Karnataka High Court
Sri. Mohammed Shabbir vs Sri. Mohammed Azar Rafiq on 9 September, 2019
Equivalent citations: 2020 (1) AKR 419
Author: John Michael Cunha
Bench: John Michael Cunha
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 09TH DAY OF SEPTEMBER 2019
BEFORE
THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA
CRIMINAL PETITION No.3944 OF 2016
C/W.
CRIMINAL PETITION No.3945 OF 2016
CRIMINAL PETITION No.3946 OF 2016
IN CRIMINAL PETITION No.3944 OF 2016
BETWEEN:
SRI. MOHAMMED SHABBIR
MANAGING PARTNER
M/S GOLD ENTERPRISES & PROPERTY DEVELOPERS
NO.79/1, 2ND CROSS
LAVELLE ROAD
BANGALORE-560025
... PETITIONER
(BY SRI: VISHWANATH R HEGDE, ADVOCATE)
AND:
SRI. MOHAMMED AZAR RAFIQ
S/O MR MOHAMMED RAFIQ SAIT
AGED ABOUT 37 YEARS
R/A 7/14, SPENCER ROAD
FRAZER TOWN
BANGALORE-560005
... RESPONDENT
(BY SRI: S V GIRIDHAR, ADVOCATE)
THIS CRIMINAL PETITION IS FILED U/S.482 CR.P.C PRAYING
TO SET ASIDE THAT PORTION OF THE IMPUGNED ORDER DATED
18.01.2016 IN CRL.A.NO.992/2015 PASSED BY THE LVI ADDL. CITY
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CIVIL AND S.J., BANGALORE BY WHICH THE APPLICATION FILED BY
THE COMPLAINANT U/S 319 OF CR.P.C. IS ALLOWED AND THE
RESPONDENT/COMPLAINANT IS PERMITTED TO IMPLEAD THE TWO
FIRMS OF THE PETITIONER AS A2 AND A3 IN THE COMPLAINT AND
THE MATTER IS REMITTED TO THE LEARNED MAGISTRATE FOR FRESH
DISPOSAL IN ACCORDANCE WITH LAW.
IN CRIMINAL PETITION No.3945 OF 2016
BETWEEN:
SRI MOHAMMED SHABBIR
MANAGING PARTNER
M/S GOLD ENTERPRISES & PROPERTY DEVELOPERS
NO.79/1, 2ND CROSS
LAVELLE ROAD, BEGNALURU-560025
... PETITIONER
(BY SRI: VISHWANATH R HEGDE, ADVOCATE)
AND
SRI MOHAMMED RAFIQ SAIT
S/O LATE ALI MOHAMMED SAIT
AGED ABOUT 67 YEARS,
R/AT 7/14, SPENCER ROAD
FRAZER TOWN
BENGALURU-560005
... RESPONDENT
(BY SRI: S V GIRIDHAR, ADVOCATE)
THIS CRIMINAL PETITION IS FILED U/S.482 CR.P.C PRAYING
TO SET ASIDE THAT PORTION OF THE IMPUGNED ORDER DATED
18.1.2016 IN CRL.A.NO.993/2015 PASSED BY THE LVI ADDL. CITY
CIVIL AND S.J., BENGALURU CITY BY WHICH THE APPLICATION FILED
BY THE COMPLAINANT U/S 319 OF CR.P.C. IS ALLOWED AND THE
RESPONDENT/COMPLAINANT IS PERMITTED TO IMPLEAD THE TWO
FIRMS OF THE PETR. AS A2 AND A3 IN THE COMPLAINT AND THE
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MATTER IS REMITTED TO THE LEARNED MAGISTRATE FOR FRESH
DISPOSAL IN ACCORDANCE WITH LAW.
IN CRIMINAL PETITION No.3946 OF 2016
BETWEEN:
SRI MOHAMMED SHABBIR
MANAGING PARTNER,
M/S GOLD ENTERPRISES & PROPERTY DEVELOPERS,
NO.79/1, 2ND CROSS,
LEVELLE ROAD,
BENGALURU-560025.
