Gujarat High Court

Manojbhai Ramnikbhai ... vs State Of Gujarat on 10 July, 2023

Bench: Sandeep N. Bhatt

    R/CR.MA/13523/2019                           JUDGMENT DATED: 10/07/2023




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/CRIMINAL MISC.APPLICATION NO. 13523 of 2019
                                  With
              R/CRIMINAL MISC.APPLICATION NO. 13524 of 2019
                                  With
              R/CRIMINAL MISC.APPLICATION NO. 13525 of 2019
                                  With
              R/CRIMINAL MISC.APPLICATION NO. 13526 of 2019
                                  With
              R/CRIMINAL MISC.APPLICATION NO. 13527 of 2019

FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE SANDEEP N. BHATT

==========================================================

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 ?

==========================================================
     MANOJBHAI RAMNIKBHAI (ROJIVADIYA) KUVADIYA PARTNER OF
                         MILAN TYRES
                             Versus
                      STATE OF GUJARAT
==========================================================
Appearance:
MR. ZALAK B PIPALIA(6161) for the Applicant(s) No. 1,2
MR VIMAL A PUROHIT(5049) for the Respondent(s) No. 2
MR SOAHAM JOSHI, APP for the Respondent(s) No. 1
VISHAL S AWTANI(7913) for the Respondent(s) No. 2
==========================================================

    CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                             Date : 10/07/2023


                                 Page 1 of 23

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      R/CR.MA/13523/2019                                     JUDGMENT DATED: 10/07/2023




                                    ORAL JUDGMENT

1. All these applications are filed under Section

482 of the Code of Criminal Procedure, 1973 (`the Code'

for short) for quashing and setting aside the complaints

being Criminal Case Nos. 2617 of 2016, 2620 of 2016,

2619 of 2016, 2612 of 2016 and 2616 of 2016

respectively filed under the provisions of the Negotiable

Instruments Act (`NI Act' for short).

2. As the common question of facts and law are

involved in all these applications, at the request of

learned advocates for the parties, they are heard together

and disposed of by this common oral judgment.

3. For the sake of convenience, the facts of

Criminal Miscellaneous Application No.13523 of 2019 are

considered, which are as under:

3.1 A complaint came to be filed in the year 2007

before the learned Chief Judicial Magistrate, Probandar, nd thereafter, the case was transferred to the court of 2

Additional Chief Judicial Magistrate, Rajkot and it was

renumbered. However, thereafter, again in view of the

amendment in the NI Act, the complaint was transferred

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to Porbandar and it was given the criminal case number

impugned herein. It is the case of the complainant that

on depositing the cheques, they were returned with the

endorsement `funds insufficient' and when the demand

for the amount was made and it was not complied with,

the demand notice was issued, which were returned back

with the endorsement `left'.

3.2 It is averred that the Milan Tyre Partnership

Firm was initially incorporated with three partners - the

applicants herein and one Sanjaybhai Mehta, who retired

subsequently. Thereafter, the applicant no.2 herein also

retired and her husband joined the firm and new

partnership deed was executed. That, the relevant communication was made to the Income Tax Department

every time the changes were made and also at the time

of dissolution of partnership firm, the relevant

communication was made. It is averred that the said

partnership firm was dissolved on 30.9.2005, however, the

dissolution deed was executed on 30.3.2007. It is the

impugned complaints which are made in the year 2007

and renumbered thereafter, which are sought to be

quashed by way of these applications.

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4. Heard learned advocates for the parties.

4.1 Learned advocate Mr.Pipaliya for the applicants

submitted that on bare reading of the complaint, it

transpires that the complaint is filed against the

partners only without impleading the partnership firm as

party. He has submitted, by drawing attention to the

notice correspondence that the notice is issued to the

partners only and no notice is issued to the partnership

firm. He has also drawn the attention of this Court to

the communication made to the Income Tax Officer,

Rajkot by the partnership firm - Milan Tyre dated

4.12.2007 intimating that the partnership firm is

dissolved on 30.9.2005 and PAN card is also surrendered. He has referred to the deed of partnership which is

executed between the partners on 28.2.2004 in which the

names of the partners were mentioned in the partnership

deed and submitted that in view of the provisions of

Sections 138 and 141 of the NI Act, more particularly,

explanation to Sectioon 141, the partnership firm is also

required to be impleaded as party in any proceeding

carried out pursuant to the transaction made by the

partnership firm. He has submitted that merely

R/CR.MA/13523/2019 JUDGMENT DATED: 10/07/2023

impleading the partners in any legal proceeding, more

particularly, under Section 138 of the NI Act, will not be

maintainable in the eye of law, in absence of partnership

firm being impleaded as party.

