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2007 DIGILAW 933 (AP)

D. Shamantakamani v. State of Andhra Pradesh

2007-09-24

G.V.SEETHAPATHY

body2007
ORDER - This petition is filed under Section 482 Cr.P.C., by A-3 and A-4 seeking to quash their prosecution in C.C.No.226 of 2007 on the file of the court of the Judicial Magistrate of the First Class, Mahabubnagar. 2. The second respondent herein filed a complaint against the respondents 3 and 4, who are A-1 and A-2, and the petitioners herein (A-3 and A-4) alleging offences under Section 138 of the Negotiable Instruments Act (for short 'the Act') and Section 420 of the Indian Penal Code. Respondent No.4 and the petitioners herein are stated to be the partners of the third respondent firm. According to the second respondent/ complainant, the third respondent/A-1 through the fourth respondent/A-2 borrowed a loan of Rs.3 lakhs on 07-02-2005 from the complainant firm by way of a cheque bearing No.946964 of State Bank of India, Mahabubnagar Branch and realized the proceeds of the cheque and executed a promissory note to repay the debt at 18% per annum and passed receipt on the same day. The complainant alleges that the accused paid an amount of Rs.12,600/- towards part of the interest and failed to pay the balance and on repeated demands A-1 through A-2 issued a post-dated cheque bearing No.353582 dated 13-09-2006 of State Bank of India, Mahabubnagar for Rs.3,75,000/- purporting to be in discharge of the debt and liability and when the complainant presented the cheque for payment, it was returned unpaid on the ground that A-1 had already closed the account. The complainant gave a statutory notice on 28- 09-2006 to which Accused No.2 issued a reply notice on 13-10-2006 and A-3 and A- 4 issued reply notice on 14-10-2006, denying their liability. Thereafter, the second respondent herein filed the complaint alleging offences not only under Section 138 of the Act, but also under Section 420 IPC. The complaint was taken on file by the learned Magistrate and numbered as C.C.No.226 of 2007. Aggrieved by the same, the present petition is filed by A-3 and A-4 seeking to quash their prosecution. 3. Arguments of the learned counsel for the petitioners, the learned counsel for the second respondent and the learned Public Prosecutor representing the first respondent-State are heard. Records are perused. 4. Aggrieved by the same, the present petition is filed by A-3 and A-4 seeking to quash their prosecution. 3. Arguments of the learned counsel for the petitioners, the learned counsel for the second respondent and the learned Public Prosecutor representing the first respondent-State are heard. Records are perused. 4. The learned counsel for the petitioners contended that A-3 and A-4 being ladies were sleeping partners and were not incharge of the day-to-day affairs of the firm and they retired from partnership on 30-06-2005 much prior to the issuance of the cheque on 13-09-2006 and, therefore, they are not liable for the offences alleged and further proceedings against them are liable to be quashed. 5. The learned counsel for the second respondent, on the other hand, contended that as per sub-clause (2) of Section 141 of the Act where an offence is committed by a company and it is proved that it was committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such person shall also be deemed to be guilty of the offence and, therefore, it is not necessary that the partners of the firm against whom the complaint is filed shall invariably be incharge and responsible to the company for the conduct of the business. He would, therefore, submit that petitioners/A-3 and A-4 are also liable for the offence as the cheque was issued with their concurrence and connivance. He further submitted that specific allegations are made against petitioners/A-3 and A-4 regarding their involvement in the offence not only under Section 138 of the Act, but also under Section 420 I.P.C. 6. According to the complainant, the third respondent firm/A-1 represented by its partners i.e., fourth respondent/A-2 and petitioners/A-3 and A-4 borrowed a sum of Rs.4 lakhs from the complainant firm on 07-02-2005 and executed a promissory note to repay the said debt with interest at 18% per annum and paid only a sum of Rs.12,600/- and pursuant to repeated demands by the complainant, the accused gave a cheque for Rs.3,75,000/- on 13-09-2006 and the same was dishonoured by the bank on the ground that the account was closed. Before filing the complaint, the complainant got issued a registered notice dated 28-09-2006 wherein also it is specifically alleged that A-1 firm through A-2 has intentionally drawn the cheque fully knowing that the account was already closed and that the cheque was issued with the concurrence of A-3 and A- 4 who were also aware of the closure of the account even by that date. In the statutory notice dated 28-09-2006 and also in the complaint it was specifically