Ketanbhai Natwarbhai Patel Thro Poa ... vs State Of Gujarat
2024 Latest Caselaw 1307 Guj

Gujarat High Court

Ketanbhai Natwarbhai Patel Thro Poa ... vs State Of Gujarat on 14 February, 2024

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     R/CR.A/372/2024                                      JUDGMENT DATED: 14/02/2024

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          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
      R/CRIMINAL APPEAL (AGAINST ACQUITTAL) NO. 372 of 2024

FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER

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1     Whether Reporters of Local Papers may be allowed                         NO
      to see the judgment ?

2     To be referred to the Reporter or not ?                                  NO

3     Whether their Lordships wish to see the fair copy                        NO
      of the judgment ?

4     Whether this case involves a substantial question                        NO
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

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    KETANBHAI NATWARBHAI PATEL THRO POA VINODBHAI MANIBHAI
                            PATEL
                            Versus
                   STATE OF GUJARAT & ORS.
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Appearance:
MR A N PATHAN FOR MR A A ZABUAWALA(6823) for the Appellant(s) No.
1
DARSHIT R BRAHMBHATT(8011) for the Opponent(s)/Respondent(s) No.
2,3
MS MONALI BHATT, ADDL.PUBLIC PROSECUTOR for the
Opponent(s)/Respondent(s) No. 1
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    CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
                     Date : 14/02/2024
                     ORAL JUDGMENT

1.This appeal is filed by the appellant

challenging the judgment and order passed by

the learned 3rd Additional Chief Judicial

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Magistrate, Nadiad dated 19.06.2023 in

Criminal Case No.2843 of 2014 acquitting the

respondent Nos.2 and 3 from the offence

punishable under Section 138 of the

Negotiable Instruments Act, 1886 ('the

N.I.Act' referred hereinafter).

2.The facts of the case are mentioned

hereinbelow:

2.1. Present appellant is the original

complainant, who has filed the private

complaint before the competent court

alleging that he is the power of attorney

of Ketanbhai Natwarbhai, who had done the

financial transactions with one Vinodbhai

Patel. The said Ketanbhai had lent the

amount of Rs.1.20 Crore cash in the month

of March 2014 as a hand loan to the

respondents­accused. To repay the amount

on repeated request, two cheques bearing

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cheque Nos.612234 and 627728 of ICICI

Bank, Petlad Branch, Nadiad was issued for

the amount of Rs.60 Lakh each. On

depositing the said cheque with the Bank,

the same was returned with an endorsement

of 'account closed'. Therefore, after

following the procedure prescribed under

the act private complaint came to be

filed.

2.2. On recording the verification under

Section 200 of the Code of Criminal

Procedure, 1973 ('the Cr.P.C. referred

hereinafter) to the respondents­accused

under Section 204 of the Cr.P.C.

2.3. On being appeared the plea came to be

recorded below Exhibits 7 & 8 of the

respondents­accused wherein they had

pleaded innocent and claimed to be tried.

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2.4. To bring the guilt to the home, the

complainant had examined himself below

Exhibit 30 and another witness Vinubhai

Patel below Exhibit 69, who was one of the

friend of the complainant and from him,

some of the amount was borrowed by the

complainant. In addition of the above,

examination of witness with various

documentary evidence was produced before

the learned trial Court, which was in the

nature of original cheque, power of

attorney, notice and the undertaking which

was executed by the complainant in favour

of one Nitinbhai Patel and Vinubhai

CHotabhai Patel.

2.5. On filing the closing pursis below

Exhibit 71, the case was posted for

recording of the further statement of the

accused however, as the accused did not

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appear though the warrant was issued, the

stage of the further statement was close.

Thereafter, considering the evidence

placed on record by both the parties,

learned trial Court passed the judgment

and order of acquittal, which is impugned

before this Court.

3.Heard the learned advocate Mr.A.N.Pathan for

the appellant and learned advocate

Mr.A.A.Zabuawala for the respondents­accused.

   3.1. Learned              advocate        Mr.A.N.Pathan                submits

       that        the        judgment           and        order        of        the

acquittal was passed by the learned trial

Court mainly on the ground that company

was not joined as a party as per the

requirement under Section 141 of the

N.I.Act. Learned advocate Mr.A.N.Pathan

submits that there was no transaction with

the company. The money was lent to the

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respondents­accused on their personal

capacity, however, cheque was issued by

the respondents­accused wherein the

signature was made as the authorized

signatory of the ACE Infrastructure

Private Limited Company.

   3.2. Learned          advocate          Mr.A.N.Pathan                 submits

       that        as    the     amount             was     lent         to       the

       respondent         Nos.2       and       3     therefore,              there

was no any requirement to join the company

as the respondent­accused and there would

not be any vicarious liability arise with

regard to the respondent Nos.2 and 3, who

are the authorized signatories of the

company. Learned advocate Mr.A.N.Pathan

submits that the cause title reflects that

accused Nos.1 and 2 were joined as

authorized signatory of the ACE

Infrastructure Private Limited therefore,

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requirement under Section 141 was already

satisfied however, without considering the

same the judgment and order of acquittal

was passed by the learned trial Court.

