Gujarat High Court
Anil Vasudev Rajgor vs State Of Gujarat & on 11 April, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/19545/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 19545 of 2016
With
CRIMINAL MISC.APPLICATION NO. 19548 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ? YES
2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy of the
judgment ? NO
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or
NO
any order made thereunder ?
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ANIL VASUDEV RAJGOR....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR NISHITH P THAKKAR, ADVOCATE for the Applicant(s) No. 1
MS ASHA D TIWARI, ADVOCATE for the Applicant(s) No. 1
MR ASIM PANDYA, ADVOCATE WITH MR. JAYESH C PATEL, ADVOCATE
for the Respondent(s) No. 2
MS NISHA THAKORE, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 11/04/2017
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ORAL JUDGMENT
1 Rule returnable forthwith. Ms. Thakore, the learned Additional Public Prosecutor wavies service of notice of rule for and on behalf of the respondent - State of Gujarat. Mr. Asim Pandya, the learned counsel waives service of notice of rule for and on behalf of the complainant.
2 By these two applications under Section 482 of the Code of Criminal Procedure, 1973, the applicant - original accused No.3 seeks to invoke the inherent powers of this Court, praying for quashing of the proceedings of the Criminal Cases Nos.1076 of 2015 and 1075 of 2015 respectively pending in the Court of the learned Judicial Magistrate First Class, Dhanera, District: Banaskantha. Both the criminal cases are relating to dishonour of cheques punishable under Section 138 of the Negotiable Instruments Act.
3 The applicant herein has been arraigned as an accused in his capacity as one of the partners of the partnership firm namely, Mangalam Oil Industries. Indisputably, the applicant has not signed the cheques on behalf of the firm. The cheques in question were signed by the original accused No.1 in his capacity as a partner for and on behalf of the partnership firm.
4 Both the cheques came to be dishonoured on the date when they were presented, as the validity period of the cheques had expired.
5 The only question that falls for my consideration is whether the applicant herein can be prosecuted for the offence alleged by virtue of Section 141 of the Negotiable Instruments Act.
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6 Indisputably, Mangalam Oil Industries i.e. the partnership firm,
being a legal entity, has not been arraigned as an accused. In such
circumstances, the decision of the Supreme Court in the case of Aneeta Hada vs. M/s. Godfather Travels and Tours Pvt. Ltd. [AIR 2008 SC (Supp) 1849] would come into play. However, Mr. Pandya, the learned counsel appearing for the complainant has an argument to canvass. According to Mr. Pandya, the proposition of law laid down by the Supreme Court in Aneeta Hada (supra) would apply only in the case of Directors of the company and not a partnership firm, as a partnership firm is not a legal entity for the purpose of Section 141 of the Negotiable Instruments Act. According to Mr. Pandya, even in the absence of the partnership firm in the complaint, the partners can be proceeded for the offence punishable under Section 138 of the N.I. Act.
7 This Court had an occasion to consider the question whether a partnership firm is a legal entity like a 'company' so far as the offence punishable under Section 138 of the Negotiable Instrument Act is concerned in the case of Oanali Ismailji Sadikot vs. State of Gujarat [(2016) 3 G.L.R. 1991]. I may quote the relevant observations:
"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.?
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• FIRST QUESTION:
9 Before I proceed to answer the first question, let me look into the decisions relied upon by the learned counsel in that regard. In Munshi Ram (supra), the appellants before the Supreme Court were partners of a firm, Bharat Industries, Chheharta. By a Notification, 15th May, 1946, the Chheharta Municipal Committee levied a profession tax under Section 61(1)(b) of the Punjab Municipal Act, 1911. The appellants filed a suit for permanent injunction restraining the defendant committee from realizing the profession tax demanded by it. The appellants challenged the validity of the assessment contending that construed in light of the definition given in Section 2(40) of the Punjab General Clauses Act, the term person occurring in Section 6(1)(b) of the Punjab Municipal Act, 1911, included a firm and since the trade carried on by the firm was one, the tax could be levied on the firm, and not on the partners individually. On such premises, it was pleaded that the Municipal Committee in levying the tax on the individual partners had exceeded its statutory powers under Section 61 (1)(b) of the Municipal Act.
