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2012 DIGILAW 322 (BOM)

P. J. Aprain v. Vasant Chedda

2012-02-10

A.V.NIRGUDE

body2012
Judgment : All these writ petitions can be disposed off by this common judgment. By consent of the learned counsels appearing for the parties, these writ petitions are taken up for hearing and are finally decided. 2. These writ petitions take exception to concurrent orders issuing process against the petitioners in criminal cases filed by the respondent no.1 against them alleging offence punishable under section 138 r/w. 141 of Negotiable Instruments Act. Before I advert to the allegations made by the respondent no.1/complainant, I must first mention the admitted facts. The respondent no.1 and the petitioners entered into a partnership agreement and formed a partnership firm which is respondent no.2 here. This firm was registered. It is agreed between the partners that each one would bring in certain amount of capital and deposit the same in the account of the firm. It was further agreed between the partners that any two partners would operate the account of the firm which was opened in a bank. The firm was registered sometime in February 2006 and the respondent no.1 brought his capital and deposited the same in the account of the firm. The firm was supposed to deal in real estate. The respondent no.1 is a resident of United States of America. 3. It is the case of the respondent no.1 in the complaint that for the purpose of running the business of the partnership, he brought capital of Rs.5 Crore. He alleged that the petitioners, his partners, did not give him particulars of the business etc., though he asked them about it. The respondent no.1 then said that he asked the petitioners to give him a copy of statement of bank account of the firm and when he saw the same, he realized that his partners have committed fraud and taken away the capital he had brought in. He found no property was acquired for the firm. Ultimately, he lodged a complaint on 17.4.2008 with the Additional Commissioner of Police, Economic Offence Wing, Crime Branch, Mumbai . 400 001, alleging offence of criminal breach of trust etc. 4. During the pendency of the said complaint, the petitioners approached the respondent no.1 with an offer to put an end to the dispute. They agreed to deposit Rs. 2.50 crore in the bank account of the firm and offered to allow the respondent No.1 to withdraw it. 400 001, alleging offence of criminal breach of trust etc. 4. During the pendency of the said complaint, the petitioners approached the respondent no.1 with an offer to put an end to the dispute. They agreed to deposit Rs. 2.50 crore in the bank account of the firm and offered to allow the respondent No.1 to withdraw it. This arrangement was accepted by the respondent and in execution of this arrangement, the petitioners issued seven post dated cheques in favour of the firm aggregating to Rs.2.50 crore. On the other hand, they in admission of their liability of legal debt, issued five post dated cheques aggregating to Rs.2.50 crore in favour of the respondent no.1 drawn on the firm's account with an undertaking that the cheques would be honoured. This arrangement was arrived at in presence of the attorney of the complainant as well as one V.V.Monji. All the cheques mentioned above were post dated and were of May 2008, June 2008, July 2008 and August 2008. The arrangement it seems was that on one hand the petitioners would one by one deposit their individual cheques in the account of the firm and on the other hand, the respondent no.1 would use the cheques drawn in his favour one by one to recover his funds. 5. Thereafter, the present cheques given by the petitioners were deposited in the firm's account and apparently, brought the funds to the account of the firm. Admittedly, the respondent no.1 then deposited two cheques issued in his favour of Rs.50 Lacs each, drawn on the firm's account by the petitioners and they too succeeded in bringing the funds to the tune of Rs.1 Crore. Thus, the respondent no.1 could recover Rs.1 Crore as per the arrangement referred to above. 6. Thereafter, he deposited the remaining three cheques at the appointed dates and they failed, and so, the respondent no.1 sent legal notice to the petitioners demanding honouring of the cheques in question. In the notice whatever is stated above in gist was stated. The petitioners sent their reply denying their liability, and through this reply their defence is disclosed, atleast partially. They admitted that there was a criminal complaint filed against them and that to resolve the dispute, Shri V.V. Monji was appointed as arbitrator cum mediator. In the notice whatever is stated above in gist was stated. The petitioners sent their reply denying their liability, and through this reply their defence is disclosed, atleast partially. They admitted that there was a criminal complaint filed against them and that to resolve the dispute, Shri V.V. Monji was appointed as arbitrator cum mediator. They stated that Monji prevailed upon them to arrive at an amicable settlement and also prevailed upon them to sign and execute the cheques in question. They stated that the cheques were kept in escrow with Shri Monji. They stated that Shri Monji assured them that