TaxTMI 
TaxTMI 
2023 (9) TMI 1246
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....haman. The appellant is an income tax consultant and he worked for the said company previously in relation to their income tax etc. Since respondents No. 2 and 3 were closely acquainted with the appellant they approached him to lend a sum of Rs. 30,50,001/- to purchase real estate in the name of the said company on consideration that the appellant would be made a Director of the said company having 1/3 share. The complainant agreed to such proposal and during the period between 7th November, 2009 to 12th January, 2010, he lend a total sum of Rs. 30,50,001/- by cheque and cash to purchase real estate property in the name of the said company. However, the respondents did not take any resolution admitting the complainant as one of the Directors of the said company and delayed the matter. Over the said issue the complainant filed civil suit against the respondents/accused persons. On 30th September, 2012 they proposed the complainant for amicable settlement and handed over three cheques amounting to Rs. 20,50,001/- in order to discharge their legally enforceable debt/liability in part. They also compromised to pay balance amount of Rs. 10 lakhs on the date of withdrawal of the civil su....
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.... Act and passed an order of acquittal in favour of the respondents. 5. Hence the appeal. 6. In the impugned judgment, the learned Magistrate inter alia, held - (i) As per the case of the complainant he lent a sum of Rs. 30,50,001/- to M/s Amba Complex Private Limited, a company incorporated under the Companies Act having a distinct and separate juristic entity. The appellant never approached company requiring it to discharge its debt. (ii) The opposite party Nos. 2 and 3 are two separate entities distinct from the company they could not be held liable for the debt of the said company. (iii) The respondent No. 3 is not at all involved in any manner in the said transactions because the complainant did not pay any money to the respondent No. 3 and the said respondents also did not issue any cheque in discharge of any debt or liability. (iv) The learned Magistrate relied on the decisions of the Hon'ble Supreme Court in Rangappa vs. Sri Mohan, (2010) 11 SCC 441 and Krishna Janardhan Bhat vs. Dattatraya G. Hegde, (2008) 4 SCC 54 on the issue of presumption under Section 139 of the N.I Act and came to a finding that the respondent No. 2 and 3 suff....
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....ary, it was drawn from the personal account of the opposite party No. 2. The complainant does not know if the respondent No. 2 took the responsibility to discharge the liability of the company. However, the fact remains that when the petitioner issued cheques from his personal account he accepted the liability to discharge the debt upon his shelter. Under the facts and circumstances of the case the principle of vicarious liability is not applicable. 10. It is also submitted by Mr. Ganguly that the learned Magistrate has wrongly placed the burden of statutory presumption under Section 139 read with Section 118 of the N.I Act. The presumption contemplated in Section 139 read with Section 118 of the N.I Act is always in favour of the holder of a cheque in due course that the drawer of the cheque has issued the same in discharge of legally enforceable debt or liability. Of course such presumption is rebuttable by the accused but in the instant case respondent No. 2 failed to rebut such presumption. The respondent No. 2 simply denied in course of his examination under Section 313 of the Cr.P.C that he did not take any loan from the complainant. However, he failed to prove as to why h....
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....to respondent No. 1 company and the respondent company may have a good case against appellant No. 1 company for recovery of its due before other fora, it would be sufficient to attract the provisions of Section 138 of the N.I Act. The appellant company and its Directors cannot be made liable under Section 138 of the Act for a default committed by respondent No. 11. An Action in respect of a criminal or a quasi criminal provision has to be strictly construed in keeping with the provision alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence of some other person, who under the statute was not liable for the commission of such offence. 12. Mr. Ganguly, next refers to a decision of this Court in the case of Nopany Education Trust vs. State reported in 2014 (1) E Cr.N (Cal) 975. In this report, the decisions of the Hon'ble Supreme Court in P.J Agro Tech Limited (supra) and Mrs. Aparna A. Saha vs. M/s Sheth Developers Private Limited, (2013) 8 SCC 71 were followed and it was held by a Coordinate Bench in the said judgment that the Apex Court has had consistently held that the principle of constructive/vicarious liability ....
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....139 of the Act held him to shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. 15. Mr. Ganguly also refers to NEPC Micon Ltd. & Ors. vs. Megma Leasing Ltd. reported in (1999) 4 SCC 253. In this decision it was held by the Hon'ble Supreme Court that dishonouring the cheque on the ground that the account is closed is the consequence of the act of the drawer rendering his account cipher. It is also held by the Hon'ble Supreme Court in paragraph 15:- "In view of the aforesaid discussion we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commerci....
