Gujarat High Court
Urmilaben Pareshbhai Kothiya vs Hdfc Bank Ltd. on 11 July, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/7872/2017 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION NO. 7872 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed to Yes
see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?
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URMILABEN PARESHBHAI KOTHIYA
Versus
HDFC BANK LTD.
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Appearance:
ADITYA A GUPTA(7875) for the PETITIONER(s) No. 1
MOHIT A GUPTA(8967) for the PETITIONER(s) No. 1
MR AR GUPTA(1262) for the PETITIONER(s) No. 1
MR VIVEK B GUPTA(5611) for the RESPONDENT(s) No. 1
PUBLIC PROSECUTOR(2) for the RESPONDENT(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 11/07/2018
CAV JUDGMENT
1. By this application under section 482 of the Cr.P.C., 1973, Page 1 of 24 R/CR.MA/7872/2017 CAV JUDGMENT the applicant-original accused No.3, seeks to invoke the inherent powers of this Court praying for quashing of the proceedings of the Criminal Case No.633 of 2017 in the court of the 11th Judicial Magistrate, Rajkot arising from the complaint filed by the respondent No.1-original complainant for the offence punishable under section 138 of the Negotiable Instruments Act.
2. It appears from the materials on record that the respondent No.1-H.D.F.C. Bank Ltd. filed a complaint under section 138 of the Act against a partnership firm and its partners. The partnership firm is the accused No.1 in the complaint and the accused Nos. 2 to 11 are the partners of the firm. The applicant herein is the accused No.3 in the complaint. The complaint reads as under;
"1. The complainant Bank is registered and incorporated under the provisions of the Companies Act 1956, having its Rajkot office at 2nd Floor, Opp. Mahatma Gandhi High School, Rajkot. Complainant Bank is in business of providing various loans. The present complaint is filed by the authorized officer who is authorized to file such complaint.
2. That the accused approached the complainant Bank for the purpose of procurement of Finance by the way of TERM LOAN and at the request of the accuse, financial assistance was provided to them under agreement No.81034097. At the time of procurement of finance, the accused accepted all the terms and conditions stipulated by the complainant Bank.
3. That, accused No.1 is borrower of the Term Loan Granted through their partners who are engaged in the day to day activity of the firm, whom are mentioned as accused No.2 to 11. Moreover, Accused No.2 to 11 have also stood as the co-borrower of the financial assistance obtained by them.Page 2 of 24 R/CR.MA/7872/2017 CAV JUDGMENT
4. The accused gave cheque as per following details, duly signed by the accused towards the legal debt which the accused had incurred on account of financial assistance provided to the accused by the complainant. Accused also gave assurance that, said cheque will be honoured on presentation.
Chequ Cheque Drawn Amount Reason Memo Date e No. Date On 18____ 05/11/1 HDFC Rs.37305 Insufficient 05.11.2016 __ 6 Bank 7/- Funds 05.11.2016 19____ Rs.37305 05.11.2016 __ 7/- 20____ Rs.37305 __ 7/-
5. The complainant presented the said cheque with its Banker for realization and the same was dishonoured by the accused's Banker as per above mentioned detail. The said cheque was presented in account maintained at Rajkot and the same was dishonoured in Rajkot.
6. Upon receipt of the said memo, the accused was called upon by statutory demand notice dated 29.11.2016 within the prescribed limitation period, to make payment of the aforesaid amount within the stipulated time. The said notice has been served upon accused on or around 03.12.2016 and they have replied the same through their Advocate through email of our Advocate. However, the accused failed to make payment. Hence, the accused has committed offence as prescribed u/s.138 r/w. 142 of the N.I. Act 1881.
7. The complainant submits that as the complainant maintains their account in the Bank which is within the jurisdiction of this Court, therefore Hon'ble Court has jurisdiction to try the case and punish the accused if he is found guilty under the provisions of the said Act."