the four cheques would be released only after obtaining necessary writings including the Deed of Retirement signed by the respondent no.1. They further stated that Monji then requested them to release funds to the tune of Rs.1 Crore and so the first two cheques were encashed. They stated that Shri Monji then in breach of trust and in collusion with the respondent no.1, without obtaining necessary writings including the Deed of Retirement, handed over the cheques in question to the respondent no.1 and the cheques thus were utilized for recovering the amounts. They stated that the amounts were not due, because the respondent no.1 had agreed to execute Deed of Retirement, before obtaining entire amount. In reply to this letter, the respondent no.1 sent his letter and denied that he had agreed to execute Deed of Retirement before encashment of the cheques in question. Thereafter, the complaint was lodged and process was issued. 7. The petitioners challenged the issuance of process by filing a Criminal Revision before the Sessions Judge, but the Learned Sessions Judge dismissed the same, holding that a strong prima facie case is shown against the petitioners etc. The learned counsel appearing for the petitioners while challenging these concurrent findings of the lower court, raised only one ground and asserted that the criminal cases filed under Section 134 are misconceived, because the respondent no.1 being a member of the partnership firm, could not have sued his partners for failure of cheques, issued on the account of the partnership firm. He asserted, that if the cheques were issued by the firm, even respondent no.1 was a party to it, and since he cannot prosecute himself, he is unable to prosecute his partners. He asserted, that if the cheques were issued by the firm, even respondent no.1 was a party to it, and since he cannot prosecute himself, he is unable to prosecute his partners. A strong reliance is placed on judgment of this court in the case of Mukesh Raoji Navadhare vs. Ajit Bhaskar Kasbekar and another reported in 2010 (2) Mh.L.J. 469. The Learned Single Judge of this court in similar circumstances, held that the complaint should be quashed, if the cheque is issued on behalf of a firm, of which the complainant is also a partner. While taking such view, the Learned Judge placed reliance on the Supreme court judgment in the case of M/s. Malabar Fisheries Co. vs. The Commissioner of Inocme Tax, Kerala, AIR 1980 SC 176 . The Learned Single Judge in paragraph six observed as follows: "6. In M/s. Malabar Fisheries Co. vs. The Commissioner of Income Tax, Kerala, AIR 1980 SC 176 , the Supreme court has considered the nature of a firm and has explained the difference between the mercantile view and the legal view on a partnership firm. Merchants and lawyers have different notions in respect of a firm. Commercial men and accountants are apt to look upon a firm in the light in which lawyers look upon a corporation i.e., as a body distinct from the members composing it, and having rights and obligations distinct from those of its members. Hence, in keeping partnership accounts, the firm is made debtor to each partner for what he brings into the common stock, and each partner is made debtor to the firm for all that he takes out of that stock. In the mercantile view, partners are never indebted to each other in respect of partnership transactions; but are always either debtors to or creditors of the firm. But this is not the legal notion of a firm. The firm is not recognized by lawyers as distinct from member composing it. The law, ignoring the firm, looks to the partners composing it. Property of the firm is their property and what is called the debts and liabilities of the firm are their debts and their liabilities. In a point of law, a partner may be a debtor or the creditor of his copartner, but he cannot be either debtor or creditor of a firm of which he himself is a member. Property of the firm is their property and what is called the debts and liabilities of the firm are their debts and their liabilities. In a point of law, a partner may be a debtor or the creditor of his copartner, but he cannot be either debtor or creditor of a firm of which he himself is a member. In para 18 of the decision, the Supreme Court observed: "18. Having regard to the above discussion, it seems to us clear that a partnership firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or firm's assets all that is meant is property or assets in which all partners have a joint or common interest." 8. He further observed that applying the law laid down by the Supreme Court to the facts of the case, the complaint was not tenable. I am, however, not in agreement with the preposition, put forward by the learned counsel appearing for the petitioners. The facts of this case are quite gross and so, the law laid down by the Supreme Court in case of M/s.Malabar Fisheries (supra) would not apply to them. In order to elaborate this, I would first discuss the law laid down by the Supreme Court in case of M/s.Malabar Fisheries (supra). 