Quashed

Sai Prasad v. Venkanagouda

Karnataka HC10 Oct 2023CRL.P/200739/2023

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed Criminal Petition No. 200739 of 2023 under Section 482 CrPC. It quashed proceedings against the petitioner for cheque dishonour under Section 138 NI Act, holding there was no material to establish his status as a director/partner or signatory, making prosecution an abuse of process involving disputed questions of fact.

What did the court decide?

The entire proceedings initiated against the petitioner in C.C.No.1749/2022 (P.C.No.16/2022) are quashed.

Sai Prasad Vs Venkanagouda — Cheque Dishonour | Karnataka HC (2023)

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NC: 2023:KHC-K:8121 CRL.P No. 200739 of 2023

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IN THE HIGH COURT OF KARNATAKA

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KALABURAGI BENCH

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DATED THIS THE 10^TH DAY OF OCTOBER, 2023

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BEFORE

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THE HON'BLE MR. JUSTICE VENKATESH NAIK T

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CRIMINAL PETITION NO. 200739 OF 2023 (482)

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BETWEEN:

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SAI PRASAD

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S/O. DEVIDAS GAONKAR AGE: 22 YEARS, OCC: BUSINESS, R/O. NAGARJUNA APARTMENTS, 100 FEET RING ROAD, OPP. ICICI BANK, J.P. NAGAR, 6^TH PHASE, BANGALORE-560078.

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…PETITIONER

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Digitally signed by SHILPA R TENIHALLI Location: HIGH COURT OF KARNATAKA

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(BY SRI. SATHISH KUMAR D GADKAR, SMT. SUMAN HEGDE, ADVOCATES)

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AND:

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VENKANAGOUDA S/O. HANAMANTHGOUDA GOUDANNAVAR AGE: 45 YEARS OCC: AGRICULTURE R/O. MANAGULI, TQ. BASAVANABAGEWADI, DIST. VIJAYAPURA-586101.

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…RESPONDENT

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(BY SRI. SHIVANAND V. PATTANASHETTI, ADVOCATE)

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THIS CRL.P IS FILED U/S.482 OF CR.P.C. PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN C.C.NO. 1749/2022 (P.C.NO. 16/2022) PENDING ON THE FILE OF ADDL. SENIOR CIVIL JUDGE AND JMFC COURT AT BASAVANABAGEWADI, DISTRICT VIJAYAPURA, FOR THE OFFENCE PUNISHABLE U/SEC. 138 OF N.I. ACT AGAINST THE PETITIONER.

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THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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Heard the learned counsel for the petitioner and the learned counsel for the respondent.

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The petitioner has filed this petition under Section 482 of Cr.P.C. praying to quash the entire proceedings in C.C.No.1749/2022 (P.C.No.16/2022), pending on the file of learned Additional Senior Civil Judge and JMFC, Basavanabagewadi, Vijayapur district, registered for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short 'N. I. Act').

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For the sake of convenience, the parties are referred to as per their ranking before the Trial Court. The

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petitioner is accused No.5 and respondent is the complainant.

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The brief facts of the complainant's case are that, the complainant is an agriculturist and having a good income in his occupation. Accused No.1 is a Company by name, Sunbio Agritech and accused Nos.2 to 4 are its Partners/Directors. Accused No.1 - Company has introduced through one Sri Prakash, who is familiar persons to the complainant, introduced accused No.1 and its Directors/Partners, thus, they are very close to the complainant. It is alleged that, the accused persons have introduced business of accused No.1 - Company and its mission on assisting and supporting the marginal and small farmers in aiding rural forming activities including raw materials, farming animal husbandry, logistics, buyback, maintenance, finance and sales as per the need of the Indian farmers by way of their design, skill, technical knowledge, supermarket etc., and to provide benefits to farmer community.

