Gujarat High Court

Sarvottam Steel Industries Through ... vs M K Patel Industrial Through Patel ... on 10 September, 2024

                                                                                                                 NEUTRAL CITATION




                            R/CR.MA/12471/2024                                      ORDER DATED: 10/09/2024

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                                    IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                        R/CRIMINAL MISC.APPLICATION (FOR LEAVE TO APPEAL) NO. 12471
                                                  of 2024

                                           In F/CRIMINAL APPEAL NO. 23976 of 2024

                                                        With
                                          F/CRIMINAL APPEAL NO. 23976 of 2024
                                                        With
                                     R/CRIMINAL MISC.APPLICATION NO. 12938 of 2024
                                                          In
                                          F/CRIMINAL APPEAL NO. 23832 of 2024
                                                        With
                                          F/CRIMINAL APPEAL NO. 23832 of 2024
                       ==========================================================
                            SARVOTTAM STEEL INDUSTRIES THROUGH ANUJ JAGDEVBHAI
                                                    SHARMA
                                                     Versus
                              M K PATEL INDUSTRIAL THROUGH PATEL MAYANKKUMAR
                                              MANGALDAS & ANR.
                       ==========================================================
                       Appearance:
                       MR NARENDRA RANAMALJI MADHU(13497) for the Applicant(s) No. 1
                       MR. ABHISHEK D JAIN(7115) for the Applicant(s) No. 1
                       MS.A.V.PATEL, APP for the Respondent(s) No. 2
                       ==========================================================

                         CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER

                                                            Date : 10/09/2024

                                                                ORAL ORDER

ORDER IN R/CRIMINAL MISC.APPLICATION NOS.

12471 of 2024 & 12938 of 2024

1. This application is filed seeking leave to prefer an appeal

against the judgment and order of acquittal passed by

the Additional Chief Metropolitan Magistrate,

Negotiable Instruments Act Court No.37 at Ahmedabad

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dated 29.04.2024 in Criminal Case No.30131 of 2017

whereby the respondent-accused was acquitted from the

offence punishable under section 138 of the Negotiable

Instruments Act, 1881.

2. It is the case of the complainant that complainant is

doing the business in the name of Sarvottam Steel

Industries and the respondent-accused is the proprietor

of M.K.Patel Industries who purchased the material for

the amount of Rs.1,28,714/-. For repayment of the

aforesaid amount alongwith VAT, the cheque was issued

for the amount of Rs.1,30,001/- being cheque No.000123

dated 25.01.2017 in favour of the complainant. On

depositing the said cheque it returned with an

endorsement of "funds insufficient" therefore, complaint

was lodged by the complainant after following due

procedure under the N.I.Act.

3. Respondent-accused appeared after receiving the

summons and he claimed to be tried therefore, in order

to prove the guilt of the respondent-accused,

complainant himself was examined below Exh.04 and

produced eight documentary evidences before the

learned trial court. Respondent-accused was also

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examined below Exh.16 and also produced two

documentary evidence in order to prove his defence.

Learned trial court after examining the evidence laid by

both the parties has acquitted the respondent-accused

from the charges which is subject matter of challenge

before this Court.

4. Heard learned advocate Mr.Abhishek Jain for the

applicant-original complainant.

4.1. Learned advocate Mr.Abhishek Jain submits that

judgment and order of the acquittal was passed by the

learned trial court mainly on the ground that complaint

was filed against the proprietor of M.K.Patel Industries,

however, cheques were issued by the partner of

M.K.Metal Industries. Learned advocate Mr.Abhishek

Jain submits that due to typographical error the notice

and complaint was filed against the respondent-accused

showing him as a proprietor of M.K.Patel Industries.

Learned advocate Mr.Abhishek Jain submits that learned

trial court has taken technical view and dismissed the

complaint without considering the fact that because of

the mistake, this complaint was filed and due to

dismissal of the complaint the respondent-accused was

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acquitted. Learned advocate Mr.Abhishek Jain submits

that no cogent reasons were assigned except that

complainant has not fulfilled the criteria mentioned

under section 141 of the N.I.Act, therefore he prays to

allow this application granting leave to prefer an appeal.

5. Before discussing the merits, section 141 of the N.I.Act

is required to be referred to, which is reproduced herein

below:

"Section 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 sub-section 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

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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."

6. Admittedly the cheque which was produced below Exh.8

was issued by Mr.Mayank.M.Patel as (any one) partner

of M.K.Metal Industries. The notice which was produced

by the complainant below Exh.12 also suggests that

same was issued to Mr.Mayankumar Mangaldas Patel

showing him as the proprietor of M.K.Patel Industries.

The complaint is also filed joining Mr. Mayankumar

Mangaldas Patel as a proprietor of M.K.Patel Industries.

It appears that though cheque was issued by the partner

of M.K.Metal Industries, complainant has issued the

notice to the proprietor of M.K.Patel Industries and

joined the proprietor of M.K.Patel Industries.

7. This Court has relied on the decision of Apex Court in

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the case of Aneeta 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 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

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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 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

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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 above ratio laid down by the Apex Court

and the facts of the case it appears that the prosecution

has been lodged against the wrong person and showing

him as a proprietor of the wrong Industries. The learned

trial court after considering the evidence has justified in

acquitting the respondent-accused.

9. In view of the above this Court does not find any

infirmity in the impugned judgment and order of learned

trial court and hence this application seeking leave to

prefer an appeal is hereby rejected.

ORDER IN F/CRIMINAL APPEAL NOS.23976 of 2024 &

23832 of 2024