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Gujarat High Court · body

2024 DIGILAW 830 (GUJ)

Rajesh Chamanbhai Kanani v. State Of Gujarat

2024-04-09

DIVYESH A.JOSHI

body2024
JUDGMENT : 1. By way of preferring present application under Section 482 of the Criminal Procedure Code, 1972, the applicants have invoked extra ordinary jurisdiction of this Court for quashing and setting aside the criminal complaint being Criminal Case No.389/2017 pending before the court of the learned 12th Additional Chief Judicial Magistrate, Rajkot. 2. Heard learned advocate, Mr. Sandeep Limbani for the applicant, learned APP Mr. Hardik Soni for the respondent and learned advocate, Mr. Pratik Jasani for the respondent no.2. 3. The brief facts leading to the filing of the present application are as under, 3.1 That, the applicant and the respondent no.2 both were friend and while doing business, the applicant suffered loss in his business and as he was in need of money, he had borrowed Rs.10,00,000/- from the respondent no.2 with an assurance that it will be repaid, however after sometime, the respondent no.2 started demanding the said amount and, therefore, the applicant issued Cheque No.315238 dated 28.08.2015 drawn on ING Vyasa Bank Ltd. from the account of Kanani Trading Company with an assurance that it will be honoured on deposit of the same and relying upon the said assurance, the respondent no.2 deposited the said cheque in his account, however, it was dishonoured and, hence, a legal notice was issued upon the applicant, which was duly served, however, the applicant did not make the payment and, hence, the respondent no.2 filed aforesaid complaint before the competent court, wherein after verification of the complainant, process was issued, which has been challenged by the applicant before this Court by filing aforesaid quashing petition. 4. Learned advocate, Mr. 4. Learned advocate, Mr. Limbani appearing for the applicant submitted that the applicant and the respondent no.2 both were friends and the applicant was working as Commission Agent and having shop in the market and he has maintained stock of the goods of agriculture product with a sole intent to earn huge profit but as the prices have gone down, the applicant suffered huge loss, therefore, the applicant borrowed amount from the respondent no.2 and in turn, the respondent no.2 has given Rs.10,00,000/- to the applicant and when the respondent no.2 started demanding the said amount, the applicant issued cheque to the respondent no.2, which was dishonoured on deposit of the same, which led to filing of the criminal complaint against the applicant before the competent court, wherein process was issued after verification of the respondent no.2, which was served upon the applicant and, hence, the applicant has approached this Court and challenged the order of issuance of process, however while issuing Rule, ad-interim relief was granted and in pursuance thereto, further proceeding of the impugned complaint has not proceeded further. 5. Learned advocate for the applicant submitted that the present application has been filed on the premise that there was infirmity on the part of the respondent no.2 at the time of institution of the complaint as the cheque issued by the applicant purportedly signed by him was belonging to one Kanani Trading Company and the present applicant is one of the Partners of the said firm. Learned advocate submitted that it is an admitted position of fact that as per the provision contained under the Negotiable Instrument Act, more particularly, under Section 138 read with Section 141 of the NI Act, all the partners of the firm as well as partnership firm are required to be joined as accused, however admittedly in the present case on hand, at the time of institution of the complaint, neither the partnership firm nor other partners of the firm have been joined as accused. Learned advocate submitted that it is also an admitted position of fact that there was mandatory provision as provided under the NI Act that before registration of the complaint under the NI Act, demand notice is required to be issued to the accused persons, however in the present case, the complainant has issued notice to the present applicant but notice was not issued to the firm as well as other partners. Learned advocate submitted that xerox copy of the partnership firm was annexed with the complaint, which clearly goes on to show that the cheque was issued by the authorized signatory of Kanani Trading Company, therefore, the cheque was issued by the firm in lieu the business transaction. Learned advocate submitted that the applicant has also annexed copy of the documents registered before the Registrar of Firms, wherein the name of all the partners are mentioned, therefore on the strength of the said material, the applicant has successfully proved that the cheque was issued by the firm and, hence, two persons have been registered as partners in the firm, therefore, there was lacuna on the part of the respondent no.2 and the respondent no.2 has failed to join all necessary parties as accused. Learned advocate, at this stage, has put reliance upon various case laws and submitted that the issue involved in the present matter is no longer res-integra as in numerous cases, the Hon’ble Apex Court as well as this Court have held that considering the statutory provision of Section 138 read with Section 141 of the NI Act, at the time of institution of the complaint against the accused persons, all the members of the firm/ Company and the Company are required to be joined as accused and if the complainant fails to join them as accused, in that event, the cognizance ought not to have been taken against the accused as there was statutory mandate on the head of the complainant, which he has to strictly adhere to and fulfill at the time of institution of the complaint and, therefore, the complaint is required to be declared as not maintainable as it was registered without joining the partnership firm as well as partners as accused. Learned advocate, therefore, urged that considering the above facts, the present application may be allowed. 6. On the other hand, learned advocate, Mr. Learned advocate, therefore, urged that considering the above facts, the present application may be allowed. 