Bombay High Court

Sai Accumulator Industries ... vs M/S Sethi Brothers Abad on 22 April, 2016

Bench: A.I.S. Cheema

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          IN  THE HIGH COURT OF JUDICATURE AT BOMBAY 

                                   BENCH AT AURANGABAD




                                                  
                         CRIMINAL APPEAL NO.426 OF 2003




                                                 
     Sai Accumulator Industries Sangamner,
     Through its Partner,
     Shri Kacheshvar Savaleram Chavan,




                                         
     Age-51 years, Occu:Trader,
     R/o-Sangamner, Dist-Ahmednagar.
                             
                                     ...APPELLANT 
                                   (Orig. Complainant)
                            
            VERSUS             

     M/s. Sethi Brothers Aurangabad,
     Through its Owner,
      

     Smt. Sunanda Sethi @ Sunita Kapoor,
     Age-51 years, R/o-Shop No.45,
   



     Sindhi Colony, Jalna Road,
     Aurangabad, Dist-Aurangabad.  
                                     ...RESPONDENT
                                  (Orig. Respondent)





                          ...
        Shri. S.T. Shelke Advocate for  Appellant.
        Shri. S.N. Pagare Advocate for Respondent. 
                          ...       





                   CORAM:  A.I.S. CHEEMA, J.

        DATE OF RESERVING JUDGMENT  :30TH MARCH,2016  

        DATE OF PRONOUNCING JUDGMENT: 22ND APRIL, 2016
                                    




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     JUDGMENT :

1. This is an Appeal against acquittal of

Respondent - original accused under Section 138 of

the Negotiable Instruments Act, 1881 ("Act" in

brief).

2. Facts in brief may be stated as follows:

(A). The Appellant - original complainant

(hereafter referred as "complainant") filed

private complaint in the trial Court claiming that

the complainant is a registered partnership firm

and had business dealings with Respondent -

accused. Respondent had purchased battery plates

from the complainant and against such transaction,

on 18th May 1994 issued two cheques (Exhibit 46,

47), each of Rupees Twelve Thousand. The cheques

were presented to Nagar Urban Central Co-operative

Bank of the complainant on 16th November 1994. The

Bank sent the cheques for collection to Indira

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Co-operative Bank of the accused. The cheques

returned back to the complainant unpaid with

memorandum (Exhibit 56) dated 22nd November 1994

reporting insufficient funds. Complainant issued

notice (Exhibit 48) on 25th November 1994 through

Advocate which was refused (according to the

complainant around 30th November 1994). The

complainant filed complaint on 5th January 1995.

(B). On behalf of the complainant, PW-1

Kacheshwar Chavan was examined. He claimed to be

one of the partners and claimed that he had the

power of attorney to file complaint and to give

evidence. Complainant examined PW-2 Pramod Joshi

from Nagar Urban Co-operative Bank to prove

documents at Exhibit 54, 55 - which were registers

regarding sending the cheques for collection and

their return. The witness proved memo Exhibit 56

relating to dishonour of cheques. Complainant

examined PW-3 Dole Asaraji from Indira Co-

operative Bank, who proved that the cheques were

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returned unpaid for want of necessary funds.

(C). The Respondent-accused entered the

witness box and deposed that she did purchase the

battery plates and had issued the concerned two

cheques. She stated that when she received the

battery plates, they were defective and her

customers started making complaints and she

deposed that one of the customer made written

complaint to her and even claimed compensation

from her. She claims that she sent the defective

battery plates to the complainant and raised

dispute regarding the quality. Her evidence is

that the complainant did not respondent for 2-3

months and so she issued letter to her Bank which

is Exhibit 85, regarding stopping of payment.

(D). The evidence from the record of the trial

Court shows that PW-1 claimed the complainant to

be registered partnership firm but this was

disputed by the accused. In the cross-examination

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of PW-1 Kacheshwar Chavan also it was suggested to

him that the complainant was not a registered

partnership firm and that PW-1 was not partner of

that firm.

(E). The trial Court discussed the evidence

and has recorded findings that the complainant had

proved that the accused had issued the two cheques

and the same were for discharge of debt or

liability. Trial Court held that it was proved

that the cheques were dishonoured due to

insufficient funds in the account of the accused.

It also concluded that the notice dated 25th

November 1994 (Exhibit 48) was sent to the

Respondent-accused on correct address. However,

the trial Court found that the complainant had not

proved as to on what date the notice was refused,

as the envelope had postal seals only dated 25th

November 1994 when the Notice was booked. The

trial Court held that the complainant produced

copies of the registration of the firm which

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showed that it was registered only on 14th October

1999, which is during pendency of the complaint.

