Back
2025 Supreme(Bom) 446
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.M. MODAK, J.
Morries Energies Limited - Appellant
Versus
Sumit Agarwal - Respondents
Criminal Application (ALP) No. 14 of 2022
Decided on : 26-03-2025
Advocate Appeared:
Mr. Ashok Mundargi, Senior Counsel i/by Mr. Kunal Ambulkar
Advocate for the Applicant in ALP 15 of 2022.
Mr. Nilesh Ojha a/w Mr. Abhishek Mishra, Mr. Hania Shaikh, Mr. Chaitanya Raote i/by
Dipashri Raorane Advocate for Respondent No. 1 in ALP 15 of 2022
Mr. H. J. Dedhia and Ms. R. S. Tendulkar
APP for the Respondent-State in ALP
15 of 2022
The burden of proof lies with the complainant to establish liability under the Negotiable Instruments Act, and mere signing of cheques or correspondence is insufficient to prove complicity.
Headnote:
(A) Negotiable Instruments Act - Sections 138 and 142 - Complaint for dishonor of cheques - Conviction of accused set aside by Appellate Court, leading to an application for leave to appeal - Trial Court accepted claim as legally recoverable debt, but Appellate Court did not - The acquittal of accused No. 2 was based on lack of liability under Section 142, while accused No. 4 was acquitted due to non-proof of liability of the company - The court emphasizes the need for substantial evidence to establish complicity and liability of directors under the Act. (Paras 1-44)
(B) Appeal - Standard of review in appeals against acquittal - Appellate courts should exercise caution and not interfere with acquittals unless there are compelling grounds to do so. (Paras 13-14)
Facts of the case:
The applicant filed a complaint against four individuals for dishonoring 16 cheques issued by a construction company towards a debt for services rendered. The trial court convicted three individuals, but the appellate court acquitted them, leading to the current applications for leave to appeal.
Findings of Court:
The court found that the acquittal was based on different grounds for each accused, with insufficient evidence to prove liability for accused No. 4, while accused No. 2's acquittal was justified as he did not fall under the relevant provisions of the law.
Issues: The main issues were whether the acquittals were justified based on the evidence and the interpretation of liability under the Negotiable Instruments Act.
Ratio Decidendi: The court held that the burden of proof lies with the complainant to establish the liability of the accused, and mere signing of cheques or correspondence is not sufficient to establish complicity.
Result: Leave to appeal against accused No. 4 is refused; leave to appeal against accused No. 2 is granted.
Certainly. Based on the provided legal document, here are the key points summarized:
-
The core legal issue revolves around the burden of proof in cases under the Negotiable Instruments Act, specifically Section 138. The complainant must establish the liability of the accused, and mere signing of cheques or correspondence alone is insufficient to prove complicity or liability (!) (!) .
-
The case involves a complaint filed by Morries Energies Limited against multiple accused persons for dishonoring 16 cheques issued towards a debt. The trial court convicted some accused, but the appellate court acquitted them, leading to appeals for leave to challenge those acquittals (!) (!) .
-
The appellate court emphasized that liability under the Act requires substantial evidence, particularly regarding the participation and responsibility of directors or officers. The concept of "in charge of and responsible to the company" is critical in establishing vicarious liability, and the complaint must contain specific averments to this effect (!) (!) (!) .
-
The stage of proceedings at the leave to appeal phase involves a limited inquiry focused on whether there are sufficient grounds to interfere with the acquittal. Detailed assessment of evidence is deferred until the final hearing. The court must exercise caution and not interfere unless compelling reasons exist (!) (!) .
-
For accused no. 4, the court found that correspondence and assurances to replace cheques alone do not prove his liability. The evidence did not substantiate that he was in charge of or responsible for the company's conduct regarding the dishonored cheques (!) (!) .
-
For accused no. 2, the court noted that signing cheques and related documents, along with supporting evidence like recovery certificates and notices, suggest involvement. However, the appellate court's findings on the non-proof of liability require further scrutiny, and the standard of evidence at this stage is limited (!) (!) (!) .
-
The court highlighted that the absence of certain documentation, such as expenses or accounts, does not automatically invalidate the claim of a debt, especially when other evidence like enhanced interest rates and recovery certificates support the liability (!) (!) .
