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GUJARAT HIGH COURT
J.B. Pardiwala, J.
Murjibhai Vishram Varsani —Applicant
versus
Adam Alimamad Kumbhar and Ors. —Respondents
Criminal Misc. Application (For Quashing & Set Aside Fir/order) No.11911 of 2015
Decided on 2.2.2017
For the Applicant:Mr. A.R. Gupta and Aditya A Gupta, Advocates
For the Respondent No.1:Darshan M. Varandani, Advocate
For the Respondent No.2: Ms. Shruti Pathak, APP
IMPORTANT POINT
For maintaining prosecution against Director under Section 141 of Negotiable Instruments Act, arraigning of a company as an accused is imperative.
.
Headnote:(A) Negotiable Instruments Act, 1881—Section 138—Indian Partnership Act, 1932—Section 69—Criminal Procedure Code, 1973—Section 482—Dishonour of cheque—Offence by company—For maintaining prosecution against Director under Section 141 of Negotiable Instruments Act, arraigning of a company as an accused is imperative—In absence of legal entity not being arraigned as an accused, a partner or authorised signatory cannot be prosecuted for offence under Section 138 of Negotiable Instruments Act—For maintaining prosecution under Section 141 of Negotiable Instruments Act, arraigning of company as an accused is imperative, mainly on the basis of vicarious liability of Directors of company and not necessarily because company is a juristic person and it has its own respectability—Criminal proceeding quashed. (Paras 3, 4 and 5)
(B) Negotiable Instruments Act, 1881—Section 138—Indian Partnership Act, 1932—Section 69—Dishonour of cheque—Offence by company—Wherever there is a reference under Section 141 to a company it has to be substituted by word firm where accused is a partnership firm and provision has to be read as if it refers to firm—Complaint can be filed for offence under Section 138 Negotiable Instruments Act not only against partnership firm on whose behalf cheque was issued but also against an individual partner or person who, at the time of commission of offence, was in charge of affairs of firm or responsible to it for conduct of its business—There is nothing in the provision which indicates that in every complaint involving dishonour of a cheque issued by a firm both firm as well as its partners have to be compulsorily impleaded—Complaint in which only firm is made an accused and partners are not would not be bad in law for that reason. (Para 19)
Result: Criminal Application allowed.
J.B. Pardiwala, J.—By this application under Section 482 of the Code of Criminal Procedure, 1973, the applicant – original accused seeks to invoke the inherent powers of this Court, praying for quashing of the proceedings of the Criminal Case No.1834 of 2014 pending before the learned Chief Judicial Magistrate at Bhuj, for the offence punishable under Section 138 of the Negotiable Instruments Act.
2. The applicant herein is one of the partners of a partnership firm running in the name of Varsani Construction Company. One another partner of the firm and an authorised signatory, namely, Rajeshbhai Varsani, issued a cheque of the amount of Rs.1 lac dated 20th August 2014 in favour of the complainant drawn on the HDFC Bank. The said cheque came to be dishonoured. In such circumstances, the complaint came to be lodged in the court of the learned Chief Judicial Magistrate, Bhuj-Kachchh, registered as Criminal Case No.1834 of 2014. The learned counsel appearing for the applicant accused has too fold submissions to canvass. He submits that the applicant indisputably has not signed the cheque. At best, vicarious liability can be fastened by virtue of Section 141 of the Negotiable Instruments Act, and his second submission is that the complaint itself should fail because the partnership firm as a legal entity has not been arraigned as an accused.
3. On the other hand, this application is opposed by Mr. Varandani, the learned counsel appearing for the complainant. He submitted that it is always open for him to either implead the partnership firm as an accused or even file a fresh complaint impleading the partnership firm as a legal entity and the authorised signatory.
4. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is, whether the proceedings of the Criminal Case should be quashed against the applicant herein.
5. I am of the view that this application should succeed on the ground that in the absence of the legal entity not being arraigned as an accused, a partner or the authorised signatory cannot be prosecuted for the offence under Section 138 of the Negotiable Instruments Act. The law in this regard is wellsettled.
6. In the case of Aneeta Hada v. Godfather Travels & Tours Private Limited [(2012) 5 SCC 661], the question that arose for disposal of the Supreme Court was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Act without the company being arraigned as an accused. As initially there was difference of opinion between the two learned Judges regarding the interpretation of Section 138 of the Negotiable Instruments Act, a Reference was made to the Larger Bench of three Judges. While deciding the said Reference and interpreting Sections 138 and 141 of the Negotiable Instruments Act, the Supreme Court observed as under:
“53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.
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 o