urged that accused have committed offences not only under Section 138 of the Act, but also under Section 420 I.P.C. In the reply notice got issued by them on 11-10-2006 petitioners/A-3 and A-4 stated that A-2 has retired from the partnership firm on 14-07-2005 and the firm was reconstituted on 14-07-2005 and the reconstituted firm has nothing to do with the alleged borrowal made by A-2 on 07-02-2005. The petitioners further alleged that the issuance of cheque for Rs.3,75,000/- by A-2 was not to the knowledge of petitioners/A-3 and A-4. Admittedly, as on the date of borrowal i.e., 07-02- 2005, A-2 to A-4 were partners of A-1 firm. The question as to whether or not the alleged borrowal is true and whether or not the petitioners/A-3 and A-4 are also liable for the debt incurred by A-1 firm and whether or not the firm was reconstituted on 14-07-2005 on account of the alleged retirement of A-2 are matters which arise for consideration at the time of trial, but not at this stage. In fact, Section 32 of the Indian Partnership Act lays down as follows: Retirement of a partner - (1) A partner may retire- (a) with the consent of all the other partners, (b) in accordance with an express agreement by the partners, or (c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. (2) A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement. (3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them, which would have been an act of the firm if done before the retirement, until public notice is given of the retirement: Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner. (4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm. 7. Section 45(1) of the Partnership Act provides that notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution. Section 72 of the said Act prescribes mode of giving public notice and states that a public notice under the Act is to be given where it relates to the retirement or expulsion of a partner from a registered firm or to the dissolution of the registered firm, by notice to the Registrar of Firms under Section 63, and by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm is having principal place of business. 8. In the reply notice dated 11-10-2006 got issued by petitioners/A-3 and A-4 except stating that the firm was reconstituted on 14-07-2005 owing to retirement of A-2 and the reconstituted firm was registered by the Registrar of Firms, Mahabubnagar as 98/05 dated 21-07-2005, it is nowhere stated that any public notice as contemplated under Section 72 of the Partnership Act was issued regarding retirement of A-2 from A-1 firm. In the absence of any such publication in the Official Gazette and in the vernacular newspaper, as required under Section 72 of the said Act, it cannot be said that there was any public notice of the alleged retirement of A-2 or reconstitution of the firm. Under those circumstances, the rights of the complainant firm, a third party, would not in any way be affected in view of Section 32(3) of the Partnership Act. 9. In a decision in C.ASSIAMMA V. STATE BANK OF MYSORE, AIR 1990 Ker. Under those circumstances, the rights of the complainant firm, a third party, would not in any way be affected in view of Section 32(3) of the Partnership Act. 9. In a decision in C.ASSIAMMA V. STATE BANK OF MYSORE, AIR 1990 Ker. 157 , it was held that in the absence of any publication in the Official Gazette and notice to the Registrar of Firms mere publication of a notice in the local newspaper is not sufficient to absolve retired partner from its liability to third persons. 10. Admittedly, petitioners/A-3 and A-4 are partners of the reconstituted firm and their liability towards their partners for the debts incurred by the previous firm does not get wiped out in view of Section 32(3) of the Partnership Act. The contention of the petitioners/A-3 and A-4 is that being ladies and sleeping partners, they had no knowledge of the issuance of the disputed cheque by A-2 on behalf of A-1 firm on 13-09-2006. 11. Section 141 of the Act renders every person who at the time offence was committed, was incharge of and was responsible to the company for the conduct of its business, liable for the offence. Proviso to Section 141(1) of the Act states that the said person shall not be rendered liable if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent commission of such offence. Admittedly, petitioners/A-3 and A-4 were partners of the firm by 13-09-2006 the date on which the cheque was issued. But, of course, they plead that they are partners of the reconstituted firm, but not the original firm. Whether or not the cheque was issued with their knowledge is a matter to be considered on evidence at the time of trial. In fact, the burden lies on them to prove that the offence was committed with their knowledge or that they had exercised all due diligence to prevent the commission of the offence. Such occasion for petitioners to prove want of knowledge on their