... PETITIONER
(BY SRI: VISHWANATH R HEGDE, ADVOCATE)
AND:
SRI: MOHAMMED AZAR RAFIQ
S/O. MR.MOHAMMED RAFIQ SAIT,
AGED ABOUT 37 YEARS,
R/AT 7/14, SPENCER ROAD,
FRAZER TOWN,
BENGALURU-560005.
... RESPONDENT
(BY SRI: S.V. GIRIDHAR, ADVOCATE)
THIS CRIMINAL PETITION IS FILED U/S.482 CR.P.C PRAYING
TO SET ASIDE THAT PORTION OF THE IMPUGNED ORDER DATED
18.1.2016 IN CRL.A.NO.994/2015 PASSED BY THE LVI ADDL. CITY
CIVIL AND S.J., BENGALURU CITY BY WHICH THE APPLICATION FILED
BY THE COMPLAINANT U/S 319 OF CR.P.C. IS ALLOWED AND THE
RESPONDENT/COMPLAINANT IS PERMITTED TO IMPLEAD THE TWO
FIRMS OF THE PETR. AS A2 AND A3 IN THE COMPLAINT AND THE
MATTER IS REMITTED TO THE LEARNED MAGISTRATE FOR FRESH
DISPOSAL IN ACCORDANCE WITH LAW.
THESE CRIMINAL PETITIONS COMING ON FOR ADMISSION
THIS DAY, THE COURT MADE THE FOLLOWING:-
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ORDER
These three Criminal Petition Nos.3944, 3945 and 3946 of 2016 are directed against the impugned order dated 18.01.2016 in Crl.A.No.992/2015, Crl.A.No.993/2015 and Crl.A.No.994/2015 respectively passed by learned LVI Addl. City Civil & Sessions Judge, Bengaluru City. Since common questions of law and facts are involved in the matters, all these petitions are disposed of by this common order.
2. The essential facts necessary for disposal of these petitions are as follows:-
(i) Petitioner (herein referred to as 'accused'), as power-of-attorney of M/s.Anushka Investments, a partnership firm, haivng its office at J.C. Road, Bangalore and also representing himself as the Managing Partner of M/s.Gold Enterprises and Property Developers, executed an agreement of sale dated 2.1.2018 in favour of respondent herein/complainant.
As per the said agreement, the petitioner agreed to sell 6.76% of undivided share, right, title and interest in the land bearing 5 Municipal corporation No.17/1, situated in Millers Road, Bangalore - 560046 for a sale consideration of Rs.33,75,000/-.
(ii) Apart from the said agreement of sale, he also entered into another agreement for construction dated 2.1.2008 for a total price of Rs.76,25,000/-. As per the terms and conditions of the said agreement dated 2.1.2008, the complainants jointly paid an aggregate amount of Rs.64,50,000/- to the petitioner under various cheques.
(iii) Petitioner/accused being unable to perform his part of the obligation under the aforesaid agreement of sale and agreement of construction, sought for cancellation of the agreements and offered to refund the amount of Rs.64,50,000/- to the complainants and accordingly, the parties entered into an Memorandum of Understanding dated 19.12.2011 whereunder the petitioner/accused agreed to repay a sum of Rs.64,50,000/- with an additional amount of Rs.80,50,000/- aggregating to Rs.1,45,00,000/- and issued three post-dated cheques in favour of the complainants for Rs.60,00,000/-, Rs.71,00,000/- and Rs.14,00,000/- respectively.
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(iv) The said cheques, when presented for encashment were dishonoured for insufficient funds.
(v) The complainants issued a joint demand notice dated 06.11.2012 calling upon the petitioner/accused to pay amount of the cheques.
(vi) Petitioner/accused having failed to comply with the demand, respondent/complainants presented three separate complaints before the court below under section 138 of Negotiable Instruments Act, 1881 (for short "N.I. Act") which were numbered as C.C.No.3510/2013, C.C.No.3511/2013 and C.C.No.3512/2013 respectively.