3. Mr. Aditya A. Gupta, the learned counsel appearing for the applicant-accused vehemently submitted that the Page 3 of 24 R/CR.MA/7872/2017 CAV JUDGMENT complaint under section 138 of the Act is not maintainable as his client is neither the signatory to the cheques in question nor the partner of the firm. According to the learned counsel, the applicant was one of the sleeping partners in the partnership firm. The applicant came to be inducted as a partner vide the partnership deed dated 08.06.2009. The partnership was, thereafter, reconstituted on 31.12.2014 vide the partnership deed dated 31.12.2014. In the said deed, it has been recorded that the applicant and the others have retired as the partners on 7.10.2014 in pursuance to an understanding arrived at between the partners. The learned counsel invited my attention to the following averments made in paras-6 and 7 of the present application;
"6. That the complaint is not maintainable and vexatious in the eye of law as the petitioner is neither a partner of the firm which issued the cheque nor the petitioner is signatory of the cheques in question. The petitioner states that the facts of the matter is that the petitioner was one of the sleeping partners in the firm being M/s. Radheshyam Cottex vide its partnership deed dated 08.06.2009. Thereafter, the said partnership was reconstituted on 31.12.2014 vide partnership deed dated 31.12.2014. It is recorded in the said deed that the petitioner inter alia others retired as on 07.10.2014 in pursuance of an understanding and thus the partnership was reconstituted. Thus the petitioner ceased to be a partner of the said firm as on 07.10.2014. The petitioner states that the petitioner ceased to be partner of the said firm on 07.10.2014 however, the cheques in question were issued by the said firm much later on 05.11.2016. The petitioner states that by no stretch of imagination, the petitioner can be made liable for the dishonour of the said cheques, which were issued almost two years after the retirement of the petitioner from the firm. Copy of partnership deed dated 31.12.2014 and partnership deed dated 08.06.2009 and copy of FORM No.G issued by Registrar of Firms recording various changes in the firm are annexed herewith and marked as ANNEXURE-Page 4 of 24 R/CR.MA/7872/2017 CAV JUDGMENT
D(Colly).
7. It is stated that in order to import vicarious liability to the petitioner, it is necessary that the petitioner ought to have been one of the partner of the firm which issued the cheque at the time when the cheque was issued. However, when the petitioner ceased to be one of the partners of the firm almost two years back from the date on which the cheques were issued, the petitioner cannot be made liable for dishonour of the cheques under the provisions of section 138 of the Act. It is further stated that it was well within the knowledge of the respondent No.1 that the petitioner is not one of the partners of the firm. This fact becomes absolutely clear from the language of the statutory notice."
4. Thus, according to the learned counsel appearing for the applicant, the prosecution for the offence under section 138 of the N.I. Act is not maintainable against the applicant, as on the date of the commission of the alleged offence, the applicant was not the partner of the firm.
5. In such circumstances, referred to above, the learned counsel prays that there being merit in this application, the same be allowed and the proceedings of the criminal case be quashed so far as the applicant is concerned.
6. In support of his submissions, the learned counsel has placed reliance on the following decisions;
Sr. No. Judgment & Proposition Annexure/Relev ant Paras 1 DCM Financial Services Ltd. vs. Paras J.N. Sareen, 2008 8 SCC 1 1,19,21,23 For the proposition that a person should be in charge of and responsible for the day to day affairs Page 5 of 24 R/CR.MA/7872/2017 CAV JUDGMENT of the firm at the time of presentation of the cheque and not at the time of handing over of the post-dated cheques.
2 Harshendra Kumar D vs. Paras-7, 25 Rebatialata Koley, 2011 3 SCC 351 For the proposition that the statutory documents such as annual return, Form No.32 in the context of the company and Form G in the context of the partnership firm can be relied upon in Quashing proceeidngs funder section 482 as they are evidence of unimpeachable character.
3 Anita Malhotra vs. Apparel Paras-16 and Export Promotion Council, 2012 1 21 SCC 520.
For the proposition that the statutory documents such as annual return, Form No.32 in the context of the company and Form G in the context of the partnership firm can be relied upon in Quashing proceedings under section 482 as they are evidence of unimpeachable character.
4 Balaji Seafoods Exports (India) Paras-2 and 8 Ltd. v. Mac Industries, 1999 1 CTC 6 For the proposition that signed cheques handed over at the time of taking a loan not meant for the purpose of immediate negotiation do not come within the ambit of Section 138 5 Shanku Concretes Pvt. Ltd. v. Paras-3, 10 to State of Gujarat, 2000 Cr.LJ 1988 13 For the proposition that signed cheques handed over at the time of taking a loan when the loan amount has not become due do not come Page 6 of 24 R/CR.MA/7872/2017 CAV JUDGMENT within the ambit of Section 138.
6 Indus Airways Pvt. Ltd., v. Para 20 Magnum Aviation Ltd., 2014 12 SCC 539 For the proposition that both the aforesaid judgements of Hon'ble High Court in Balaji Seafoods and Shanku Concretes confirmed by the Hon'ble Supreme Court of India in this decision.
7 K.K Ahuja vs. V.K. Vora, 2009 10 Paras-25, SCC 48 27(iii), 27(iv) , 28 and 29 For the proposition that if a person other than a Director is impleaded vicariously by the complainant then (I) he can be prosecuted under section 141(2) (ii) that detailed averments stating his role, in what manner and how he was involved in the act of dishonour of the cheque.