9.1 The trial Court dismissed the suit, on appeal by the plaintiffs, the Additional District Judge, Amritsar, reversed the judgment of the trial Court and decreed the suit. The Municipal Committee carried a further appeal to the High Court. The learned Single Judge, who heard the appeal, affirmed the judgment and decree of the first appellate Court. The matter reached upto the Supreme Court. The Supreme Court in para 14 quoted Section 61(1)(b) of the Municipal Act material for the purpose of deciding the case which reads as under:
Subject to any general or special orders which the State Government may make in this behalf, and the rules, any committee may, from time to time for the purposes of this Act, and in the manner directed by this Act, impose in the whole or any part of the municipality any of the following taxes, namely: (1) (a) ..............
(i) to (iii) ..........
(b) a tax on persons practising any profession or art or carrying on any trade or calling in the municipality.
Explanation. A person in the service or person holding an office under the State Government or the Central Government or a local or other public authority shall be deemed to be practicing a profession within the meaning of this subsection."
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9.2 The Supreme Court proceeded to observe in paras 15, 16 and 18 as under:
15. From a plain reading of the extracted provision, it is clear that a tax leviable under clause (b) is, in terms, a tax on "persons". The expression "persons" undoubtedly includes natural persons. The class of such taxable persons has been indicated by the Legislature with reference to their occupational activity. Thus, in order to be authorised, a tax under clause (b) of Section 61 (1) must satisfy two conditions: First, it must be a tax on "persons". Second, such persons must be practicing any profession or art or carrying on any trade or calling in the municipality.
16. There can be no dispute that the appellants are "person" and, as such, satisfy the first condition. Even the learned counsel for the appellants has candidly conceded that the individual partners are also "persons" within the meaning of the said clause (b).
Controversy thus becomes narrowed down into the issue: Whether persons collectively doing business in partnership in the municipality, fulfill the second condition? That is to say, do such persons "carry on any trade or calling in the municipality" within the contemplation of clause (b)?
18. 'Partnership' as defined in Section 4 of the Indian Partnership Act, 1932, is the relation between persons who have agreed to share the profits of a business carried on by all or any of them for the benefit of all. The section further makes it clear that a firm or partnership is not a legal entity separate and distinct from the partners. Firm is only a compendious description of the individuals who compose the firm. The crucial words in the definition of 'partnership' are those that have been underlined. They hold the key to the question posed above. They show that the business is carried on by all or any of the partners. In the instant case, admittedly, all the plaintiffappellants are carrying on the business in partnership. All the six partners are sharing the profits and losses. All the partners are jointly and severally responsible for the liabilities incurred or obligations incurred in the course of the business. Each partner is considered an agent of the other. This being the position, it is not possible to hold that each of the six partners is not carrying on a trade or calling within the purview of clause (b) of Section 61 (1) of the Municipal Act. At the most, it can be said that each of these six persons is severally as well as collectively carrying on a trade in the Municipality. There is nothing in the language of Section 61 or the scheme of the Municipal Act which warrants the construction that persons who Page 5 of 21 HC-NIC Page 5 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT are carrying on a trade in association or partnership with each other cannot be individually taxed under clause (b) of Section 61 (1). On the contrary, definite indication is available in the language and the scheme of this statute that such partners can be taxed as persons in their individual capacity. As noticed already, clause (b) makes it clear in no uncertain terms that this is a tax on 'persons'. Its incidence falls on individuals, who belong to a class practicing any profession or art; or carrying on a trade or calling in the municipality. To hold that persons who are collectively carrying on a trade in the municipality cannot be taxed individually, would be to read into the statute words which are not there. There are no words in clause (b) or elsewhere in the statute which, expressly or by necessary implication, exclude or exempt persons carrying on a trade collectively in the municipality from being taxed as individuals. To attract liability to a tax under this clause, it is sufficient that the person concerned is carrying on a trade in the municipality, irrespective of whether such trade is being carried on by him individually or in partnership with others. Thus, both the conditions necessary for levying a tax under clause (b) of sub section (1) of Section 61 of the Municipal Act existed in this case. The appellants are "persons" and they are carrying on a trade in Chheharta Municipality.
9.3 By placing reliance on the observations made in para 18, the learned counsel submitted that a firm or partnership is not a legal entity separate and distinct from the partners.
