TaxTMI 
TaxTMI 
2021 (4) TMI 651
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....anted 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 the repayment of a said loan was issued and was signe....
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....s.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 and arrived at erroneous conclusion that dishonoured cheque were not towards the discharge of a liability. The learned trial Court erred in holding that loan transact....
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....rary 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 of the NI Act and considered that directors of the accused company including accused no.3 are not responsible for the act of the company. Non-consideration of the eviden....
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....tisfied. 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 of NI Act, the accused need not adduce evidence and can rely on the material submitted by the complainant in order to raise the defence. It is also contended that though Raghu Pikale is alleged to be a common Chartered Accounta....
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....l 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 and he himself has not made any efforts to verify whether the accused persons are the directors of accused no.1 company, nor examined the Raghu Pikale. 17. Shri Kantak, the learned counsel for the respondent no.6 relied on following Judgments:- 1. Saroj Kumar Poddar Vs. State (NCT of Delhi) and anr.(2007) 3 SCC 693. 2. K. Shrikanth Singh Vs. North East Securit....
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....bmitted 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. Whether the required ingredients to attract section 138 of NI Act were in existence? iii. Whether appellant proved that the said cheque was issued towards discharge of legally enforceable debt for attracting presumption in its favour? iv. Whether the appellant has proved that the person committing the offence under Section 138 of NI Act is a company and every person at the time the offence was committed was in charge of, and was responsible to the company ....
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....d 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 29.4.1997 at Exh. C/70 and copy of deposition of Peter Prabhu in Special Civil Suit No. 69/99. 30. He examined himself and deposed as per the complaint. In cross examination, he has admitted that (1) he does not have any document to show that he paid an amount. The payment is made on 17.9.1996 in cash. (2) He deposed that the accused was introduced to him by his Chartered Accountant and he advised that there was no need for him taking any acknowledgment in writing. (3) He does not have any document to show that the accused ....
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....I) 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 presumption can be rebutted only by a person denying it by entering into a witness box. The learned counsel also relied on the same judgment in support of his contention that it is the accused to prove that he was not managing the affairs of the company. 33. The learned counsel for the respondent nos. 3 and 4 Shri Dhond pointed out from the same judgment and submitted that the presumption are rebuttable and the accused is not required to tender evidence or bear burden of proof of the same magnitude as the prosecution. The standard of proof is preponderance of probabilities and inference of preponderance of probabilities can be drawn while rebutting the presumption not only from the material on record, but also by reference to the circumstances upon which the accused relie....
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.... 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 proceeding. 37. The learned counsel placed reliance on Rangappa (supra) in support of his contention that once the accused has admitted that the signature on the impugned cheque was indeed his own Section 139 of the Act mandates a presumption that the cheque pertained to a legally enforceable debt or liability. This presumption is of rebuttal nature and the onus is then shifts on the accused to raise a probable defence. 38. The learned counsel Shri Dhond for the respondent nos.3 and 4 submitted that in the same judgment in para 10 the Division Bench of this Court relying on Krishna Janaradhan Bhat Vs Dattatraya G. Hegde, (2008) 4 SCC 54 observed at paragraphs 30, 34 and 45 thus:- 30. The proviso appended to the said section provides for compliance with legal requirements before a....
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....ainant 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 lakhs from him. Cheque issued in repayment was dishnoured. As the complainant was unable to produce the document to show that there was enforceable debt against accused. The said amount admittedly was not shown in income tax returns and also did not reflect in the books of accounts. The Hon'ble High Court upheld the trial's Court verdict that the defence of the accused that there was no legally enforceable debt on the date of presentation of the cheque and dismissed the complaint. 40. Similarly the learned counsel relied on Kishor L. Purohit (supra), wherein the Hon'ble Bombay High Court held that the "complainant's case that the accused had issued cheque towards part payment of friendly loan. However, it is unbelievable that a businessman like the complainant would advance a loan of Rs. 3.40 lakhs to a ....
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....le 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 Online SC 389 wherein Hon'ble Apex Court held that ordinarily the Appellate Court will not be upsetting the judgment of the acquittal if the view taken by trial court is one of the possible view of the matter and unless the Appellate Court arrives at a clear finding that the judgment of the trial court is perverse that is not supported by the evidence on record or contrary to what is regarded as normal or reasonable or is wholly unsustainable in law. However, such restrictions needs to be visualised in the context of the particular matter before the Apex Court and the nature of the inquiry therein. The same rule with same rigour cannot be applied in a matter relating to the offence under section 138 of the NI Act. 45. On similar proposition he relied on Rajendra Pangam (supra). In this matter also though it was possible to examine the Chartered....
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....blished 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'ble Apex Court that conviction of the accused not proper. The Hon'ble Apex Court held that for drawing presumption under Section 118 read with Section 139 of NI Act burden is heavily upon the complainant to have shown that he had required funds for having advanced the money to the accused; that the issuance of the cheque in support of the said payment advanced was true and that the accused was bound to make the payment as had been agreed while issuing. The complainant not sure as to who wrote cheques nor aware as to where and when existing transaction took place for which cheque were issued by the accused. Thus defect in the evidence of the complainant as noted by the trial Court was proper. Specific averments about directors in charge 52. In N. K. Wahi (supra), wherein Hon'ble Supreme Court held that it is necessary to specifically aver in a complainan....
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....ng 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 the appellant liable to be quashed. It is further held that a person would vicariously liable for commission of an offence on the part of the company only in the event the conditions precedent laid down therefor in Section 141 of the Act stands satisfied. 59. The learned counsel on relied on K. Shrikanth Singh (supra), wherein the Hon'ble Apex Court held that to attract vicarious liability of a director of a company under Section 141 it must be pleaded and shown that the director was responsible for the conduct of business of the company at the time of commission of the offence. Only being a director not enough to cast a criminal liability. Vicarious liability must be pleaded and proved and cannot be merely inferred. 60. The learned counsel for the respondent no.9, Shri R. Chodankar, relied on Harshendra Kumar D. (supra), wherein Hon'ble Apex Court held that a director w....
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....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 debt or other liability. As it is an offence against the company, it is also require to be established that the accused is the person responsible for affairs of the company he was in charge and having the control over the company's affiars at the time of commission of the offence. A person who has already resigned or whose authority is withdrawn at the time of commission of the offence can not be made accountable and fasten with liability for anything done by company after acceptance of his resignation or after withdrawal his authority to sign the cheque. In the present matter as discussed earlier though the complainant is having cheques in his possession it doesn't bare the name of the payee. Even if it is considered as a held by the learned JMFC that the cheque is though a "self" cheque the word "or bearer" is not cancelled. It can be assumed that the complainant is the holder in due cours....
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....aints 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 person. As per his deposition he incurred information in respect of directors of a company from the chartered Accountant Shri Raghu Pikale. however, the said Raghu Pikale was not examined. Failure to establish this fact that he was having capacity to pay the amount of 20 lakhs cash as a loan or failure to show that he has received 24% interest per annum from the company the complainant failed to established that cheques were issued in discharge of any legal liability or part thereof. The accused respondents have established their defence on the basis of preponderance of probabilities that neither any such amount is paid to the company nor it is reflecting in the any account of the complainant nor the complainant is able to establish his capacity. As such, the acquittals of the respondents herein is perfectly justified. It reveals from the record that accused nos.3, 4,5 and 6 are not the signatories t....