Kerala High Court
M/S.Kasaragod Self Employees ... vs Smt.Mamtha Rathnakara Shetty on 8 November, 2024
CRL.A NO. 2186 OF 2008 1 2024:KER:83620
CR
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MRS. JUSTICE SOPHY THOMAS
FRIDAY, THE 8TH DAY OF NOVEMBER 2024 / 17TH KARTHIKA, 1946
CRL.A NO. 2186 OF 2008
AGAINST THE JUDGMENT DATED 02.06.2008 IN CRL.A NO.372 OF
2004 OF ADDITIONAL SESSIONS JUDGE (ADHOC)I, KASARAGOD (C.C.NO.351
OF 2001 OF CHIEF JUDICIAL MAGISTRATE COURT, KASARAGOD)
APPELLANT/1ST RESPONDENT/COMPLAINANT:
M/S.KASARAGOD SELF EMPLOYEES FINANCING COMPANY(R),
REP BY ITS GENERAL POWER OF ATTORNEY HOLDER
SATHEESHAN.K (46 YEARS),S/O.KRISHNA KOMERA, RESIDING AT
"EAGLES WEST", KUDLU, P.O RAMADASNAGAR, KASARAGOD TALUK
BY ADVS.
SRI.BRIJESH MOHAN
SMT.M.U.VIJAYALAKSHMI
RESPONDENTS/APPELLANT/ACCUSED AND STATE:
1 SMT.MAMTHA RATHNAKARA SHETTY
AGED 37 YEARS, W/O.RATHNAKARA SHETTY, RAJ SHIVAM,,
FLAT NO.306-B-WING, ASHOK VAN, DAISAL EAST., MUMBAI-68.
2 STATE OF KERALA,REPRESENTED BY PUBLIC
PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.
R1 BY SMT.N.S.HASNAMOL - AMICUS CURIAE
R2 BY SRI.M.C.ASHI, PUBLIC PROSECUTOR
THIS CRIMINAL APPEAL HAVING BEEN FINALLY HEARD ON 08.11.2024,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
CRL.A NO. 2186 OF 2008 2 2024:KER:83620
CR
JUDGMENT
This appeal is at the instance of the complainant in
C.C.No.351 of 2001 on the file of Chief Judicial Magistrate
Court, Kasaragod, impugning the judgment in Crl.A No.372 of
2004, by which the trial court judgment was set aside, and the
accused was acquitted under Section 138 of the Negotiable
Instruments Act (for short, 'the NI Act').
2. The complainant-M/s.Kasaragod Self Employees
Financing Company(R), represented by its General Power of
Attorney holder, filed a complaint under Section 138 of the NI
Act against the accused, alleging that the accused, towards
discharge of the amount borrowed by her from the complainant
firm, issued Ext.P2 cheque dated 15/5/2001 for an amount of
Rs.19,78,000/-, assuring that it would be honoured on
presentation before the bank, and the complainant presented
the cheque before the bank for encashment, but it was returned
CRL.A NO. 2186 OF 2008 3 2024:KER:83620
dishonoured for the reason 'insufficient funds'. Though statutory
notice was sent to the accused in her correct address, it was
returned unclaimed, and the amount was not repaid. Hence, the
complaint.
3. After taking cognizance and on appearance of the
accused before the trial court, particulars of offence were read
over and explained, to which she pleaded not guilty and claimed
to be tried.
4. Thereupon, PWs 1 to 3 were examined, and Exts.P1 to
P7 were marked from the side of the complainant.
5. On closure of complainant's evidence, accused was
questioned under Section 313 of Cr.P.C. She denied all the
incriminating circumstances brought on record, and stated that
she is a housewife, and she never issued any cheque in favour
of the complainant, and Ext.P2 cheque was not drawn from her
account. The transaction was between her husband and one
Mr.T.V Gangadharan. Her address shown in the notice was not
CRL.A NO. 2186 OF 2008 4 2024:KER:83620
correct.