5. In support of his submissions, learned advocate

Mr.Pipaliya has relied on the following decisions:

(1) Aneeta Hada V/s Godfather Travels & Tours Pvt.Ltd.,

reported in (2012)5 SCC 661, more particularly,

paragraph 42

(2) Ratishbhai D Ramani V/s State of Gujarat and Ors.

Reported in 2015(1) GLR 848, more particularly, paragraph 9

(3) Kiritbhai Patel V/s State of Gujarat, decided on

19.1.2016 in Criminal Miscellaneous Application No.16297

of 2011.

6. He, therefore, submitted that in view of the

above settled legal position, in the present case, when

admittedly the partnership firm is not impleaded as

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accused in the said complaint, the same is required to

be quashed as not maintainable in the eye of law. He,

therefore, prays to exercise the inherent powers under

Section 482 of the Code and allow these applications and

quash the impugned complaints.

7. Per contra, learned APP Mr.Joshi for

respondent no.1-state and learned advocate Mr.Abhishek

Sharma appearing for learned advocate Mr.Vimal Purohit

for the respondent no.2-complainant have opposed these

applications and submitted that this Court should not

exercise its inherent powers by interfering with the

proceedings of recovery of huge amount and the

proceedings initiated under Section 138 of the Act are perfectly justified. Learned advocate Mr.Sharma has

further drawn the attention of this Court towards the

factual aspect of the matter by indicating that the

partnership is dissolved in the year 2005 but such

communication is made by the firm to the Income Tax

Officer on 4.12.2007 whereas the impugned cheques are

issued and bounced on 3.3.2007. Therefore, this

communication made to the Income Tax Officer is an

afterthought with a view to create false record to escape

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the liability to pay the dues to the present complainant.

He has further submitted that the judgment cited by

learned advocate for the applicants are not helpful as, in

the facts of the present case, the present applicants are

accused nos.1 and 2 in the complaint and they are

impleaded in the capacity of partners of partnership firm

and therefore, in view of the provisions of the

Partnership Act, partners are also liable for the act done

on behalf of the partnership firm and they cannot escape

from their liability to repay their dues. He further

submitted that in any case, all these disputes are

required to be considered at the time of trial and this

Court should not exercise inherent powers under Section

482 of the Code, which otherwise, should be exercised sparingly.

8. Learned advocate Mr.Sharma has also

submitted that the said cheques are signed by one of the

partners who is one of the accused and therefore being

the signatory of the cheque which is signed on behalf of

the partnership firm and he cannot run away from his

liability to pay the amount of dues. He, therefore,

requested to dismiss these applications.

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9. I have considered the rival submissions and

perused the material on record.

10. At the outset, the provisions of Sections 138

and 141 of the NI Act are required to be seen, which

read as under:

"138. Dishonour of cheque for insufficiency, etc., of funds in the account.

Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for "a term which may extend to two year", or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply

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unless

(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(b) The payee or the holder induce course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer, of the cheque, "within thirty days" of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and

(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation: For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability."

"141 Offences by companies. (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was 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 and shall be liable to be proceeded against and proceeded against and punished accordingly:

Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that

R/CR.MA/13523/2019 JUDGMENT DATED: 10/07/2023

the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attribute to, any neglect on the part of, any director, Manager, secretary, or other office of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation. For the purposes of this section,

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "Director", in relating to a firm, means a partner in the firm."

11. Now, if the facts of the present case are

perused, then the partnership firm is not a party in the

R/CR.MA/13523/2019 JUDGMENT DATED: 10/07/2023

complaint filed under Section 138 of the NI Act; it

transpires that the complaint is filed by the complainant

as power of attorney of one partnership firm and the

complaint is filed against two persons namely Manojbhai

Kuvadiya and Bhartiben Kuvadiya describing them as

partners in the partnership firm - Milan Tyres and the

partnership firm - Milan Tyres is not impleaded

independently as accused. Further, the documents

produced on record by the applicant in these applications

remained uncontroverted and undisputed and as such,

those documents are required to be accepted in the eye

of law.

12. As regards the judgments cited by learned advocate Mr.Pipaliya for the applicants, in the case of

Ratishbhai D Ramani (supra), considering the judgment in the case of Aneeta Hada (supra), it is held in

paragraphs 9 and 10 as under:

"9. The learned advocate for the applicant has rightly relied upon the decision of the Apex Court in the case of Aneeta Hada (supra). The Honourable Apex Court observed in paragraphs Nos. 39, 42 and 43 as under:

R/CR.MA/13523/2019 JUDGMENT DATED: 10/07/2023

"39. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.