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Believing the assurance and version placed before the complainant and verifying by all side about accused No.1 - Company, the complainant and his many farmer friends have agreed to join with the business of accused No.1 - Company, accordingly, accused No.1 - Company issued proposal forms to the complainant and to other farmers, they paid a sum of Rs.6,00,000/- in the year 2018-2019 in different installments by way of cash to the Directors of accused No.1 - Company. Accordingly, accused No.2 has issued receipt for consideration amount of Rs.6,00,000/- to the complainant. Later, accused No.1 - Company failed to perform its obligation assured to complainant and other farmers, thus, during the month of May, 2022, accused No.2 issued two cheques for refund of the amount to the complainant, but, same were dishonoured for the reason 'Account Inactive', hence, the complainant got issued legal notice calling upon accused No.2 to pay the amount due under the cheques. In spite of issuance of legal notice, accused No.2 has not paid any

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amount, hence, the complainant filed a private complaint before the Trial Court in P.C.No.16/2022.

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After institution of the complaint, the Trial Court took cognizance of the offence against the accused persons and issued process against them including the present petitioner. Taking exception of the same, the petitioner/accused No.5 has filed this petition under Section 482 of Cr.P.C.

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The learned counsel for the petitioner contended that, petitioner is innocent, he has not committed any offence; the petitioner is a law abiding citizen, having no other criminal antecedents; petitioner is neither a Director nor a Partner of accused No.1 - Company and he is not signatory to cheques in question, same were issued by accused No.2 in his individual capacity, hence, the provisions of Section 141 of N. I. Act not applicable to the petitioner; the presence of petitioner is not at all required in this case, thus, the initiation of criminal proceedings against the petitioner is purely abuse

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of process of law. Hence, prayed to quash the proceedings.

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The learned counsel for the respondent submits that, petitioner is also partner of accused No.1 - Company, thus, he is also vicariously liable, as accused No.2 has issued cheques for and on behalf of accused No.1 - Company. The counsel further submits that, the petitioner is disputing question of fact, which cannot be gone into under Section 482 of Cr.P.C. Thus, prayed to dismiss the petition.

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On perusal of the material available on record,

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it appears that, as per the contents of complaint, accused Nos.2 to 4 representing accused No.1 - Company, have entered a transaction between the complainant and others and received a sum of Rs.6,00,000/- for supporting the marginal and small farmers in aiding rural forming activities including raw materials, farming animal husbandry, logistics, buyback, maintenance, finance and sales as per the need of the Indian farmers by way of their

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design, skill technical knowledge, supermarket etc., and to provide benefits to farmer community and later failed to perform the obligation and accordingly, issued cheques in favour of the complainant and same were dishonoured.

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On perusal of cheques at Exs.P2 and P4 dated 25.05.2022, for a sum of Rs.3,00,000/- each, issued by accused No.2 - Devidas in favour of complainant. Exs.P2 and P4 do not bears signature of petitioner. No document is placed on record to substantiate that, petitioner is one of the Director/Partner of accused No.1 - Company/Partnership Firm and cheques in question have been issued in the name of accused No.1 Company/Partnership Firm. Thus, there is no material against the petitioner/accused No.5 to proceed against him for the offence under Section 138 of N. I. Act.

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The learned counsel for the

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respondent/complainant contended that, in the complaint, the complainant has clearly described the role of accused

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No.5 and his liability to pay the amount, hence, he relied upon Section 141(2) of the N. I. Act.

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Section 141(2) of the N. I. Act, reads as under:

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"Section 141(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,—

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(a) “company” means any body corporate and includes a firm or other association of individuals; and

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(b) “director”, in relation to a firm, means a partner in the firm.]

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Whereas, in order to attract Section 141(2) of N. I. Act against accused No.5, complainant has not placed

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any records to connect accused No.5 in the case.

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On perusal of the material available on record and the above proposition of law, whenever question of fact is disputed, such case cannot be quashed under Section 482 of Cr.P.C. The Hon'ble Apex Court, in the case of Rajeshbhai Muljibhai Patel And Others vs. State of Gujarat and Another Etc. in Crl.A.Nos.251 252/2020 dated 10.02.2020, held that, "when disputed questions of facts are involved which need to be adjudicated after the parties adduce evidence, the complaint under Section 138 of N. I. Act ought not to have been quashed by the High Court by taking recourse to Section 482 of Cr.P.C".