6. DWs 1 to 3 were examined and Exts.D1 and D2 were
marked from the side of the accused. Exts.X1 to X3 were
marked as witness exhibits.
7. On analyzing the facts and evidence, and on hearing the
rival contentions from either side, learned trial court found that,
an offence under Section 138 of the NI Act was made out
against the accused, and so she was convicted and sentenced
under Section 138 of the NI Act, to undergo simple
imprisonment for six months and to pay compensation of Rs.15
lakh, with a default sentence of simple imprisonment for three
months.
8. Aggrieved by the conviction and sentence, the accused
preferred Crl.A No.372 of 2004 before the Additional Sessions
Judge (Adhoc)-I Kasaragod. Learned appellate court allowed
the appeal, setting aside her conviction and sentence, finding
that PW1 had no authority to file the complaint, and the address
CRL.A NO. 2186 OF 2008 5 2024:KER:83620
in which the statutory notice was sent, was not the correct
address of the accused. Moreover, being an unregistered firm,
the complainant company could not have initiated prosecution
against the accused, under Section 138 of the NI Act. Aggrieved
by the judgment of the appellate court, the complainant has
preferred the present appeal.
9. Heard learned counsel for the appellant/complainant
and learned Amicus Curiae for the 1st respondent/accused.
10. For the purpose of convenience, the appellant, and 1st
respondent shall be referred as the complainant and accused
respectively.
11. The complainant is assailing the impugned judgment in
Crl.A No.372 of 2004, mainly on three grounds. Firstly, that the
appellate court failed to note that, there was a validly executed
power of attorney by the managing partner of the complainant
firm, in favour of PW1, for filing the complaint. Moreover, PW1
was a partner cum accountant of that firm, and so he was
CRL.A NO. 2186 OF 2008 6 2024:KER:83620
familiar with the transaction involved in this case.
12. Secondly, the appellate court did not realise the fact
that, though the accused was disputing her address in the
statutory notice sent by the complainant, her vakalath shows the
very same address as in the notice sent by the complainant.
The evidence adduced by PW3-the postman was also there, to
show that the statutory notice was sent in the correct address of
the accused. The appellate court failed to appreciate the
evidence of PW3 in its correct perspective.
13. Thirdly, regarding prosecution under Section 138 of the
NI Act by an unregistered firm, the bar under Section 69(2) of
the Partnership Act, 1932, (hereinafter referred as 'the
Partnership Act') was not applicable, and that fact also was
conveniently ignored by the appellate court.
14. The case of the complainant is that, the accused had
borrowed Rs.15 lakh from the complainant firm, and towards
discharge of that debt with interest, she issued Ext.P2 cheque
CRL.A NO. 2186 OF 2008 7 2024:KER:83620
drawn from her bank account. Though the accused was
disputing Ext.P2 cheque, the evidence given by PW2 Bank
Manager was sufficient enough to show that, it was a cheque
drawn from the account maintained by her, in North Malabar
Gramin Bank, Kasaragod Branch. The complainant had
complied with all the statutory formalities in order to attract an
offence punishable under Section 138 of the NI Act, against the
accused. Moreover, the presumptions under Sections 118 and
139 of the NI Act will come to the aid of the complainant, to
show that Ext.P2 cheque was issued towards discharge of a
legally enforceable debt. So, in any view of the matter, the
impugned judgment will not stand in the eye of law, and
according to him, it has to be set aside, restoring the trial court
judgment.
15. Learned Amicus Curiae asserted her argument with
respect to lack of authority of PW1 to file the complaint, wrong
address shown in the statutory notice, and non-maintainability of
CRL.A NO. 2186 OF 2008 8 2024:KER:83620
the prosecution under Section 138 of the NI Act, by an
unregistered firm.
