agreement between the parties. The Court noted the presumption of consideration and Anubhav's role as a signatory.

- Key Evidence and Findings: Evidence included the signed cheques, recovery certificates, and oral testimony. The Court found that the appellate court had misunderstood or misinterpreted this evidence.

- Application of Law to Facts: The Court applied the presumption of consideration and found that the evidence supported the claim of a legally enforceable debt. The Court noted the enhanced interest rate granted by the Debt Recovery Tribunal, which justified the service charges claimed by Morries.

- Treatment of Competing Arguments: The Court considered the arguments regarding the lack of documentary evidence for professional expenses but found the presumption of consideration and the agreement sufficient to support the claim.

- Conclusions: The Court granted leave to appeal against Anubhav, finding that the appellate court's conclusions were erroneous and required further examination.

3. SIGNIFICANT HOLDINGS

- The Court held that mere involvement in correspondence or signing of documents does not establish vicarious liability unless the individual is in charge of and responsible for the company's conduct of business.

- The Court emphasized the presumption of consideration in cases of cheque issuance and noted that this presumption is rebuttable but was not effectively rebutted in this case.

- The Court concluded that the evidence against Anubhav warranted further examination, while the evidence against Sumit did not justify granting leave to appeal.

ORDER

(i) Leave to prefer an appeal is refused against accused No. 4, Sumit.

(ii) Criminal Application No. 14 of 2022 is dismissed.

(iii) Leave to prefer an appeal against accused No. 2, Anubhav, is granted.

(iv) Criminal Application No. 15 of 2022 is allowed and disposed of. The appeal is admitted and will be placed before the Regular bench for further orders.