(vii) In support of their claim, respective complainant in C.C.No.3510/2013 examined himself before the Trial Court as PW.1 and produced in evidence 11 documents as per Ex.P1 to Ex.P11. In C.C.No.3511/2013 and C.C.No.3512/2013, 12 documents each were marked as Ex.P1 to Ex.P12. 7
(viii) In rebuttal, petitioner/accused examined himself as DW.1 and did not produce any documentary evidence.
3. In the course of trial, petitioner/accused took up the following contentions:-
(i) That the cheques in question belonged to M/s.Gold Enterprises- a firm, but the complaints were filed against the accused in his individual capacity. Since the cheques did not belong to the personal account of accused, the petitioner/accused is not liable to pay the amount of the cheques.
(ii) Cheques were drawn in the account maintained by M/s. Gold Enterprises which was a firm and since the firm was not arrayed as a party, the complaints were not maintainable.
(iii) The consolidated notice demanding payment of three separate cheques was not in accordance with section 138 of N.I. Act and based on the said notice, the complaints could not have been maintained.8
4. The Trial Court negatived these contentions and by its order dated 02.07.2015, found the accused guilty of the above offences under section 138 of N.I. Act and accordingly, sentenced him to pay fine of Rs.65,10,000/-, in default, to undergo simple imprisonment for one year in C.C.No.3510/2013, fine of Rs.76,10,000/-, in default, to undergo simple imprisonment for one year in C.C.No.3511/2013 and fine of Rs.15,10,000/-, in default to undergo simple imprisonment for one year in C.C.No.3512/2013.
5. Petitioner challenged the above orders in Criminal Appeal Nos.992/2015, 993/2015 and 994/2015. During the pendency of the appeals, respondent/complainant filed applications under section 319 of Cr.P.C., seeking to permit the complainant to bring the firm M/s.Gold Enterprises and Property Developers and M/s Gold Enterprises as accused Nos.2 and 3 in the original complaint in view of decision of the Hon'ble Supreme Court in Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd., 2012 AIR SCW 2693. The Appellate Court considered the said applications along with the main appeal and by the impugned 9 judgment, set-aside the orders passed by the learned Magistrate in C.C.No.3510/2013, C.C.No.3511/2013 and C.C.No.3512/2013 and allowed the applications filed by the complainant under section 319 of Cr.P.C. and consequently, permitted the complainant to implead or insert the firm of accused Nos.2 and 3, as prayed for in the applications. For the said purpose, the matter was remitted to the Trial Court for fresh disposal in accordance with law after permitting the complainant to array the firms as accused Nos.2 and 3 as per the applications. These orders are challenged by the petitioner/accused before this Court under section 482 Cr.P.C.
6. The contentions of the petitioners are that learned Appellate Judge has erred in holding that the Company or Firm can be arrayed as a party under section 319 of Cr.P.C. This finding is illegal in the light of the law laid down by the Constitution Bench of the Hon'ble Supreme Court in the case HARDEEP SINGH vs. STATE OF PUNJAB, (2014) 3 SCC 92. Learned Appellate Judge has also erred in relying upon the decision of the Delhi and Jarkhand High Courts to hold that a 10 Company can be arrayed at any stage as a party under section 319 of Cr.P.C. This observation is contrary to the settled position of law. Learned Sessions Judge has brushed aside the objections raised by the petitioner to the maintainability of the applications under section 319 of Cr.P.C. These applications were beyond the powers of the Appellate Court. Learned Sessions Judge has exceeded his jurisdiction by allowing the applications since the language of section 319 Cr.P.C. did not authorize filing of such applications at the stage of appeal.
7. Learned counsel for petitioner has argued in line with the contentions urged in the memorandum of petition and placing reliance on the various judgments of the Hon'ble Apex Court as well as various High Courts, emphasized that in view of clear law laid down by the Hon'ble Supreme Court in Aneeta Hada referred supra, the prosecution of petitioner/accused without making the firm a prime accused, in legally not tenable. Learned counsel has placed reliance on the recent decision of the Hon'ble Supreme Court in N.HARIHARA KRISHNAN vs. J.THOMAS, AIR 2017 SC 4125 and pointed out that, every 11 person signing a cheque on behalf of a Company on whose account a cheque is drawn, does not become the drawer of the cheque. Such a signatory is only a person authorized to sign the cheque on behalf of the Company or drawer of the cheque and therefore the prosecution of the petitioner being opposed to Section 142 of N.I.Act, are liable to be quashed.
