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2021 DIGILAW 643 (GUJ)

Patel Uveshbhai Mohmadsalim v. State Of Gujarat

2021-07-30

B.N.KARIA

body2021
ORDER : 1. By preferring this application, the applicant has requested to quash and set aside the proceedings of Criminal Case No. 1254 of 2014 pending before the Additional Chief Judicial Magistrate Court, Lunavada for the offence punishable under Section 138 of the Negotiable Instruments Act, as well as order of process issued dated 14.10.2014. 2. The brief case of this case are as under:- 2.1 That, the applicant-original accused, who was the partner of Honest Trading Company at Lunavada and was looking over the management of such company and was connected with respondent No.2 for the purpose of buying grains from him. That, on 11.5.2014, the applicant purchased grains from respondent No.2 agreeing to pay Rs.6,63,592/- and as against such purchase, it was promised that the amount so agreed to be paid to respondent No.2 within a period of one month, against which, when the same was not paid to respondent No.2 within the said promised period the amount was demanded by respondent No.2 from the applicant herein and therefore, the applicant issued a cheque bearing cheque No.000241 dated 12.8.2014 of Rs.6,63,592/- towards payment of the grains which was purchased in the name of respondent No.2. That, the applicant signed such cheque in capacity of a partner to Honest Trading Company. That, a cheque on being deposited with Bank of Baroda on 26.8.2014, the same was returned back with an endorsement of “insufficient funds” on 27.8.2014.Therefore, respondent No.2 issued a legal notice through Registered Post AD on 20.9.2014, despite the notice was served upon the applicant, he did not chose to repay back the amount due to respondent No.2 and therefore, an offence under Section 138 of the N.I.Act was registered against the applicant for such non-payment. 3. It is submitted by learned advocate for the applicant that the applicant was a partner of Honest Trading Company at Lunavada and was acting on behalf of the Company. It is further submitted that as per Section 141 of the Negotiable Instrument Act and as per decision of the Apex Court rendered in case of Anita Hada Case Vs. God Father Travels & Tours Pvt. Ltd. reported in 2012(5) SCC 661 which is further referred recently now in case of Ajit Balse Vs. Ranga Karkere reported in 2016(3) SCC Criminal 379 and also rendered in case of Onali Ismaileji Sadiket Vs. State of Gujarat reported in 2016(3) GLR 1991 . God Father Travels & Tours Pvt. Ltd. reported in 2012(5) SCC 661 which is further referred recently now in case of Ajit Balse Vs. Ranga Karkere reported in 2016(3) SCC Criminal 379 and also rendered in case of Onali Ismaileji Sadiket Vs. State of Gujarat reported in 2016(3) GLR 1991 . He has also relied the decision rendered in case of G. Ramesh Vs. Kanike Harish Kumar Ujwal reported in 2019(O) AIJEL-SC 64303, it is now a mandate of law that unless and until the partnership firm/Company who is legal entity in the eyes of law is implicated as one of the accused, complaint itself is not maintainable against partner. It is further submitted that present case is squarely covered with reported decisions, as Honest Trading Company on behalf of whom, the applicant was acting as a partner is not joined as an accused, which is defect of law and therefore, as complaint itself is not maintainable and the same is required to be quashed and set aside. No other grievances were raised by learned advocate for the applicant. 4. While referring the complaint, it appears that the cheque issued on 12th August, 2014. It is submitted that the applicant by tries his level best to serve the notice to respondent No.2 but it was refused by him to accept, and therefore, notice was unserved to him. Affidavit of service is also filed by the applicant namely Uvesh M.Salim Patel in support of his contention about try to his serve the notice to respondent No.2. 5. Learned Additional Public Prosecutor appearing for the respondent -State has submitted that it is private dispute between the applicant and the respondent No.2. He further submits that the complaint is filed under Section 138 of N.I.Act and hence, this Court may pass necessary order. 6. No arguments advanced on behalf of the respondent No.2 as he has refused to accept the notice. 7. Having heard learned advocates for the respective parties and learned APP for the respondent-State, it appears that as per submission of learned advocate for the applicant as only question is to be decided by this Court is whether the complaint under Section 138 of the N.I.Act is maintainable in the eyes of law in view of the judgments referred by learned advocate for the applicant. If we refer the complaint produced on record i.e. Criminal Case No. 1254 of 2014. If we refer the complaint produced on record i.e. Criminal Case No. 1254 of 2014. Para 1 itself speaks that accused- present applicant is a partner of Honest Trading Company at Lunavada. He is administrator of the partnership firm. On 11th May, 2019, the accused purchased some rationing from the complainant and amount of Rs.6,63,592/ was to be paid by the accused. On demanding money from the accused, he issued cheque of Bank of Baroda, Lunavada Branch for the amount of Rs. 6,63,592/- on 12th August, 2014 in favour of the complainant under his signature as partner of the Honest Trading Company. Complainant deposited the cheque before the bank authority which was returned back on 27th August, 2014 with an endorsement of “insufficient fund”. Therefore, the complainant issued notice through his advocate on 20th September, 2014 demanding his amount due with the applicant-accused. Notice was duly served to the accused on 22nd September, 2014. However, no amount was paid by the accused and no reply was given in connection with the legal notice issued by the complainant. Therefore, he has filed impugned complaint u/s. 138 of Negotiable Instrument Act. If we consider the cheque issued in favour of the respondent No.2, it was under the signature of the applicant as a partner of the Honest Trading Company. This Court would like to refer the decision of this Court rendered in case of Ismailji Sadikot Vs. State of Gujarat & Anr. passed in Special Criminal Application (Quashing) No. 4536 of 2015 dated 3.3.2016 which reads as under:- “14. What is discernible from a conspectus of the authorities referred to above is that a partnership firm, unlike a company registered under the Indian Companies Act, is not a distinct legal entity or a juristic person, but is only a compendium of its partners. Even the registration of a firm would not make it a distinct legal entity like a company. The partners of a firm are coowners of the proprietary firm, unlike the shareholders in a company who are not coowners of the property of the company. 