Mehul Construction S Partner ... vs State Of Gujarat
2021 Latest Caselaw 7793 Guj

     R/CR.MA/11898/2019                           JUDGMENT DATED: 06/07/2021




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

        R/CRIMINAL MISC. APPLICATION NO. 11898 of 2019

FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE GITA GOPI

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1      Whether Reporters of Local Papers may be allowed
       to see the judgment ?

2      To be referred to the Reporter or not ?

3      Whether their Lordships wish to see the fair copy
       of the judgment ?

4      Whether this case involves a substantial question
       of law as to the interpretation of the Constitution
       of India or any order made thereunder ?

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    MEHUL CONSTRUCTIONS PARTNER GOVINDBHAI @ BHIKHUBHAI
                      HIRABHAI KARENA
                           Versus
                     STATE OF GUJARAT
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Appearance:
MR DEEP D VYAS (3869) for the Applicant(s) No. 1
MS MONALI BHATT, ADDL. PUBLIC PROSECUTOR (2) for the
Respondent(s) No. 1
SERVED BY RPAD (N)(6) for the Respondent(s) No. 2
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     CORAM: HONOURABLE MS. JUSTICE GITA GOPI

                              Date : 06/07/2021

                             ORAL JUDGMENT

1. By way of this petition filed under Section 482 of the Code of Criminal Procedure, the applicant has prayed to quash and set aside the proceedings of Criminal Case No.140 of 2009 pending before the Court

R/CR.MA/11898/2019 JUDGMENT DATED: 06/07/2021

of learned Judicial Magistrate First Class, Jamjodhpur along with all consequential proceedings.

2. The facts in brief are that on 27.02.2019, the respondent No.2 herein, original complainant, filed a complaint against one Govindbhai @ Bhikubhai Hirabhai Karena, in the capacity of being a Partner of M/s. Mehul Construction Company, under Section 138 of the Negotiable Instruments Act, 1881 (for short, "the NI Act") before the Court of learned Judicial Magistrate First Class, Jamjodhpur inter alia alleging that he had advanced Rs.3,00,000/- in cash to the said accused. Towards repayment of the said loan amount, the accused had issued a cheque of the said amount on 07.12.2018. However, the same got dishonored on the ground that the account was already closed. After following due process, the complaint in question came to be filed before the Magisterial Court.

3. It is the case of the applicant that the complaint in question is bereft of relevant details and particulars, which constitutes the ingredients of the offence punishable under Section 138 read with Section 141 of the NI Act and that the complaint would not be maintainable since the Partnership Firm in question - M/s. Mehul Construction Company, has not been arraigned as a party in the proceedings. It is the further case of the applicant that said Govindbhai @ Bhikubhai Hirabhai Karena was an erstwhile Partner of the applicant - Company and that by way of Deed of Modification in Partnership dated 26.05.2017, four of the Partners had retired from the Partnership Firm. The said accused was a party to such Deed of Modification in Partnership and thus, with effect from 26.05.2017, the said accused had retired from the applicant - Company.

4. Learned advocate Mr. Vyas for the applicant - Company submitted

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that in view of the Deed of Modification in the Partnership, the retirement from the applicant - Firm was made by way of Notice published in a local daily named "Aajkal" on 06.11.2017, which has wide circulation in the Districts of Jamnagar, Rajkot, Ahmedabad, Porbandar, Bhavnagar and Bhuj. It is further submitted that the applicant - Firm has not been made an accused in the complaint in question and therefore, the proceedings against the applicant - Firm is neither legal nor proper. It was contended that no offence is made out against the applicant since the Bank Account of the Firm is not maintained by the applicant. The complaint in question is also hit by the provisions of Limitation and is not in consonance with the provisions of Section 138 read with Section 141 of the NI Act. The averments made in the complaint do not disclose that the cheque was issued towards discharge of any debt or liability. The statutory notice is not duly served upon the Firm instead it has been misused and the pendency of the criminal prosecution against the applicant would seriously prejudice the rights of the applicant. It was, therefore, prayed that the application may be allowed by quashing and setting aside the impugned complaint and all the consequential proceedings.

