D.P. Jain And Co. And Ors. vs Green Earth Asphalt And Power Pvt. ...
2006 Latest Caselaw 682 Bom

JUDGMENT

K.J. Rohee, J.

1. Rule made returnable forthwith. Heard finally by consent of parties.

2. By this application under Section 482 of the Code of Criminal Procedure read with Articles 226 and 227 of the Constitution of India, the applicants seek to quash Summary Criminal Case No. 72/2005 pending before the Judicial Magistrate, First Class, Achalpur.

3. Non-applicant No. 1 (hereinafter referred to as the "Complainant") is a company duly registered under the Indian Companies Act, 1956, It is engaged in the business of construction. Its registered office is at Achalpur Camp, District -Amravati.

4. Applicant No. 1 is a partnership firm which is also engaged in the business of construction. It has its office at Nagpur. Applicant Nos. 2 to 4 are the partners of applicant No. 1.

5. The complainant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the applicants alleging therein that the complaint provided plant and machinery on rental basis to the applicants. Towards the payment of rental amount, applicant No. 2 (Girish s/o Dharampal Jain) on behalf of all the applicants, issued cheque for Rs. 3 Lacs on 25-10-2004 in favour of the complainant drawn on State of Bank of India, Industrial Finance Branch, Nagpur. The cheque was issued towards the amount due and payable by all the applicants to the complainant and in discharge of their pre-existing debt and liabilities. As per the instructions of the applicants the said cheque was represented by the complainant with its Bank for encashment on 26-2-2005. However, the said cheque was returned dishonoured by the bankers with the remarks "Payment stopped by Drawer" and an intimation to that effect was received by the complainant on 2-3-2005. The complainant issued notice to the applicants on 5-3-2005 demanding the amount. The said notice was received by the applicants on 10-3-2005. Despite receipt of the notice the applicants did not make payment within 15 days. Hence the complainant filed complaint in April, 2005. After verification the learned Magistrate directed issuance of process under Section 138 of the Negotiable Instruments Act against all the applicants by order dated 16-5-2005.

6. On 25-10-2005 the applicants moved an application for dismissal of the complaint. However, by order dated 16-11-2005 the said application was dismissed by the learned Magistrate on the ground that dismissal of the complaint would amount to review of his own order which is not permissible. Thereafter the applicants preferred Criminal Revision Application No. 155/2005 and by order dated 28-2-2006 the Additional Sessions Judge, Achalpur dismissed revision application. The applicants have challenged the dismissal of the revision application and have prayed for dismissal of the complaint.

7. The applicants have challenged the proceedings mainly on the ground that the complainant has not stated about the role played by the applicants in the alleged transaction. In fact, no role has been attributed to any of the applicants in the said complaint. In the absence of such averment either in the complaint or in the verification, no offence under Section 138 of the Negotiable Instruments Act is made out and the proceedings initiated against the applicants are liable to be quashed and set aside.

8. I have heard Mr. Shyam Dewani, Advocate for the applicants and Mr. Nitin Sambre, Advocate for non-applicant No. I/original complainant.

9. The learned Counsel for the applicants submitted that under Section 141 of the Negotiable Instruments Act, if the person committing an offence under Section 138 is a company (which includes a firm), every person who, at the time the offence was committed, was in charge of, and was responsible to the company/firm for the conduct of the business of the company/firm, as well as the company/firm, shall be deemed to be guilty of the offence. The learned Counsel for the applicants submitted that in order to attract the provisions of Section 138 of the Negotiable Instruments Act the complainant must make averment in the complaint itself that every person, who is named as an accused, was responsible to the firm for the conduct of the business of the firm. In the absence of such averment no vicarious liability can be fastened on the partner of the firm. The learned Counsel for the applicants pointed out that in para No. 1 of the complaint, it is averred that the "complainant is a company registered under the Indian Companies Act, 1956 and accused No. 1 is a partnership firm of which accused Nos. 2 to 4 are the partners". In para No. 2 of the complaint it is averred that "accused No. 2 on behalf of all the accused issued a cheque in favour of the complainant and that the said cheque was issued towards the amount due and payable, by all the accused to the complainant and in discharge of preexisting debt and liabilities". The learned Counsel for the applicants vehemently submitted that it is nowhere averred in the complaint that accused Nos. 2, 3 and 4 were in charge of and were responsible to the firm for the conduct of the business of the firm. In the absence of such an averment it cannot be said that they are guilty of the offence punishable under Section 138 of the Negotiable Instruments Act. In support of his submissions, the learned Counsel for the applicants placed his reliance on the following cases:

(i) In K.P.G. Nair v. Jindal Menthol India Ltd. , it is held that:

In view of Section 141 a person other than the company can be proceeded against under those provisions only if that person was in charge of and was responsible to the company for the conduct of its business. Though words of Section 141(1) need not be incorporated in a complaint as magic words but substance of the allegations read as a whole should answer and fulfil the requirements of the ingredients of the said provision (for being proceeded against for an offence which he is alleged to have committed). On the above premise, it is clear that the allegations made in the complaint do not either in express words or with reference to the allegations contained therein make out a case that at the time of commission of the offence the appellant was in charge of and was responsible to the Company for the conduct of its business. Therefore, in this case the High Court has misdirected itself and committed an error in coming to the conclusion that the requirements of Section 141 are prima facie satisfied insofar as the appellant is concerned. The proceedings in question for the alleged offence under Section 138 as against the appellant are quashed.

