AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 651
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....r. As both of them are taken together leave is granted and appeals are treated as admitted. All the appeals are taken up together for decision to be decided by common judgment. 2. The present appeals are filed by the original complainant challenging the judgment of acquittal of the respondent/ original accused in complaint Other Act Case No.223/1998/C passed by the learned Judicial Magistrate First Class at Panaji under Section 138 of the Negotiable Instruments Act (for short "NI Act") dated 13.3.2018. 3. The case of the complainant before the Magistrate as per the complaint is that the complainant is a businessman by profession and that the accused no.1 is a Public Limited Company registered under the Companies Act. It is further his case that the accused nos.2 and 9 are the directors/authroised signatories of the accused no.1's company with the accused no.3 being the Managing Director. Accused nos.2 to 10 are in charge of and responsible for the business of the company at the time when the loan was taken by accused no.1 from the complainant. It is further contention of the complainant that the accused nos.2 to 10 were in charge when the cheque for consideration towards ....
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....plainant as belonging to M/s. Skyline Constructions a sister concern of accused no.1. The said proposal is made on behalf of accused no.1 company by accused nos.2, 3 and 9 in order to compensate the complainant equivalent in value with the said loan amount. However, the complainant rejected the said proposal. Proceedings against the accused no.2 and 7 are abated during the trial. Accused no.8 was discharged. 5. As accused persons after service of summons appeared and pleaded not guilty and claimed to be tried. Evidence came to be recorded. Statement under Section 313 of CRPC was recorded of accused nos. 3,4,6,9 and 10. Accused no.5 filed an application as he is not willing to answer the statement and accused no.10 stated that he is willing to lead evidence and examine himself. Accused no.3 filed written statement. 6. After recording of evidence and hearing the parties, the learned JMFC acquitted accused nos.3,4,5,6, 9 and 10. The said judgment and order is under challenge before this Court. 7. The appeals are filed mainly on the ground that the learned JMFC has failed to examine evidence on record on the basis of presumption of law contained under the provision of NI Act a....
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....acknowledging issuance of cheque against loan. The signature on the said letter was not denied by accused no.2 The observation of the learned JMFC in that regard is contrary to the provisions of Evidence Act. It is observed that the accused no.2 was alive when the said document was produced in evidence and not denied his signature, which proof of acknowledgment of the loan as the complainant has to corroborate the signature on the said letter by persons who were conversant with the same. The learned Magistrate has not considered the Power of Attorney executed by the accused no.3 in his personal capacity and as a managing director of the company. This fact was sufficient to demonstrate that accused no.2 was acting on behalf of company as its director and manager to sign the correspondence and, in view thereof, the letter ought to be held as proof of acknowledgment of the loan. The learned Trial Court has not referred the same. The rejection of consideration of the contents of letter dated 29.4.1997 are legally unsustainable grounds have resulted in gross miscarriage of justice. It is further contended that the learned Magistrate has failed to apply correct provisions of Section 141 ....
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....ifficult to believe that such company would receive such a huge loan and make payment of interest without any document. Hence the requirement that the cheques have to be issued towards an enforceable debt has not been satisfied. 11. The cheques were returned as "Authority to sign withdrawn" and not for insufficient funds. As such, the ingredients which are condition precedent to invoke the provision under Section 138 of the NI Act not satisfied. 12. It is further categorically submitted by PW2 Mr. Bernard Pereira(Bank Personnel) in his deposition that even if there was no balance in the account of accused no.1 if the signatures were correct as per the resolution the bank would transfer the amount from PCL account to the account of accused no.1 to honour the cheques. It is further submitted that there is no evidentary value to the letter dated 29.4.1997 as the author of the said letter has not been examined nor any witnesses who were conversant with the signature of the author of the said letter has been examined. 13. It is further submitted that it is settled position when the complainant have failed to establish and prove the basic ingredients required under Section 138 o....
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....ingh & Ors., AIR 2007 SC 1454. 16. Mr. Narendra Urangi & Ors. Vs. M/s Greenmint India Agritech Pvt. Ltd. & Anr., 2016 ALL MR (Cri) Journal 449. 17. Smt Nanda Dharam Nandanwar Vs. Nandkishor Talakram Thaokar, 2010 ALL MR. (Cri) 733. 18. Mulchand Ramji Saiya Vs. Mr. Premji Ratanshi Gangar and anr. 2011 ALL MR(Cri) 3568. 19. Anil Baburao Kataria Vs Purshottam Prabhakar, 2010(2) Bankmann 90(Bom). 16. Shri Kantak, the learned counsel for the respondent no. 6 pointed out that the accused no.6 was not the signatory of the cheque. He further argued that in view of the complainant's deposition that he has not come across any resolution or document to say that the accused no. 6 was involved in decision making or to issue the cheques or that he was part of any financial decision pertaining to the accused no.1 and that if he attended any board meeting in respect of accused no.1/company. There are no specific averments to disclose that the accused/directors were in charge and responsible for the affairs of the company. Complainant's case is that on the basis of information given by the Chartered Accountant Shri Raghu Pikale, he filed a complaint an....