15. However, the position of a partnership firm so far as Section 138 read with Section 141 of the Negotiable Instruments Act is concerned appears to be altogether different. Section 141 of the Act reads as under: “141. 15. However, the position of a partnership firm so far as Section 138 read with Section 141 of the Negotiable Instruments Act is concerned appears to be altogether different. Section 141 of the Act reads as under: “141. Offences by companies (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence : [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been committed by a company and it is proved that the offence has been 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 director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. For the purposes of this section.(a) "company" means any body corporation and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.” 16. Explanation. For the purposes of this section.(a) "company" means any body corporation and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.” 16. Subsection (1) of Section 141 of the Act provides that if a person committing an offence under the section is a company, every person who, at the time offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The offender in section 138 of the Act is the drawer of the cheque. He alone would have been the offender thereunder if the Act did not contain other provisions. It is because of section 141 of the Act that penal liability under section 138 is cast on other persons connected with the company. Three categories of persons can be discerned from the said provision who are brought within the purview of the penal liability through the legal fiction envisaged in the section. They are: (1) The company the principal offender which committed the offence, (2) Every one who was in charge of and was responsible for the business of the company, (3) Any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence. However, if a person proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence, he shall not be liable to punishment under this section. Subsection (2) further provides that where any offence under this Act has been committed by a company and it is provided that the offence has been 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 director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. The Explanation to the section defines ‘company’ as any body corporate and includes a firm or other association of individuals; and ‘director’, in relation to a firm, means a partner in the firm. 17. It is only the drawer of the cheque, who can be held responsible for an offence under Section 138 of the Act. Section 141 provides for the constructive liability. It postulates that a person, in charge of and responsible to the company, in the context of the business of the company, shall also be deemed guilty of the offence. The drawer can be a company, a firm or an association of individuals, but only those directors, partners, or officers can be held responsible for the offence punishable under Section 138 of the Act, who are responsible to the company – firm for the conduct of its business. 18 The Legislature has thought fit to provide an explanation in Section 141 of the Act and the plain reading of the expression “company” as used in Sub-clause (a) of the explanation appended to Section 141 of the Act shows that it is an inclusive of any body corporate or “other association of individuals”. Though the heading of Section 141 of the Act reads “offences by companies”; according to the explanation to that Section, “company” means “any body corporate and includes a firm or other association of individuals and “director”, in relation to a firm means “a partner in the firm”. The term “other association of individuals” should not be understood to refer even to informal understanding between the individuals. It has to be understood in the context of body corporate and partnership firms. The principal of ejusdem generis gets attracted in such a case. Therefore, a sole proprietary concern is not a company within the meaning of “company” as defined under the explanation to Section 141 of the Act. 19 The Explanation to Section 141 makes it clear that wherever there is a reference under Section 141 to a company it has to be substituted by the word firm where the accused is a partnership firm and the provision has to be read as if it refers to the firm. 19 The Explanation to Section 141 makes it clear that wherever there is a reference under Section 141 to a company it has to be substituted by the word firm where the accused is a partnership firm and the provision has to be read as if it refers to the firm. What this means is that a complaint can be filed for the offence under Section 138 Negotiable Instruments Act not only against the partnership firm on whose behalf the cheque was issued but also against an individual partner or person who, at the time of the commission of the offence, was in charge of the affairs of the firm or responsible to it for the conduct of its business. There is nothing in the provision which indicates that in every complaint involving the dishonour of a cheque issued by a firm both the firm as well as its partners have to be compulsorily impleaded. In other words a complaint in which only the firm is made an accused and the partners are not would not be bad in law for that reason. Clearly that is not the intention of the Parliament. 