6. On the other hand, learned advocate, Mr. Jasani appearing for the respondent no.2 has objected the present application with vehemence and submitted that because of the friendship between the applicant and the respondent no.2, the respondent no.2 had given certain amount and in lieu thereof, the applicant had issued cheque, which was dishonoured on deposit of the same, which led to issuance of notice first and then, filing of the complaint as there was no other option left with the respondent no.2 and, therefore, the aforesaid complaint has been filed against the applicant only as there was no business transaction but with sole intent to save life of the applicant from the loss suffered by him, the amount was handed over to him at the relevant point of time and, hence except the present applicant, no other persons have been joined as accused. Learned advocate further submitted that the cheque issued by the applicant was in his personal capacity and, hence, there is no involvement of the firm as well as other partners as accused in the aforesaid complaint nor the notice was issued to them. Learned advocate, however, submitted that as stated above, just because of friendly relationship of the applicant with the respondent no.2, amount was given to him and in discharge of his duty, the cheque was issued and thus, it was a transaction between the applicant and the respondent no.2 and, hence only on the ground of technicality, the impugned complaint cannot be quashed. It is, therefore, urged that the present application may be rejected. 7. It is, therefore, urged that the present application may be rejected. 7. Having heard learned advocates appearing for the parties and having gone through the documents produced on record, it is found out that the applicant and the respondent no.2 both were friends and as the applicant was in need of money due to loss suffered in the business, he had borrowed the amount from the respondent no.2 and when the respondent no.2 demanded the said amount, a cheque was issued, which was dishonoured on deposit of the same and, hence, the respondent no.2 issued legal notice, which was duly served, however the applicant did not make the payment and, hence, the aforesaid impugned complaint has been filed, wherein after verification, the process was issued, which was served upon the applicants and, hence, the present application is filed for quashment of the impugned complaint. 8. Much emphasis is made by learned advocate for the applicant on the aspect of non-joinder of the partnership firm/ Company and its partners as accused in view of the fact that it is the mandatory requirement as contained in Section 138 read with Section 141 of the NI Act, which the respondent no.2 has failed to comply. Therefore as this stage, this Court would like to put reliance upon the provision of Sections 138 and 141 of the NI Act, which reads as under, 138. Dishonour of cheque for insufficiency, etc., of funds in the account. Therefore as this stage, this Court would like to put reliance upon the provision of Sections 138 and 141 of the NI Act, which reads as under, 138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.-For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.] 141. Explanation.-For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.] 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 sub-section 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 sub- section (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 corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.] 9. Thus bare reading of aforesaid sections, it is found out that Sub-section (1) of Section 141 of the NI 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 NI Act is the drawer of the cheque. The drawer of the cheque alone would have been the offender thereunder if the NI Act did not contain other provisions. It is because of Section 141 of the NI Act that penal liability under Section 138 of the NI Act is cast on other persons connected with the company. It is also found out from the above provision that 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 i.e. (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, and (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. Therefore in the facts of the present case, admittedly except the signature of the cheque, no other persons from the Company has been joined as accused. 10. At this stage, this Court would like to put reliance upon the decision of the Hon’ble Supreme Court in case of Aneeta Hada Vs. Therefore in the facts of the present case, admittedly except the signature of the cheque, no other persons from the Company has been joined as accused. 10. At this stage, this Court would like to put reliance upon the decision of the Hon’ble Supreme Court in case of Aneeta Hada Vs. M/s. Godfather Travels & Tours Pvt. Ltd., reported in AIR 2012 SC 2795 , wherein the Hon’ble Apex Court has considered the provision of Sections 138 and 141 of the NI Act and made observations in Paragraph Nos.39, 42 and 43 as under, "39. 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. 42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words as well as have to be understood in the context. In Reserve Bank of India v. Peerless General Finance and Investment Co. The words as well as have to be understood in the context. In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. And others it has been laid down that the entire statute must be first read as a whole, then section by section, clause by clause, phrase by phrase and word by word. The same principle has been reiterated in Deewan Singh and others v. Rajendra Prasad Ardevi and others and Sarabjit Rick Singh v. Union of India. 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. 43. 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 dragnet 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 ( AIR 1971 SC 447 ) (supra) which is a threeJudge Bench decision. Thus, the view expressed in Sheoratan Agarwal, ( AIR 1984 SC 1824 ) (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada, ( AIR 2000 SC 145 : 1999 AIR SCW 4228) (supra) is overruled with the qualifier as stated in paragraph 37 the decision in Modi Distilleries, ( AIR 1988 SC 1128 ) (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove." 11. The decision in Anil Hada, ( AIR 2000 SC 145 : 1999 AIR SCW 4228) (supra) is overruled with the qualifier as stated in paragraph 37 the decision in Modi Distilleries, ( AIR 1988 SC 1128 ) (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove." 11. In my view, the case of the applicant is squarely covered by the ratio laid down by the Hon’ble Apex Court in the case of Aneeta Hada (supra). In the present case, admittedly the original complainant has not joined the partnership firm as an accused and the complaint is filed only against the applicant, who is one of the partners of the firm, and therefore, in view of the ratio enunciated in the aforesaid decision rendered by the Hon’ble Apex Court in the case of Aneeta Hada (supra), the impugned complaint is not maintainable. Therefore, the present application deserves to be allowed. 12. Accordingly, the present application is allowed. The criminal complaint, being Criminal Case No.389 of 2017 pending before the learned 12th Additional Chief Judicial Magistrate, Rajkot filed by the respondent No.2 - complainant and all other consequential proceedings pursuant thereto are hereby quashed and set aside. Rule is made absolute.