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....ar, for the respondent no.10 has submitted that he came to be appointed on 18.3.1995 resigned on 8.4.1997 and relieved on 30.4.1997. The cheques are dated 26.12.1997 onwards i.e much later from his leaving the company. He was not even the employee at the relevant time. He also submitted that he signed only six blank cheques however, he was arrayed in all the 12 matters. 22. The learned Counsel Shri Menezes, for the applicant in rejoinder submitted that there is no question of application of Money Lenders Act as it is nobodies case that the complainant was a money lender. Burden to prove that the complainant is money lender is on the accused. The presumption that cheque is issued on behalf of the company can be rebutted only by the Managing Director by leading evidence. The documents produced by PW2 Bank person are not proved. 23. I have heard the learned counsel for all the parties at length. Now rival contention fall for my consideration. 24. The main questions involved in this application/appeal are:- i. Whether the Judgment passed by the learned JMFC contrary to law and resulted in gross miscarriage of justice by acquitting the respondents/accused? ii.....
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....e or in part of any debt or other liability. It is also necessary, to avail presumption under Section 139 of NI Act to establish that the cheques have been issued for the discharge of debt or liability. As per the contention of the complainant the said cheques were issued towards the repayment of the loan borrowed by the company accused no.1. 28. The accused persons disputed the same and have stated that there was no liability to discharge by the accused persons. It is also contention of the accused that the cheques were invalid cheques, as the authority to sign was withdrawn. 29. Now the complainant first to prove that there was a loan transaction between the complainant and the accused no.1. The complainant to establish his case has produced the cheques, dated 26.12.1997, memo of the bank dated 11.6.1998, notice to the accused dated 18.6.1998, acknowledgment receipt at Exh. PW1/D, reply dated 2.7.1998, reply dated 24.6.1998, reply of accused no.5 at Exh. PW1/G, reply of accuse no.6 dated 27.6.1998, reply of accused no.8 at Exh. PW1/I, reply dated 17.7.1998, power of attorney dated 28.5.1995, Written Statement of accused no.2, 3 in Special Civil Suit No.110/99, letter dated ....
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.... FREDRICK & S.KUMAR 23/1/1996 8 607058 1,00,000 26/12/1997 11/6/1998 FREDRICK & S.KUMAR 17/8/1995 9 055804 1,00,000 26/12/1997 11/6/1998 FREDRICK & KURIEN 24/9/1996 10 054162 1,00,000 1/1/1998 16/6/1998 FREDRICK & KURIEN 22/8/1996 11 913455 1,00,000 1/1/1998 12/6/1998 FREDRICK & S.KUMAR 10/5/1996 12 054103 1,00,000 1/1/1998 15/6/1998 FREDRICK & KURIEN 22/8/1996 I) Resolution dated 8.3.1995 till 16.5.97 Accused no.10 Saju Kurien or Accused no. 2 Fedrick D'Suza could sign alongwith Accused no. 9 Salva Kumar. II) Resolution datd 16.5.1997 till 23.3.98 Accused no. 2 Fredrick D'souza Could sign alonwith Vasudev Byndoor. III) Resolution dated 23.3.1998 Vasudev Byndoor could singally sign all cheques. 32. The learned counsel Shri V. Menezes, placed his reliance on Krishna Morajkar (supra) in support of his contention that to rebut the presumption under Section 118(b) of the NI Act, which provides that only when a contrary is proved, a Negotiable Instruments is presumed to have been made on the date shown on the instrument. The same pres....
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.... also relied on Goa Plasts (P) Ltd (supra) in support of his contention that the presumption in favour of holder of cheque can be rebutted by accused by entering into witness box. In the said matter the cheque was dishonoured due to stop payment instructions. Neither the said letter shifting the liability on a third person nor its contents were proved. The accused was MD of complainant's company not stepped into the witness box. On fact, it is held that Courts below erred in treating the said letter as proof sufficient to rebut the presumption under Section 139 of the NI Act. It is the duty of the Courts below to see whether the company had sufficient funds in its account on the date of signing of the cheques, presentation of the cheque and the date on which stop payment instructions were issued. 36. The learned counsel further submitted that the expression 'other legal proceedings' appearing in Section 446(1) of the Companies Act does not include complaint under section 138 of the N.I.Act. In other words, the leave of the Tribunal as provided in Section 446(1) of the Companies Act is not required to be obtained by the complainant to continue with the present proceed....
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....come into play when the complainant will demonstrate that the amount he has advanced was available with him. There are documents, accounts to that effect should be available with the complainant. The evidence shows otherwise. He claimed that he had advanced 20 lakhs in cash to the company without there being any acknowledgment from the company. The said amount is neither reflected in the account of complainant nor in the account of the company. There is no resolution of the company to the effect that company is in need of loan. In such circumstances, advancement of the huge amount in cash itself is in doubt. The case in which private person is involved in as an accused, stand on different footing than where there is an offence against the company. The learned counsel in support his proposition that "failure by the complainant to disclose the amount in the income tax returns or books of account is sufficient to rebut the presumption specifically when the amount is huge and paid in cash. It cannot be said to be a legally enforceable debt." The learned counsel relied on Vasudeo Ramchand Ahuja (supra), wherein the complainant alleging that the accused had taken friendly loan of Rs. 5 l....