part would arise only at the time of trial, but not at this stage. In fact, the burden lies on them to prove that the offence was committed with their knowledge or that they had exercised all due diligence to prevent the commission of the offence. Such occasion for petitioners to prove want of knowledge on their part would arise only at the time of trial, but not at this stage. Even otherwise, sub-section (2) of Section 141 of the Act lays down that where any offence is committed by a company and it is proved that the offence committed is with the consent or connivance or is attributable to any neglect on the part of any director, managing partner etc., of the company, such person shall also be deemed to be guilty of the offence. It is specifically alleged not only in the statutory notice, but also in the complaint that the disputed cheque dated 13-09-2006 was issued by A-2 purporting to act on behalf of A-1 with the connivance and concurrence of A-3 and A-4. The specific averment in the complaint is to the effect that A-1 through A-2 intentionally has drawn the cheque fully knowing that the account of A-1 was already closed and A-3 and A-4 are also fully aware about issuing of the said cheque and A-1 through A-2 issued the same with the concurrence of A-3 and A-4. It is further averred that even if the plea of retirement is correct, it amounts to further cheating on the part of A-1 and A-2 in issuing the cheque and in such an event A-3 and A-4 are also responsible for the acts of A-1 and A-2 and thus, the accused not only committed an offence under Section 138 of the Act, but also committed an offence under Section 420 I.P.C. In the face of specific averment in the complaint attributing knowledge to and concurrence and connivance on the part of A-3 and A-4 in issuance of the disputed cheque by A-2 on behalf of A-1, it cannot be said that that there is no prima facie case made out from the averments of the complaint as against A-3 and A-4. The question as to the truth or otherwise of the said imputation of knowledge, concurrence and connivance on the part of A-3 and A-4 in issuance of the disputed cheque cannot be gone into at this stage, in the present proceedings. 12. The question as to the truth or otherwise of the said imputation of knowledge, concurrence and connivance on the part of A-3 and A-4 in issuance of the disputed cheque cannot be gone into at this stage, in the present proceedings. 12. Further, it is to be noted that the cheque was dishonoured on the ground that the account was already closed. The very allegation of the complainant is that in spite of having knowledge that the account was closed, A- 2 purporting to act on behalf of A-1 firm has issued the cheque with the concurrence of A-3 and A-4 and thereby cheated the complainant and committed an offence under Section 420 I.P.C., as well. If the said allegation is duly proved by adducing necessary evidence at the time of trial, the offence of cheating would certainly be made out. 13. In a decision in K.SUBRAHMANIAM V. KAMAKSHI CONSTRUCTIONS, 1999 (1) ALD (Crl.) 776, this Court held as under: "The complaint in the present case discloses that the cheque was issued with the consent of the present petitioners. It also discloses that they were the Directors of the Company. Since the cheques which got bounced were issued with the consent of the petitioners who had been Directors at the relevant point of time, therefore, prima facie, there is an offence made out under Section 141. It is now well settled that, all the ingredients of an offence need not to be stated in the complaint itself. 14. The above case refers to the decision of the Apex Court in MUNICIPAL CORPORATION OF DELHI V. RAM KISHAN, 1983 Crl.LJ 159, wherein it was held as under: "It is, therefore, manifestly clear that proceedings against an accused in the initial stages can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted. In other words, the test is that taking the allegations and the complaint as they are, without adding or subtracting anything, if no offence is made out then the High Court will be justified in quashing the proceedings in exercise of its powers under Section 482 of the present Code." 15. In other words, the test is that taking the allegations and the complaint as they are, without adding or subtracting anything, if no offence is made out then the High Court will be justified in quashing the proceedings in exercise of its powers under Section 482 of the present Code." 15. In RAJESH BAJAJ V. STATE NCT OF DELHI, 1999 (2) Supreme 442 , the Apex Court held as follows: "It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the complaint, is not the need at this stage. If factual foundation for the offence has been laid in the complaint the court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing an FIR (a step which is permitted only in extremely rare cases) the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence." 16. In