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.... the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their nonexistence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing during evidence to prove that the consideration did not exist, or that he had not incurred any debt or liability, the accused may also rely upon the circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon the presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions under Sections 118 and 139 of the N.I Act. In a case where cheque is issued by the respondent in favour of appellant and the signature of the respondent has not been disputed, once the cheque is proved to be issued, it carries statutory presumption under Section 139 of the N.I Act. Therefore, conclusion drawn by the Court below to acquit the respondent holding, inter alia, that the complainant issued the chequ....
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.... the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: ^22[Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", ....
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.... converted two of such cheques into negotiable instruments and lodged a false complaint against the accused persons. It is further submitted by Mr. Chatterjee that according to the appellant he paid Rs. 30,50,001/- in favour of the company of the respondents by cheque as well as cash. Out of the said money the complainant was able to prove that he paid a sum of Rs. 2,50,000/- by issuing a cheque in the name of M/s Amba Complex Private Limited. Thus, as per the case of the complainant he paid Rs. 28,00,001/- to the respondents by cash. The complainant failed to produce any supporting documents in support of payment of money either to the respondents or to the company by cash. He also failed to state the dates on which such payments were allegedly made. In the absence of such evidence the trial court did not believe the case of the complainant and acquitted the accused persons. 24. It is submitted by Mr. Chatterjee, referring to a decision of the Hon'ble Supreme Court in the case of K. Prakashan vs. P.K Surenderan reported in (2008) 1 SCC 258, that ordinarily a judgment of acquittal should not be reversed when two views are possible. It is now trite that if two views are possible,....
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....ew taken by the trial court is either perverse or such that no reasonable person could come to such conclusion or that such a conclusion of trial court is not based on any material on record, it should not be merely because another view is possible, reversing the finding of the trial court. On the same issue Mr. Chatterjee refers to State of Uttar Pradesh vs. Awdesh reported in (2008) 16 SCC 461, Rathinam @ Rathinam vs. State of Tamil Nadu and Anr, (2011) 11 SCC 140, Jawaswamy vs. State of Karnataka, (2018) 7 SCC 219, Banareddy & Ors vs. State of Karnataka & Ors, (2018) 5 SCC 790. 27. On due consideration of the submissions made by the learned Counsels on behalf of the appellants and respondents and having gone through meticulously the written notes of argument along with the decision referred by the learned Counsels for the parties I like to record at the outset that there is absolutely no evidence from which criminal law under Section 138 of the N.I Act could be attributed to respondent No. 3. Therefore, recording of the order of acquittal in favour of respondent No. 3 by the learned Magistrate cannot be called into question. 28. The learned Advocate for the respondents has....
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.... its conduct of the appeal should and will act in accordance with rules and principles well known and recognised in the administration of justice." It was stated that the appellate court has full powers to review and to reverse the acquittal. 21. In Atley vs. State of U.P., AIR 1955 SC 807, the approach of the appellate court while considering a judgment of acquittal was discussed and it was observed that unless the appellate court comes to the conclusion that the judgment of the acquittal was perverse, it could not set aside the same. To a similar effect are the following observations of this Court speaking through Subba Rao J., (as His Lordship then was) in Sanwat Singh vs. State of Rajasthan, AIR 1961 SC 715: "9. The foregoing discussion yields the following results: (1) an appellate court has full power to review the evidence upon which the order of acquittal is founded; (2) the principles laid down in Sheo Swarup case afford a correct guide for the appellate court's approach to a case disposing of such an appeal; and (3) the different phraseology used in the judgments of this Court, such as, (i) 'substantial and compelling ....
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....egative the order of acquittal is not to be disturbed. Conversely, if the appellate court holds, for reasons to be recorded, that the order of acquittal cannot at all be sustained in view of any of the above infirmities it can then and then only reappraise the evidence to arrive at its own conclusions." The object and the purpose of the aforesaid approach is to ensure that there is no miscarriage of justice. In another words, there should not be an acquittal of the guilty or a conviction of an innocent person. 25. In Ajit Savant Majagvai vs. State of Karnataka, (1997) 7 SCC 110, this Court set out the following principles that would regulate and govern the hearing of an appeal by the High Court against an order of acquittal passed by the Trial Court: "16. This Court has thus explicitly and clearly laid down the principles which would govern and regulate the hearing of appeal by the High Court against an order of acquittal passed by the trial court. These principles have been set out in innumerable cases and may be reiterated as under: (1) In an appeal against an order of acquittal, the High Court possesses all the powers, and nothing less than th....