8. Refuting the contentions, learned counsel for the respondent has placed reliance on the following authorities:-
A. Firm is not a Legal Entity Qua the Partner
1. (1985) 1 SCC 218 Regional Director, ESI Vs Ramanjuju Match Industries[Paragraphs 4,5,6 and 9]
2. (1990) 2 SCC 231 Keshavji Ravji and Co. Vs. Commissioner of Income Tax [Paragraph 21]
3. 1991 SCC Online Delhi 658, Commissioner of Wealth Tax Vs. A.K. Tandon[Paragraph 35] B. Partner of a Firm can be sued without the necessity of the Firm
4. (2001) 10 SCC 78 T.Stanes and Co., Vs. A Jaffarullah
5. (2001) 10 SCC 91 R Rajgopal Vs. S.S. Venkat
6. ILR 1994 Karnataka 2991 Samant Vs. KGN Travels [Paragraphs 8,10 and 13] 12
7. (1997) 4 Karnataka Law Journal 23 Visva Cement Products Vs. KSFC [Paragraph 10] C. Remedy/Consequences if the firm is not made a Party to the proceedings.
8. 2016 SCC Online Bombay 64, Philip J Vs. Ashapura Minechem Limited
9. 2017 (3) RLW 2376. Rajesh Sharma and Another Vs. State of Rajasthan.
9. The contention of learned counsel for respondent is that, "Firm" is not a legal entity qua partner. In view of section 18 of the Partnership Firm Act, 1932, every partner is the agent of the firm for the purposes of the business of the firm and by virtue of section 19 of the Partnership Act, an act of a partner does not, in the usual course of business, binds the firm. A partnership firm is not a legal entity. The position of a partner qua a firm is in not in the nature of Master and servant. Hence, the law laid down in the case of Aneeta Hada's case, supra, which was rendered in the context of a Company which is a juristic person, cannot be made applicable in the case of partnership firm which is not a separate juristic person. Further 13 the decision in Aneeta Hada case is only an authority for what it decided and hence there is no case for interference in the matter.
10. I have bestowed my careful thought to the rival contentions urged at the Bar and have carefully scrutinized the material on record.
11. In the light of the contentions urged by the parties, two questions arise for consideration, namely, (1) Whether the applications under section 319 Cr.P.C., could be entertained at the appellate stage? (2) Whether in the facts and circumstances of the case, proposed party could be proceeded against for the offences under section 138 of N.I. Act?
12. Regarding question No.(1):-
(i) Insofar as the maintainability of an application under Section 319 Cr.P.C. after pronouncement of judgment is concerned, learned counsel for petitioner has placed reliance on the decision in HARDEEP SINGH vs. STATE OF PUNJAB, (2014) 3 14 SCC 92, to bring home the point that such an application could be filed at any time before pronouncement of judgment and not thereafter. In this regard, the Hon'ble Supreme Court, in para 47 of the above judgment, has observed as under:
"Since after the filing of the charge-sheet, the court reaches the stage of inquiry and as soon as the court frames the charges, the trial commences, and therefore, the power under Section 319(1) Cr.P.C., can be exercised at any time after the charge-sheet is filed and before the pronouncement of judgment, except during the stage of Section 207/ 208 Cr.P.C., committal, etc., which is only a pre-trial stage, intended to put the process into motion."
(ii) In the instant case, undisputedly, the applications were moved by the complainants during the pendency of appeals. These applications were filed seeking to implead M/s.Gold Enterprises and Property Developers and M/s Gold Enterprises, as respondent Nos. 2 and 3 in the respective complaint. The impleaded party has not challenged the said order. Petitioner is not affected by the said order. The aggrieved party himself having not questioned the order passed by the 15 First Appellate Court, in my view, this question cannot be gone into at the instance of the petitioner.