   3.3. Learned          advocate          Mr.A.N.Pathan               submits

       that       huge     amount              was      lent          by        the

complainant to the respondents­accused and

though it is observed by the learned trial

Court in the impugned judgment that

despite various summons and the warrants

accused Nos.1 and 2 were remained failed

to remain present before the learned trial

Court and therefore, stage of further

statement was also closed. However,

without considering the same, the judgment

and order was passed on technical ground

by the learned trial Court.

3.4. Learned advocate Mr.A.N.Pathan further

submits that even if, the company has not

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joined as a party before the learned trial

Court, but for that technical reasons the

accused cannot be exonerated from the

liability to repay the amount. As the

transaction was personal in nature which

was made with the respondent Nos.1 and 2.

   3.5. In        view        of        the        above         submissions,

       learned       advocate                Mr.A.N.Pathan                 submits

       that        the         appeal               be        allowed               and

       respondents­accused                    be    convicted             for       the

       charges levelled against them.


4.Considering            the        submissions               made         by       the

learned advocate for the appellant, relevant

provisions of the N.I.Act is required to be

looked into.

"138 Dishonour of cheque for insufficiency, etc., of funds in the account. --Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in

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whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless--

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

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Explanation.-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.]

141 Offences by companies. --

(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub­section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

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.

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(2) Notwithstanding anything contained in sub­section (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", in relation to a firm, means a partner in the firm."

5.The sole ground for which the judgment and of

the acquittal was passed was that the

company, namely, ACE Infrastructure Private

Limited was not joined as a party in the

complaint.

6.On perusing the record, more particularly

below Exhibit 19 i.e. the disputed cheque, it

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transpires that the cheque was signed by the

accused Nos.2 and 3 as authorized signatory

for ACE Infrastructure Private Limited. The

cauase title of the complaint shows that the

accused No.1, namely, Rajanbhai Dilipbhai

Desai and accused No.2, namely, Hetalbhai

Kaushikbhai Patel were joined as respondents­

accused and as authorized signatories of ACE

Infrastructure Private Limited. However, the

company, namely, ACE Infrastructure Private

Limited was not joined as a respondent­

accused.

7.It is a settled law in the judgment rendered

by the Apex Court in case of Anil Hada vs.

Godfather Travels and Tours Pvt.Limited,

reported in (2012) 5 SCC 661 wherein the Apex

Court in paragraphs No.56 to 59 held as

under:

"56.We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard

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being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context.

57.In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and others it has been laid down that the entire statute must be first read as a whole, then section by section, clause by clause, phrase by phrase and word by word. The same principle has been reiterated in Deewan Singh and others v. Rajendra Prasad Ardevi and others[45] and Sarabjit Rick Singh v. Union of India.

58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence

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subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted.

59.In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh (supra) which is a three- Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada(supra) is overruled with the qualifier as stated in paragraph. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove."

8.Considering the provisions of Section 141 of

the N.I.Act and ratio laid down by the Apex

Court in the above mentioned case it

transpired that if a person committing an

offence under Section 138 of the Act is a

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company, every person, who at the time when

the offence committed in charge of or was

responsible to the company for the conduct of

business of the company as well as the

company, shall be deemed to be guilty of the

offence and shall be liable to proceed

against and punished.

9.In absence of the company being arraigned as

accused, a complaint against the respondents­

accused appears to be a non­maintainable. The

respondent Nos.2 and 3 had signed in the

cheque as authorized signatories of the

company, demand notice which was issued below

Exhibit 21 also not served to the company

therefore, in absence of the compliance of

the provisions under Sections 138 and 141 of

the N.I.Act, the judgment and order passed by

the learned trial Court acquitting the

respondents­accused is just and proper.

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10. Though it is submitted that the

transaction was with the respondents No.2 and

3 on their personal capacity, but when the

cheque was issued in favour of the

complainant as a authorized signatory of the

company, the company certainly be required to

be joined as a respondent­accused. In absence

fulfilling of the requirement under Section

141, the respondent Nos.2 and 3 cannot be

held vicariously liable for the offence and

therefore they cannot be punished.

11. Considering the above judgment and

overall circumstances of the case, this Court

is of the view that the judgment and order of

acquittal passed by the learned trial Court

is in accordance with law and there is no any

illegality, perversity or impropriety found

in the judgment and, therefore, the same is

required to be confirmed.

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12. In view of the above discussions, this

appeal fails. The judgment and order passed

by the learned 3rd Additional Chief Judicial

Magistrate, Nadiad dated 19.06.2023 in

Criminal Case No.2843 of 2014 acquitting the

respondent Nos.2 and 3 from the offence

punishable under Section 138 of the

Negotiable Instruments Act, 1886 is hereby

confirmed.

13. Record and proceedings be sent back to

the concerned trial Court, forthwith. be sent

back to the concerned trial Court, forthwith.

(M. K. THAKKER,J) M.M.MIRZA