IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO.3961 OF 2007 Leela Captial & Finance Ltd. .. Applicant Versus Smt.Yash Kohli & Ors. .. Respondents Mr.Shirish Gupte, Sr.Counsel i/by Mr.Sanjay Parab for the applicant. Mr.Mahesh Jethmalani, Sr.Counsel a/w Mr.Nevile Master i/by M/s.Crawford Bayley & Co for the respondent nos.1. Mr.Mahesh Jethmalani, Sr.Counsel a/w Mr. Madhu Patel for the respondent no.2. Ms.A.T.Jhaveri, A.P.P for the State. CORAM CORAM CORAM : A.S.OKA, J. : A.S.OKA, J. : A.S.OKA, J. DATE DATE DATE : 12th February 2009. : 12th February 2009. : 12th February 2009. P.C.: . The submissions of the learned senior counsel appearing for the applicant and the learned senior counsel appearing for the 1st and 2nd respondents were heard yesterday. This is an application for special leave under sub section 4 of section 378 of the Code of Criminal Procedure, 1973 (hereinafter referred to as the said Code). The applicant is the original complainant. The applicant filed a complaint alleging commission of (2) offence under section 138 read with section 141 of the Negotiable Instruments Act, 1881 (hereainfter referred to as the said Act). 2. In the complaint filed by the applicant, the 1st and 2nd respondents were impleaded as 2nd and 3rd accused. The 1st accused was a limited company. There were three other accused persons impleaded in the complaint. It was stated in the complaint that the 2nd accused (1st respondent) was the Vice President of the 1st accused company and the 3rd accused (2nd respondent) was the chairman of the said company. The case made out in the complaint was that the 2nd accused approached the applicant and requested for a short term loan in the form of intercorporate deposit in the sum of Rs.90 lacs for a period of 90 days. On the basis of the said request and after negotiations, the applicant company agreed to give deposit of Rs.5 crores. The 2nd accused had offered to pledge shares in favour of the applicant by way guarantee for repayment of the loan amount. On 19th February 1996, a cheque in the sum of Rs.5 crores drawn in favour of the 1st accused company was forwarded by the applicant. The 1st accused company forwarded two postdated cheques dated 19th May 1996 in the amounts of (3) Rs.5 crores and Rs.25,63,151/- favouring the applicant. The first cheque covered the principal amount and the second cheque covered agreed interest for the period of 90 days. According to the case of the applicant, the 2nd accused by letter dated 19th May 1996 requested the applicant company not to deposit the said cheque for Rs.5 crores and to roll over the said intercorporate deposit by one month. The specific case made out by the applicant is that the said request was not acceded to by the applicant and in fact the Chairman of the applicant had discussion with the 3rd accused (Chairman of the 1st accused) and the 3rd accused informed the Chairman of the applicant that he was instructing his office to make arrangement for repayment of the loan. He requested the chairman of the applicant to present the cheque for encashment. The cheques were accordingly deposited. The cheque in the sum of Rs.5 crores was dishonoured. The other cheque was honoured. Therefore, the complaint was filed on which the process was issued only as against the 1st to 3rd accused (i.e the 1st accused and 1st and 2nd respondents herein). 3. By judgment and order dated 04th September 2007 the learned Metropolitan Magistrate convicted the 1st (4) accused company. But he proceeded to acquit the 2nd and 3rd accused (1st and 2nd respondents herein). 4. The learned senior counsel appearing for the applicant has taken me through the averments made in the complaint. He has also invited my attention to the oral evidence as well as findings recorded by the learned Judge. He placed reliance on the decision of the Apex Court in the case of S.M.S.Pharmaceuticals Ltd Vs. Neeta Bhalla & Anr. (AIR 2005 Supreme Court 3512). Inviting my attention to clause (c) of paragraph 20 of the said decision he submitted that learned Judge has committed a gross error by acquitting the 2nd respondent (3rd accused) in as much as it was not disputed that at the relevant time he was the Chairman of the 1st accused company. He invited my attention to various averments in the complaint including the averments made in paragraph nos.3 and 15 thereof. He also invited my attention to averments made in paragraphs 3 and 4 of the affidavit in lieu of evidence of one Mr.Arvind Degwekar, the authorised signatory of the applicant. He submitted that the said assertions are in conformity with section 141 of the said Act and the same are in terms of the requirements laid down by the Apex Court in the case of (5) S.M.S.Pharmaceuticals Ltd (supra). He submitted that there is no challenge in the cross examination of the authorised representative of the applicant to the assertion that the 2nd accused was the Vice President of the 1st accused and was actually incharge of and was responsible to the 1st accused company for day to day business. He also invited my attention to the affidavit in lieu of evidence of the 2nd accused. The learned senior counsel appearing for the applicant submitted that a clear case was made out as against the 2nd accused even on the basis of the evidence of the 2nd accused. 