9. The case before the Supreme Court arose from certain provisions of Indian Income Tax Act. The question before the Supreme Court was whether the distribution of assets of the firm consequent on its dissolution, amounts to transfer of its assets within the meaning of expression "otherwise transferred" occurring in Section 34 of the Indian Income Tax Act, having regard to the definition of "transfer" in Section 2 of the Act. The facts giving rise to this question were as under : M/s.Malabar Fisheries was a partnership firm and was dissolved. Before dissolution, it had four partners carrying on different businesses in six different names and styles. The firm was dissolved in 1963 and under the Deed of Dissolution executed by the partners, six businesses were taken over by the partners and one partner received certain amount of cash, in lieu of his share in the assets of the firm. Before dissolution, it had four partners carrying on different businesses in six different names and styles. The firm was dissolved in 1963 and under the Deed of Dissolution executed by the partners, six businesses were taken over by the partners and one partner received certain amount of cash, in lieu of his share in the assets of the firm. Prior to dissolution, the firm had installed certain machinery and claimed and received, certain development rebate in Income Tax. After dissolution of the firm, the Income Tax took up a stand that since the assets of the firm were transferred to the partners, the rebate should be cancelled and the tax should be recovered. The Supreme Court then held that in the facts and circumstances of the case, there was no transfer of assets within the meaning of the words "otherwise transferred" occurring in Section 34 of the Income Tax Act, after the dissolution of the firm. In this regard, the Supreme Court elaborating the law on the subject, observed in paragraph 18 as under : "18. Having regard to the above discussion, it seems to us clear that a partnership firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or firm's assets all that is meant is property or assets in which all partners have a joint or common interest. If that be the position, it is difficult to accept the contention that upon dissolution the firm's rights in the partnership assets are extinguished. The firm as such has no separate rights of its own in the partnership assets but it is the partners who own jointly in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of Section 2(47) of the Act. In our view, therefore, there is no transfer of assets involved even in the sense of any extinguishment of the firm's rights in the partnership assets when distribution takes place upon dissolution." 10. The law laid down in this judgment, in my view, is not applicable to the facts of this case for following reasons : The firm in this case, has a bank account which was operated mostly by the petitioners. The respondent no.1 was unable to operate this account because he is residing in United States. After the admitted amicable settlement between the parties, the respondent no.1 agreed to resign from the firm, provided apparently, he received back Rs.2.5 Crores sought to be refunded to him, through the cheques in question. The arrangement made between the partners is discussed above and as per the same, it is prima facie clear that the firm's account was sought to be utilized, as the personal account of the petitioners. They put their own funds in the said account and then issued the cheques in question for refunding the capital to the respondent no.1. They were not distributing any benefits arising out of the firm's business to him. This arrangement prima facie shows that they treated the account of the firm as their personal account and so, the defence which is almost sham, is not available to the petitioners. 11. The Supreme Court in the above referred judgment was considering altogether a different question, and what happened in that case was, after dissolution of the firm. Thereafter, the assets of the firm were distributed amongst the partners and so, it was held that the assets were not transferred to the partners because, the firm and the partners were not different entities etc. There is stark difference between the facts of that case and the facts of this case. The learned counsel appearing for the respondent no.1 tried to bring before me other documents, which would further support his case, but I refused to take them into account, because they were not before the court below. But even without looking into those documents, the case of the respondent no.1 is quite clear, that the amounts made payable through the cheques in question to him, were in discharge of legal liability of the petitioners. 12. But even without looking into those documents, the case of the respondent no.1 is quite clear, that the amounts made payable through the cheques in question to him, were in discharge of legal liability of the petitioners. 12. The defence of the petitioners is that it was agreed between the parties, that before receiving the entire amount payable through the cheques in question, the respondent no.1 agreed to execute Deed of Retirement as partner of the firm. But this is a question on facts and can be appreciated and decided at the time of trial. At this stage, this defence which is reflected in their reply to the notice, cannot be taken into account. 13. In view of this, I do not find any error in the impugned orders. The Petitions stand dismissed.