10 In Mahabir Cold Storage (supra), the appeal before the Supreme Court was filed by the appellant assessee against the judgment of the Division Bench, Patna made in the Tax Case answering in favour of the Revenue and against the Assessee. In the said case, the assessee was a registered partnership firm. In para 11, the Court observed as under:
11. The crucial question, therefore, is whether the appellant is the owner of the machinery and plant in the relevant assessment year 196263. Acquisition of ownership is a condition precedent to avail of the development rebate under S. 33(1) of the Act.It is now fairly clear from the statement of facts that the old and the new partnership firms are separately registered under the Act and the old one was doing its business at Calcutta and the new one at Purnea. They have been separately being assessed as independent assessable entities. Only the new firm alone was reconstituted consisting of the two partners of the old firm M/s. Prayagchand Hanumanmal and Periwal and Co. (P.) Ltd. Prayagchand and Hanumanmal individually are entitled to 25 per cent shares each for the profits in the appellant firm and Periwal and Co. (P.) Ltd.
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has 50 per cent shares of profit. Under the Indian Partnership Act, '1932 the partnership firm registered thereunder is neither a person nor a legal entity. It is merely acollective name for the individual members of the partnership. A firm as such cannot be a partner in another firm though its partners may be partners in another firm in their individual capacity. Either under the repealed Act or the Act, a firm is liable to be separately assessed to tax as well as all its partners in their capacity as individuals if they have taxable income. The appellant is separately registered under S. 26A of the Act and assessed to tax from the assessment year 196061 and onwards. There is no reconstitution of the original firm Prayagechand Hanumanmal inducting Periwal,and Co. (P.) Ltd. as its partner. Thus it is clear that the appellant assessee is a new identity under the Act. It is not a successor in interest of the old firm as per the provisions of the Act. The question then is whether the assessee is entitled to development rebate under S. 33(1) of the Act. (Under S. 10(1)(vib) of the repealed Act). Section 33(1) gives right to development rebate only to the owner who has acquired the ship or installed the machinery or plant. The necessary implication is that the assessee who claims development rebate should continue to remain to be the owner of the ship or plant or machinery during the relevant previous assessment year/ years and the owner alone is entitled to the development rebate till it becomes nil in the relevant previous assessment year or the succeeding assessment years carried forward up to 8 years and not thereafter.
11 In Comptroller and Auditor General (supra), the issue before the Supreme Court was whether the respondent being a proprietary concern was eligible for being brought on the panel for audit work of government companies and concerns. The audit work of the government and public undertakings was assigned to only those Chartered Accountant firms which were enrolled on the panel maintained by the appellant. The appellant through an advertisement invited applications from the firms of the Chartered Accountants for the purpose of empanelment for audit of the government companies. The respondent therein had submitted an application for enrollment on the panel, but the same was rejected on account of the fact that his firm was not a partnership firm, but a proprietary concern. Aggrieved, the respondent filed a writ application under Article 226 of the Constitution of India challenging the exclusion of the proprietary concerns from their empanelment as being discriminatory, arbitrary and violative of Article 14 of the Constitution. The learned Single Judge of this High Court allowed the writ petition. The Letters Patent Appeal before the Division Bench was also dismissed. The Comptroller and Auditor General preferred an appeal before the Supreme Court. The Supreme Court, while dismissing the appeal, observed in para 9 as under:
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9. The appellant insists that it is only a smaller group of Chartered Accountants firms that would be eligible for being brought on the panel for audit of public sector undertakings or Government concerns. The audit work of public sector undertaking, no doubt, is to be done by the qualified and efficient Chartered Accountants.
Once a person is qualified, experienced and efficient, it is difficult to understand how he could be discriminated against only for the reason that he has chosen to act alone in the professional career and has not been able to form a partnership firm. The efficiency, as pointed out by the High Court, springs from the personal experience, proficiency and personal capacities. It is, therefore, not possible to link these characteristics and professional acumen to a person or persons in a firm alone. A single individual as an auditor in a proprietary concern can have such characteristics and professional acumen by himself and also through the assistance of experienced auditor who could be in his services as efficient as any partnership firm. It is often seen in many cases that some of the partners of the partnership firm are sleeping partners with no professional duties to discharge. A partnership concern is not a legal entity like company; it is a group of individual partners. In a partnership firm, it is the partner who will be assisted in carrying out the work but quite remains the eligible Chartered Accountant. It is the same situation as in a proprietary concern where a Chartered Accountant would be carrying on audit work allinone. Merely because some of the Chartered Accountants have formed a partnership firm, it cannot be assumed that they become more efficient for carrying out audit work than the individual Chartered Accountant who forms proprietary concern. It is, therefore, evident that the appellant himself erroneously assumed that the partnership firms are more efficient than the proprietary concern in the matter of audit of accounts of the public sector undertakings or of the Government concerns.