[As provided in section 141 Explanation, 'company' includes a firm & 'Director' in relation to a firm, means a partner in the firm] 8 National Small Industeis Paras- 38 and Corporation Ltd. vs. Harmeet 39(iv) Singh Paintal, 2010 3 SCC 330 For the proposition that if a person other than a Director is impleaded vicariously by the complainant then (I) he can be prosecuted under section 141(2) (ii0 that detailed averments stating his role, in what manner and how he was involved in the act of dishonour of the cheque.
9 Gunmala Sales vs. Anu Mehta, Paras-34.3, 2015 1 SCC 103 35(Last six lines from the For the proposition that inspite of the bottom) basic averment being made against Page 7 of 24 R/CR.MA/7872/2017 CAV JUDGMENT a director that he is in charge of and responsible for the day to day affairs of the company, still the complaint can be quashed by the Hon'ble High Court if it feels that making the accused stand in trial would amount to abuse of process of court.
In this case, inspite of basic averments, the complaint against an old lady was quashed on the ground that making the old lady stand to trial is an arm-twisting tactic.
10 A.C. Naravanan vs. State of Paras-21, 21.1 Maharashtra, 2014 11 SCC 790 to 21.5 , 29,30 and 33 For the proposition that the power of attorney/Authorised person filing the complaint under section 138 should personal knowledge regarding the transaction. Otherwise, his deposition in support of the complaint would not be valid.
7. On the other hand, this application has been vehemently opposed by Mr. Vivek B. Gupta, the learned counsel appearing for the respondent No.1-original complainant. Mr. Gupta has filed his written submissions. The written submissions are as under;
"1. The applicant, being original accused has preferred the present petition for quashing Criminal Case No.633 of 2017 pending before the 11th Additional Chief Judicial Magistrate, Rajkot under Section 138 read with Section 141 of The Negotiable Instruments Act, 1881 against them, whereby she has been impleaded as accused in her capacity as partner of M/s Radheshyam Cottex on the ground that she had retired as partners of M/s Radheshyam Cottex before the presentation of the said cheques for collection by the respondent No.1 and as such she cannot be prosecuted under Section 138 read Page 8 of 24 R/CR.MA/7872/2017 CAV JUDGMENT with Section 141 of the Negotiable Instruments Act, 1881. In support of her contention, the applicant has annexed an alleged Deed of Reconstitution of Partnership dated 31/12/2014 and 'Form-G' of Register of Firms relating to M / s Radheshyam Cottex along with the memo petition.
2. The relevant provisions of The Indian Partnership Act, 1932 relating to retirement of a partner from a partnership firm, which would be necessary for deciding the present petition are as follows:
Section 32 - Retirement of a partner (1) A partner may retire,
(a) with the consent of all the other partners,
(b) in accordance with an express agreement by the partners, or
(c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. (2) A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement.
(3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would has been an act of the firm if done before the retirement, until public notice is given of the retirement:
Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.
(4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm.
Section 72 - Mode of giving public notice Page 9 of 24 R/CR.MA/7872/2017 CAV JUDGMENT A public notice under this Act is given-
(a) where it relates to the retirement or expulsion of a partner from a registered firm, or to the dissolution of a registered firm, or to the election to become or not to become a partner in a registered firm by a person attaining majority who was admitted as a minor to the benefits of partnership, by notice to the Registrar of Firms under section 63, and by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business, and
(b) in any other case, by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business.
3. A bare perusal of sub-Section (3) of Section 32 makes it clear that notwithstanding the retirement of a partner from a firm, he / she and the partners continue to be liable as partners to third parties for any act done by them which would has been an act of the firm if done before the retirement, until public notice is given of the retirement. In the present case, admittedly, there is no publication of the retirement in the Official Gazette and no public notice in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business has been given in the manner as prescribed in Section 72 of The Indian Partnership Act, 1932 (reproduced above) relating to retirement of the applicant as partners of M/s Radheshyam Cottex and as such the applicant cannot be said to has legally retired from the partnership firm M/s Radheshyam Cottex as per the provisions of The Indian Partnership Act, 1932. In other words, since admittedly, there is no publication of retirement in the Official Gazette and further since no public notice in at least one vernacular news-paper circulating in the district where the firm to which it relates has its place or principal place of business has been published, as contemplated under Suction 32 read with Section 72 of The Indian Partnership Act, 1932 either by the applicant or by any partner of the reconstituted firm, the applicant still continues to be partners of M/s Radheshyam Cottex and are liable to be prosecuted under Section 138 read with Section 141 of The Negotiable Instruments Act, 1881. As such, the Page 10 of 24 R/CR.MA/7872/2017 CAV JUDGMENT applicant's submission that she has retired from M/s Radheshyam Cottex is thoroughly mis-conceived and not tenable at law. It would be pertinent to mention here that it is an undisputed position that at the time of availing loan from the respondent No.1 Bank and issuance of the subject cheques (3 Nos.) to it, the applicant was partner of M/s Radheshyam Cottex and in fact the applicant had also signed the subject loan agreement as partners of M/s Radheshyam Cottex as well as in her individual capacity as a borrower/ guarantor. In view of the above, the applicant is liable to discharge the liabilities of M/s Radheshyam Cottex to the respondent No.1 Bank and as such the impugned cheques (3 Nos.) issued in discharge of the said liability would be covered under the definition of "legally enforceable debt" and the applicant would be liable for dishonour of the said cheques in question.