16. Let us take up the contentions one by one:-
Regarding the first contention as to the power of PW1, to
file the complaint and to give evidence, learned counsel for the
accused would contend that, Ext.P1 power of attorney allegedly
executed by the Managing Partner of the complainant firm,
without the concurrence of other partners, cannot confer any
authority on PW1, even though he was a partner of that firm.
Moreover, in Ext.P1 power of attorney, the seal of the firm was
not seen affixed, and so, it is doubtful whether the power of
attorney was executed on behalf of the firm. Learned counsel for
the complainant would contend that, Ext.P6 certified copy of the
partnership deed will show that Mrs.M.Jayasheela was the
managing partner of that firm, and PW1 Mr.K.Satheesan was a
partner of that firm. He would further argue that, partner is an
agent of the firm for the purpose of its business, and the act of
CRL.A NO. 2186 OF 2008 9 2024:KER:83620
the partner would bind the firm. He invited attention of this
Court, to the definition of an 'act of a firm' as defined in Section
2(a) of the Indian Partnership Act, which reads as follows:-
"2. Definitions.
xxx
(a) an "act of a firm" means any act or
omission by all the partners, or by any partner or
agent of the firm, which gives rise to a right
enforceable by or against the firm;"
16. Sections 18,19 and 22 of the Partnership Act are
also worth quoting, in this context, which read thus:-
"18. Partner to be agent of the firm.
Subject to the provisions of this Act, a partner is
the agent of the firm, for the purpose of the business
of the firm.
19. Implied authority of partner as agent of the
firm.
(1) Subject to the provisions of section 22, the
act of a partner which is done to carry on, in the usual
way, business of the kind carried on by the firm, binds
CRL.A NO. 2186 OF 2008 10 2024:KER:83620
the firm.
The authority of a partner to bind the firm
conferred by this section is called his "implied
authority".
(2) In the absence of any usage or custom of
trade to the contrary, the implied authority of a partner
does not empower him to-
(a) submit a dispute relating to the business of
the firm to arbitration,
(b) open a banking account on behalf of the
firm in his own name,
(c) compromise or relinquish any claim or
portion of a claim by the firm,
(d) withdraw a suit or proceeding filed on
behalf of the firm,
(e) admit any liability in a suit or proceeding
against the firm,
(f) acquire immovable property on behalf of
the firm,
(g) transfer immovable property belonging to
the firm, or
(h) enter into partnership on behalf of the firm.
CRL.A NO. 2186 OF 2008 11 2024:KER:83620
22. Mode of doing act to bind firm.--
In order to bind a firm, an act or instrument done
or executed by a partner or other person on behalf of
the firm shall be done or executed in the firm name, or
in any other manner expressing or implying an
intention to bind the firm."
17. Learned counsel for the complainant, based on the
statutory provisions aforestated, would argue that there was no
need for concurrence of all the partners for executing Ext.P1
power of attorney, by the managing partner, and the act of the
managing partner, authorising PW1 to file the complaint on the
strength of the power of attorney, will bind the firm.
18. Learned counsel for the complainant would rely on the
decision of the Hon'ble Apex court in Purushottam Umedbhai
and Co. v. M/s.Manilal and sons [1961 KHC 506] to reaffirm
his arguments in this context. In that case, the power of attorney
executed by the Manager of a firm, authorizing the power of
attorney holder, to sue for recovery of money due to the firm
CRL.A NO. 2186 OF 2008 12 2024:KER:83620
was found perfectly maintainable, as Section 18 of the
Partnership Act says that, a partner is an agent of the firm, for
the purpose of the business of the firm.