20. A partnership firm is a separate legal entity in terms of the Indian Partnership Act 1932 and it is answerable in law in that capacity. That is how under various statutes like the Income Tax Act 1961, the Central Excises Act 1944, the Sales Tax Laws and Section 141 Negotiable Instruments Act, a firm can be proceeded against as such. It is perfectly possible for a complainant, aggrieved by the dishonour of a cheque issued by or behalf of a firm, to file a complaint for the offence under Section 138 Negotiable Instruments Act only against the firm. The complainant may choose not to proceed against the individual partners as accused either because he is not aware as to who are the partners or is not interested in proceeding against the partners apart from the firm. 8. In another case rendered in case of Ajit Balse Vs. Ranga Karkere reported in (2016) 3 SCC (Cri.) 379, the Hon’ble Apex Court has taken the same view in para referring the decision of Anit Hada’s case which is observed as under :- “15. 8. In another case rendered in case of Ajit Balse Vs. Ranga Karkere reported in (2016) 3 SCC (Cri.) 379, the Hon’ble Apex Court has taken the same view in para referring the decision of Anit Hada’s case which is observed as under :- “15. In Aneeta Hada case [Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241], the Court, inter alia, held: (SCC pp. 687-88, paras 53 & 58-59) “53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant. *** 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words ‘as well as the company’ appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh[State of Madras v. C.V. Parekh, (1970) 3 SCC 491 : 1971 SCC (Cri) 97] which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal[Sheoratan Agarwal v. State of M.P., (1984) 4 SCC 352 : 1984 SCC (Cri) 620] does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1 : 2001 SCC (Cri) 174] is overruled with the qualifier as stated in para 51. The decision in Modi Distillery [U.P. Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684 : 1987 SCC (Cri) 632] has to be treated to be restricted to its own facts as has been explained by us hereinabove.” 16, The learned Counsel appearing on behalf of the respondent while accepting that Adivasi Machua Samiti, Sirsida on whose behalf cheque was issued was not impleaded as the accused before the trial Court, contended that the judgment in Aneeta Hada case cannot be made applicable retrospectively in respect of cases where the conviction took place much prior to the judgment. However, such objection cannot be raised in the present case. Though judgment in Aneeta Hada is prospective but is applicable in all pending cases, including the trial, appeal, revision and special leave petition/ appeal pending before this Court. The case of the appellants being covered by the decision in Aneeta Hada case, we set aside the impugned judgment and conviction passed by the trial Court as affirmed by the appellate court and the impugned order dated 31.8.2012 passed by the High Court of Chhattisgarh at Bilaspur in Criminal Revision No.365 of 2012. 9. In another case rendered in case of G Ramesh (Supra), it is observed as under :- 15. 9. In another case rendered in case of G Ramesh (Supra), it is observed as under :- 15. In the present case, it is evident from the relevant paragraphs of the complaint which have been extracted above that the complaint contains a sufficient description of (i) the nature of the partnership; (ii) the business which was being carried on; (iii) the role of each of the accused in the conduct of the business and, specifically, in relation to the transactions which took place with the complainant. At every place in the averments, the accused have been referred to in the plural sense. Besides this, the specific role of each of them in relation to the transactions arising out of the contract in question, which ultimately led to the dishonour of the cheques, has been elucidated. 16. The complaint contains a recital of the fact that the first set of cheques were returned for insufficiency of funds. It is alleged that the first respondent transferred an amount of Rs 1,00,000 on 8 February 2011 and 10 February 2011. The complaint also contains an averment that after the second set of cheques were dishonoured, the accused assured the complainant that they will be honoured on re-presentation in the month of July 2011. The averments are sufficient to meet the requirement of Section 141(1). 17. The High Court proceeded on the basis that the first accused was a company in which the other two accused were directors. Section 141 undoubtedly uses the expression “company” so as to include a firm or association of persons. The fact that the first accused, in the present case, is a partnership firm of which the remaining two accused are partners has been missed by the High Court. 10. It appears from the affidavit of the service produced on record by the applicant on oath, which reads as under:- 1. I am authorized by Advocate for the applicant to serve the notice of the said Criminal Misc. Application. 2. I receive the packet containing the notice order passed in this petition for service from office of the Hon’ble High Court. 3. On 16th February, 2017, I have tried to serve the notice at Ditwas but the shop and residence of respondent No.2 was closed. Application. 2. I receive the packet containing the notice order passed in this petition for service from office of the Hon’ble High Court. 3. On 16th February, 2017, I have tried to serve the notice at Ditwas but the shop and residence of respondent No.2 was closed. Thereafter, I have contacted the Respondent No.2 on his Mobile No.9825126230 on 17.2.2017 and I have also scanned the notice and send him on his whatsapp at 3:18 p.m. which he has read the contents of notice at 5:36 P.M. Thereafter, he has come to Lunawada on 26.2.2017 and I have contacted in person and tried to serve the notice to him but the Respondent No.2 has refused to take the notice. 11. In the present case, the partner of Honest Trading Company is implicated as accused person and therefore, complaint u/s. 138 of N.I.Act, without impleading the the partnership firm, is not sustainable. Not only that, without comply with the mandatory provision of Section 141 of the Negotiable Instrument Act as well as without impleading the Company or partnership Firm in the complaint, the initiation of proceedings by the complainant is not sustainable. 12. In the aforesaid discussion, the complaint filed by the respondent No.2 being Criminal Case No. 1254 of 2014 pending before the learned Additional Chief Judicial Magistrate, Lunavada is not maintainable and deserves to be quashed and set aside. Hence, this application is allowed. Rule is made absolute to the aforesaid extent.