4. In Vishwa Mitter of Vijay Bharat Cigarette Stores, Dalhousie Road, Pathankot Versus O.P. Poddar & Ors. (1983) 4 SCC 701 the Hon'ble Supreme Court has held that if a special enactment provides for a specific procedure then that particular procedure has to be followed. Accordingly, since the applicant has admittedly not complied with the specific procedure relating to retirement as a partner prescribed under Section 32 read with Section 72 of The Indian Partnership Act, 1932, she continues to be a partner of the firm.
5. In fact, the applicant was very well aware of the said legal provisions of The Indian Partnership Act, 1932 and accordingly has been discharging her duties as partners of M/s Radheshyam Cottex, continuously. In support of the said contention, the respondent No.1 refers to and relies upon pleadings of three legal proceedings wherein it has been asserted that she continue to be partners of M/s Radheshyam Cottex. In this connection, it is submitted that in the memo of petition of SCA No.11977/2016 filed before this Hon'ble Court preferred by M /s Radheshyam Cottex against the respondent No.1 bank, which has been affirmed on 09-07-2016, it has been asserted in the very beginning that the applicant along with other partners of M/s Radheshyam Cottex, who claim to has retired on the basis of the alleged Deed of Reconstitution of Partnership dated 31/12/2014, are still partners of the said partnership firm. Further, the said petition has been affirmed by Mr. Rahul Kanubhai Page 11 of 24 R/CR.MA/7872/2017 CAV JUDGMENT Kothiya, the applicant No.6 herein, in his capacity as partner of M/s Radheshyam Cottex, who surprisingly claims to has retired from the partnership vide the said alleged Deed of Reconstitution of Partnership dated 31/12/2014. This nails the applicant' pack of blatant lies that have been asserted on affidavit in the memo of the present application that she has retired as partner of M/s Radheshyam Cottex with effect from 07-10-2014, which is contrary to the stand taken in Special Civil Application No.11977/2016. A copy of memo of petition of S.C.A. No.11977 of 2016 is annexed as Annex: B' along with respondent No.1's reply affidavit.
6. Further, even in written statement filed in O.A. No. 352 of 2016 before the DRT-II at Ahmedabad, which is affirmed in November, 2016, a copy whereof has been served on the counsel for the respondent No.1 bank on 06-12-2016, it has been asserted that the applicant is partners of M/s Radheshyam Cottex, again, completely contrary to the stand taken by the applicant in the memo of the present application. This again shows that the applicant's averment on affidavit in the memo of the present application that she has retired as partners of M/s Radheshyam Cottex with effect from 07-10- 2014, is contrary to the stand taken in O.A. No.352/2016. A copy of the said written statement filed in O.A .No.352/2016 before the DRT-II at Ahmedabad is annexed as 'Annex.:
C' along with the respondent No. 1's reply affidavit.
7. Furthermore, even in the memo of application of Civil 13529/2016 filed by M/s Radheshyam Cottex against the respondent No.1 bank, which has been affirmed on 15-12-2016, it has been again asserted that the applicant is a partner of the said partnership firm.
The said application is again affirmed by Mr. Rahul Kanubhai Kothiya, in his capacity as a partner of M/s Radheshyam Cottex, who claims to has retired from the partnership vide the said alleged Deed of Reconstitution of Partnership dated 31/12/2014. A copy of the memo of application of CA No.13529 of 2016~filed before this Hon'ble Court is annexed as 'Annex.: D' to respondent No.1's reply affidavit.
8. The respondent No.1 Bank submits that the above self- contradictory stand taken by the applicant, amounts to playing fraud with the Hon'ble Court in addition giving Page 12 of 24 R/CR.MA/7872/2017 CAV JUDGMENT false evidence as defined under Section 191 of The Indian Penal Code, 1860. As such the applicant are liable to be prosecuted and punished for giving false evidence under Section 193 of The Indian Penal Code, 1860.
