Sharma Pramod Narayanprasad vs State Of Gujarat on 11 April, 2018

[Cites 6, Cited by 1]

Gujarat High Court

Sharma Pramod Narayanprasad vs State Of Gujarat on 11 April, 2018

Bench: G.R.Udhwani

         R/CR.RA/529/2014                                           JUDGMENT



           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
           R/CRIMINAL REVISION APPLICATION NO. 529 of 2014
                                With
           R/CRIMINAL REVISION APPLICATION NO. 530 of 2014

FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE G.R.UDHWANI
===============================================================

1     Whether Reporters of Local Papers may be allowed toNo
      see the judgment ?

2     To be referred to the Reporter or not ?                        No

3     Whether their Lordships wish to see the fair copy of theNo
      judgment ?

4     Whether this case involves a substantial question of lawNo
      as to the interpretation of the Constitution of India or any
      order made thereunder ?

================================================================
                 SHARMA PRAMOD NARAYANPRASAD & Anr.
                               Versus
                          STATE OF GUJARAT
================================================================
Appearance:
MR YN RAVANI ADVOCATE WITH VIVEK V BHAMARE(6710) for the
PETITIONER(s) No. 1,2
MR VN BHAMARE(1122) for the PETITIONER(s) No. 1,2
MR P P MAJMUDAR(5284) for the RESPONDENT(s) No. 2
MR KL PANDYA ADDITIONAL PUBLIC PROSECUTOR(2) for the
RESPONDENT(s) No. 1
================================================================

    CORAM: HONOURABLE MR.JUSTICE G.R.UDHWANI

                                 Date : 11/04/2018

                            COMMON ORAL JUDGMENT

1. Judgement and order dated 30.08.2014 passed by the learned 3rd Additional Sessions Judge, Anand in Criminal Appeal No. 35 of 2014 and Criminal Appeal No. 36 of 2014 after affirming the judgement and order dated 12.03.2014 passed by the learned 8th Additional Chief Page 1 of 9 R/CR.RA/529/2014 JUDGMENT Judicial Magistrate, Anand recording conviction for the appellants for the offence punishable under section 138 of the Negotiable Instruments Act, 1881 ( for short 'N.I.Act') is assailed in the revisional jurisdiction of this court.

2. It is unnecessary for this court to refer to the factual matrix of the case in detail in light of the question of law raised in this Criminal Revision Application; suffice it to say that the two accused namely Sharma Pramod Narayanprasad and Bhargava Satish Ramchandra were convicted under the above provisions as the partners of Gajanand Developers.

3. The question of law raised herein is whether in absence of indictment of partnership firm as coaccused for the offence punishable under section 138 of the N.I. Act, the prosecution would be maintainable?

4. The rival contentions further give rise to the following question: Is it permissible to go beyond section 141 of the N.I. Act for interpretation of the expression "firm" applied in Explanation to section 141 of the N.I. Act?

4.1 For ready reference the said provision is quoted hereunder:

[ 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:

Page 2 of 9

R/CR.RA/529/2014 JUDGMENT 1 [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 corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.]

5. The provision received consideration from the Apex Court in detailed judgement in Aneeta Hada versus Godfather Travels and Tours Private Limited and other allied - 2012(5) SCC 661. After considering the case law cited before it, the relevant considerations are found in paras 58 and 59 of the pronouncement which read thus:

"58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted.

59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of Page 3 of 9 R/CR.RA/529/2014 JUDGMENT the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh (supra) which is a threeJudge Bench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada (supra) is overruled with the qualifier as stated in para 51. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove."

6. Thus it was ruled that for maintaining the prosecution under section 141 of the N.I. Act, arraigning of company as an accused is imperative. As can be noticed, in section 141 itself, the explanation "company", would include firm. Pertinently the Apex Court did not seek assistance of the legal provisions of the Companies Act and rested its findings purely on interpretation of Section 141 of N.I. Act. The learned counsel for the respondent pounced upon the following statement in para 58 in Aneeta Hada (supra)." ....one cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted......". He would contend that Aneeta Hada proceeds on the premise that the company was a juristic person and therefore in order to hold its directors liable, their indictment was mandatory. Such submission does not find favour with this court for the simple reason that nowhere except in para 58, the Apex Court refers the said aspect. This court does not find any submissions or arguments on that line in the said case. Therefore, the said observations cannot be construed as laying the proposition of law that the company being a juristic person, must be joined under section 141 of N.I. Act for holding its directors liable to the wrongful act of the company.

Page 4 of 9

R/CR.RA/529/2014 JUDGMENT

7. This court had an occasion to read Aneeta Hada amongst other pronouncements, in detail in Oanali Ismailji Sadikot v. State of Gujarat and Anr. 2016 (3) GLR 1991. It was held thus in paras 30, 31, 32, 33 and 34:

" 30 Thus, it has been laid down in unequivocal words in the aforesaid decision that for maintaining the prosecution against the director under Section 141 of the Negotiable Instruments Act, arraigning of a company as an accused is imperative. In view of explanation to Section 141 of the Negotiable Instruments Act referred to above, this legal position needs to be automatically made applicable in case of prosecution against a partnership firm also. Therefore, it has to be held that for maintaining prosecution against a partner under Section 141 of the Negotiable Instruments Act, arraigning of partnership firm as an accused is imperative.

31 The conclusions drawn by the Supreme Court in the case of Aneeta Hada (supra) are not based merely on the fact that the company is a separate legal entity and juristic person, but these conclusions are drawn on the basis of the fact that Section 141 of the Negotiable Instruments Act deals with the vicarious liability. In paras 58 and 59 of the said judgment , referred above, the Supreme Court has referred to the wordings in Section 141 of the Negotiable Instruments Act and observed that commission of offence by a company is an express condition precedent to attract the vicarious liability of others. It was further held that the words "as well as the company" appearing in the section make it unmistakably clear that when a company is prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. It was further observed that the other categories of offenders like directors or partners of the firm can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself.