5. The learned senior counsel appearing for the 2nd and 3rd accused supported the impugned judgment and order. He submitted that the evidence of the authorised representative of the applicant is of no help to the applicant as the said witness had no personal knowledge of the transaction. He, therefore, submitted that no case is made out for grant of special leave. 6. I have carefully considered the submissions. There are clear assertions in the complaint that the 3rd accused (2nd respondent) herein was the chairman of the (6) 1st accused company at the relevant time. There are clear assertions in paragraph 22 of the complaint that the 3rd accused was the chairman who was incharge of and responsible to the 1st accused for the conduct of its business. There is no serious challenge to the fact that at the relevant time the 3rd accused was the chairman of the 1st accused company. 7. It will be necessary to refer to the decision of the Apex Court in the case of S.M.S.Pharmaceuticals Ltd (supra). There were three questions decided by the Apex Court by the said decision. Question (c) which was decided by the Apex Court reads thus: "(c) even if it is held that specific averments and necessary, whether in the absence of such averments the signatory of the cheque and or the Managing Directors or Joint Managing Director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against." The said question (c) was answered as under: (7) "(c) The answer to question (c) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office By virtue of the office By virtue of the office they they they hold as Managing Director or Joint Managing hold as Managing Director or Joint Managing hold as Managing Director or Joint Managing Director, Director, Director, these persons are in charge of and these persons are in charge of and these persons are in charge of and responsible responsible responsible for the conduct of business of the for the conduct of business of the for the conduct of business of the company. company. company. Therefore, they get covered under Therefore, they get covered under Therefore, they get covered under Section Section Section 141. 141. 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141." (Emphasis added) 8. There are material averments made against the 3rd accused (Chairman) in terms of section 141 of the said Act. There is a case made out that the cheque in question was deposited by the applicant on instructions of the 3rd accused. Considering the factual situation, (8) a case is made out for grant of special leave to prefer appeal as against the 3rd accused (the 2nd respondent herein). 9. It will be necessary to refer to the averments made in the complaint in so far as the 2nd accused is concerned. In paragraph 3 it is stated that the 2nd accused is the Vice President of the company. It is asserted that the 2nd accused had approached the applicant for grant of intercorporate deposit. There are averments made in terms of section 141 of the said Act against the said accused in paragraph 22 of the complaint. As far as role played by the 2nd accused is concerned, it is necessary to refer to paragraph 13 of the complaint which reads thus: "13. I say that as stated above the said cheque was to be presented on 19th May 1996. However, the accused no.2 by letter dated 19th May 1996 sent by fax requested the company not to deposit the said cheque for Rs.5 crores only and to roll over the said intercorporate deposit by one month." (9) Paragraph 15 of the complaint is relevant: "15. Thereafter my Chairman again talked to accused no.3 who then informed my chairman that he is giving instructions to his office to make arrangements for the repayment of the loan and requested my Chairman to present the said cheque for encashment. Hereto annexed and marked Exhibit B are copies of the letters dated 18th may 1996 exchanged between the company and accused no.1." 10. Thus, the specific case made out by the applicant/complainant is that though the 2nd accused had requested the applicant to roll over the intercorporate deposit by one month, the 3rd accused i.e the chairman of the 1st accused informed the chairman of the applicant that he will be giving instructions to make repayment of the loan and that the cheque should be presented for encashment. Thus, notwithstanding request made by the 2nd accused, the 3rd accused who was the chairman of the 1st accused requested the applicant to deposit the cheque. This is one indication to show that (10) the 2nd accused may not be incharge of day today business of the 1st accused company. It will be also necessary to refer to the affidavit in lieu of examination in chief of Mr.Arvind Degwekar, authorised signatory of the applicant. In paragraph 4 of his affidavit he has stated thus: "4. Accused nos.2 and 3 are and were actively incharge of and responsible to the accused no.1 for the conduct of the day to day affairs and business of the accused no.1 and as well as its management, at all material times relevant to the present complaint." 