Allowed

V.Shanmugam v. Palanisamy

Madras HC8 Nov 2021CRL RC/1010/2015

Case brief

AI extract

What is this about?

The High Court allowed the criminal revision and acquitted the petitioner. The court held that cheques drawn from a joint account requiring both signatures, signed by only one, are invalid instruments and cannot attract conviction under Section 138, especially where the partnership firm was acquitted.

What did the court decide?

Conviction and sentence under Section 138 of the Negotiable Instruments Act set aside; petitioner acquitted; bail bond cancelled and fine refunded.

V.Shanmugam Vs Palanisamy — Cheque Dishonour | Madras HC (2021)

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BAIL SLIP

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The Petitioner / Accused namely V.Shanmugam, S/o.Velusamy, is enlarged on bail and in by the order dated 22.09.2015 made in MP.No.1 of 2015 in CRL.R.C.NO.1010 OF 2015 on the file of this High Court, Madras.

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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ORDERS RESERVED ON ORDERS PRONOUNCED ON 25.08.2021 08.11.2021

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CORAM

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THE HONOURABLE MR.JUSTICE RMT.TEEKAA RAMAN

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CRL.R.C.NO.1010 OF 2015

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V.Shanmugam .. Petitioner/2nd Accused

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Vs.

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Palanisamy .. Respondent/Complainant

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PRAYER : Petition filed under Sections 397 and 401 of the Criminal Procedure Code, praying to call for the records and set aside the judgment of conviction dated 16.06.2015 made in C.A.No.18 of 2014 on the file of the learned I Additional District and Sessions Judge, Tirupur, confirming the judgment dated 22.01.2014 made in C.C.No.161 of 2010 on the file of the learned Judicial Magistrate, Palladam, Tirupur District and acquit him.

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For Petitioner : Mr.P.M.Duraiswamy For Respondent : Mr.M.Selvaraju for Mr.K.Velayutham

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ORDER

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[The matter is heard through "Video Conference".]

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The convicted second accused in C.C.No.161 of 2010 is the petitioner herein.

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2. This criminal revision case has been preferred by the petitioner/A.2 against the judgment passed by the learned I

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Additional District and Sessions Judge, Tirupur, in C.A.No.18 of 2014, dated 16.06.2015, confirming the judgment passed by the learned Judicial Magistrate, Palladam, Tirupur District, in C.C.No.161 of 2010, dated 22.01.2014.

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3. The respondent herein has filed a private complaint against the petitioner/A.2, his firm M/s.Fine Tech Poly pipes Products (A.1) and his wife S.Sudha (A.3) for the alleged offence under Section 138 r/w. 142 of the Negotiable Instruments Act and the same was taken on file by the learned Judicial Magistrate, Palladam, in C.C.No.161 of 2010. The learned Judicial Magistrate, by order dated 22.01.2014, has acquitted A.1 and A.3 and convicted the petitioner/A.2 alone for the alleged offence under Section 138 of the Negotiable Instruments Act and sentenced him to undergo six months simple imprisonment and to pay a fine of Rs.1,000/-, in default, to undergo one month simple imprisonment. Aggrieved by the said judgment, the petitioner has preferred an appeal in C.A.No.18 of 2014 before the learned I Additional District and Sessions Judge, Tirupur. The learned I Additional District and Sessions Judge, Tirupur, by order dated 16.06.2015, has dismissed the said appeal and confirmed the judgment passed by the learned Judicial Magistrate. As against the said judgment, the second accused has preferred this criminal revision case before this Court.

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4. Learned counsel for the revision petitioner/A.2 would contend that the cheques were allegedly drawn by the petitioner on behalf of the first accused partnership firm and the learned Judicial Magistrate having acquitted the first accused firm cannot convict the partner viz., the petitioner for the alleged offence under Section 138 of the Negotiable Instruments Act.

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5. As per Ex.P.3, the Bank memorandum for bouncing of the cheque, it is very clear that it is a joint account to be operated by both the partners of the first accused firm. The dishonoured cheque was returned for the reason that 'joint sign required' and hence, it is an invalid cheque in the eyes of law. So, Section 138 of the Negotiable Instruments Act does not attract for bouncing of the same.

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6. Learned counsel for the respondent/private complainant would contend that Exs.P.1 and P.2 are the two cheques for a sum of Rs.3,50,000/- and Exs.P.3 and P.4 are the return memos issued by the Bank. After issuing the single legal notice for the dishonoured cheque under Ex.P.6, A.3 alone has issued reply in Ex.P.7 and returned covers of A.1 and A.2 were marked as Exs.A.9 and 10 and the sufficiency of funds has also been proved and hence, both the Courts below have rightly convicted the second accused/petitioner herein under Section 138 of the Negotiable Instruments Act.