32. Thus, the Supreme Court has arrived at an irresistible conclusion that for maintaining the prosecution under Section 141 of the Negotiable Instruments Act, arraigning of the company as an accused is imperative, mainly on the basis of the vicarious liability of the directors of the company and not necessarily because the Page 5 of 9 R/CR.RA/529/2014 JUDGMENT company is a juristic person and it has its own respectibility. That was an additional circumstance considered by the Apex Court while holding that arraigning of a company as an accused is imperative, but the main basis for arriving at its conclusion was the vicarious liability which the directors or partners of the firm can have towards the company and hence without joining the company on the touchstone of vicarious liability they cannot be prosecuted.

33. Therefore, the ratio laid down in the case of Aneeta Hada (supra) can be made equally applicable in the case of a partnership firm also. The partners are liable and sued in their vicarious liability. Whether the partnership firm is a juristic person or not is a different aspect. What is important is that a partner of the firm is arraigned as an accused in the dragnet on the touchstone of vicarious liability, as is done in the case of directors of the company. Therefore, there is no reason at all to draw any distinction in respect of the law to be made applicable to a partnership firm and the company.

34. Moreover, the Legislature has already made it clear that the company includes any body corporate which includes a firm or other association of individuals and director in relation to a firm means a partner in the firm. On this count also, when Section 141 of the Negotiable Instruments Act and explanation thereto does not make any distinction between the company and the partnership firm, there is absolutely no reason to draw such distinction while making applicable the law laid down by the Apex Court in Aneeta Hada (supra) to the partnership firm merely because in that judgment the Apex Court was considering the eventuality of nonjoining of the company. The basic premise of holding either the director or the partner liable for prosecution being the same that of the vicarious liability. Therefore, once the company is held to be an essential party and that arraigning of a company as an accused is imperative for prosecution under Section 141 of the Negotiable Instruments Act, it necessarily follows that arraigning of a partnership firm is also imperative for prosecution against the partners under Section 141 of the Negotiable Instruments Act. The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable."

8. Learned counsel for the respondents would contend that the Page 6 of 9 R/CR.RA/529/2014 JUDGMENT partnership firm is not legal entity and "vicarious liability" is foreign to the Partnership Act and that in Aneeta Hada(supra), the Apex Court had in mind the provisions of the Company Act according to which, the company is a juristic and legal entity which can be sued and be sued in its own name and therefore if the company is an offender, the persons incharge of its affairs may be arraigned as accused but when it comes to partnership firm, arraigning of the partners responsible for the affairs of the firm without arraigning partnership firm as co=accused would be sufficient compliance of section 141 of the N.I. Act. In his submission the partners are not vicariously liable to the firm but liability of the firm and partners is coextensive. For this purpose, the learned counsel referred to various provisions of the Partnership Act. The learned counsel would also contend that as such having regard to the expression 'company' in clause (1) to the explanation to section 141, the company would mean any body corporate and not the firm and that so far as firm is concerned, the inclusive words in the said explanation follow after the expression 'body corporate' and is disjuncted by the word 'and' indicating that the firm is not treated as 'body corporate' but is only included for the purposes of the Act. It was contended that by mere inclusion of the partnership firm in the definition of 'company' would not ascribe all the attributes of the company to it. The arguments seems to be attractive but must fail on close scrutiny. The first principle of the interpretation is that when the language of the provision is clear, it has to be read as it is without any external aid. Secondly, when the legislature in its wisdom intends to cast a specific meaning to the expression and the words casting such specific meaning are clear and unequivocal, they must be given its due and appropriate meaning.

9. Keeping in with the purpose and/ or the object to be achieved, the Page 7 of 9 R/CR.RA/529/2014 JUDGMENT legislature may provide different meanings and attributes to the same expression in different statutes. The words "company" means any body corporate.........." used in section 141 indicate that the legislature was conscious that "company" is a body corporate and thereafter it proceeded to state "and includes a firm...", indicating its intention to include a firm amongst other entities in explanation (a) to Section 141 of the N.I. Act. The clear legislative intent is again demonstrated in clause

(b) of the above explanation when it defines directors in relation to a firm, to mean a partner in the firm. The conscious departure from the provisions of Partnership Act is thus made loud and clear and when intention is loud and clear, the provisions of Partnership Act are irrelevant for interpreting the expression "company" in explanation (a) to Section 141 of the N.I. Act. The expression "company" used in explanation (a) to Section 141 is not to be understood in the limited sense of it being only a juristic person but would include even non juristic persons as intended by the legislature.

10. It is also submitted by the learned counsel for the respondent that since the partnership firm was not a registered firm and in absence of mandate to get the firm registered, its non arraigning as coaccused would not be fatal. For the foregoing reasons, again it is not permissible to go beyond the language used in section 141 and therefore even in absence of registration of the partnership firm, section 141 shall have to be complied with in its later spirit.

11. The learned counsel also invited attention of this court to the title of the complaint where it has been stated thus: " partners of Gajanand Developers" and would contend that infact the partnership firm was also arraigned as respondent. This court is unable to accept the said Page 8 of 9 R/CR.RA/529/2014 JUDGMENT submission for the simple reason that there are only two accused being the partners as named in the cause title and had the partnership firm being arraigned, it would have been a third accused which is not the case.

12. For the foregoing reasons the impugned judgement and order are quashed and petitioners are ordered to be acquitted.

13. Record and Proceedings if any shall be returned to the Court below.

(G.R.UDHWANI, J) niru* Page 9 of 9

Unlock Advanced Research with PRISMAI

Gujarat High Court