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....n then- and then only-reappraise the evidence to arrive at its own conclusions." 27. This Court in Chandrappa & Ors. vs. State of Karnataka, (2007) 4 SCC 415, highlighted that there is one significant difference in exercising power while hearing an appeal against acquittal by the appellate court. The appellate court would not interfere where the judgment impugned is based on evidence and the view taken was reasonable and plausible. This is because the appellate court will determine the fact that there is presumption in favour of the accused and the accused is entitled to get the benefit of doubt but if it decides to interfere it should assign reasons for differing with the decision of acquittal. 28. After referring to a catena of judgments, this Court culled out the following general principles regarding the powers of the appellate court while dealing with an appeal against an order of acquittal in the following words: "42. From the above decisions, in our considered view, the following general principles regarding powers of the appellate court while dealing with an appeal against an order of acquittal emerge: (1) An appellate court has full powe....
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....g some of the most vital facts, has acquitted the accused, that the same may be reversed by this Court, exercising jurisdiction under Article 136 of the Constitution. [State of U.P. v. Sahai, AIR 1981 SC 1442] Such fetters on the right to entertain an appeal are prompted by the reluctance to expose a person, who has been acquitted by a competent court of a criminal charge, to the anxiety and tension of a further examination of the case, even though it is held by a superior court. [Arunachalam v. Sadhananthan, AIR 1979 (SC) 1284] An appeal cannot be entertained against an order of acquittal which has, after recording valid and weighty reasons, has arrived at an unassailable, logical conclusion which justifies acquittal. [State of Haryana v. Lakhbir Singh, (1990) CrLJ 2274 (SC)] B) However, this Court has on certain occasions, set aside the order of acquittal passed by a High Court. The circumstances under which this Court may entertain an appeal against an order of acquittal and pass an order of conviction, may be summarised as follows: i) Where the approach or reasoning of the High Court is perverse: a) Where incontrovertible evidence ha....
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....es which were purely based in imagination and fantasy. [State of Uttar Pradesh v. Pussu 1983 AIR 867 (SC)] b) Where the accused had been acquitted on ground of delay in conducting trial, which delay was attributable not to the tardiness or indifference of the prosecuting agencies, but to the conduct of the accused himself; or where accused had been acquitted on ground of delay in conducting trial relating to an offence which is not of a trivial nature. [State of Maharashtra v. ChampalalPunjaji Shah, AIR 1981 SC 1675]." 29. Thus, an order of acquittal can be interfered with on the ground of (a) perversity (b) non-consideration of incontrovertible evidence (c) disbelieving the testimony of witnesses on an unrealistic conjecture (d) non-consideration of direct and cogent accounts of eye-witnesses (e) non-consideration of the testimony of natural witnesses on the ground of interestedness (f) imposition of unrealistic standard of "implicit proof" rather than that of the proof beyond reasonable doubt (g) rejection of circumstantial evidence on exaggerated and capricious theory (h) rejection of circumstantial evidence based on an exaggerated and capricious theory which are bey....
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....ddin Abdul Sattar Shaikh vs. Vijay D. Salvi (supra) 32. As drawer of the cheque respondent No. 1 is liable to be under Section 138 of the N.I Act. 33. The learned Magistrate held that the respondent No. 1 might be vicariously liable; however without impleading the company and in the absence of any pleading of vicarious liability against the respondents they were entitled to be acquitted. In case of a company being the principal offender, the theory of vicarious liability or imputed liability as a legal rule is introduced in Section 141 of the N.I Act because of the fact that a company being a juristic person is represented by an individual or group of individuals in the capacity of Managing Director or the person involved in the day to day affairs of the company. 34. If the Managing Director or Joint Director of the company takes personal responsibility to discharge the debt or liability which the company owed and issued cheque in his/their capacity, the said person is solely liable as drawer of the cheque. 35. On careful perusal of the entire evidence on record this Court finds that the learned Magistrate recorded an order of acquittal on misreading of evidence and the....