Research › Search › Judgment

Gujarat High Court · body

2025 DIGILAW 235 (GUJ)

Patel Uveshbhai Mohammadsalim v. State of Gujarat

2025-03-07

J.C.DOSHI

body2025
ORDER : J. C. DOSHI, J. 1. By this application under Section 482 of the Code of Criminal Procedure (for short “the Code”), the applicant seeks quashing of proceedings of old Criminal Case No.941 of 2015 (New Criminal Case No.465 of 2017) filed by the complainant pending in the Court of Chief Judicial Magistrate, Lunavada (Now at Morvah) and further proceedings arising thereof. 2. The brief facts of the case are as under : 2.1 That applicant is partner of Honest Trading company at Lunawada and looking over the management of said company. It is further case that applicant who purchased grans from respondent no.2 agreed to pay Rs.13,10,547/- and against purchase and on demand being made by complainant for such payment, the applicant issued cheque bearing No.000238 dated10.03.2015 of Bank of Baroda, Lunavada Branch for Rs.13,10,547/- towards payment of grains pruchased. Respondent no.2 deposited the cheque with Bank of Baroda and same was returned backe with endorsement of insufficient funds. The complainant gave legal notice on 17.04.2015 and accused did not gave reply. The complainant thereafter preferred Old Criminal Case No.941 of 2015 (new Criminal Case No.465 of 2017) in Court of CJM, Lunawada (now at Morvah) which is pending. Hence, the present petition. 3. Challenging the prosecution under Section 138 of the Negotiable Instruments Act, 1881 (“the N.I. Act”, for short) preferred against the present petitioner in capacity of partner of Honest Trading Company as Criminal Case No.941 of 2015, learned advocate Mr.Barot appearing for the petitioner submits that true purport of Section 141 of the N.I. Act is that besides director or partner of the firm, the firm is also required to be arraigned as accused. He would further submit that in the present case, the complainant has filed the Criminal Case under Section 138 of the N.I. Act for return of cheque issued by Honest Traving Company signed by its partner. He would submit that Section 141 demands that besides the partner who has signed the cheque, the partnership firm is also required to be joined as party accused. In the present case, the partnership firm has not been joined as party accused nor the statutory notice was issued to partnership firm. He would submit that Section 141 demands that besides the partner who has signed the cheque, the partnership firm is also required to be joined as party accused. In the present case, the partnership firm has not been joined as party accused nor the statutory notice was issued to partnership firm. Therefore, he submits that the ratio laid down by coordinate Bench of this Court in case of Oanali Ismailji Sadikot vs. State of Gujarat – 2016 (3) GLR 1991 , would squarely apply in the present case. Upon above submissions, he would submit to quash the prosecution against the present petitioner. 4. Learned advocate for respondent - complainant supported the impugned order and submitted to dismiss the petition. 5. Learned APP in the facts and circumstances of the case submits to pass necessary order. 6. To appreciate the arguments canvassed by learned advocate Mr.Barot, at the outset, I may refer to Section 141 of the N.I. Act : “"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 corporation and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm." 7. Sub-section (1) of Section 141 of the Act derives 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. Explanation (a) states that 'company' means any body corporate and includes a firm or other association of individuals and Explanation (b) 'director' in relation to a firm means a partner in the firm. Thus, it is manifestly clear that beside the director or in case of firm, a partner, company or firm, as the case may be, is also accused in the matter. Thus, it is manifestly clear that beside the director or in case of firm, a partner, company or firm, as the case may be, is also accused in the matter. In the present case, the statutory notice issued under Section 138(B) is given to Abhishek Prakash Nathwani, who is petitioner and partner in Nathwani Polymers, but it is given in his individual capacity and the partnership firm is not joined as party to whom the statutory notice under Section 138(B) is issued. Perusal of the complaint filed before the jurisdictional Court, it is also filed against Patel Uveshbhai Mohmmadsali. At this time, the complainant joined him as partner of Honest Trading Company, but again what is missing is arraignment of Honest Trading Company, partnership firm as accused. Manifestly, Section 141 of the N.I. Act is breached in the present case. Prosecution against the partner of the partnership firm is not maintainable without arraigning partnership firm as accused. 8. The coordinate Bench in case of Oanali Ismailji Sadikot (supra), addressed the identical issue while framing following three questions : “8. Having heard the learned counsel appearing for the applicant and having considered the materials on record, the following questions fall for my consideration: (I) Whether a partnership firm is a legal entity like a company so far as the offence punishable under Section 138 of the Negotiable Instruments Act is concerned? (II) Is the prosecution of the partners of a firm, by virtue of Section 141 of the Act, maintainable in the absence of the partnership firm being impleaded or arraigned as an accused? (III) When the complaint under Section 138 of the Act has the initial defect in its sustainability, can such defect be cured by amending the proceedings by virtue of an application under Section 319 of the Cr. P.C.?” 9. The relevant paragraphs of judgment in case of Oanali Ismailji Sadikot (supra), are as under : “16.Sub-section (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. 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 Section141 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. 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. 21. It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. Sarathi in 'Interpretation of Statutes' while dwelling on the various aspect of an Explanation observes as follows: "(a) The object of an explanation is to understand the Act in the light of the explanation. (b) It does not ordinarily enlarge the scope of the original section which it explains, but only makes the meaning clear beyond dispute." *** 28. Sarathi in 'Interpretation of Statutes' while dwelling on the various aspect of an Explanation observes as follows: "(a) The object of an explanation is to understand the Act in the light of the explanation. (b) It does not ordinarily enlarge the scope of the original section which it explains, but only makes the meaning clear beyond dispute." *** 28. