Irregularities found in compliance of the provisions of Sections 193 and 194 of Companies Act.

The complainant, having failed in its attempt to get a conviction against the accused in C.C.No.1439/1993 under Section 138 of the Negotiable Instruments Act (hereinafter called 'the Act'), has preferred this appeal.

2. The facts leading to criminal case and acquittal:

(a) The accused/respondent in the course of the business transaction, approached the complainant for financial assistance of Rs.27,00,000/-, to purchase 6000 bags of wheat at the rate of Rs.450/- per bag, as per the conditions agreed in the letter dated 10.8.1992. Accordingly, a sum of Rs.27,00,000/- was advanced by bankers cheque dated 11.8.1992. The accused agreed to pay the financial charge of Rs.15 per bag for 15 days and 50 paise per bag for 15 days as godown rent. In pursuance of the agreement, the accused stored only 5930 bags of wheat and issued 3 bills also. The accused unable to sell the above said 5930 bags of wheat, requested the complainant to purchase the same at Rs.445/- per quintal, as per the market rate prevailed in the last week of August 1992. He also further assured, that he would pay the difference of Rs.5/- between the sale price per bag of Rs.445/- and the price quoted in the bills viz., Rs.450/- along with the financial charges and godown rent, as agreed. In this way, accounts were verified and it was found that a sum of Rs.1,20,466/- was due, for which the accused issued a cheque bearing No.569611 dated 8.9.1992, drawn on Punjab National Bank, Madras-1, to discharge the sum of Rs.1,20,466/- due and payable by the accused to the complainant.

(b) The complainant presented the cheque for collection through their bank, which was returned unpaid on 12.9.1992 with an endorsement "Insufficient funds" by the accused bank, which was informed to the accused also. After the information given by the complainant, the accused instructed the complainant to present the cheque once again and accordingly, the cheque was presented for collection on 9.10.1992, which was returned once again, for the reason of "insufficient funds", thereby showing, the accused had deliberately issued the cheque, knowing fully well, that he did not have sufficient funds in the bank and also failed to provide sufficient funds in his bank account, to honour the cheque, which is liable to be dealt with under Section 138 of the Act.

(c) The complainant issued a statutory notice on 13.10.1992, which was received and acknowledged by the accused on 23.10.1992. As per the notice, the accused ought to have paid the amount, but failed to do so, thereby attracting the penal provisions of Section 138 of the Act. In this way, a private complaint was lodged before the VII Metropolitan Magistrate, George Town, Madras.

(d) The accused, upon appearance, on questioning, denied the averments, thereby invited a trial, compelling the complainant to make out a case for punishment. The complainant, to establish the allegations in the complaint, aiming conviction, examined one Natarajan, the Manager, as P.W.1, seeking support from 16 documents. To eclipse the above materials, neither the accused has been examined nor any documents have been marked.

(e) The learned Magistrate, weighing the above materials, came to the conclusion, that the complainant failed to prove the legal liability, that the statutory notice issued was not in accordance with law and that the resolution authorising the manager to sign the complaint was not proper, since there was violation of Section 193(1)(b) of the Companies Act, 1956. Thus, concluding the complaint came to be dismissed, acquitting the accused on 13.6.1995, which is challenged in this criminal appeal.

3. Heard the learned counsel for the appellant, Mr. S.R.Rajagopal and the learned counsel for the respondent, Mr. Abudu Kumar Rajarathinam.

4. The learned counsel for the appellant submitted that the trial Court had committed a patent error in coming to the conclusion, that there was no enforceable liability, ignoring the admitted facts as well as the presum