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TMI Blog2025 (3) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred to as 'Morries') before the Court of Metropolitan Magistrate, Mumbai. It was filed for commission of an offence under Section 138 read with Section 142 of the Negotiable Instruments Act. It was filed against four accused persons. All were tried. The learned Magistrate disposed of the case vide judgment dated 29/05/2019. The result is as follows:- a) Accused No. 1-M/s. Chamber Constructions Private Limited (hereinafter referred to as 'Chamber') b) Accused No. 2-Anubhav /director c) Accused No. 4-Sumit/VP Finance & Taxation All the three were convicted. d) Accused No. 3-Gokul Aggarwal/director was acquitted. 2. Amongst them two convicted individuals have preferred appeals. Both were allowed and conviction was set aside by the Court of Judge City Civil on 18/06/2021. (Criminal Appeal 529 of 2019 - accused No. 4-Sumit and Criminal Appeal No. 530 of 2019 by Appellant / accused No. 2-Anubhav). On this background, Morries has sought leave to prefer an appeal (ALP 14 of 2022 against accused no. 4 Sumit and ALP No. 15 of 2022 against accused No. 2 - Anubhav). Facts 3. The facts averred in the complaint and in the documents are little bit different from normal pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t behalf. Both have entered into Memorandum of Understanding on 20.07.2013. As per this MOU, Chamber has agreed to pay 10% of amount of enhanced interest to Morries. 7. Prior to issuance of present 16 cheques, Chamber has also issued earlier slot of cheques. Towards discharge of part of the liability three cheques were issued. It has happened (in between the Parties) few of the cheques were not encashed and Chamber has issued fresh cheques. There was correspondence exchanged in between them. Accused Nos. 2, 3 and 4 have participated at different levels. Even one Anil Agrawal participated later on, he expired. In the year 2014, 16 post dated cheques were issued "prior to realization of those cheques, fresh 16 cheques drawn on Central Bank of India, Churchgate branch were issued on behalf of Chamber". 8. All 16 cheques got dishonoured on presentation, for the reason "funds insufficient". There was statutory notice dated 01/08/2014 sent to all the accused. Chamber did not comply with the notice. That is how complaint was filed. There was oral evidence given by one Hemant Kumar Garg, Director of Morries Energies Limited. One Santosh Date, Chartered accountant of M/s. Morries Energy L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets rebutted. The accused can discharge the burden on the basis of admissions brought in cross-examination or even he can adduced evidence. With this view in mind, the issue needs to be decided. 14. In present two matters, both the learned Advocates for the complainant submitted for grant of leave whereas learned advocates for accused Nos. 2 and 4 have vehemently opposed grant of leave. According to them, the appeals need not be entertained. 15. When I have gone through the judgment given by the Appellate court, I find grounds for acquittal for accused No. 2 and grounds for accused No. 4 are different. Accused No. 2-Anubhav was acquitted for the reason "he does not fall within the clutches of section 142 of the Negotiable Instrument Act. He is not that category of person who can be held liable for acts of company Chamber". Whereas accused No. 4- Sumit (who is signatory to all cheques) was acquitted on the ground of "non-proof of the liability of accused Chamber in favour of Complainant-Morries company." The stage of both the proceedings is not final hearing of appeals, but they are at the stage of granting of leave. Provisions for grant of leave 16. This issue is governed as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of email dated 23rd December 2013 Sent by Morries to accused no. 4-Sumit Requesting to issue fresh cheque 19. According to learned Advocate Mr Niranjan Mundargi, accused No. 4-Sumit has made correspondence and assured to replace the cheque shows his complicity. It shows his knowledge about issuance of cheque. To buttress his submission, he relied upon judgment in case of S. P. Mani and Mohan Dairy Vs. Dr. Snehalatha Elangovan Manu/SC/1189/2022. He criticized the judgment of acquittal. 20. Whereas according to learned Senior Advocate Mr. Ponda, merely signing a correspondence is not enough. According to him, a person should not only be in-charge of affairs, but he must also be responsible to the management. He emphasized on the factual aspects. He made correspondence through email, which is not directly connected to the accused Chamber. He relied upon following judgments:- (i) Siby Thomas Vs. Somany Ceramics Ltd. (2023) SCC Online SC 1299. (ii) Ashok Shewakramani and Others Vs. State of Andhra Pradesh and Another (2023) 8 SCC 473. (iii) Girdhari Lal Gupta Vs. D. H. Mehta and Anr. (1971) 3 SCC 189. (iv) S. M. S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Anr. (2005) 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y averment in the complaint. c. when it can be said there is consent, connivance or neglect. Meaning of phrase "in charge of and responsible" 22. There is discussion of the phrase 'in charge of and responsible' in para nos. 19, 20 and 21 of K.K. Ahuja's case. This phrase is not defined either in the Negotiable Instruments Act or even in the Companies Act. 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 (para nos. 20,21 of the said judgment). 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. 23. The Hon'ble Supreme Court has dealt with this issue in number of judgments. They are S. M. S. Pharmaceuticals Ltd. (supra), (t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of K.K.Ahuja (supra), these two provisions are discussed. Sub-section (1) lays down a legal fiction of vicarious liability. Whereas the liability fastened under sub-section (2) is not on the basis of legal fiction but on account of specific part played that is consent, connivance or neglect (para no. 17 and 18). In case of S.P.Mani (supra), the functioning of any Company is explained and how it is correlated to the provisions of section 141 is elaborated. An offence means an aggregate of facts or omissions which are punishable by law and therefore can consist of several parts, each part being committed at different time and place involving different persons (para no.34). This is explained with the help of an example. 'A' might be in charge of the company at the time of drawing of cheque. 'B' might be in charge of the company at the time of dishonour of cheque and 'C' might be in charge of the company at time of failure to pay within 15 days. In such a case, the permissibility of prosecution of A, B and C, respectively, or any of them would advance the purpose of the provision and if, none can be prosecuted or punished, it would frustrate the purpose of the provisions of section 138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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. On doing the same exercise, I had come to conclusion not to grant leave in this application, hence Criminal Application (ALP) No. 14 of 2022 is dismissed. IN CRIMINAL APPLICATION (ALP) NO. 15 OF 2022 29. As said above accused no. 2-Anubhav has signed those 16 cheques. Learned Senior Advocate Mr. Mundargi has invited my attention to the following documents:- (i) 16 cheques signed by accused no. 2 on behalf of the Company Chamber. (ii) New recovery certificates thereby fulfilling the promises given as per the agreement. (iii) the cheque return memos. (iv) The mandatory notice and documents to show the receipt of the notice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment is on the basis of the facts of those cases and slight variation in the fact may lead to different result. The accused can rely upon those observations when evidence will be finally appreciated. It is true once the cheques are issued, there is presumption in favour of passing of the consideration. This is rebuttable presumption. The Accused can rebut it by cross-examining the witness or by adducing evidence. 35. Now in order to determine the legally enforceable debt, we have got cheques signed by accused no. 2 and the agreement . He has not denied the issuance of the cheque. As against this, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s does not invalidate the debt. 41. Prima-facie, I find the observations of the Appellate Court as erroneous. Any business carried out by the Company which is not incorporated in object clause cannot be ipso facto becomes unlawful, atleast, an outsider cannot make that complaint. 42. I feel 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. 43. There is merit in the submissions made on behalf of the Morries. For the above discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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