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. The first question is answered accordingly in the affirmative.” 10. After answering question No.1 in aforesaid terms, for question No.2, the coordinate Bench held as under : “30.Thus, it has been laid down in unequivocal words in the aforesaid decision that for maintaining the prosecution against the director under Section 141 of the Negotiable Instruments Act, arraigning of a company as an accused is imperative. In view of explanation to Section 141 of the Negotiable Instruments Act referred to above, this legal position needs to be automatically made applicable in case of prosecution against a partnership firm also. Therefore, it has to be held that for maintaining prosecution against a partner under Section 141 of the Negotiable Instruments Act, arraigning of partnership firm as an accused is imperative. 31. Therefore, it has to be held that for maintaining prosecution against a partner under Section 141 of the Negotiable Instruments Act, arraigning of partnership firm as an accused is imperative. 31. The conclusions drawn by the Supreme Court in the case of Aneeta Hada (supra) are not based merely on the fact that the company is a separate legal entity and juristic person, but these conclusions are drawn on the basis of the fact that Section 141 of the Negotiable Instruments Act deals with the vicarious liability. In paras 58 and 59 of the said judgment, referred above, the Supreme Court has referred to the wordings in Section 141 of the Negotiable Instruments Act and observed that commission of offence by a company is an express condition precedent to attract the vicarious liability of others. It was further held that the words "as well as the company" appearing in the section make it unmistakably clear that when a company is 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. It was further observed that the other categories of offenders like directors or partners of the firm can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. 32. Thus, the Supreme Court has arrived at an irresistible conclusion that for maintaining the prosecution under Section 141 of the Negotiable Instruments Act, arraigning of the company as an accused is imperative, mainly on the basis of the vicarious liability of the directors of the company and not necessarily because the company is a juristic person and it has its own respectability. That was an additional circumstance considered by the Apex Court while holding that arraigning of a company as an accused is imperative, but the main basis for arriving at its conclusion was the vicarious liability which the directors or partners of the firm can have towards the company and hence without joining the company on the touch-stone of vicarious liability they cannot be prosecuted. 33. Therefore, the ratio laid down in the case of Aneeta Hada (supra) can be made equally applicable in the case of a partnership firm also. The partners are liable and sued in their vicarious liability. 33. Therefore, the ratio laid down in the case of Aneeta Hada (supra) can be made equally applicable in the case of a partnership firm also. The partners are liable and sued in their vicarious liability. Whether the partnership firm is a juristic person or not is a different aspect. What is important is that a partner of the firm is arraigned as an accused in the dragnet on the touchstone of vicarious liability, as is done in the case of directors of the company. Therefore, there is no reason at all to draw any distinction in respect of the law to be made applicable to a partnership firm and the company. 34. Moreover, the Legislature has already made it clear that the company includes any body corporate which includes a firm or other association of individuals and director in relation to a firm means a partner in the firm. On this count also, when Section 141 of the Negotiable Instruments Act and explanation thereto does not make any distinction between the company and the partnership firm, there is absolutely no reason to draw such distinction while making applicable the law laid down by the Apex Court in Aneeta Hada (supra) to the partnership firm merely because in that judgment the Apex Court was considering the eventuality of nonjoining of the company. The basic premise of holding either the director or the partner liable for prosecution being the same that of the vicarious liability. Therefore, once the company is held to be an essential party and that arraigning of a company as an accused is imperative for prosecution under Section 141 of the Negotiable Instruments Act, it necessarily follows that arraigning of a partnership firm is also imperative for prosecution against the partners under Section 141 of the Negotiable Instruments Act. The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable. 35. In view of the specific provisions of the Act itself, it is very difficult for the Court to take a view that a partnership firm for the purpose of Section 138 read with Section 141 of the Act is not a legal entity, and therefore, it need not be made an accused in the complaint. The decisions relied upon by the learned counsel appearing for the petitioner are of no avail in any manner. The decisions relied upon by the learned counsel appearing for the petitioner are of no avail in any manner. Thus, the first question is answered accordingly. 36. The second question is answered accordingly.” 11. The ratio laid down by the coordinate Bench of this Court squarely applies to the present case. Prosecution against the present petitioner without arraigning the partnership firm is not maintainable and putting the petitioner into trial, according to this Court, is absurd process. 12. Resultantly, the present petition is allowed. Proceedings of old Criminal Case No.941 of 2015 (New Criminal Case No.465 of 2017) pending in the Court of Chief Judicial Magistrate, Lunavada (Now at Morvah) and all subsequent proceedings arising therefrom are hereby quashed and set aside qua the petitioner. Rule is made absolute. Direct service is permitted.