13. Regarding question No.(2) Undisputedly, initially the complaint was filed only against the petitioner in his capacity as the Managing Partner of M/s.Gold Enterprises and Property Developers. The firm M/s. Gold Enterprises and Property Developers was not made a party to the proceedings. But the averments made in the complaint go to show that the alleged transaction was entered into with the Firm and not with the petitioner in his individual capacity. As such, the Firm was required to be made a party. This position is impliedly accepted by the Appellate Court by directing the Firm to be made as a party. But, the question is, whether the firm could be proceeded against for the offence under section 138 of N.I. Act at the stage of appeal?
14. Law is now well settled that the scheme of prosecution under section 138 of N.I. Act is different from the scheme of Code of Criminal Procedure. Section 138 of N.I. Act defines the offence and prescribes punishment. It does not 16 prescribe any procedure for investigation of offences. Nonetheless in order to constitute an offence under section 138 of N.I. Act, each and every ingredient of section 138 of N.I. Act is required to be satisfied. Those ingredients are:-
(i) that a person drew a cheque on an account maintained by him with the banker;
(ii) that such a cheque when presented to the bank was returned by the bank unpaid;
(iii) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity whichever is earlier;
(iv) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and
(v) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid.
(vi) the drawer of the cheque fails to make the payment of the said amount within fifteen days of the receipt of the notice. 17
15. In the instant case, undisputedly, the cheques in question are seem to have been signed by the petitioner herein as the authorized signatory of M/s.Gold Enterprises which is not a party to the proceedings before learned Magistrate. It is also not in dispute that the subject cheques were drawn on the account maintained in the name of the Firm namely M/s Gold Enterprises. As held by the Hon'ble Supreme Court in N.HARIHARA KRISHNAN case, referred supra, "every person signing a cheque on behalf of a Company on whose account a cheque is drawn does not become the drawer of the cheque. Such a signatory is only a person duly authorised to sign the cheque on behalf of the Company/drawer of the cheque." Under the said circumstances, merely on account of subscribing his signature to the subject cheques as authorized signatory, the petitioner does not render himself liable for the consequences of dishonour of the said cheques. Therefore, it follows that in order to maintain the prosecution for dishonour of the subject cheques, notice of dishonour ought to have been given to the drawer of the cheques namely M/s. Gold Enterprises and the complaint ought to have been filed against M/s.Gold Enterprises 18 within the time prescribed under clause (c) of the proviso to Section 138 of N.I. Act lest it would be barred in view of Section 142(1)(b) of N.I. Act. But, undeniably, none of these requirements are seem to have been complied in the instant case nor could they be complied at this point of time insofar as the proposed party is concerned. The proposed party is totally a new entity which is sought to be added as co-accused without compliance of preconditions laid down under section 138 of N.I. Act. Since the material produced before learned Magistrate did not prima facie disclose the commission of the offences by the proposed party, learned Magistrate did not derive jurisdiction to proceed against the proposed party even under section 319 of Cr.P.C.
16. No doubt, courts below have proceeded on the premise that M/s.Gold Enterprises and Property Developers and M/s.Gold Enterprises are sister concerns and both are managed by the petitioner herein as its Managing Partner and therefore, the defect in the complaint could be cured by impleading the drawer Firms namely M/s.Gold Enterprises and M/s.Gold 19 Enterprises and Property Developers under Section 319 Cr.P.C. This approach, in my view, is not permissible in view of the provisions of N.I. Act under which the prosecution could be maintained against the drawer of the cheque only after compliance of the requirements prescribed therein and that too, within the time limit as stipulated therein. Since the proposed party namely M/s.Gold Enterprises or M/s.Gold Enterprises and Property Developers were not issued with the statutory notice within the prescribed period and no prosecution was launched against them within the time stipulated under section 142(1)(b) of N.I. Act, no cause of action had arisen entitling the complainant to proceed against the proposed party under section 319 of Cr.P.C.