It found that the power of attorney tendered was

also not proved. The trial Court held that the

complainant failed to prove that prior to 14th

October 1999 the complainant was registered

partnership firm and that PW-1 Kacheshwar Chavan

had right to file complaint as a partner of the

firm or that he was power of attorney holder. The

trial Court referred to Judgment in the matter of

Mr. Amit Desai and another vs. M/s. Shine

Enterprises and another, reported in 2000 Cri.

L.J. 2386, from Andhra Pradesh High Court and

found that complainant was unregistered

partnership firm when the complaint was filed. It

found that PW-1 had no right to file the

complaint.

3. I have heard the counsel for both sides.

The dispute has narrowed down to the question as

to what is the effect of the complainant not being

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a registered partnership firm at the relevant time

when complaint was filed. The learned counsel for

the Appellant submitted that PW-1 Kacheshwar

Chavan produced photo copy of partnership deed and

power of attorney. The transaction was not in

question and the sending of notice was not

disputed although date when it was refused was in

dispute. The accused has not denied that the

cheques were bounced but she has raised dispute

that the battery plates were defective and the

cheques could not have been presented for

clearance when dispute on that count had been

raised. The learned counsel for Appellant relied

on the case of Abdul Gafoor vs. Abdurahiman,

reported in 2000(3) ALL M.R. (JOURNAL) 17, and the

case of Gurcharan Singh vs. State of U.P. and

another, reported in 2002 CRI. L.J. 3682 of

Allahabad High Court. It is stated that in the

case of Gurcharan Singh, the Allahabad High Court

has relied on the Judgment in the case of BSI Ltd.

and another vs. Gift Holdings Pvt. Ltd. and

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another, reported in 2000 Supreme Court Cases

(Cri.) 538. The counsel submitted that the Hon'ble

Apex Court has, while referring to Section 69(2)

of the Indian Partnership Act, 1932 repelled the

contention that suit for recovery of money would

encompass prosecution proceedings also. Thus, it

is argued that there was no bar to the filing of

the complaint by unregistered partnership.

4. Against this, the counsel for Respondent-

accused submitted that the Respondent had issued

the concerned two cheques for battery plates which

had been supplied. The battery plates were

defective and her customers were making complaints

and most of the customers returned back the

defective battery plates. The accused sent the

defective battery plates to the complainant for

testing. The complainant did not replace the

defective battery plates inspite of various

requests. The complainant did not respond for 3

to 4 months and the accused was left with no

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choice but to request her Bank by letter dated 8th

June 1994 (Exhibit 85) to stop the payment of

cheques. It is argued, relying on the Judgment in

the matter of Mr. Amit Desai (supra) that the

complaint could not have been filed by

unregistered partnership and the trial Court has

rightly acquitted the accused.

Section 69 of the Indian Partnership Act,

1932 ("Partnership Act" for short) deals with

effect of non-registration of partnership firm.

Sub-Section (2) of Section 69 provides that no

suit to enforce a right arising from a contract

shall be instituted in any Court by or on behalf

of a firm against any third party unless the firm

is registered and the persons suing are or have

been shown in the Register of Firms as partners in

the firm.

. There is no dispute regarding the fact

that this Sub-Section relates to Suits, which need

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to be understood as Civil Suits. The complainant

has relied on the Judgment in the matter of Abdul

Gafoor, (referred supra). In Para 3 and 4 of that

Judgment, there is reference to the submissions

which were made before the said Court. Going

through the paragraphs, I find it difficult to

decipher which portion is relating to argument and

which is relating to finding or the whole of the

paragraphs relate to arguments. I do not intend to

get diverted by the Head Notes of the Citation.

6. Coming to the Judgment in the case of

Gurcharan Singh (supra), which is the Judgment of

Hon'ble Single Judge of the Allahabad High Court,

it related to Section 138 matter between M/s

Sterling Novelty Products, Moradabad, a

partnership firm and International Gifts Ltd., a

company from Canada of which President was one

Gurcharan Singh, who was made accused. Gurcharan

Singh was the applicant before the High Court and

dispute was raised that the Respondent firm was

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unregistered. The learned Single Judge discussed

Section 69 of the Partnership Act. It also

considered the Judgment in the matter of Mr. Amit

Desai (supra) to observe that the Judgment in the

matter of Amit Desai had not discussed the law

involved except referring to Section 69. The

learned Single Judge then referred to the Judgment

of the Hon'ble Supreme Court in the matter of BSI

Ltd. vs. Gift Holding Pvt. Ltd. (supra) and

observations of the Supreme Court and on that

basis concluded that even if M/s. Sterling Novelty

Products was not a registered firm, bar created

under Section 69 of the Partnership Act had no

application and proceedings under Section 138 of

the Act was maintainable.

