IN THE HIGH COURT OF KERALA AT ERNAKULAM
Viju Abraham, J.
S. Balakrishna Prabhu – Petitioner
Versus
Mrs.V.Indira, W/o. Ratnakara Prabhu and Ors. – Respondents
Crl.R.P. Nos.36, 37, 38 and 39 of 2007
Decided On : 09-11-2023
NI Act - Prosecution of Partnership Firm - Section 138 of the NI Act - Section 141 - Summary of Acts and Sections: The court discussed the interpretation of Section 141 of the NI Act, which imposes vicarious liability on persons associated with a company or firm when the company or firm commits an offense. The court highlighted the requirement of arraigning the partnership firm as an accused for maintaining a prosecution under Section 141 of the NI Act. The judgment in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd. was referenced to establish the necessity of arraigning the company or firm as an accused for maintaining a prosecution under Section 141 of the NI Act.
Fact of the Case:
The revision petitioner was convicted of the offense punishable under Section 138 of the NI Act for dishonoring cheques issued by a partnership firm. The petitioner contended that the partnership firm should have been made an accused in the complaint for maintaining the prosecution under Section 141 of the NI Act.
Finding of the Court:
The court found that a prosecution under Section 141 of the NI Act cannot be maintained without arraigning the partnership firm as an accused in the complaint. Therefore, the conviction and sentence passed against the revision petitioner were set aside, and the petitioner was acquitted and set at liberty forthwith.
Issues: The main issue was whether a prosecution under Section 141 of the NI Act is maintainable without arraigning the partnership firm as an accused in the complaint.
Ratio Decidendi: The court held that for maintaining a prosecution under Section 141 of the NI Act, arraigning the partnership firm as an accused is imperative, as per the interpretation of Section 141 and the judgment in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd.
Final Decision: The revision petitions were allowed, setting aside the conviction and sentence passed by the courts below under Section 138 of the NI Act, and the revision petitioner was acquitted and set at liberty forthwith.
ORDER :
Parties and the contentions raised in these criminal revision petitions are the same and therefore all these cases are heard and disposed of together.
2. Revision petitioner in these cases is the 2nd accused in C.C.Nos.650 of 2002, 647 of 2002, 649 of 2002 and 648 of 2002 on the file of the Judicial First Class Magistrate Court-II, Kochi, alleging offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (in short, “NI Act”). In C.C.No.650 of 2002, the complaint was filed by the 1st respondent on the basis of the allegation that accused 1 and 2 who were Managing Partner and Partner of M/s.Swathi Garments borrowed an amount of Rs.2,00,000/-and to clear the liability, four cheques were issued for the said amount and on presentation of the cheques, they were dishonoured for want of sufficient funds. Though a lawyer notice was issued demanding payment, the accused failed to make the payment and hence the complaint alleging offence punishable under Section 138 of the NI Act was filed. In C.C.Nos.647 of 2002, 649 of 2002 and 648 of 2002 the allegation is the same.
3. Only the revision petitioner/2nd accused appeared before the trial court and the 1st accused was absconding. Therefore, the case against the 1st accused was split up and only the revision petitioner/2nd accused faced trial. All the cases were tried jointly and evidence was recorded in C.C. No. 647 of 2002. During the trial, the power of attorney holder of the complainant was examined as PW1 and marked Exts.P1 to P30. The trial court on appreciation of the evidence adduced, held the revision petitioner/2nd accused guilty of the offence punishable under Section 138 of the NI Act and thus convicted and sentenced him to undergo simple imprisonment and to pay compensation and in default, the accused was directed to undergo simple imprisonment for a further period. Aggrieved by the conviction and sentence, the revision petitioner has filed criminal appeals as Crl.Appeal Nos.430 of 2005, 432 of 2005, 433 of 2005 and 429 of 2005 before the Additional Sessions Court (Adhoc-I), Ernakulam. Appellate Court as per the common judgment dated 15.02.2006 confirmed the conviction but modified the sentence by reducing the substantive sentence till rising of the court and increasing the compensation amount, with a default sentence.
4. In the criminal revision petitions, the revision petitioner raised a contention that the partnership firm that issued the cheque is not made an accused in the said complaint and without the partnership firm being arrayed as an accused, the complaint itself is not maintainable. The learned counsel appearing for the 1st respondent complainant relied on the judgment in Anil Hada v. Indian Acrylic Ltd, (2000) 1 SCC 1 which held that the NI Act does not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons who falls within the second and third category mentioned in Section 141 of the NI Act.
5. Admittedly, the cheque was issued on behalf of a partnership firm and it is alleged in the complaint that accused 1 and 2 who are the Managing Partner and Partner of the firm “M/s. Swathi Garments” issued the cheque. On the basis of the same, it is contended by the learned counsel appearing for the revision petitioner that if the amount was borrowed for and on behalf of the firm, the firm ought to have been made a party to the proceedings and in the present case the firm is not arraigned as an accused and therefore contended that for maintaining a prosecution under Section 141 of the NI Act, arraigning of the firm as an accused is imperative.
6. The issue to be considered is as to whether a prosecution under Section 141 of the NI Act is maintainable without arraigning the firm as an accused in the complaint. The specific averment in the complaint is that towards the amount due, accused nos. 1 and 2 as Managing Partner and Partner respectively of “M/s. Swathi Garments” had issued the cheques in favour of
Anil Hada v. Indian Acrylic Ltd
Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd.
Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781
Himanshu v. B.Shivamurth (2019) 3 SCC 797
Hindustan Unilever Limited v. State of Madhya Pradesh (2020) 10 SCC 751
Point of Law : Section 141 of N.I. Act provides that for purpose of this Section, "company" means anybody corporate and includes a firm or other association of Individuals; and "director", in relatio....
Section 141 of N.I. Act deals with offences by companies.
Prosecution against a partner of a partnership firm under Section 138 of the N.I. Act is not maintainable without including the firm as an accused, affirming the principle of vicarious liability.
Point of law: Negotiable instruments – Conviction set aside - There can be no vicarious liability unless there is a prosecution against the firm. The vicarious liability gets attracted when the condi....
Criminal proceedings under Section 138 of the N.I. Act require the partnership firm to be arraigned as an accused; failure to do so renders the proceedings against individual partners not maintainabl....
(1) Dishonour of cheque – Vicarious liability in criminal law in terms of Section 141 of NI Act cannot be fastened because of civil liability.(2) Dishonour of cheque – Vicarious liability arises only....
A partnership firm cannot be individually liable under Section 138 of the N.I. Act without including all partners in the complaint; liability is joint and several.
Partners of a firm can be individually prosecuted for cheque dishonour despite the firm's acquittal, as the firm lacks separate legal identity.
The main legal point established in the judgment is the requirement to join all necessary parties as accused under the provisions of the Negotiable Instrument Act, and the vicarious liability of comp....
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