19. In paragraph 10 of Purushottam's case cited supra, we
read thus:-
"........ We have no doubt, on a perusal of the Power
of Attorney, that it authorized Dunderdale to file the plaint
on behalf of the firm Manilal & Sons and also to verify it. It
was suggested that this was a Power of Attorney by
Manubhai Maganbhai Amin for himself and not for the firm
of Manilal & Sons. As we understand the Power of
Attorney that is not so. No doubt the Power of Attorney is
not signed by all the partners of Manilal & Sons but only
by Manubhai Maganbhai Amin. In our opinion, it was not
necessary that the Power should have been signed by all
the partners of the firm because Manubhai Maganbhai
Amin was the manager of the firm. Under S. 18 of the Act
a partner is an agent of the firm for the purposes of the
business of the firm. Manubhai Maganbhai Amin was
therefore the agent of the firm as well as its manager. It is
to be noticed that under S. 19(2) of the Act instances are
stated where, in the absence of any usage or custom of
CRL.A NO. 2186 OF 2008 13 2024:KER:83620
trade to the contrary, the implied authority of a partner
does not empower him to do matters mentioned in cls. (a)
to (h). It is significant that in these clauses there is no
prohibition to a partner executing a Power of Attorney in
favour of an individual authorizing him to institute a suit on
behalf of the firm. In these circumstances, it cannot be
said that at the time the plaint was filed it was defective
because the Power of Attorney in favour of Dunderdale
was not a Power of Attorney on behalf of the firm and its
partners. As the High Court has pointed out, there is on
the record now Powers of Attorney on behalf of all the
partners of the firm."
20. In the case on hand, the managing partner of the
complainant firm executed Ext.P1 power of attorney in favour of
PW1, who was a partner cum accountant of that firm,
authorising him to file the complaint, give evidence etc..., and
PW1 deposed before court that, he was having personal
knowledge also, about the transaction involved in this case. So,
this Court cannot find any infirmity in the power of PW1, to file
the complaint or to give evidence on the strength of Ext.P1
CRL.A NO. 2186 OF 2008 14 2024:KER:83620
power of attorney. Hence, the contention taken up by learned
counsel for the accused, that PW1 had no authority to file the
complaint or to give evidence, is liable to be turned down.
21. The second contention as to the correctness of
address in the statutory notice sent by the complainant, though
the accused contended that Ext.P5 notice was not sent in her
correct address, as already stated, the vakalath filed by the
accused was in the very same address. PW3-the postman
categorically stated before court that, even prior to Ext.P5
notice, he had gone to the address shown in that notice, for
delivering postal articles and so he was familiar with that
address. Though accused produced Exts.D1 and D2
documents, it could be seen that, it was not related to the period
of sending Ext.P5 notice. The address in the ration card was of
the period, which pertains to five years prior to the sending of
Ext.P5 notice, and the address in Ext.D2 was that of two years
later to that notice. So, the accused failed to show that Ext.P5
CRL.A NO. 2186 OF 2008 15 2024:KER:83620
notice was not sent in her correct address. True that Ext.P5
notice was not directly served on the accused, and it was
returned unclaimed after intimation. Since the complainant was
able to show that he had sent registered notice to the accused
in her correct address with acknowledgement due, service of
notice can be presumed.
22. Learned counsel for the complainant would rely on the
decision of the Hon'ble Apex court in M/s.Indo Automobiles v.
M/s.Jai Durga Enterprises and others [2008 (3) KHC 815]
which says that once notice has been sent by registered post
with acknowledgement due in the correct address, it must be
presumed that, the service of notice has been made effective.
As we have already stated, Ext.P5 notice was sent in the correct
address of the accused, and accused failed to show that, during
that period, she was not residing in that address. Even if she
was out of station for a short while, without giving any intimation
to the postal authorities regarding change of address, we cannot
CRL.A NO. 2186 OF 2008 16 2024:KER:83620
accept her contention that, notice was not sent in her correct
address. So, that contention also will not hold good.
23. Regarding the third contention as to
non-maintainability of prosecution under Section 138 of the NI
Act, by the complainant firm, as it was an unregistered firm,
learned counsel for the accused would contend that, there is
clear bar under Section 69(2) of the Partnership Act. Admittedly
the complainant firm is an unregistered partnership firm. So, let
us consider the impact of the bar under Section 69(2) of the
Partnership Act, on the complaint filed by the complainant.