17. That apart, the initial prosecution having been launched only against the petitioner namely one of the partners of M/s.Gold Enterprises and Property Developers, without making the Firm a party, in view of the ratio laid down by the Hon'ble Apex Court in Aneeta Hada case that a partner alone could not be prosecuted on the touchstone of vicarious liability 20 without the Firm being arrayed as a prime accused, this fundamental defect cannot be cured by recourse to Section 319 of Cr.P.C., at the appellate stage.
18. What is the stage at which power under section 319 of Cr.P.C. can be exercised came up for consideration of the Hon'ble Supreme Court in HARDEEP SINGH case, referred supra, and the Hon'ble Apex Court in para 117 of the judgment has summed up the consequences as under:-
"117. We accordingly sum up our conclusions as follows:
Questions (i) and (iii)
- What is the stage at which power under Section 319 CrPC can be exercised?
AND
- Whether the word 'evidence' used in Section 319(1) CrPC has been used in a comprehensive sense and includes the evidence collected during investigation or the word 'evidence' is limited to the evidence recorded during trial?
ANSWER 21 17.1. In Dharam Pal's case, the Constitution Bench has already held that after committal, cognizance of an offence can be taken against a person not named as an accused but against whom materials are available from the papers filed by the police after completion of investigation. Such cognizance can be taken under Section 193 Cr.P.C. and the Sessions Judge need not wait till 'evidence' under Section 319 Cr.P.C. becomes available for summoning an additional accused.
117.2. Section 319 Cr.P.C., significantly, uses two expressions that have to be taken note of i.e. (1) Inquiry (2) Trial. As a trial commences after framing of charge, an inquiry can only be understood to be a pre-trial inquiry. Inquiries under Sections 200, 201, 202 Cr.P.C.; and under Section 398 Cr.P.C. are species of the inquiry contemplated by Section 319 Cr.P.C.
Materials coming before the Court in course of such enquiries can be used for corroboration of the evidence recorded in the court after the trial commences, for the exercise of power under Section 319 Cr.P.C., and also to add an accused whose name has been shown in Column 2 of the chargesheet.
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117.3. In view of the above position the word 'evidence' in Section 319 Cr.P.C. has to be broadly understood and not literally i.e. as evidence brought during a trial.
19. In the light of the above proposition of law and more importantly, in view of the failure of the complainant to comply with the preconditions prescribed under sections 138 and 142 of N.I. Act, the direction issued by the Appellate Court to implead the Firms and to proceed against the Firms namely M/s.Gold Enterprises and M/s.Gold Enterprises and Property Developers, being contrary to law and settled canons of justice cannot be sustained.
20. In that view of the matter, the impugned order passed by the Appellate Court allowing the applications filed by complainant under section 319 Cr.P.C., and the consequent remand of the matter to the trial court to implead the Firms as party to the proceedings in C.C.No.3510/2013, C.C.No.3511/2013 and C.C.No.3512/2013 cannot be sustained. However, insofar as the finding recorded by the Appellate Court that the complaint as instituted by the respondent/complainant 23 without making the Firm a party was not maintainable, does not call for any interference. The said finding is based on sound principle of law and the provisions of section 142 of N.I. Act. The said finding, therefore, requires to be confirmed.
As a result, petitions are allowed.
(i) The impugned order dated 18.01.2016 in Crl.A.No.992/2015, Crl.A.No.993/2015 and Crl.A.No.994/2015 passed by learned LVI Addl. City Civil & Sessions Judge, Bengaluru City, insofar as directing the complainant to implead or insert the Firms of accused No.2 and accused No.3 under section 319 of Cr.P.C., is set aside. Consequently, the applications filed by the respondent/complainant under section 319 of Cr.P.C., are dismissed.
(ii) The order passed by the Appellate Court in the above appeals setting aside the impugned judgment and order of sentence dated 02.07.2015 in C.C.No.3510/2013, C.C.No.3511/2013 and C.C.No.3512/2013 passed by the XX ACMM, 24 Bangalore is confirmed. Consequently, proceedings in C.C.No.3510/2013, C.C.No.3511/2013 and C.C.No.3512/ 2013 are dismissed.
Sd/-
JUDGE Bss