(ii) In Katta Sujatha (Smt.) v. Fertilizers and Chemicals Travancore Ltd. and Anr. it is held that:

In short the partner of a firm is liable to be convicted for an offence committed by the firm if he was in-charge of and was responsible to the firm for the conduct of the business of the firm or it is proved that the offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the partner concerned.

(iii) In Monaben Ketanbhai Shah and Anr. v. State of Gujarat and Ors. 2004 Cri.L.J. 4249, it is held that:

Section 141 does not make all partners liable for the offence. Criminal liability has been fastened on those who, at the time of commission of offence, was in-charge of and was responsible to firm for conduct of business of firm. These may be sleeping partners. Primary responsibility is on complainant to make necessary averments in complaint so as to make accused vicariously liable. For fastening criminal liability, there is no presumption that every partner knows about the transaction. The obligation of appellants to prove that at the time the offence was committed they were not in-charge of and were not responsible to the firm for conduct of business of firm, would arise only when complainant makes necessary averments in complaint and establishes that fact. The instant case is of total absence of requisite averments in complaint. Therefore, order of Magistrate directing discharge of accused persons, holding that there are no allegations in complaint making out offence against them is proper.

10. The learned Counsel for non-applicant No. I/complainant, on the other hand, submitted that the pleadings made by the complainant in the complaint are sufficient to attract the provisions of Section 138 of the Negotiable Instruments Act. He pointed out that it has been specifically averred that accused No. 2 cheque in favour of the complainant on behalf of all the accused and that the same was issued towards the amount due and payable by all the accused to the complainant in discharge of their pre-existing debt or liabilities. He submitted that no more pleading is necessary. It is for the accused persons to show that the offence was committed without his knowledge or that he had exercised all due diligence. The burden in this regard has to be discharged by the accused persons during trial. Thus the complaint is not liable to be quashed as urged on behalf of the applicant. In support of his submissions, the learned Counsel for non-applicant No. I/complainant placed his reliance on the following cases:

(i) Orient Syntex Ltd. and Ors. v. Besant Capital Tech. Ltd. 1999(3) Mh.L.J. 413 : 2000 Cri.LJ. 210 (Bombay), (ii) S.V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and Anr. 2005(3) Mh.L.J. 754 (SC).

11. I have carefully considered the rival submissions. I have also gone through the case law cited at the bar. It may be noted that in order to fasten vicarious liability against the partners of the firm, there must be clear, specific and unambiguous allegations made in the complaint. Every partner of the firm cannot automatically be roped in. The complainant can proceed only against such persons who at the time the offence was committed by the firm, were in-charge of and were responsible to the firm for the conduct of its business. Such persons must be in over all control of the day-to-day business of the firm. A complainant based on vague statement that one of the partners signed the cheque on behalf of all the partners and the cheque was issued towards the amount due and payable by all the partners is not a complaint in the eye of law. The accusation against each partner must be specific and unambiguous. The role played by each of the accused must be clearly stated in the complaint. No complainant can be permitted to launch prosecution against all the partners of a firm without there being a proper foundation in the complaint itself about the actual role played by them at the material point of time when the offence is committed by the firm. No prosecution would lie against a partner on the simple accusation in the complaint that such person was the partner of the firm.

12. A bare perusal of the allegations in the complaint as referred to above would show that they fall short to make out any offence under Section 138 read with Section 141 of the Negotiable Instruments Act against the applicants.

13. It may be noted that in Orient Syntes Ltd. case cited by the learned Counsel for the complainant/non-applicant No. 1, there were averments in complaint specifically stating that the accused were in-charge of and responsible to company for conduct of its business. In S.V. Muzumdar's case, it was held that whether a person is in-charge of or is responsible to the company (firm) for conduct of the business is to be adjudicated on the basis of material to be placed by the parties. So, firstly it is for the complainant to aver in the complaint and thereafter to place material in support of the averments. In the present case such averments are lacking in the complaint and as such the complaint cannot proceed against the applicants.

14. In view of the discussion above, the order of the revisional Court dated 28-2-2006 in Criminal Revision Application No. 155/2005 is set aside. Summary Criminal Case No. 72/2005 pending on the file of the Judicial Magistrate, First Class, Achalpur is hereby quashed.

15. Rule is made absolute in the above terms.