-
The court discussed the importance of proper pleadings, especially regarding the role and responsibility of directors or officers, and emphasized that the complaint must specifically allege their in-charge and responsible status to establish liability under the Act (!) (!) (!) .
-
The final order granted leave to appeal against accused no. 2 but refused leave against accused no. 4. The applications for leave to appeal were accordingly disposed of, with the appeals to be numbered and further proceedings to be conducted before the regular bench (!) (!) (!) (!) .
-
Overall, the court underscored the necessity of a thorough examination of evidence at the final stage and clarified that the principles guiding the interpretation of liability under the Negotiable Instruments Act require specific averments and proof of responsibility, especially for directors and officers (!) (!) (!) .
Please let me know if you need further analysis or specific legal advice based on these key points.
JUDGMENT :
1. There was a complaint bearing No. 3661/SS/2014 filed by M/s. Morries Energy Limited-present applicant (hereinafter referred to as ‘Morries’) before the Court of Metropolitan Magistrate, Mumbai. It was filed for commission of an offence under Section 138 read with Section 142 of the Negotiable Instruments Act . It was filed against four accused persons. All were tried. The learned Magistrate disposed of the case vide judgment dated 29/05/2019. The result is as follows:-
a) Accused No. 1-M/s. Chamber Constructions Private Limited (hereinafter referred to as ‘Chamber’)
b) Accused No. 2-Anubhav /director
c) Accused No. 4-Sumit/VP Finance & Taxation All the three were convicted.
d) Accused No. 3-Gokul Aggarwal/director was acquitted.
2. Amongst them two convicted individuals have preferred appeals. Both were allowed and conviction was set aside by the Court of Judge City Civil on 18/06/2021. (Criminal Appeal 529 of 2019 – accused No. 4-Sumit and Criminal Appeal No. 530 of 2019 by Appellant / accused No. 2-Anubhav). On this background, Morries has sought leave to prefer an appeal (ALP 14 of 2022 against accused no. 4 Sumit and ALP No. 15 of 2022 against accused No. 2 – Anubhav).
Facts
3. The facts averred in the complaint and in the documents are little bit different from normal prosecution under Section 138 of the Negotiable Instrument Act. The liability of Chamber to Morries is preceded by different transactions in between different parties. They will be referred in due course. Trial Court accepted the claim of Morries “as legally recoverable debt”. However, the Appellate Court refused to accept said claim. This is one of the ground of challenge on behalf of Morries. At this stage, it is not expected to decide about the challenge to those findings. The evidence need to be considered only for the purpose of granting leave or not to grant leave.
Background
4. Mafatlal Engineering Industries Limited has availed of loan from various Banks. They were in arrears. Banks have initiated proceedings before Debt Recovery Tribunal Mumbai. Furthermore, some of the banks have assigned financial assets in favour of certain Assets Reconstruction Companies constituted as per the provision of SARFAESI Act. There were recovery certificates issued in favour of Banks/Assets Reconstruction Company. There was further assignment of financial assets acquired by Assets Reconstruction Company in favour of Chamber/accused company. The details are given in the complaint/affidavit of evidence. That is how Chamber came into picture.
5. Morries has offered various services to Chamber in the said assignment process. Chamber is involved in construction business. Whereas Morries is involved in the business of electricity generation. Earlier name of the Complainant was M/s. Gujrat Gems Pvt. Ltd.. The Complainant is part of group Companies. Whereas the accused No. 1 is also part of group companies owned and controlled by Aggarwal family.
6. The 16 cheques which is the foundation of criminal prosecution were issued on behalf of Chamber in favour of Morries towards the discharge of liability arisen out of the services rendered by them. Morries offered their services to Chamber while acquiring and sale of real estate. Morries and its allied companies used to issue debit note to Chamber for the professional services rendered by them. Morries has also assisted Chamber in acquisition of financial assets/debts from Assets Reconstruction Companies (ARC). Debt recovery tribunal issued recovery certificates. While adjudging the amount, the interest is granted. But it was inadequate. Chamber has moved for grant of proper interest. Morries has also offered their services in that behalf. Both have entered into Memorandum of Understanding on 20.07.2013. As per this MOU, Chamber has agreed to pay 10% of amount of enhanced interest to Morries.
7. Prior to issuance of present 16 cheques, Chamber has also issued earlier slot of cheques. Towards discharge of part of the liability thre