12 In Bacha F. Guzdar (supra), the argument before the Supreme Court was that the possession of the shareholders in a company was analogous to that of partners inter se. While holding the analogy is wholly inaccurate, the Supreme Court observed, in para 9, as under:
9. It was argued that the position of shareholders in a company is analogous to that of partners 'inter se.' This analogy is wholly inaccurate. Partnership is merely an association of persons for carrying on the business of partnership and in law the firm's name is a compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders. In Halsbury's Laws of England, Vol. 6 (3rd Ed), page 234, the law regarding the attributes of shares is thus stated :Page 8 of 21
HC-NIC Page 8 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT "A share is a right to a specified amount of the share capital of a company carrying with it certain rights and liabilities while the company is a going concern and in its winding up. The shares or other interest of any member in a company are personal estate transferable in the manner provided by its articles, and are not of the nature of real estate".
13 In V. Subramaniam (supra), the appeal before the Supreme Court arose of a suit filed before the Bombay City Civil Court instituted by the appellant praying for dissolution of an unregistered partnership firm between the appellant and the respondent. In that suit, a defence was taken that the suit was not maintainable in view of Subsection (2A) of Section 69 of the Indian Partnership Act, 1932. The Bombay City Civil Court took the view that Subsection (2A), which was introduced by the Maharastra Amendment to Section 69 of the Act, was unconstitutional being violative of Articles 14 and 19(1)(g) of the Constitution of India. The Bombay City Civil Court made a reference in that regard to the High Court under Section 113 of the Code of Civil Procedure. The High Court, held that Subsection (2A) of Section 69 was not unconstitutional. The appeal came up before the Supreme Court. After noticing Section 69(1) and (2) of the Partnership Act as well as Subsection (2A) introduced by the Maharashtra Amendment 1984, the Court observed in paras 14 and 17 as under:
14. It may be mentioned that a partnership firm, unlike a company registered under the Indian Companies Act, is not a distinct legal entity, and is only a compendium of its partners. Even the registration of a firm does not mean that it becomes a distinct legal entity like a company. Hence the partners of a firm are coowners of the property of the firm, unlike shareholders in a company who are not coowners of the property of the company.
17. It has already been mentioned above that a partnership firm, whether registered or unregistered, is not a distinct legal entity, and hence the property of the firm really belongs to the partners of the firm. Subsection (2A) virtually deprives a partner in an unregistered firm from recovery of his share in the property of the firm or from seeking dissolution of the firm.
14 What is discernible from a conspectus of the authorities referred to above is that a partnership firm, unlike a company registered under the Indian Companies Act, is not a distinct legal entity or a juristic person, but is only a compendium of its partners. Even the registration of a firm would not make it a distinct legal entity like a company. The partners of a firm are coowners of the proprietary firm, unlike the shareholders in a Page 9 of 21 HC-NIC Page 9 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT company who are not coowners of the property of the company.
15 However, the position of a partnership firm so far as Section 138 read with Section 141 of the Negotiable Instruments Act is concerned appears to be altogether different. Section 141 of the Act reads as under:
141. Offences by companies (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence :
[Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation. For the purposes of this section.
(a) "company" means any body corporation and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm.
16 Subsection (1) of Section 141 of the Act provides that if a person committing an offence under the section is a company, every person who, Page 10 of 21 HC-NIC Page 10 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT at the time offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The offender in section 138 of the Act is the drawer of the cheque. He alone would have been the offender thereunder if the Act did not contain other provisions. It is because of section 141 of the Act that penal liability under section 138 is cast on other persons connected with the company. Three categories of persons can be discerned from the said provision who are brought within the purview of the penal liability through the legal fiction envisaged in the section. They are: (1) The company the principal offender which committed the offence, (2) Every one who was in charge of and was responsible for the business of the company, (3) Any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence. However, if a person proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence, he shall not be liable to punishment under this section. Subsection (2) further provides that where any offence under this Act has been committed by a company and it is provided that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. The Explanation to the section defines company as any body corporate and includes a firm or other association of individuals; and director, in relation to a firm, means a partner in the firm.