N.LAXMAN V. SHANUKHA COTTON TRADERS, 1998 (2) ALT (Cri.) 494, a similar contention was raised by the petitioners therein that they were not incharge and were not responsible to the company for the conduct of the business and, therefore, they have not committed any offence and it was contended by the complainant, respondent therein, that the case on hand falls under sub-section (2) of Section 141 and, therefore, it was immaterial to whether there was any allegation that the petitioners/accused were incharge and responsible for the company in the conduct of its business, it was held as under: "There is no difficulty whatsoever to hold that the vicarious liability of a person for being prosecuted for an offence committed under Section 138 of the Act, by a company arises if at the material time he was incharge of and was responsible to the company for the conduct of its business. It is true that simply because a person is a director of the company it does not necessarily mean that he satisfies the twin requirements so as to make him liable for the offence committed by the company. The law is well settled. It is also true that there is no allegation in the complaint whatsoever alleging that the petitioners herein were incharge of and were responsible to the company for the conduct of the business of the company. It may be noticed that the petitioners herein are not being prosecuted by the first respondent/complainant on the ground that they were incharge of and were responsible for the conduct of the business of the company. It is the specific case of the first respondent/complainant that the petitioners herein are fully aware of the business transaction of the A-1 firm and were also aware of the issuance of the cheques knowing fully well that the cheques would be dishonoured. It is the case of the first respondent/complainant that all the accused with an intention to deceive and defraud the first respondent/complainant issued the cheques and directed the first respondent/complainant to present them on different occasions." It was further held as under: But the immediate question that would arise for consideration is as to whether there is any such allegation in the complaint which would attract the ingredients of sub-section (2) of Section 141. In my considered opinion, clear and unambiguous allegations are leveled against the petitioners herein by the first respondent/complainant about their connivance and neglect in the offence committed by A1 company. The offence alleged to have been committed by A1 company is clearly attributed to the petitioners herein. There is absolutely no ambiguity whatsoever insofar as it relates to making of allegations in the complaint. But whether the first respondent/ complainant would be in a position to prove the same as against the petitioners is a different aspect altogether and the Court cannot express any opinion about the same at this point of time. Therefore, the present case falls under sub-section (2) of Section 141 of the Act. The complaint cannot be quashed on the ground that there is no allegation that the petitioners were not incharge and were not responsible to the company for the conduct of its business." 17. Therefore, the present case falls under sub-section (2) of Section 141 of the Act. The complaint cannot be quashed on the ground that there is no allegation that the petitioners were not incharge and were not responsible to the company for the conduct of its business." 17. In the present case also there are specific averments made in the complaint that the disputed cheque was issued to the knowledge and with the connivance of A-3 and A-4 knowing fully well that the account was already closed. The decision of the Apex Court in SAROJ KUMAR PODDAR V. STATE (NCT DELHI) AND ANOTHER, (2007) 3 SCC 693 , relied upon by the learned counsel for the petitioners is not applicable to the facts of the present case for the simple reason that in the above case it was found from a reading of the complaint that there was no averment therein as to how and in what manner the appellant be responsible for the conduct of the business of the company and the allegations did not satisfy the requirements of Section 141 of the Act which are obligatory and the allegations in the complaint even if taken to be correct in their entirety, do not disclose any offence against the appellant. The above decision is not applicable to the factual matrix of the present case, wherein a reading of the complaint clearly discloses that specific averments are made against the petitioners/A-3 and A-4 which if proved would certainly constitute the offences alleged not only under Section 138 of the Act, but also under Section 420 I.P.C. 18. In the circumstances and for the reasons stated above, it is held that this is not a fit case to quash the proceedings by invoking the inherent powers of the Court under Section 482 Cr.P.C. 19. In the result, the criminal petition is dismissed.