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HIGH COURT OF BOMBAY
ROHIT B. DEO, J
Bharuka Trading Company – Appellant
Versus
M/s. Hanuman Dal Industries Pvt. Ltd. – Respondent
Criminal Writ Petition No.623 of 2020|Summary Criminal Case 187/2018
For the Appellants/Petitioners: Mr. Palash K. Mohta
For the Respondents: Mr. M. Anilkumar, Mr. N.S. Rao
Statutory notice must be issued to the drawer of the cheque; failure to do so invalidates proceedings under Section 138 of the Negotiable Instruments Act.
Headnote:(A) Negotiable Instruments Act, 1881 - Sections 138 and 142 - Statutory notice - Requirement of notice to the drawer of the cheque is mandatory for proceeding under Section 138. The complainant must issue statutory notice to the partnership firm if cheques are issued by the firm, not the private limited company. (Paras 10, 20, 23)
(B) Penal statute - Distinction between legal entities - A partnership firm and a company are separate legal entities; thus liability cannot extend from one to another without proper procedure. (Paras 20, 23)
Facts of the case:
The petitioner filed a complaint under Section 138 N.I. Act for dishonoured cheques issued by the partnership firm, but the private limited company was mistakenly arraigned as accused. The Sessions Judge quashed the issuance of process on grounds of non-compliance with statutory notice requirements.
Findings of Court:
The court upheld that since the cheques were issued by the partnership firm without a proper notice served, the issuance of process against the private limited company was legally erroneous.
Issues: Whether the statutory notice was appropriately issued to the drawer of the cheque, and the implications of distinct legal identities of a partnership firm and private limited company.
Ratio Decidendi: The court reiterated that liability stemming from dishonoured cheques lies with the drawer; thus, failing to serve the relevant party invalidates the case under Section 138. Previous precedents establish that directors of a company are not liable if the company itself is not a party to the proceedings.
Result: Petition dismissed.
Key Points: - The statutory notice to the drawer of the cheque is mandatory for proceeding under Section 138 NI Act; failure to issue such notice invalidates proceedings. (!) - Partnership firms and companies are distinct legal entities; liability cannot extend from one to the other without proper procedure. (!) (!) - In the case, the cheques were issued by the partnership firm, but the private limited company was arraigned as accused without proper notice to the firm, leading to jurisdictional error and invalid process. (!) (!) - Notice must be issued to the drawer of the cheque; if issued to the wrong entity, the case cannot proceed against the correct entity. (!) - The law treats notice as the essential "soul" of the case under Section 138 NI Act; amendment without addressing the proper drawer does not cure the defect. (!) - The court upheld that misnaming or misidentification of the accused entity results in dismissal of the revision due to jurisdictional error. (!) (!) - Directors of a company are not automatically liable if the company is not a party to the proceedings; liability lies with the drawer/entity that issued the cheque. (!)
What is the mandatory nature of statutory notice to the drawer of the cheque under Section 138 NI Act?
What is the impact of distinct legal identities of a partnership firm and a company on liability under Section 138 NI Act?
What are the consequences of issuing process against the wrong entity when the drawer of the cheque is a partnership firm and the notice was not served on that firm?
| Table of Content |
|---|
| 1. complaint details regarding dishonoured cheques. (Para 4 , 5 , 6 , 10 , 12) |
| 2. legal argument concerning the issuance of cheques. (Para 8 , 14 , 19) |
| 3. absence of notice to the drawer prevents prosecution. (Para 18) |
| 4. serious emphasis on the necessity of proper issuance of notice. (Para 20 , 23) |
| 5. partnership firms and private limited companies are distinct entities. (Para 22) |
2. Rule.
3. With consent, the petition is finally heard.
4. The petitioner, who shall be referred to as the complainant hereinafter, instituted Summary Criminal Case 187/2018 under Sections 138 read with Section 142 of the Negotiable Instruments Act, 1881 (Act for short) arraigning M/s. Hanuman Dal Industries Pvt. Ltd., Nagpur, Ramanarao Muslaji Naggaya Bolla, Tirupatirao Bolla and Vijayalaxmi Bolla as accused 1 to 4 respectively.
5. The complainant is a businessman engaged in wholesale trade in grain under the name and style “Bharuka Trading Company”.
6. It is averred in paragraph 1 of the complaint that the accused 2 to 4 carry on business under the name and style “M/s. Hanuman Dal Industries Pvt. Ltd.,”. It is further averred that “Hanuman Dal Industries” is a registered partnership firm and accused 2 to 4 are the partners of the said firm.
7. In the cause-title, while disclosing the address of the accused, the alternate address disclosed is “M/s. Hanuman Dal Industries”.
8. A conjoint reading of the cause-title and the averments in paragraph 1 would suggest that the complainant was separate and independent existence of “Hanuman Dal Industries” which is a firm. This has some significance since the learned Sessions Judge has quashed the order of issuance of process on the premise that the firm which issued the cheque is not arraigned as accused, which order of the learned Sessions Judge is impugned.
9. Revering to the averments in the complaint, paragraph 2 avers that accused 2 to 4 purchased grain for and on behalf of “M/s. Hanuman Dal Industries Pvt. Ltd.” and that an amount of Rs.54,57,747/- is due and payable as the price of the goods supplied by the complainant.
10. It is further averred in the complaint that accused 2 Ramanarao Muslaji Naggaya Bolla issued five cheques on behalf of the “Partners and Firms” which were dishonoured and that despite the receipt of the statutory notice the accused did not make the payment covered by the dishonoured cheques.
11. Perusal of the statutory notice reveals that the notice is issued to “M/s. Hanuman Dal Industries Pvt. Ltd.” and the accused 2 to 4. The statutory notice refers to “M/s. Hanuman Dal Industries Pvt. Ltd., Nagpur” as a registered partnership firm and to accused 2 to 4 as the partners.
12. The learned Judicial Magistrate First Class, Risod was pleased to issue process under Section 138 of the Act, vide order dated 30.10.2018.
13. The respondents herein – accused preferred revision under Section 397 of the Code of Criminal Procedure, 1973 (Code) challenging the order of issuance of process.
14. The accused contended that the dishonoured cheques were issued by M/s. Hanuman Dal Industries through its partner Ramanarao Bolla and not by the company “M/s. Hanuman Dal Industries Pvt. Ltd. The extension of the contention is that the company “M/s. Hanuman Dal Industries Pvt. Ltd.” and its Directors are unnecessarily implicated.
15. The memo of revision further contends that although the cheque was issued by a partnership firm, the firm was not issued the statutory notice. In paragraph 5 of the memo of revision the constitution of the partnership firm and the company is disclosed.
16. In sum and substance, the contention in the memo of revision is that the learned Magistrate committed a jurisdictional error in taking cognizance of the offence.
17. By the impugned judgment the learned Additional Sessions Judge, Washim was pleased to allow the revision and quash the order of issuance of process.
18. The learned Sessions Judge noted that the dishonoured cheques are issued by the partnership firm and not b