17 It is only the drawer of the cheque, who can be held responsible for an offence under Section 138 of the Act. Section 141 provides for the constructive liability. It postulates that a person, in charge of and responsible to the company, in the context of the business of the company, shall also be deemed guilty of the offence. The drawer can be a company, a firm or an association of individuals, but only those directors, partners, or officers can be held responsible for the offence punishable under Section 138 of the Act, who are responsible to the company firm for the conduct of its business.
18 The Legislature has thought fit to provide an explanation in Section 141 of the Act and the plain reading of the expression company as used in Subclause (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.
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The term other association of individuals should not be understood to refer even to informal understanding between the individuals. It has to be understood in the context of body corporate and partnership firms. The principal of ejusdem generis gets attracted in such a case. Therefore, a sole proprietary concern is not a company within the meaning of company as defined under the explanation to Section 141 of the Act.
19 The Explanation to Section 141 makes it clear that wherever there is a reference under Section 141 to a company it has to be substituted by the word firm where the accused is a partnership firm and the provision has to be read as if it refers to the firm. 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."Page 12 of 21
HC-NIC Page 12 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT 22 Swarup in 'Legislation and Interpretation' very aptly sums up the scope and effect of an Explanation thus :
"Sometimes an explanation is appended to stress upon a particular thing which ordinarily would not appear clearly from the provisions of the section. The proper function of an explanation is to make plain or elucidate what is enacted in the substantive provision and not to add or subtract from it. Thus an explanation does not either restrict or extend the enacting part; it does not enlarge or narrow down the scope of the original section that it is supposed to explain.......... The Explanation must be interpreted according to its own tenor; that it is meant to explain and not vice versa ."
23 Bindra in 'Interpretation of Statutes' (5th Edn.) at page 67 states thus :
"An explanation does not enlarge the scope of the original section that it is supposed to explain. It is axiomatic that an explanation only explains and does not expand or add to the scope of the original section.... The purpose of an explanation is, however, not to limit the scope of the main provision.... The construction of the explanation must depend upon its terms, and no theory of its purpose can be entertained unless it is to be inferred from the language used. An 'explanation' must be interpreted according to its own tenor."
24 The principles laid down by the aforesaid authors are fully supported by various authorities of the Supreme Court. In Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer [(1961) 1 SCR 902 : (AIR 1961 SC 315)], a Constitution Bench decision of the Supreme Court observed thus :
"Now, the Explanation must be interpreted according to its own tenor, and it is meant to explain cl. (1)(a) of the Article and not vice versa . It is an error to explain the Explanation with the aid of the Article, because this reverses their roles."
25 In Bihar Cooperative Development Cane Marketing Union Ltd. v. Bank of Bihar (1967) 1 SCR 848 : (AIR 1967 SC 389) the Supreme Court observed thus :
"The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed Page 13 of 21 HC-NIC Page 13 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT as to widen the ambit of the section."
26 In Hiralal Rattanlal etc. v. State of U.P. [(AIR 1973 SC 1034)], the Supreme Court observed thus :
"On the basis, of the language of the Explanation this Court held that it did not widen the scope of clause (c). But from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the legislature named that provision as an Explanation. "
27 In Dattatraya Govind Mahajan v. State of Maharashtra [(1977) 2 SCR 790: (AIR 1977 SC 915), the Supreme Court observed thus :
"It is true that the orthodox function of an explanation is to explain the meaning and effect of the main provision to which it is an explanation and to clear up any doubt or ambiguity in it.......... Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language and not on any a priori considerations."
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.
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The first question is answered accordingly in the affirmative."
8 Let me test the argument of Mr. Pandya from a different angle. Let me assume for the moment that the partnership firm is not a legal entity, and therefore, it is not necessary to arraign the partnership firm as an accused in the complainant. If that be so, then how can the other partners be prosecuted for the offence punishable under Section 138 of the Negotiable Instruments Act, more particularly, when they have not signed the cheques.
