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2024 Supreme(Online)(Mad) 57730
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Sathi Kumar Sukumara Kurup, J
B. Kandasamy – Appellant
Versus
State represented by The Inspector of Police, Economic Offences Wing-II Unit, Cuddalore – Respondent
Crl. Appeal No.514 of 2016
For the Appellants/Petitioners: K. Balu
For the Respondents: G.V. Kasthuri
Section 5 of the T.N.P.I.D Act requires proof of active participation in the management of a financial establishment for conviction. Mere status as a spouse or partner, without evidence of day-to-day administrative involvement, is insufficient to hold an accused liable for the firm's default.
Headnote:(A) Tamil Nadu Protection of Interest of Depositors (in Financial Establishments) Act, 1997 - Section 5 - Financial establishment default - Vicarious liability of partners - Need for proof of active involvement in day-to-day administration - Mere relationship (wife/spouse) to a partner without evidence of management participation is insufficient to sustain conviction under the Act.
(B) Appeal - Appreciation of evidence - Burden of proof to show settlement of dues - Where the accused alleges settlement of deposit dues but failed to produce documentary evidence or cross-examine prosecution witnesses effectively to establish the same, the assertion of settlement cannot be accepted in appeal.
Facts of the case:
The appellants (a partnership firm and its partners) were convicted for failing to return deposits with interest as promised. The firm collected deposits from various individuals, defaulted on repayments, and subsequently closed its premises. A complaint was lodged after ten years, leading to a criminal case being registered under the T.N.P.I.D Act.
Findings of Court:
The court upheld the conviction of the firm and the primary partner (A2) as they failed to prove the alleged settlement of dues. However, the court set aside the conviction of the female partner (A3, wife of A2) on the grounds that there was no evidence on record to prove her active involvement in the day-to-day management of the financial establishment.
Issues: Whether the appellants were guilty of offences under Section 5 of the T.N.P.I.D Act and whether the wife of the primary accused could be held liable despite a lack of evidence regarding her active management of the firm.
Ratio Decidendi: To hold a partner liable under the T.N.P.I.D Act, the prosecution must establish the active involvement of such partner in the management of the firm. Mere status as a spouse or partner without evidence of administrative participation is insufficient for conviction.
Result: Criminal Appeal partly allowed. Conviction against the wife of the primary accused set aside; findings against the firm and the primary partner sustained with modified sentencing/fines.
| Table of Content |
|---|
| 1. summary of trial court findings and procedural background of the case. (Para 2) |
| 2. appellants' contentions regarding the lack of evidence against the female partner. (Para 3 , 4 , 5 , 6) |
| 3. prosecution's rebuttal concerning the active role of the accused. (Para 7 , 8 , 9) |
| 4. review of the evidentiary burden in cases involving alleged settlement of debts. (Para 10 , 11 , 12 , 13 , 14) |
| 5. application of law regarding vicarious liability of family members in financial firms. (Para 15 , 16 , 17 , 18 , 19) |
| 6. final pronouncement of guilt and modification of sentencing. (Para 20) |
JUDGMENT
The Appellants had preferred this Criminal Appeal as against the judgment dated 02.07.2016 made in C.C.No. 3 of 2010 by the learned Special Judge under T.N.P.I.D Act, Chennai.
2.The brief facts, which are necessary for the disposal of this Criminal Appeal, are as follows:-
2.1.The first Accused in this case is a Company – Vallisudhan Finance & Investments. The second Accused – Kandasamy is the partner of the first Accused Company. The third Accused – Manickavalli is the wife of second Accused and also partner of the first Accused Company and the fourth Accused – Vannamayil (since dead) is the mother of second Accused and she is also a partner of first Accused Company. Accused 2 to 4 were the partners of the first Accused Company – Vallisudhan Finance and Investments which was a Financial Establishment. They ran the Financial Establishment at No.138, Indira Nagar, Neyveli. The first Accused Financial Establishment was registered before the Registrar of Firms with Sl.No.31/VSF/95, dated 01.03.1995 at Cuddalore. The Accused 2 to 4 canvassed and collected the deposits from the depositors assuring that the amount will be repaid with 24% interest after maturity period. Based on the canvass by the Accused 2 to 4, many of the depositors had deposited amounts in the first Accused Company. One Mr.B.Venugopal, S/o.K.Bangaruswamy Naidu, resident of No.B.24, Sreeneevasan Salai, Block No.13, Neyveli - 31 lodged a complaint on 04.01.2008 against the first Accused/Financial Establishment and its partners Accused 2 to 4. As per the complaint, the complainant had deposited totally a sum of Rs.1,47,000/- with the first Accused/Financial Establishment in his name and in the name of his daughter on various dates. The Accused assured to pay interest at 24%. Later the Accused paid interest only for two months. The Complainant demanded his entire amount, for which the Accused did not repay the deposit amount. The Accused defaulted to repay the deposited amount. Similarly, the Economic Offences Wing received complaints from various depositors against the defaulted Financial Establishment. Based on the complaint of B.Venugopal, S/o.K.Bangaruswamy Naidu, a case was registered in Crime No.1 of 2008 on the file of the Economic Offences Wing-II, Cuddalore. The Inspector of Police, Economic Offences Wing-II, Cuddalore, proceeded with the investigation and in the due course of investigation, it was found that the Accused Nos.1 to 4 had collected deposits from various depositors totalling to the tune of Rs.20,22,156/- from 12 depositors. The first Accused/Financial Establishment was closed. Therefore, the complaint was registered. After completion of investigation, the Inspector of Police, Economic Offences Wing-II, Cuddalore, laid final report before the Court of the learned Special Judge, Special Court under the Tamil Nadu Protection of Interest of Depositors (in Financial Establishments) Act, 1997, Chennai. The final report was laid against the Accused Nos.1 to 4. Accused Nos.2 to 4 were responsible for the management of the affairs of the Financial Establishment. All the Accused conspired together to collect the amount from the depositors with fraudulent intention and dishonestly misappropriated and cheated the depositors. Accused 2 to 4 converted the deposited amount into their own use, thereby wilfully caused loss to the depositors by default in repayment of dep
