Gujarat High Court
Sanjaybhai Jamnadas Dharsandiya @ ... vs State Of Gujarat on 18 November, 2021
Author: Gita Gopi
Bench: Gita Gopi
R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION NO. 2416 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE GITA GOPI
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1 Whether Reporters of Local Papers may be allowed -
to see the judgment ?
2 To be referred to the Reporter or not ? -
3 Whether their Lordships wish to see the fair copy -
of the judgment ?
4 Whether this case involves a substantial question -
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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SANJAYBHAI JAMNADAS DHARSANDIYA @ GHARSANDIYA
Versus
STATE OF GUJARAT
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Appearance:
MR MANTHAN K BHATT(6549) for the Applicant(s) No. 1
MS. MEGHNA A PATEL(6651) for the Applicant(s) No. 1
MR PB SHAH(5812) for the Respondent(s) No. 2
MR PRANAV TRIVEDI, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE GITA GOPI
Date : 18/11/2021
ORAL JUDGMENT
1. The petitioner, as partner of "Ambika Builders", has challenged the proceedings under Section 138 of Negotiable Instruments Act, 1881 being Criminal Case No. 31803 of 2019 before the Additional Chief Judicial Magistrate Court, Vadodara under Articles 226 and 227 of the Constitution of India and under Page 1 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 Section 482 of the Code of Criminal Procedure, 1973 on the grounds that M/s "Ambika Builders" is having eight partners, who had purchased land vide registered sale deed dated 01.02.2019 from the complainant of Criminal Case No.31809 of 2019 and one Vijaybhai Ishwarbhai Patel. Cheques were drawn by the "Ambika Builders"
on the Bank a/c maintained by the firm. It was assured that undisputed possession of the land with clear title would be handed over and therefore, part payment was done. However, as a dispute arose regarding the title and possession of land, the payment of cheques was instructed to be stopped by "Ambika Builders".
1.1. It is stated that two cheques bearing Nos. 254174 and 724369 dated 01.08.2019 of State Bank of India were returned unpaid and therefore, statutory notice was issued to the present petitioner, in the capacity of being Partner of "Ambika Builders".
1.2. Ms. Meghna A. Patel, learned counsel for the petitioner contends that the transaction of land took place between "Ambika Builders" as a Partnership Firm and the complainant and Vijaybhai Ishwarbhai Patel. The cheques were drawn by "Ambika Builders"
from the Bank account maintained by "Ambika Builders". No Statutory Notice was issued to "Ambika Builders", nor "Ambika Builders" was made a party in the criminal case. Thus, contents that the initiation of proceedings under Section 138 of the N.I. Act against petitioner, without joining the Partnership Firm, is bad in law and it would be unreasonable to prosecute him under the N.I. Act.Page 2 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022
R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021
2. Ms.Meghna A. Patel, learned advocate for the petitioner further submitted that the sale-deed so executed also discloses that the land in question was purchased by the Partnership Firm. She states that the petitioner does not agitate the fact that he is an authorized Partner of the firm. Ms. Patel submits that any proceedings under Section 138 of the N.I. Act keeping in view the provisions of Section 141 of the Act, mandates that the partnership firm has to be made a party to the proceedings. She further states that cheque was drawn by "Ambika Builders"- partnership firm and therefore the firm is a necessary party to the proceedings.
3. She relied on the decisions rendered in the case of Anil Vasudev Rajgor vs. State of Gujarat reported in [2017 (3) GLH 802] and in the case of Sharma Pramod Narayanprasad vs. State of Gujarat, in Criminal Revision Application No.529 of 2014 dated 11.04.2018.
4. Countering the arguments, learned advocate Mr. P.B. Shah for respondent No.2 by relying on the provisions of Sections 24 and 25 of the Indian Partnership Act, submitted that a notice to the authorized Partner of the firm, is deemed to be a notice to the firm itself and that every partner is jointly & severally liable for all acts of the firm done while he is a Partner .
4.1. Mr. Shah further stated that partnership firm is not a separate legal entity and therefore, liability of partner is joint and several. He further stated that criminal prosecution is neither for recovery of Page 3 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 the money nor for enforcement of any security, etc. Section 138 of the Negotiable Instruments Act is a penal provision, the commission of offence entails a conviction and sentence on proof of the guilt being established in criminal proceedings. Mr. Shah stated that once an offence under Section 138 is completed, the prosecution can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability.
4.2. Mr. Shah stated that the petitioner is an authorized Partner of the firm and was conducting the day-to-day affairs of the firm. The sale deed itself reflects the fact that the petitioner was responsible for and on behalf of the firm and for other partners, and therefore, the prosecution against him has to be considered in accordance with the provisions of law. He further stated that as soon as the complaint under Section 138 of the N.I. Act is presented before the concerned Magistrate, it is the duty of the learned Magistrate to take cognizance and thereafter, if the learned Magistrate comes to the conclusion that prima facie case is made out then summons may be issued. He submitted that the Magistrate Court has performed his duty in accordance with the provisions of law and summons has been issued against the petitioner. To support his arguments, he has relied on following judgments:
(1) Bhagwanji Devraj Versus Union of India reported in 1973 (0) AIJEL-HC 201489.
(2) Bsi Limited Versus Gift Holdings Private Limited reported in Page 4 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 2000 (0) AIJEL 4197.
(3) Smt. Rani Kapoor vs. M/S Silvermount in CRL.M.C. 3474/2016 & Crl.M.A. 14666/2016 (stay) dated 7th July, 2017.
(4) M/S Balaji Diesel vs. Dalton Ceramic Industries in Crl.A.No. 1139 of 2002 dated 31.08.2008.