5. Though served, none appears on behalf of respondent No.2, original complainant.

6. Heard learned advocate for the applicant and learned Additional Public Prosecutor. The certified copy of the complaint in question and the order passed below Exhibit-1 are on record. The cause title of the complaint, prima facie, reveals that the applicant - M/s. Mehul Construction Company, which is a Partnership Firm, has not been joined as an accused in the complaint. The applicant is shown as an accused but his status is not referred to be as for and on behalf of the Firm. The

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complaint was filed on 27.02.2019. The Deed of Modification of Partnership shows that the accused had retired from the partnership firm as a Partner on 26.05.2017. The Public Notice about such retirement was published in the local daily on 06.11.2017. Thus, on the date of filing of the impugned complaint, the accused was not a Partner of the Firm. The questioned three cheques are dated 07.12.2018.

7. Further, the cheques in question were drawn from ICICI Bank and it is averred in the complaint that the cheques were of the Firm. The allegation is of having borrowed the money from the complainant on friendly terms on the ground of business purpose.

8. Section 141 of the NI Act relates to offences by the Company and the Explanation appended to the said section states that the Company would also include a Firm or other Association of individuals and the Directors in relation to the firm would mean a Partner in the firm. It is provided under Section 141 that if a person commits an offence under Section 138 of the NI Act is a Company, every person, who at the time the offence was committed, was in-charge of and responsible to the Company for the conduct of the business of the Company as well as the Company shall be deemed to be guilty of the offence.

9. In the case of Aneeta Hada V. Godfather Travels and Tours Private Limited, (2012) 5 SCC 661, the Apex Court has held that the prosecution without arraigning the Company as an accused is not maintainable. The criminal liability on account of dishonor of cheque primarily falls on the drawer Company and extends to his officer only when the conditions incorporated under Section 141 of the NI Act stands satisfied. It has been held that the Company can have criminal liability fastened on it if the

R/CR.MA/11898/2019 JUDGMENT DATED: 06/07/2021

group of persons that guide the business of the Company have criminal intent that would be imputed to the body corporate. Section 141 stipulates that when a person which is a Company commits an offence, then certain categories of persons in charge as well as the Company would be deemed to be liable for the offence under Section 138. Thus, the statutory intendment is absolutely plain. The provision makes the functionaries and the companies to be liable and that is by deeming fiction.

10. In the case of Himanshu V. B. Shivamurthy and another, (2019) 3 SCC 797, it was held that in absence of Company being arraigned as accused, the complaint against its Director would not be maintainable. In the said case, the applicant therein had borrowed money for developing his business. The cheque so drawn was returned with the endorsement of "insufficient funds". On these facts, the Apex Court held that the commission of offence by the Company is express condition precedent to attract vicarious liability of others and when Company can be prosecuted then only persons mentioned in other categories could be vicariously liable for offence subject to pleadings and proof. While prosecuting Directors, the Company must be arraigned as an accused.

11. In this case, the Firm has not been arraigned as an accused. No averment has been made in the complaint to the effect that the accused was in-charge of and responsible to the conduct of the business of the Firm. Admittedly, the amount was taken for business purpose and the cheque was drawn on the account maintained by the Firm. However, when the complaint came to be filed, the accused was not a Partner of the Firm. Thus, this Court is of the view that the proceedings against the applicant is not tenable in the eyes of law and it deserves to be quashed and set aside.

R/CR.MA/11898/2019 JUDGMENT DATED: 06/07/2021

12. For the foregoing reasons, the application is allowed. The proceedings of Criminal Case No.140 of 2009 pending before the Court of learned Judicial Magistrate First Class, Jamjodhpur along with all consequential proceedings are quashed and set aside. Rule is made absolute.

( GITA GOPI, J )

PRAVIN KARUNAN