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....rns and his accounts book, the same were not produced. Similarly he has admitted that there is no document to show that he has lent the money to the respondent. The person in whose presence he alleged to have made the payment is not examined. This would be sufficient to raise an adverse inference and this Court held that presumption stood rebutted. 43. The learned counsel relied on K. Subramani (supra), wherein Hon'ble Apex Court considering the fact that alleged loan of Rs. 14 lakhs without producing bank statements to substantiate his claim and upheld the order of the acquittal of the trial Court. 44. The learned counsel also relied on Shri Vikas Gopi Bhagat (supra) wherein this Court relying on the ratio laid down in Basalingappa Vs. Mudibasappa, 2019 SCC On line SC 491 held that respondent have rebutted the presumption by raising probable defences. In the said Basalingappa's (supra) case, the Hon'ble Apex Court summarised the principles as regards to section 118 sub clause (a) and 139 of the NI Act. So also in the same judgment reliance is placed on judgment of Hon'ble Apex Court in case of Rohitbhai Jivanlal Patel Vs. State of Gujarat and another 2019 SCC....
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....t the extent to which such presumption can operate and can the benefit of such presumption be availed then the case set up by the complainant is found to be not substantiated. 50. The learned counsel for respondent Shri Dhond further relied on judgment in the case of Ashish Parikh (supra) in support of his contention that to attract Section 138 of the NI Act the cheque is to be dishonoured for "want of sufficient funds". To attract Section 138 of NI Act, the cheque must have been returned unpaid by the drawee's bank either because amount of money standing to the credit of the account is insufficient to honour the cheque or it exceeds the amount arranged to be paid from that account by an agreement made with that bank. It is submitted that in the present matter the cheques were returned dishonoured on the count that "authority withdrawn" and it is not established that there were no sufficient funds to clear the cheques. There was no direction for stop payment or there is no case of closure of account. In such circumstances, there is no liability of the company nor any of the accused. 51. The learned counsel relied on John K. Abraham (supra) herein it is held by the Hon'....
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.... amount was given in cash and promissory note stipulating interest. Complainant engaged in money lending business without valid licence. Held trial Court was justified in holding that the debt was not legally enforceable debt. 57. In Anil Baburao Kataria (supra),wherein Hon'ble Bombay High Court upheld the acquittal order passed by the learned JMFC as loan advanced by the money lender without licence is not a debt or other liability and it was held that provisions of Section 138 will not apply to such transaction. 58. The learned counsel for the respondent no.6, Shri A. R. Kantak, submitted that accused no. 6 is not the signatory of the cheque. He relied on Saroj Kumar Poddar (supra) in support of his contention that as there was no averment in the complaint as to how and in what manner the appellant was responsible for the conduct of business of company, moreover he having not issued any cheque, his responsibility for dishonour of cheque ought to have stated specifically. The allegation thus, did not satisfy the requirement of Section 141 which was obligatory. In the matter before the Hon'ble Apex Court in the similar set of facts it was held that proceedings against....
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....saying that the cheque is honoured. and therefore he cannot be made responsible for the payment. 62. He also relied on Ashok Mal Bafina, Baba Chandrashekhar Radhakrishnan and ors., Mrs. Anita Malhotra, Mr. Shehzad Valimohammad Merchant and Girdhari Parmanand Motiani (supra) in support of his above contention. 63. After considering the above referred citations a common proposition emerges that when offence under section 138 is in respect of a company section 141 comes into play. It is a penal provision creating vicarious liability and must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in the complaint that the director (arrayed as an accused)in charge of and responsible to the company for the conduct of the business of the company. The complaint should spell out as to how and in what manner the accused was in charge of or was responsible to the company for the conduct of its business. 64. Thus to make accused liable under Section 138 read with Section 141 of NI Act, it is necessary that the complainant should establish that he is a holder of a cheque and the said cheque has been issued for the discharge in whole or in part of any de....
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....sufficient funds" but "authorisation is withdrawn" of the person who signed the cheques. 66. The complainant is harping on the letter dated 29.4.1997 Exh.70. The said letter allegedly written by accused no.2. The said accused has expired. Although the said letter is exhibited through the complainant the contents thereof ought to have been proved by examining other witness who are conversant with the signature of the accused no.2. It is the contention of the appellant that when the letter was produced accused no. 2 who was very much alive but he had not disputed the same. On this count one cannot say that the contents therein are proved. 67. It is matter of record that on all the 12 cheques the signatories are not the same. On six cheques as shown in the chart are issued under the signature of Fredrick and S. Kumar and six under the signature of Fredrick and Kurien. However, in all the 12 complaints all the three persons were made as respondents/accused. Apart from this there is no specific averments who is the director responsible for the affairs of the accused no.1 company. Thus it transpires that complainant himself is not sure as to who were the directors and responsible p....