11. In paragraph 13 he also deposed that as per instructions of the 3rd accused a cheque was presented by the applicant. In the cross examination the witness admitted that in the year 1972 he was not concerned with the matter. He stated that he was not aware personally about the intercorporate deposit and he knew about the matter only from the documents and the persons involved. Not only this but in the further part of the cross examination he categorically admitted that he knew (11) accused no.2 since March 1999 and that he has no personal knowledge of the role played by the accused no.2. The said part of the cross examination reads thus: " .... I know accused no.2 since March 1999. It It It is true that therefore I have no personal is true that therefore I have no personal is true that therefore I have no personal knowledge knowledge knowledge of role played by accused no.2. It is of role played by accused no.2. It is of role played by accused no.2. It is true true true that accused no.2 is not director of that accused no.2 is not director of that accused no.2 is not director of accused accused accused no.1. I do not know if she is a share no.1. I do not know if she is a share no.1. I do not know if she is a share holder. holder. holder. It is true that accused no.2 is not It is true that accused no.2 is not It is true that accused no.2 is not signatory signatory signatory of the cheque in question. It is true of the cheque in question. It is true of the cheque in question. It is true that that that accused no.2 was an employee of accused accused no.2 was an employee of accused accused no.2 was an employee of accused no.1. no.1. no.1. It is not true to say that accused nos.2 and 3 are falsely implicated. .... " (Emphasis added) Thus, the only the witness examined by the applicant has categorically stated that he has no personal knowledge of the role played by the accused no.2. In fact he had no personal knowledge of the transaction of the intercorporate deposit. 12. The 2nd accused examined herself by filing (12) affidavit in lieu of examination in chief. The 2nd accused in paragraph 3 of the affidavit stated thus: "3. I was neither authorized nor a signatory to any of the Banks operating Modiluft accounts. I am giving evidence from the records available to me." In paragraph 5 the 2nd accused stated thus: "5. On the instructions received from the Board of Directors of Modiluft the ICD Agreement dated 20th February 1996, was executed and I on behalf of the Company signed the same." In paragraph 19 the 2nd accused stated thus: "19. I am not a signatory in any of the Banks operating any of the Modiluft/Royal Airways/or Spice Jet accounts as I was not concerned with the day to day financial matters of accused no.1 at any time. I have not signed this cheque which is the subject matter of this criminal complaint. Hence it is submitted that I am (13) innocent." 13. In response to a question in the cross examination, the 2nd accused stated that she was in touch with the Finance Department and was not the incharge of the Finance Department. The answer was in response to the suggestion that the 2nd accused was responsible and incharge of the day to day affairs of the accused no.1 company. 14. As stated earlier, the 2nd accused was admittedly not a Director of the 1st accused. The 2nd accused is an employee of the 1st accused. The only witness who was examined by the applicant had admittedly no personal knowledge of the role played by the 2nd accused. Reliance was sought to be placed by the learned senior counsel appearing for the applicant on certain letters at Exhibits 18 to 21 on record which are signed by the 2nd accused in support of the contention that the 2nd accused was incharge of the business activities of the 1st accused. The said letters have been addressed by the 2nd accused in capacity as the Vice President of the 1st accused. Merely because an officer of a company makes correspondence on behalf of (14) the company, one cannot jump to the conclusion that the officer becomes vicariously liable by invoking section 141 of the said Act. It is obvious that the correspondence made by the company is bound to be signed by some officer. In this case two factual aspects are very crucial. One is the admission of the authorised representative of the applicant who is the only witness examined by the applicant that he had no personal knowledge regarding the role played by the 2nd accused. The applicant has not discharged the burden of establishing the role played by the 2nd accused. The second crucial factor is that though by a letter signed by the 2nd accused, a request was made by the applicant to roll over deposit for one month, it was the 3rd accused, the Chairman of the 1st accused who assured that payment will be arranged for and he instructed the chairman of the applicant to deposit the cheque notwithstanding the request made by the 2nd accused. 15. Considering all the aforesaid aspects together with clear denial on oath by the 2nd accused, the conclusion arrived at by the learned Judge that the 2nd accused cannot be held liable under section 141 of the said Act can be said to be certainly a possible (15) conclusion. There is no perversity in the said conclusion drawn by the learned Judge. 16. Hence, I pass the following order: (i) The application stands rejected in so far as the 1st respondent (2nd accused) is concerned. (ii) Special Leave to prefer appeal is granted confined to the 2nd respondent (3rd accused). (iii) Appeal is admitted. (iv) The advocate on record for the 2nd respondent waives service of the appeal. In view of this position, at this stage, no action is necessary under section 390 of the Code of Criminal Procedure, 1973 as against the 2nd accused. (A.S.Oka,J)