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7. As stated supra, it is a specific contention of the revision petitioner that the private complainant was working as a driver with the revision petitioner herein/second accused. While the first accused is the partnership firm, A.2 and A.3 are the partners. A.2 is the husband of A.3. After trial, both the Courts below have held that A.1 and A.3 are not liable and accordingly, acquitted A.1 and A.3. When the partnership firm itself is admitted, whether one of the partner can be held liable in a private capacity is the moot question arises in this case, besides, the nature of the account maintained by the first accused partnership firm.

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8. Perused the documents Exs.P.1 and P.2 cheques. It is in

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the account of the first accused in Account No.1288115 No.1991, drawn on Karur Vysya Bank Limited, Palladam. Serial Number of the cheques are 280804 and 280806 and date of the both cheques is the same date i.e., 03.06.2010 for the same amount Rs.3,50,000/- signed by the second accused alone. Perused the documents Exs.P.3 and P.4 Bank Memos. There are two entries in Ex.P.3. The reasons for return of the cheques were mentioned at Serial Nos.1 and 84. In Serial No.1, it is mentioned as "Funds insufficient" and in Serial No.84, it is mentioned as Other reasons. "Joint sign required". In the second memo, it is mentioned only as funds insufficient. However, both are issued under same account number assumes significance. P.W.2, Manager of the Bank was examined. His chief examination is to the effect that both the cheques were issued for 'Fine Tech Poly Pipes Products', partnership firm consisting of two partners. P.W.2, in his cross-examination, has stated as follows:-

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" fzpdpapy fhnrhiyia ifahSk mjpfhuk
ahUf;Fs;sJ vd;Wk;. mjpy;cs;s ifbaGj;J ahUilaJ
vd;gij ghh;itapl;lgpwFjhd;rhpahf brhy;y Koa[k;/ ehd fhnrhiy rk;ge;jkhf ghprPypf;f Mtz';fs;,e;j tHf;fpy
jhf;fy;bra;atpy;iy/ ePjpkd;wj;jpy;,J Fwpj;J nfl;ftpy;iy/ vdnt. jhf;fy bra;atpy;iy/ fhnriyapy bjhif
epug;gg;gl;l ,lj;jpy;. bjhif vGjg;gl;l njjp. bjhif ntW ikapdhYk;. ifbaGj;ij ntW ikapdhy;vGjg;gl;Ls;sJ vd;why;rhpjhd;/ fhnrhiyapy;,uz;L g';Fjhuhh;fs ifbaGj;J ntz;oa epiyapy;xU g';Fjhuh;kl;Lk
ifbaGj;J bra;J mDg;gg;gLnkahdhy;. me;j fhnrhiyia
tiue;jth;mDg;gg;gl;Ls;sJ vd;Wk;. ifbahg;gk;FiwghL cs;s epiyapy;eh';fs;fhnrhiyia jpUg;gp mDg;g[nthk;/ " (emphasis supplied)

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9. Thus, this Court finds that from the evidence of Bank Manager P.W.2 coupled with the returned memos-Exs.P.3 and P.4,

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Exs.P.1 and P.2, the cheques were bounced for both the reasons viz., the joined account holders' signature is required and also for insufficiency of funds. On perusal of the Lower Court records, it is seen that it is only one of the joint account holder has signed the cheques. As per the endorsement, the signature of the another account holder is also required and hence, the cheques were returned. When that being the case, when the cheques are required to be signed by both the account holders and returned for want of signature of the other joint account holder, the offence under Section 139 of the Negotiable Instruments Act cannot be invoked.

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10. In CDJ 2013 SC 535 [Mrs.Aparna A.Shah Vs. M/s.Sheth Developers Pvt. Ltd., and Another], wherein, the Hon'ble Supreme Court has held that the joint bank account which is to be operated by anyone and has held that if the cheque was drawn from the joint bank account, that could be operated by anyone of the person, who signed the cheques alone is liable and not the other, who was not signed the document cannot be fastened with the liability. In the said judgment, at paragraph Nos.20 and 22, the Hon'ble Supreme Court has held as follows:-

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"20. ...... The cheque was drawn to a joint bank account which is to be operated by anyone, i.e., the petitioner or by her husband, but the controversial document is the cheque, the liability regarding disonouring of which can be fastened on the drawer of it.

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22. In the light of the above discussion, we hold that under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination-in-chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque."

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11. So also, in CDJ 2013 DHC 2251, [Urmila Kumari Vs. Rukmani Devi & Others], at paragraph No.11, the High Court of Delhi has held as follows:-

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"11. From a bare reading of Section 138 of the Negotiable Instruments Act, 1881, it transpires that the liability of the drawer of the cheque, who has issued the cheque from the joint account maintained by him and his wife, does not specifically bear any implication that the latter is equally responsible even when the cheque was drawn by her husband and therefore, no

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vicarious liability can be fastened on the holder of a joint account by a mere fact that the dishonoured cheque was issued from the same account by the drawer of such a cheque. The analogy of Section 141 of the Negotiable Instruments Act, 1881 which deals with the offences of the company, cannot be stretched to make the joint holder of a bank account vicariously liable to face the prosecution under Section 138 of the Negotiable Instruments Act, 1881."