9. Now, coming to the contents of the alleged documents produced by the applicant in support of her petition, as regards the Deed of Reconstitution of Partnership dated 31-12- 2014 is concerned, it seems that the same has been given effect from 07-10-2014; however the same has been executed by the concerned partners before a Notary Public on 31-12- 2014. On going through the contents of the said Deed of Reconstitution of Partnership, more particularly the delay between execution of the same and the date on which it has been given effect to, creates serious doubts regarding the genuineness of the said document and it seems that the same has been prepared with malafide intention to achieve ulterior motives and ends, best known to the applicant and other partners of the partnership firm M/s Radheshyam Cottex. As such, the said document cannot be relied upon for quashing Criminal Case No.633/2017 against the petitioner herein, under Section 482 of The Code of Criminal Procedure, 1973 and the applicant should be relegated to the Trial Court to prove the said document in accordance with law, more particularly The Evidence Act, 1872. Further, while the applicant claims to have retired with effect from 07-10-2014 vide agreement dated 31-12-2014, the entry to this effect has been registered in Form-G more than a year thereafter, i.e.; on 22-01-2016. The unusual and unexplained delay caused in making the said entry again creates serious doubts with regard to the contents of the said document also and as such the same also cannot be considered for quashing the present case against the applicant. 10, Further, since the procedure for retirement of a partner from a partnership firm as provided under The Indian Partnership Act, 1932 has admittedly not been followed by the applicant or any of the partners of the partnership firm M/s Radheshyam Cottex, and the applicant are still continuing to discharge her duties as partners of M/s Radheshyam Cottex, as evident on the face of the pleadings of S.C.A. No.11977/2016, O.A. No.352/2016 and CA. No.13529/2016, copies whereof are annexed herewith, it cannot be said that the applicant has retired as partner of the said firm and as such she Page 13 of 24 R/CR.MA/7872/2017 CAV JUDGMENT was partner of the firm on the date of dishonour of the cheque and also continues to be partner as on date and as such she is liable to be proceeded against for trial for having committed the offence under Section 138 read with Section 141 of The Negotiable Instruments Act, 1881. In the present case, the applicant has merely created a facade of her retirement from M /s Radheshyam Cottex, while actually she continue to be partners of the said partnership firm by discharging her duties towards the said firm as clearly evident on face of the pleadings of various litigations between the parties.
11. Last but not the least, as held by the Hon'ble Supreme Court in a number of decisions, powers under Section 482 of the Code of Criminal Procedure, 1973 are to be exercised sparingly and with caution to secure ends of justice, prevent abuse of process of any Court and to make such orders as may be necessary to give effect to any order under the Code, depending upon the facts .of each case. In the present case, undisputedly the applicant was partner of the partnership firm M/s Radheshyam Cottex at the time of applying and availing the loan from the respondent No.1, further she was also partner when the post dated cheques were handed over to the respondent No.1 Bank before reconstitution of the partnership firm. Further, even when the cheques got dishonoured, she was partner of the said firm and in fact still continue to be partner of the firm, in view of the specific provisions of The Indian Partnership Act, 1932 relating retirement of a partner, which has admittedly not been complied with by the applicant and/ or any of the partners of the partnership firm M/s Radheshyam Cottex and the pleadings of different proceedings annexed herewith along with the reply affidavit. As such, it cannot be held by any stretch of imagination or legal provision or interpretation that the applicant has not committed the offence as envisaged under Section 138 read with Section 141 of The Negotiable Instruments Act, 1881 and as such the present petition preferred under Section 482 of the Cr.P.C., 1973, deserves to be dismissed with heavy exemplary costs for misleading the Hon'ble Court and playing fraud with the Hon'ble Court, as described in necessary detail above, and for coercing the respondent No.1 to appear and contest a totally ill-conceived and malafide proceedings based on false evidence and fabricating false evidence, as aforesaid."
Page 14 of 24 R/CR.MA/7872/2017 CAV JUDGMENT8 Thus, the case of the complainant is that the issue whether on the date of the commission of the alleged offence, the applicant was a partner of the firm or not, being a disputed question of fact, the same cannot be gone into by this Court in the present proceedings. The principal argument of the learned counsel appearing for the complainant is that assuming for the moment that the applicant-accused had retired as a partner from the partnership firm, whether such retirement could be said to be in accordance with law, and if such retirement could not be said to be in accordance with law, then even if the applicant has ceased to be the partner, the applicant would not get absolved from her liability under section 138 read with section 141 of the Act. In such circumstances, referred to above, the learned counsel prays that there being no merit in this application, the same be rejected.
9. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the criminal proceedings should be quashed so far as the applicant is concerned.
10. Along with the affidavit-in-reply filed by the complainant opposing this application, few documents have been annexed. One of the documents is a memo of the Special Civil Application No.11977 of 2016 filed by the partnership firm M/s. Radheshyam Cottex with the following prayers;
Page 15 of 24 R/CR.MA/7872/2017 CAV JUDGMENT"(a) YOUR LORDSHIPS BE PLEASED to quash and set aside the possession Notice dated 03.03.2016 under Section 13(4) issued by the Respondent HDFC Bank Ltd at Annexure C to this petition being illegal and in violation of Section 13(3A) of the SARFAESI Act, 2002 and to issue a writ of mandamus, certiorari or any other writ, direction or order to quash and set aside the aforesaid notices in the interest of justice.
(b) YOUR LORDSHIPS BE PLEASED to issue a writ of mandamus to direct the Respondent to comply with the provision of Section 13(3A) and deal with the various objection/representation presented by the petition under Section 13(3A) of the SARFAESI Act, 2002.
(c ) YOUR LORDSHIPS BE PLEASED to restrain Respondent and/or their agents, servants to take further steps under the SARFAESI Act, 2002, qua the secured asset of the petitioner to the petition pending admission, hearing and final disposal of this petition.
(d) YOUR LORDSHIPS BE PLEASED pass such other and further orders, which may be deemed fit, in the interest of justice."
11. In the memo of the writ application, the averments made in para-1 are important. The averments are as under;
"(1) The petitioner is a partnership firm having partners (I) Pareshbhai Parbatbhai Kothiya (ii) Urmilaben Pareshbhai Kothiya (iii) Chimanbhai Kabariya (iv) Kapilbhai Kabariya (v) Kanubhai Kabariya (vi) Lilavantiben Kabariya (vii) Parbatbhai Kothiya (viii) Saileshbhai Kothiya (ix) Rahulbhai Kothiya (x) Bhailabhai Kothiya having its address mentioned in the cause title hereinabove. The present petition is being filed through the partner of the petitioner firm.'
12. Thus, in the writ application filed by the firm, it has been Page 16 of 24 R/CR.MA/7872/2017 CAV JUDGMENT stated that Urmilaben Pareshbhai Kothiya, i.e., the applicant herein, is one of the partners of the firm. This writ application was affirmed on 9th July, 2016.
13. In the decision reported in CDJ 2004 MHC 972, V.Sundaram Vs. E.Santhalingam, it is observed as follows:
"3. ........ From the decisions cited above, it is clear that a partner who has retired from the partnership is bound to give notice in a vernacular newspaper of the locality wherein the principal place of business of the partnership situated and also in the official gazette. Further from the judgments referred to above, it is also clear that notwithstanding the dissolution of the partnership firm, a partnership continues as to third persons who deal with the members thereof as partners until public notice of dissolution is given, even though, as between the partners the firm has been dissolved prior to such notice. In other words, a partnership is presumed to continue as to third persons until public notice of dissolution has been given unless the person dealing with the firm after its dissolution had actual knowledge of such dissolution. Section 45 of the Indian Partnership Act says that a partnership continues as to third persons unless the dissolving of the firm is taken to the knowledge of the third persons who deal with the firm."
14. In the decision reported in 2007 (3) CTC 356 B.Narashimha Rao Vs. T.Raghavalu Naidu & Co, in paragraph 10 it is observed as follows:
"10. The said provision makes it very clear that in case of retirement or expulsion or dissolution, etc., it should be by notice to the Registrar of Firms under Section 63 of the Act and by publication in the Official Gazette in atleast in one vernacular newspaper circulated in the district where the firm does its business. Thus, the public notice as contemplated under this Section makes it very clear that the above three modes have to be carried out relating to the retirement or expulsion of the partners, etc."Page 17 of 24 R/CR.MA/7872/2017 CAV JUDGMENT
15. In the decision reported in CDJ 2007 MHC 1847, N.R.Mahesh Vs. N. Ashok, while considering a similar set of facts, the learned Judge has observed as under in paragraph 12 as follows:
"12. Though in the cause title it appears that the petitioner/accused has been prosecuted as if in his personal capacity, while elaborating the details of the petitioner, it has been stated that the petitioner is a partner of the firm. The name of the firm has been omitted in the cause title. The cheque in question has been issued only by the petitioner in the name of the partnership firm, mentioned in the complaint. Issuance of notice by the respondent/complainant to the petitioner is not in dispute. For the notice issued, no reply has been sent by the petitioner."