9 It is only the drawer of the cheque, who can be held responsible for the dishonour of the cheque. The law, in this regard, is wellsettled. In the case of Mrs. Aparna A. Shah vs. M/s. Sheth Developers Pvt. Ltd. and another [AIR 2013 SC 3210], the Supreme Court has observed in so many words that it is only the drawer of the cheque who can be held responsible. If the other partners are to be held responsible for the dishonour, then they can be held responsible only by fastening vicarious liability under Section 141 of the Negotiable Instruments Act and this is permissible only if the firm is a legal entity.
10 On this ground alone, the proceedings deserve to be quashed so far as the applicant herein is concerned.
11 There is one more contention raised by Mr. Pandya, the learned counsel appearing for the complainant as regards the validity period of the cheques. Indisputably, on the date when the cheques were presented in the Bank, the validity period of the instruments had expired. This is what the Bank informed to the complainant. According to Mr. Pandya, the law permits him to deposit the cheques within six months from the Page 15 of 21 HC-NIC Page 15 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT date mentioned in the cheques. However, the period, which has been mentioned in Section 138(a) of the Negotiable Instruments Act, has now been reduced from six months to three months vide R.B.I. Notification No.RBI/201112/251, DBOD.AML BC. NO.47/14.01.001/201112 dated 4th November 2011 (w.e.f. 1st April 2012). According to Mr. Pandya, when the law provides six months, the same could not have been reduced to three months by the Reserve Bank of India by way of a Notification. According to Mr. Pandya, as per List I, which is styled as the Union List in the Seventh Schedule of the Constitution, all the items mentioned therein fall within the exclusive jurisdiction of the Union of India and item 45 in the List I of Schedule 7 is banking and Entry 46 therein is Bill of Exchange, cheques, etc. Mr. Pandya, the learned counsel submitted that the banking comes within the exclusive jurisdiction of the Government of India and the same can be regulated only by the Government of India. Mr. Pandya is right in his submission, but I would like to add that the banking can be regulated by the Government of India and the Reserve Bank of India. Although the above argument advanced by the learned counsel for the complainant, at the first blush, appears to be attractive, yet if examined closely, cannot be accepted on the face of Clause (a) of the proviso to Section 138 of the Negotiable Instruments Act, which reads as under:
"Provided that nothing contained in this section shall apply unless
(a) the cheque has been presented to the bank within the period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier."
12 From the above proviso, it is clear that the provisions of Section 138 of the Negotiable Instruments Act are enacted taking into consideration the currency of cheques for a period of six months from the date of issue or the reduced period of validity, whichever is earlier.
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Therefore, this provision of the Negotiable Instruments Act contemplates cheque with lesser period of validity than six months, which is the general banking practice and stipulates that the cheque should be presented for encashment either within the period of six months or within the period of validity of the cheque, whichever is earlier. Hence, a cheque, which is issued with the reduced validity period, has to be presented for encashment within the expiry of that period so as to attract the provisions of Section 138 of the Negotiable Instruments Act. Indisputably, in the case on hand, the cheque was presented by the complainant for encashment after the expiry of currency of three months and in such circumstances, the provisions of Section 138 of the Negotiable Instruments Act are not attracted in this case in view of Clause (a) of the proviso to Section 138 of the Negotiable Instruments Act.
13 The Supreme Court, in the case of Shri Ishar Alloys Steels Ltd vs. Jayaswals NECO Ltd. [AIR 2001 SC 1161], observed in para 9 as under:
"It, however, does not mean that the cheque is always to be presented to the drawer's bank on which the cheque is issued. The payee of the cheque has the option to present the cheque in any bank including the collecting bank where he has his account but to attract the criminal liability of the drawer of the cheque such collecting bank is obliged to present the cheque in the drawee or payee bank on which the cheque is drawn within the period of six months from the date on which it is shown to have been issued. In other words a cheque issued by (A) in favour of (B) drawn in a bank named (C) where the drawer has an account can be presented by the payee to the bank upon which it is drawn i.e. (C) bank within a period of six months or present it to any other bank for collection of the cheque amount provided such other bank including the collecting bank presents the cheque for collection to the (C) bank. The non presentation of the cheque to the draweebank within the period specified in the Section would absolve the person issuing the cheque of his criminal liability under Section 138 of the Act, who shall otherwise may be liable to pay the cheque amount to the payee in a civil action initiated under the law. A combined reading of Sections 2, 72 and 138 of the Act would leave no doubt in our mind that the law mandates the cheque to be presented at the Page 17 of 21 HC-NIC Page 17 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT bank on which it is drawn if the drawer is to be held criminally liable. Such presentation is necessarily to be made within six months at the bank on which the cheque is drawn, whether presented personally or through another bank, namely, the collecting bank of the payee."