7 (A). As the learned Single Judge of

Allahabad High Court has relied on the Judgment of

the Hon'ble Supreme Court, I have also gone

through the said Judgment. The Judgment in the

matter of B.S.I. Ltd. (supra) shows that the

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Hon'ble Supreme Court was dealing with companies

and their directors struggling to get themselves

extricated from the catch of prosecutions filed

against them, consequent to non-payment of amounts

covered by cheques issued by such companies. It

appears that against those directors process had

been issued by the Magistrate under Section 138 of

the Act. The company moved the Board for

Industrial Finance and Reconstruction (BIFR) to

declare it a sick industrial company. When the

proceedings were pending before BIFR under Section

16 of the Sick Industrial Companies (Special

Provisions) Act, 1985 ('SICA" for short), a

declaration was made by the order passed by BIFR

as per Section 22(3) of SICA. On such basis the

appellant BSI Ltd. contended before the Supreme

Court that it was not liable to be prosecuted in

view of embargo contained in Section 22(1) of

SICA. Sub-Section (1) of Section 22 of SICA reads

as under:

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"22. Suspension of legal proceedings,

contracts, etc.-(1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme

referred to under section 17 is under preparation for consideration or a sanctioned scheme is under implementation or where an appeal under section 25

relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of

the industrial company or any other instrument having effect under the said

Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like

against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the

enforcement of any security against the industrial company or of any guarantee in

respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may

be, the Appellate Authority."

(Emphasis supplied)

(B). Relying on such provision, it was claimed

before the Hon'ble Apex Court that all legal

proceedings including prosecution would stand

suspended by the operation of embargo.

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(C). In Para 15 of the Judgment in the case of

B.S.I. Ltd. (supra), the Hon'ble Supreme Court

observed as under:

"15. The fallacy of the above contention is twofold. First is, that maintainability of prosecution

proceedings is not to be tested on the touchstone of any practical hurdle in

enforcing the sentence which might be imposed on a company after conviction. Second is, there is no insurmountable

hurdle for recovery of the fine covered by the sentence even from a sick industrial company because the ban contained in Section 22(1) is only

conditional as could be discerned from the last limb thereof which reads thus:

"Except with the consent of the Board or, as the case may be, the appellate authority." It means that with such consent the court would be in a position

to resort to proceedings for distress against the properties of the sick industrial company. Hence the aforesaid contention has no merit at all."

(D). In Para 19 the Apex Court further

observed that:

"19. The said contention is also devoid

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of merits. The word "suit" envisaged in

Section 22(1) cannot be stretched to criminal prosecutions. The suit mentioned therein is restricted to "recovery of

money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial

company". As the suit is clearly delineated in the provision itself, the context would not admit of any other stretching process."

(E). The Hon'ble Supreme Court then concluded

that, if commission of the offence under Section

138 of the Act was completed before the

commencement of proceedings under Section 22(1) of

SICA, there is no hurdle in any of the provisions

of SICA against the maintainability and

prosecution of a criminal complaint duly

instituted under Section 142 of the NI Act.

8. It is quite clear that Judgment of the

Hon'ble Supreme Court in the case of B.S.I. Ltd.

(supra), was in different context and the Hon'ble

Supreme Court was clearly considering Section

22(1) of SICA. There is a sea difference between

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the right to prosecute and the right not to be

prosecuted unless provisions are complied. The

consideration in the matter of B.S.I. Ltd.

(supra), was based on the claim that the

prosecution cannot proceed because Section 22(1)

of SICA had got attracted. In the present matter,

it is a question of right of the complainant, if

it has any, to prosecute. In this context, I find

that the Judgment of the Hon'ble Andhra Pradesh

High Court is much closer to the point involved in

this matter. In the matter of Mr. Amit Desai (supra),

the Division Bench of Andhra Pradesh High Court dealt

with Section 69 of the Partnership Act. It considered

also the matter of Abdul Gafoor, referred above. In

Para 15 of the Judgment, the Division Bench of

Andhra Pradesh High Court observed as under:

"15......... Explanation to Section 138 of the Negotiable Instruments Act specifically laid down that the debt or other liability means a legally enforceable debit or other liability. Enforcement of legal liability has to be in the nature of civil suit because the

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debt or other liability cannot be

recovered by filing a criminal case and when there is a bar of filing a suit by unregistered firm, the bar equally

applies to criminal case as laid down in explanation (2) of Section 138 of the Negotiable Instruments Act."

9. Perusal of Section 138 of the Act shows

that it has to be a transaction which relates to

legally enforceable debt or other liability. It is

quite clear that under Section 69(2) of the

Partnership Act, the complainant, unregistered

partnership could not have legally enforced the

debt. If being unregistered partnership it cannot

legally enforce the debt, it is not legally

enforceable debt and would go out of the purview

of Section 138 of the N.I. Act. When complaint was

filed complainant was not a registered partnership

and thus could not have, at that time, filed the