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12. In both the cases, it was joint bank account which is to be operated by anyone and hence, the cheque issued by anyone of the joint account holder is valid in law. The Bank is bound to follow the procedure and honour the cheques, if there is a funds in the account. Here, in the instant case, Exs.P.1 and P.2 are the joint account which could be operated only by both the parties viz., both the joint account holders viz., A.2 and A.3 have to sign for its validity. However, the cheques were signed only by A.2 and not A.3 and hence, I find that the endorsement found in Exs.P.1 and P.2 itself is invalid and the same cannot be honoured by the bank, even sufficient funds are available in the account and therefore, I find that the petition under Section 138 of the Negotiable Instruments Act is not maintainable.

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13. Learned Appellate Judge has held that in view of Section 20 of the partnership Act, the signature of one of the partner is sufficient to hold the criminal liability. However, failed to note that this particular account is a joint bank account can be operated only by jointly and not individually viz., either or Account [i.e. either one can operate]. When that being the case, when one of the partner alone has signed the document, the same is not an instrument which can be termed as an instrument within the ambit of the provisions of the Negotiable Instruments Act.

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14. Yet another point is that both the Courts below have acquitted the first accused partnership firm. When both the Courts below have acquitted the partnership firm, one of the partner alone cannot be convicted. A.3 has already been acquitted and no appeal has been filed against the said acquittal. Since A.1-partnership firm was acquitted and A.3 one of the partner is also acquitted, however, another partner A.2 alone cannot be convicted.

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15. It remains to be stated that the suggestive case of the defence is that Exs.P.1 and P.2-cheques were issued as a security to one Mr.Suresh and the said Suresh has manipulated through the private complainant, who is a driver of A.2 and he does not have sufficient funds to lend a sum of Rs.7,00,000/-. Though it is the specific evidence of P.W.1 that he had borrowed

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the amount from his brother-in-law viz., Mr.Ramesh, for the reasons best known, the said Ramesh was not examined as one of the witness to prove the lending power of the said Ramesh. Since the non-examination of the said Ramesh on the side of the private complainant through whom P.W.1 has stated to have mobilized the amount, I find that the said Ramesh viz., the brother-in-law of the private complainant is a material witness to show the lending power. Due to the non-examination of the material witness also caused serious doubt as to the case of the private complainant/respondent.

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16. The private complainant had issued single legal notice for the two cheques. The legal notice issued to the first and second accused were returned unserved and they were marked as Exs.P.9 and 10. Ex.P.6-legal notice was served on A.3 and acknowledgment was marked as Ex.P.8. The reply given by A.3 was marked as Ex.P.7. Since both the cheques were issued from the same account which stands in the name of the partnership firm and as per the endorsement contained in Exs.P.3 and P.4, not only insufficiency of funds but also want of signature of the another account holder, I find that the nature of the account maintained by the first accused is a joint account, which mandates both the account holder viz., A.2 and A.3 and when A.3 has not signed the cheques, he is not liable. Accordingly, the trial Court has acquitted A.3. The cheque has been returned for want of signature of the joint account holder and hence, I find that the documents Exs.P.1 and P.2 itself are not an instrument to be termed as Negotiable Instruments Act, since it is in complete documents. It has no enforceability and hence, the complaint under Section 138 of the Negotiable Instruments Act cannot be pressed into services.

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17. In the decision reported in CDJ 2014 SC 567 [Anil Gupta Vs. Star India Pvt. Ltd. & Another], wherein, the Hon'ble Supreme Court has held as follows:-

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"It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant ........

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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

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accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself".

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18. Hence, for maintaining the prosecution under Section 141 of the Negotiable Instruments Act, arraigning of the partnership firm as an accused is imperative in this case. The trial Court has already acquitted A.1 and A.3 and one of the partner viz., A.2 cannot be convicted.

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19. Accordingly, this Criminal Revision Case is allowed and the conviction and sentence imposed on the petitioner/A.2 by the learned Judicial Magistrate, Palladam, Tirupur District, in C.C.No.161 of 2010, dated 22.01.2014 and confirmed by the learned I Additional District and Sessions Judge, Tirupur, in C.A.No.18 of 2014, dated 16.06.2015, are set aside and the revision petitioner/A.2 is acquitted from the charge under Section 138 of the Negotiable Instruments Act. The bail bond executed by the revision petitioner/A.2 shall stand cancelled and the fine amount paid, if any, is ordered to be refunded to him.

Sd/-

Assistant Registrar

//True Copy//

Jrl Sub Assistant Registrar

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