24. Section 69(2) of the Partnership Act deals with the
effect of non-registration, which reads thus:-
"69. Effect of non-registration.--
(1) xxx
(2) No suit to enforce a right arising from a contract shall
be instituted in any Court by or on behalf of a firm against
any third party unless the firm is registered and the
persons suing are or have been shown in the Register of
Firms as partners in the firm."
CRL.A NO. 2186 OF 2008 17 2024:KER:83620
25. Obviously, that bar is for enforcing a right arising from
a contract. Learned counsel for the complainant would rely on a
decision of this Court in Abdul Gafoor v. Abdurahiman [1999
KHC 394 : MANU/KE/1020/1999], which says that, the effect of
non-registration of the partnership firm under Section 69 of the
Partnership Act is applicable only to cases involving civil rights,
and it has no application to criminal cases. That was a case under
Section 138 of the NI Act, and this Court found that, the
prosecution under Section 138 of the NI Act by an unregistered
partnership firm was not hit by Section 69(2) of the Partnership
Act.
26. A three judge Bench of the High Court of Andhra
Pradesh in the decision Dr.A V Ramanaiah and another v. M
Shekhar and others [2007 SCC Online AP 1261] observed that
Section 138 of the NI Act is a penal provision the commission of
which entails prosecution and conviction on proving of guilt. Once
the offence under Section 138 of the NI Act is completed, the
CRL.A NO. 2186 OF 2008 18 2024:KER:83620
prosecution can be initiated for bringing the offender to penal
liability. So there is no point in stretching the bar under Section
69(2) of the Partnership Act, which is in the nature of temporary
bar to the suit, to the complaints under Section 138 of the NI Act,
which is in the nature of penal provision, with the object, to
inculcate faith in banking transactions. The term suit under
Section 69(2) of the Partnership Act cannot be stretched for
securing immunity from criminal prosecutions and the bar under
Section 69(2) of the Partnership Act, is liable to be confined only to
enforcement of contractual obligations. The bar under Section
69(2) of the Partnership Act is intended to prevent an unregistered
partnership firm to enforce a right arising out of a contract against
a third party, and it is not intended to create any such bar, for the
purposes of enforcing rights arising out of statutes, or for invoking
the protection available under any other statute. So, it has to be
held that prosecution of an accused under Section 138 of the NI
CRL.A NO. 2186 OF 2008 19 2024:KER:83620
Act by an unregistered firm is not hit by the bar created under
Sub-section 2 of Section 69 of the Partnership Act.
27. Learned counsel for the complainant would rely on the
decision of the Hon'ble Apex Court in Kamal Pushp Enterprises v
D.R Construction Co. [2000 KHC 1295] to say that the bar under
Section 69(2) of the Partnership Act, in relation to an unregistered
firm, had no application even to the proceedings before an
arbitrator. So according to him, that bar cannot have any effect in a
criminal prosecution under Section 138 of the NI Act.
28. In paragraph 9 of Kamal Pushp Enterprises's case
cited supra, Hon'ble Apex Court held thus:
" 9. The prohibition contained in S.69 is in respect
of instituting a proceeding to enforce a right arising from
a contract in any Court by an unregistered firm, and it
had no application to the proceedings before an
Arbitrator and that too when the reference to the
Arbitrator was at the instance of the appellant itself. If
the said bar engrafted in Section 69 is absolute in its
terms and is destructive of any and every right arising
CRL.A NO. 2186 OF 2008 20 2024:KER:83620
under the contract itself and not confined merely to
enforcement of a right arising from a contract by an
unregistered firm by instituting a suit or other
proceedings in Court only, it would become a
jurisdictional issue in respect of the arbitrator's power,
authority and competency itself, undermining thereby
the legal efficacy of the very award, and consequently
furnish a ground by itself to challenge the award when it
is sought to be made a rule of court."