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In a case pertaining to an offence under Sections 138 and 141 of the N. I. Act, the law requires that, the complaint must contain a specific averment that

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the director was in charge of, and responsible for, the conduct of the Company’s business at the time when the offence was committed. Whereas in the instant case, the complainant has not disclosed that, the petitioner being the director of accused No.1 - Company was in-charge of, and responsible for, the conduct of the Company's business at the time when the offence was committed. On the contrary, the complainant disclosed that, accused No.2 was in-charge of and responsible for the conduct of accused No.1 - Company, issued receipt infavour of complainant, for having receipt of Rs.6,00,000/- from complainant, and once he failed to perform his obligation, he issued cheques in question.

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In deciding a quashing of proceedings under Section 482 of Cr.P.C., the Court must consider whether the averment made in the complaint is sufficient or if some unimpeachable evidence has been brought on record which leads to the conclusion that the director could never have been in charge of and responsible for the conduct of

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the business of the company at the relevant time. The similar ratio is laid down by the Hon'ble Apex Court, in the case of AD Radha Krishna Vs. Dasari Deepthi & Ors. reported in 2019 SCC Online 357.

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The Hon'ble Apex Court, in the case of Gunmala Sales (P) Ltd. v. Anu Mehta reported in (2015) 1 SCC 103, held that, "if an accused wants the process under Sections 138 and 141 of the N. I. Act to be quashed by filing a petition under Section 482 Cr.P.C., he must make out a case that, making him stand in the trial would be an abuse of process of Court".

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Admittedly, in the instant case, the petitioner,

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who has not drawn or issued the cheque cannot be prosecuted under Section 138 of N. I. Act, even in case of joint liability. In case of individual persons, who has not drawn the cheque on account maintained by him, cannot be prosecuted for the offence under Section 138 of N. I. Act.

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A person might have been jointly liable to pay the debt, but, if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the Bank account is jointly maintained and that he was a signatory to the cheque. Whereas, in the instant case, the complainant has not placed any materials to substantiate that, Bank account of accused No.1, 2 and 5 jointly maintained.

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Further, Section 141 of the N. I. Act is relating to the offence by companies and it cannot be made

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applicable to the individuals. The learned counsel appearing for the complainant has submitted that ‘company’ means any body corporate and includes, a firm or other Association of individuals and therefore, in case of a joint liability of two or more persons, it will fall within ‘other association of individuals’ and therefore, with the aid of Section 141 of N. I. Act, the accused, who is jointly liable to pay debt, can be prosecuted. The aforesaid contention cannot be accepted. Two private individuals

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cannot be said to be ‘other Association of individuals’. Therefore, there is no question of invoking Section 141 of the N. I. Act against the accused, as the liability is the individual liability (may be a joint liabilities), but, cannot be said to be the offence committed by a company or by it corporate or firm or other association of individuals. The accused herein is neither a director nor a partner in any firm, who has issued the cheques. Therefore, even the accused cannot be convicted with the aid of Section 141 of N. I. Act. The similar ratio is laid by the Hon'ble Apex Court in the case of Alka Khandu Avhad vs. Amar Syamprasad Mishra & Anr. in Crl.A.No.258/2021 dated 08.03.2021.

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However, on perusal of the above propositions of law and the material available on record, no material has been placed by the complainant to show that, the petitioner/accused No.5 is the director or partner of accused No.1 - Company/partnership firm. Therefore, in the absence of any such material particulars, prosecuting

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accused No.5 for the offence punishable under Section 138 of the N. I. Act is abuse of process of law. Hence, the following:

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ORDER

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The criminal petition is allowed.

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The entire proceedings initiated against petitioner/accused No.5 in C.C.No.1749/2022

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(P.C.No.16/2022), pending on the file of learned Additional

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Senior Civil Judge and JMFC, Basavanabagewadi, Vijayapur district, is hereby quashed.

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Any observations made in this petition are only for the purpose of deciding this petition. The Trial Court shall not be influenced by the observations made in this petition.

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Sd/JUDGE

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SRT List No.: 1 Sl No.: 33

Sai Prasad v. Venkanagouda

Case brief

What is this about?

What did the court decide?

Sai Prasad v. Venkanagouda

Case brief

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