16. All the above referred three decisions came to be considered by the Madras High Court in the case of S. Raja Saravanan S/o. S. Devarajan vs. K. Anandarajan S/o. Kathavarayan, Cri. O.P.No.18129 of 2007, decided on 20.11.2007. The learned Single Judge of the Madras High Court observed in para-28 as under;
"As far as the contention of the learned counsel for the respondent based on Sections 45 and 72 of the Indian Partnership Act and the decisions reported in CDJ 2004 MHC 972 (V.Sundaram Vs. E.Santhalingam) and 2007 (3) CTC 356 (B.Narashimha Rao Vs. T.Raghavalu Naidu & Co,) are concerned, I am of the considered view that the said contention is not applicable to this case. In the context of considering the civil liability of a retiring partner or a partner of a dissolved firm it has been held that in the said decisions that the procedure prescribed under Sections 45, 63 and 72 of the Indian Partnership Act should be complied with. The partnership continues to third parties who deal with the members of the firm as partners until public notice of dissolution is given. Even though as between the partners the firm has been dissolved prior to such notice. But while Page 18 of 24 R/CR.MA/7872/2017 CAV JUDGMENT considering the criminal liability of the retiring partner of the firm or the partner of the dissolved firm under Section 138 of the Negotiable Instruments Act, the main question to be considered is as to whether on the date of issue of cheque and on the date of arising of cause of action such partner was really and actually a partner of the firm or not. Therefore, the said decisions referred to and relied upon by the learned counsel for the respondent cannot be applied to the facts of this case. "
17. I am in respectful agreement with the view taken by the learned Single Judge of the Madras High Court. The mode and the procedure prescribed for the purpose of retiring from a partnership firm has been explained under the provisions of sections 45, 63 and 72 of the Indian Partnership Act. If the legal procedure prescribed has not been followed, then the civil liability of a retiring partner continues to the third parties who deal with the members of the firm as partners until public notice of dissolution is given. However, I am dealing with a matter under section 138 of the N.I. Act. While considering the criminal liability of the retired partner of the firm or the partner of the dissolved firm under section 138 of the N.I. Act, the main question to be considered is as to whether on the date of issue of the cheque and on the date of arising of the cause of action, such partner was really and actually a partner of the firm or not.
18. Having regard to the materials on record, I am of the view that the issue raised as regards the retirement of the applicant as a partner, on the firm being dissolved and re- constituted, is a highly disputed question of fact. Not only in the Special Civil Application No.11977 of 2016 filed by the partnership firm, as referred to above, the applicant Page 19 of 24 R/CR.MA/7872/2017 CAV JUDGMENT has been shown as one of the partners, but even in the written submissions filed in O.A. No.352 of 2016 before the DRT (II) at Ahmedabad, affirmed in November, 2016, it has been asserted that the applicant is a partner of M/s. Radheshyam Cottex. This is evident from Annexure-C to the reply filed by the complainant.
19. Furthermore, even in the memo of the Civil Application No. 13529/2016 filed by M/s. Radheshyam Cottex against the respondent No.1 Bank, which has been affirmed on 15.12.2016, it has been again asserted that the applicant is a partner of the said partnership firm. The said application is affirmed by one Mr. Rahul Kanubhai Kothiya, in his capacity as a partner of M/s. Radheshyam Cottex, who claims to have retired from the partnership vide the said alleged Deed of Reconstitution of Partnership dated 31.12.2014. This is evident from Annexure-D to the reply of the complainant.
20. The Supreme Court, in the case of Rallis India Ltd. vs. Poduru Vidya Bhushan & ors., reported in (2011) 13 SCC 88,, has taken the view that once the vicarious liability of a partner of the firm is specifically made out by appropriate averments in the complaint, then the High Court should not discharge the accused of their vicarious liability for the offences under sections 138 and 141 of the N.I. Act at the threshold on the ground that they had retired from the partnership firm. The question as to whether or not the accused were the partners in the firm on the date of the commission of the offence, is one of fact, which has to be established in trial. I may quote the relevant observations;
Page 20 of 24 R/CR.MA/7872/2017 CAV JUDGMENT"10. Thus, in the light of the aforesaid averments as found by us in the Criminal Complaint, we are of the considered opinion that sufficient averments have been made against the Respondents that they were the partners of the firm, at the relevant point of time and were looking after day to day affairs of the partnership firm. This averment has been specifically mentioned by the Appellant in the complaint even though denied by the Respondents but the burden of proof that at the relevant point of time they were not the partners, lies specifically on them. This onus is required to be discharged by them by leading evidence and unless it is so proved, in accordance with law, in our opinion, they cannot be discharged of their liability. Consequently, High Court committed an error in discharging them. Also, at the cost of repetition, by virtue of their own submissions before the High Court (reproduced in Para 6 above), the Respondents have admitted the fact that the Appellant had referred to them in their capacity as partners who were incharge of the affairs of the firm in the initial complaints. The question as to whether or not they were partners in the firm as on 31.03.2004, is one of fact, which has to be established in trial. The initial burden by way of averment in the complaint has been made by the Appellant.