14 A learned Single Judge of this Court in the case of Arunbhai Nilkantharai vs. Jayaben Prahladbhai [2000 Cri. L.J. 1152] had an occasion to consider almost an identical issue. In the said case, it was contended on behalf of the complainant that what should the payee of the cheque do if the cheque is returned holding that the validity period had expired. In the said case, an argument was canvassed that there may be a delay on the part of the collecting bank in sending the cheque to the paying bank though it had been within the period of validity, or because of the delay on the part of the postal authority, the cheque might reach the paying bank after the expiry of the period of validity or six months, as the case may be, the holder of the cheque, in such circumstances, would be helpless. The learned Single Judge rejected the contention observing as under:
"10...The contention must fail. In that case initiation of criminal action is view of nonfulfilment of the requirements of Sec. 138 of the Act would certainly be barred, but it will be open to the payee to initiate the civil action filing the suit for the recovery of the cheque amount subject to the law of limitation. The civil Court will certainly pass the decree if the case alleged in plaint is proved. The payee qua the recovery of the sum will not be helpless. It may however be stated that when the cheque is required to be presented at the paying bank before it becomes a stale cheque, the holder of the cheque or the payee has to present the cheque well in advance, considering the exigencies or contingencies or delay that is likely to occur on the part of the collecting bank or the postal authorities. He cannot wait till the last day of the period of validity for presentment of the cheque, because proviso (a) to Sec. 138 makes it abundantly clear that if presentment of a cheque is not made within 6 months from the date on which the cheque is drawn or within the period of its validity whichever is earlier, the cause to lodge the complaint does not subsist or live on, for in that case the offence cannot be said to have been constituted and payee or holder of a cheque loses his right if there be any to initiate criminal action.
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11. In this case, presentment of the cheque to the paying Bank is, in view of the abovestated dates, not made within 6 months of the date of the cheque. The presentment is late by four days. The cheque, therefore, became a stale cheque and the same was, therefore, bounced without honouring the same. As the presentment is not in consonance with Sec. 138 of the Act, and is late by 4 days, one of the essential requirements of Sec. 138 of the Act for initiating penal action is not satisfied. When that is so, the complaint lodged cannot be entertained, the same has to be quashed, and the petitioner, who is the accused, in that case, is required to be discharged."
15 In taking the aforesaid view, I am supported by a decision of the Kerala High Court in the case of Kesavan Thankappan vs. State of Kerala [1999 Cri. L.J. 714]. I may quote the relevant observations as under:
"5. The counsel for the appellant vehemently argued that the dishonour of the cheque on the ground that the cheque was out of time since the cheque drawn on Treasury Saving Bank is current only for three months from the date of issue as against the Banking practice of the currency of cheques for six months from the date of issue, and the provisions of the Negotiable Instruments Act, are illegal and unsustainable. The Treasury Code is framed by the Government of Kerala as empowered under Art. 283(2) of the Constitution and promulgated by the Governor of Kerala by notification No. 54282 dated 641983.
6. As per List 1 which is styled as Union List in 7th Schedule of the Constitution, all the items mentioned therein fall within the exclusive jurisdiction of the Union of India and item 45 in the list I of Schedule 7 is Banking and entry 46 therein is Bill of Exchange, Cheques etc. Therefore, the counsel for the appellant argued that banking comes within the exclusive jurisdiction of the Government of India and the same can be regulated only by the Government of India and Reserve Bank of India.