29. Based on the above discussion, we can safely conclude
that a prosecution under Section 138 of the NI Act, even by an
unregistered firm, is not hit by the bar under Section 69(2) of the
Partnership Act. So, the argument of non-maintainability of
prosecution put forward by learned counsel for the accused, is
liable to be rejected.
30. Coming to the merits of the case, PW1 would say that
the accused had borrowed Rs.15 lakh from the complainant firm,
and towards discharge of that debt with interest, Ext.P2 cheque
was issued. But the case of the accused is that, she is a housewife
CRL.A NO. 2186 OF 2008 21 2024:KER:83620
and she had no transaction with the complainant, and she never
issued any cheque in his favour. Her husband was having a loan
transaction, with the husband of the managing partner of the
complainant firm and he had repaid Rs.14 lakh in that loan. DW2-
the husband of the managing partner of the complainant firm was
examined from the side of the accused. But he would say that, the
accused had borrowed Rs.15 lakh from the complainant firm, and
her husband had borrowed Rs.30 lakh from the private limited
company, of which DW2 was the Managing Director. DW2 admitted
that, DW1-the husband of the accused, had repaid some money
towards the loan availed by him, from his company, and the
balance is still outstanding. If the accused had not borrowed any
amount from the complainant firm, she could have easily called for
the registers if any, of the firm, especially when, registers will be
kept in the firm for the loan sanctioned. But her attempt was to
disown the cheque which was obviously issued from her account.
Testimony of PW2 will clearly show that, Ext.P2 cheque was
CRL.A NO. 2186 OF 2008 22 2024:KER:83620
issued from her bank account only. The presumptions available
under Sections 118 and 139 of the NI Act also will come to the aid
of the complainant to presume that Ext.P2 cheque was issued
towards discharge of a legally enforceable debt.
31. Adverting to the facts and circumstances as
aforementioned, this Court is of the view that acquittal of the
accused under Section 138 of NI Act by the appellate court is liable
to be set aside. Since an offence punishable under Section 138 of
the NI Act was made out against the accused, she is liable to be
convicted and sentenced thereunder.
32. The trial court convicted the accused to undergo simple
imprisonment for six months and to pay compensation of Rs.15
lakh. That judgment was delivered as early as on 30.10.2004. 20
years elapsed since then. So, the sentence is liable for
modification.
33. The Hon'ble Apex Court in the decision Kaushalya Devi
Massand vs Roopkishore Khore [2011 KHC 281], held that the
CRL.A NO. 2186 OF 2008 23 2024:KER:83620
gravity of a complaint under the NI Act cannot be equated with an
offence under the provisions of the Indian Penal Code or other
criminal offences. An offence under Section 138 of the NI Act, is
almost in the nature of a civil wrong which has been given criminal
overtones.
34. Taking into account the purpose and object of the
enactment, and imbibing the spirit of Kaushalya Devi's case cited
supra, this Court is inclined to give priority to the compensatory
aspect of the remedy, over the punitive aspect. The accused being
a lady, this Court is not inclined to send her behind the bars,
after a long gap of 23 years, from the date of the cheque. But
since the cheque amount was Rs.19,78,000/-, the compensation
amount shall not be less than that amount. So, this Court is
inclined to sentence the accused to undergo simple imprisonment
for one day, till rising of court and to pay compensation of Rs.20
lakh to the complainant firm. In default of payment of
CRL.A NO. 2186 OF 2008 24 2024:KER:83620
compensation, the accused shall undergo simple imprisonment for
six months.
35. The accused shall appear before the trial court, to
receive the sentence and to pay the compensation, on or before
31.12.2024. In default, the trial court has to take steps to execute
the sentence without further delay.
36. Registry to forward a copy of this judgment along with
the trial court records to reach the same before the trial court,
before 31.12.2024.
With these directions, the appeal stands allowed.
Sd/-
SOPHY THOMAS
JUDGE
ska