11. The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, proviso to Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his knowledge or he had exercised due diligence to prevent the commission of such offence, he will not be liable of punishment. Needless to say, final judgment and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about Page 21 of 24 R/CR.MA/7872/2017 CAV JUDGMENT the status of the partners "qua" the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced - if they are eventually found to be not guilty, as a necessary consequence thereof would be acquitted.
12. At the threshold, the High Court should not have interfered with the cognizance of the complaints having been taken by the trial court. The High Court could not have discharged the respondents of the said liability at the threshold. Unless parties are given opportunity to lead evidence, it is not possible to come to definite conclusion as to what was the date when the earlier partnership was dissolved and since what date the Respondents ceased to be the partners of the firm.
13. Before concluding the present discussion, we also take this opportunity to strike a cautionary note with regard to the manner in which High Courts ought to exercise their power to quash criminal proceedings when such proceeding is related to offences committed by companies. The world of commercial transactions contains numerous unique intricacies, many of which are yet to be statutorily regulated. More particularly, the principle laid down in Section 141 of the Act (which is pari materia with identical sections in other Acts like the Food Safety and Standards Act, the erstwhile Prevention of Food Adulteration Act etc. etc.) is susceptible to abuse by unscrupulous companies to the detriment of unsuspecting third parties.
14. In the present case, there are several disputed facts involved - for instance, the date when the partnership came into being, who were the initial partners, if and when the Respondents had actually retired from the partnership firm etc. Strictly speaking, the ratio of the SMS Pharmaceuticals (supra) can be followed only, after the factum that accused were the Directors or Partners of a Company or Firm respectively at the relevant point of time, stands fully established. However, in cases like the present, where there are allegations and counter- allegations between the parties regarding the very composition of the firm, the above rule of `specific averment' must be broadly construed.Page 22 of 24 R/CR.MA/7872/2017 CAV JUDGMENT
15. Indeed, it would be nothing short of a travesty of justice if the Directors of a Company of Partners of a Firm, who, having duped a third-party by producing false documents (like a fake partnership deed) or making false statements (that some others were in charge of the Company/Firm), at a subsequent stage, seek protection from prosecution on the ground that they were not directly indicted in the complaint - such a proposition strikes against one of the very basic tenets of the law of natural justice, which is, that none shall be allowed to take advantage of his own default. Of course, the above observation is of a general nature, and has no bearing on the present case, but nonetheless, the power to quash a criminal proceeding with respect to an offence under Section 141 of the Act, must be exercised keeping this advisory note and caveat in mind.
16. On account of foregoing discussion, we are of the considered opinion that the impugned judgment and order passed by learned Single Judge exercising the jurisdiction conferred on him under Section 482 of the Cr.P.C. cannot be sustained in law. The same are hereby set aside and quashed. The trial court is directed to dispose of the Criminal complaints filed by Appellant at an early date, after giving opportunity of hearing to both sides, in accordance with law. However, the Trial Court would not be influenced by any of the observations made hereinabove and would decide the matters in accordance with law. The appeals are allowed. Parties to bear their respective costs."
21. I have also considered the case law relied upon by the learned counsel appearing for the applicant in support of his submissions. There need not be any debate as regards the principles or the ratio propounded in the decisions of the Supreme Court. The statutory documents such as annual returns, Form No.32 in the context of the Company and Form-G in the context of the partnership firm can be relied upon and looked into by the Court, but so far as the case in hand is concerned, the materials placed by the other side on record Page 23 of 24 R/CR.MA/7872/2017 CAV JUDGMENT would indicate that the picture is very hazy and the parties must be given an opportunity to lead appropriate evidence before the Trial Court.
22. I am of the view that the parties will have to lead appropriate evidence before the Trial Court in accordance with law. It will not be proper to take the view, while deciding a quashing application under section 482 of the Code, that the applicant was not the partner of the firm on the date of the commission of the alleged offence having regard to the materials on record.
23. In the result, this application fails and is hereby rejected. Rule is discharged. The interim relief, earlier granted, stands vacated forthwith. The Trial Court shall now proceed further with the Criminal Case No.633 of 2017 pending before the 11th Judicial Magistrate at Rajkot expeditiously.
(J.B.PARDIWALA, J) Vahid Page 24 of 24