(5) Madan Mohan Upadhya And Ors. vs. State of Bihar reported in 1987 (35) BLJR 305.
4.3. Mr. Shah further stated that the cause title of the complaint reflects that the petitioner is shown as the authorized Partner of "Ambika Builders"- partnership firm and therefore, it cannot be said that the partnership firm has not been made party to the proceedings.
5. Undisputed facts are that the cheques were issued by the partnership firm, the present petitioner is the signatory to the cheque as an authorized partner and the transaction of purchase of land was for the firm.
6. Section 141 of the N.I. Act provides for the constructive liability on the person responsible for the conduct of the business of the company or partnership firm. Section 141 describes about the offences by the Company. The explanation to Section 141 giving the meaning to 'Company' means any body corporate and includes a firm or other association of individuals, further "director", in relation to a firm, means a partner in the firm. The petitioner is before this Page 5 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 Court challenging the proceedings against him under Section 138 of the N.I. Act contending that the firm has not been joined in the criminal proceedings.
7. In the case of Aneeta Hada vs M/S Godfather Travels & Tours reported in (2012) 5 SCC 661, the Apex Court has held that prosecution without arraigning of company as an accused is not maintainable, the criminal liability on account of dishonour of the cheque primarily falls under drawer company and extends to the person responsible for the act of company only when conditions incorporated in Section 141 stand satisfied. Section 141 of the N.I. Act and explanation thereto does not make any distinction between Company and the partnership firm. Learned advocate Mr. Shah contends that the partnership firm is not a legal entity and the concept of vicarious liability does not get attached to the partnership Act and therefore, the person in-charge of the offence of the firm would be arraigned as an accused without arraigning the partnership firm in the proceedings under Section 138 of the N.I. Act. He states that the partners are not vicariously liable to the firm, by going through the provisions of Section 24 and 25 of the Partnership Act, Mr. Shah tried to project that the liability of the firm and the partners are co-extensive and therefore, stated that even though there is provision of including the firm in the definition of Company under the N.I. Act, concept of vicarious liability would not be made applicable to the partnership firm since is not a legal entity.
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8. In the case of Anneta Hada (supra), it has been held as follows:
(1) Section 141 uses the term 'person' and refers it to a company.
There is no trace of doubt that the company is a juristic person. The concept of corporate criminal liability is attracted to a corporation and company and it is so luminescent from the language employed under Section 141 of the Act. The present enactment is one where the company itself and certain categories of officers in certain circumstances are deemed to be guilty of the offence.
(2) The word "deemed" used in Section 141 of the Act applies to the company and the persons responsible for the acts of the company. It crystallizes the corporate criminal liability and vicarious liability of a person who is in charge of the company. The criminal liability on account of dishonour of cheque primarily falls on the drawer company and is extended to the officers of the company and as there is a specific provision extending the liability to the officers, the conditions incorporated in Section 141 have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable.
(3) The Company can have criminal liability fastened on it, and if a group of persons that guide the business of the companies have the Page 7 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 criminal intent, that would be imputed to the body corporate. Section 141 of the Act clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain. The provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own signification.
9. In the case of K.K. Ahuja vs. V.K. Vora & Anr. reported in 2009 (10) SCC 48, the Supreme Court has observed as follows:
"20. The position under section 141 of the Act can be summarized thus :
(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix `Managing' to the word `Director' makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.
(ii)In the case of a director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of Section 141.
(iii) In the case of a Director, Secretary or Manager (as defined in Sec. 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under section Page 8 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section.
(iv)Other Officers of a company can not be made liable under sub-section (1) of section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence."
10. Thus the deeming provision under Section 141 of the Act applies to the Company and person responsible for the acts of the Company. Section 141 clarifies that the company would mean any body corporate and would include a firm and "directors", in relation to firm, would also means a partners in the firm. Section 141 clearly stipulates that the person which is a Company commits offence then certain categories of person as provided therein, as well as the Company would be deemed to be liable for the offences under Section 138 of the N.I. Act. Explanation to Section 141 thus makes deeming fiction applicable in the case of partnership firm too, which gets included in the meaning of the Company for the purpose of Section 141 of the N.I. Act. The effect of the Section 141 is that Company is principal offender under Section 138 of the Act and remaining persons are made offender by virtue of legal fiction created by the legislature as per the Section. Thus actual offence should have been committed by the Company then alone the other categories of persons would become liable for the offences. The same legal fiction gets extended in the case of the firm, as offence would be primarily attributed to the firm and person thereafter, responsible for, the Firm would become liable for the offence. Thus Page 9 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022 R/SCR.A/2416/2020 JUDGMENT DATED: 18/11/2021 the deeming provision makes its imperative to join partnership firm as party being principal offender to the criminal proceedings under Section 138 of the N.I. Act read with Section 141 of the Act. Here in the present case though the name of the firm has been reflected in the cause title showing petitioner as partner of the firm, but the firm has not been separately, in individual capacity, made a party to the proceedings. The petitioner has been joined as a partner to the firm without impleading the firm in the criminal proceedings, which is not tenable.
11. In view of the above reasons, the petition deserves to be allowed and stands allowed. The impugned criminal complaint being Criminal Case No.31803 of 2019 pending before learned Additional Chief Judicial Magistrate Court, Vadodara and consequential proceedings arising thereto are quashed and set aside. This petition stands disposed of. Rule is made absolute.
(GITA GOPI,J) KUMAR ALOK Page 10 of 10 Downloaded on : Wed Jan 12 02:05:17 IST 2022