7. The counsel for the appellant further argued that the Treasury Code is intended for transactions in Government money only and not for banking business for the public and if the Treasuries conduct banking business the entire rules and regulations regarding bank including those rules applicable to cheques etc. contained in the Negotiable Instruments Act and the Banking Practice should be followed by the Treasuries. According to him, though the Treasury can regulate the period of validity of cheques, it will bind only the Treasuries and persons who are transacting with the Treasury by opening accounts with them and it cannot bind a person who Page 19 of 21 HC-NIC Page 19 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT has no dealings with the Treasury and in whose favour a Treasury cheque is issued.
8. The learned counsel for the appellant also argued that appendix 3 to Treasury Code Vol. II relates to rules regulating transactions in the Treasury Savings Bank, Rule 1 in appendix 1 states that the object of the Government in establishing Treasury Savings Bank Scheme is to provide a ready means for the deposit of savings and so to encourage thrift. Treasury Code Vol. I, Part I, Rule 2(c) defines 'cheque' and Rule 61(1) deals with nonbanking Treasuries and Rule 61(2) deals with banking Treasuries. Chapter III of the Kerala Treasury Code Vol. II deals with the rules relating to Treasury Savings Bank. The counsel for the appellant argued that transaction in the banking Treasury is similar to the transaction in ordinary banks and the Treasury cheque drawn has to be treated as a cheque drawn on a bank for all purposes under S. 138 of the Negotiable Instruments Act and there cannot be any distinction between ordinary bank and the Treasury dealing with banking transactions.
9. The counsel for the appellant further argued that banking being Union subject in the first list of Schedule 7 of the Constitution, the Treasury Code which is a subordinate legislation promulgated by the Governor of Kerala applicable to the territory in Kerala under Art. 283(2) of the Constitution, cannot have overriding effect on the provisions of the Negotiable Instruments Act enacted by the Parliament and the Banking Rules and Regulations and the Banking Practice approved and enforced by the Central Government. Therefore, according to him, the provisions regarding the currency of cheque drawn on a banking Treasury reducing the period of currency to three months as provided under Rule 245(b) of Vol. I of the Treasury Code cannot be pressed into service in this case as against the prevailing banking practice of currency of cheques for six months as provided under the Negotiable Instruments Act.
10. Though the above arguments advanced by the counsel for the appellant are very attractive, they cannot be accepted on the face of clause
(a) of the proviso to S. 138 of the Negotiable Instruments Act which reads as follows :
"Provided that nothing contained in this section shall apply unless
(a) the cheque has been presented to the bank within the period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier."
From the above proviso, it is clear that the provisions of S. 138 of the Negotiable Instruments Act are enacted taking into consideration of the currency of cheques for a period of six months from the date of issue or the reduced period of validity, whichever is earlier. Therefore, this provision of the Negotiable Instruments Act contemplates cheque with lesser period of Page 20 of 21 HC-NIC Page 20 of 21 Created On Tue Aug 15 20:58:14 IST 2017 R/CR.MA/19545/2016 JUDGMENT validity than six months, which is the general banking practice and stipulates that the cheque should be presented for encashment either within the period of six months or within the period of validity of the cheque, whichever is earlier. Hence a cheque which is issued with the reduced validity period has to be presented for encashment within the expiry of that period so as to attract the provisions of S. 138 of the Negotiable Instruments Act. Therefore, the argument advanced by the counsel for the appellant that the Treasury Code promulgated by the Governor of Kerala should be subject to the provisions of the Negotiable Instruments Act, the Banking Rules and Regulations issued by the Government of India, the Banking Practice and the Rules promulgated by the Reserve Bank of India and the provisions of the Treasury Code cannot have overriding effect against the provisions of the Negotiable Instruments Act and the Banking Practice, need not be considered in this case.
11. In view of the fact that the cheque was presented by the appellant for encashment after the expiry of currency of three months, the provisions of S. 138 of the Negotiable Instruments Act are not attracted in this case in view of clause (a) of the proviso to S. 138 of the Act."
16 In the result, both the applications succeed and are allowed. The proceedings of the Criminal Cases Nos.1076 of 2015 and 1075 of 2015 respectively pending in the Court of the learned Judicial Magistrate First Class, Dhanera, District: Banaskantha are quashed. Rule is made absolute. Direct service is permitted.
(J.B.PARDIWALA, J.) chandresh Page 21 of 21 HC-NIC Page 21 of 21 Created On Tue Aug 15 20:58:14 IST 2017