42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term as well as in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words as well as have to be understood in

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the context. In Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. And others it has been laid down that the entire statute must be first read as a whole, then section by section, clause by clause, phrase by phrase and word by word. The same principle has been reiterated in Deewan Singh and others v. Rajendra Prasad Ardevi and others and Sarabjit Rick Singh v. Union of India. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted.

43. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of

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vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V.Parekh (AIR 1971 SC 447) (supra) which is a threeJudge Bench decision. Thus, the view expressed in Sheoratan Agarwal, (AIR 1984 SC 1824) (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada, (AIR 2000 SC 145 : 1999 AIR SCW 4228) (supra) is overruled with the qualifier as stated in paragraph 37 the decision in Modi Distilleries, (AIR 1988 SC 1128) (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove."

10. In my view, the case of the applicant in all the three applications is squarely covered by the ratio laid down by the Honourable Apex Court in the case of Aneeta Hada (supra). In the present case, the original complainant has not joined the partnership firm as an accused, and the complaint is filed only against the driver of the firm, and therefore, in view of the decision rendered by the Honourable Apex Court in the case of Aneeta Hada (supra), all the aforesaid impugned complaints in the present three cases are not maintainable. Hence, this Court can exercise the powers under Section 482 of the Cr.P.C. for quashing and setting aside the impugned complaints. Accordingly, the Criminal Miscellaneous Applications are allowed. The criminal complaints, being Criminal Cases No. 283 of 2007,

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284 of 2007 and 154 of 2008, pending before the learned Judicial Magistrate First Class, Sayla, filed by the respondent No.2 - complainant are hereby quashed and set aside. Rule is made absolute."

13. In the case of Kiritbhai Patel (supra), this

Court has considered the provisions of Section 138 of the

NI Act in detail and has reiterated the ratio of Aneeta

Hada (supra) and held that:

"7. In view of the aforesaid discussion, when the respondent no.2-original complainant has not joined the partnership firm as an accused in the impugned complaint, this Court can exercise the powers under Section 482 of the Cr.P.C. for quashing and setting aside the impugned complaint. However, as the present application is filed qua only one accused, the complaint is quashed and set aside qua the present applicant only."

14. In the cases on hand, the partnership firm is

required to be impleaded as accused, which is admittedly

not done in these cases, the cheques are issued by the

partnership firm and signed by one of the partners and

there is no dispute of existence of the partnership firm

at the relevant point of time. Even the notice

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correspondence is not done with the partnership firm.

Therefore, the ingredients of Sections 138 and 141 of the

NI Act are not satisfied qua the present applicants.

15. It is also relevant to refer to the judgment of

the Hon'ble Apex Court in the case of Inder Mohan

Goswami and Another versus State of Uttaranchal reported in (2007) 12 SCC 1, more particularly para : 23

& 24 thereof, which read as under :

"23. This Court in a number of cases has laid down the scope and ambit of courts' powers under Sec. 482 CrPC. Every High Court has inherent power to act ex debito justitiae to do real and substantial justice, for the administration of which alone it exists, or to prevent abuse of the process of the court. Inherent power under Sec. 482 CrPC can be exercised:

[(i) to give effect to an order under the Code;]

[(ii) to prevent abuse of the process of court, and]

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[(iii) to otherwise secure the ends of justice.]

24. Inherent powers under Sec. 482 CrPC though wide have to be exercised sparingly, carefully and with great caution and only when such exercise is justified by the tests specifically laid down in this section itself'. Authority of the court exists for the advancement of justice. If any abuse of the process leading to injustice is brought to the notice of the court, then the court would be justified in preventing injustice by invoking inherent powers in absence of specific provisions in the statute. Discussion of decided cases."

16. It is also fruitful to refer to the judgment rendered by the Hon'ble Apex Court in the case of

S.P.Mani and Mohan Dairy V/s Dr.Snehalatha Elangovan reported in 2022 SCC Online SC 1238, more particularly, paragraphs 40, 41 and 47, which read as under:

"40.The principles discernible from the aforesaid decision of this Court in the case of Ashutosh Ashok Parasrampuriya (supra) is that the High Court should not interfere under Section 482 of the Code at the instance of an accused unless it comes across some unimpeachable and

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incontrovertible evidence to indicate that the Director/ partner of a firm could not have been concerned with the issuance of cheques. This Court clarified that in a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/ partner provided the Director/partner is able to adduce someunimpeachable and incontrovertible evidence beyond suspicion and doubt.

Specific Averments in the complaint:

41.In Gunmala Sales Private Limited (supra), this Court after an exhaustive review of its earlier decisions on Section 141 of the NI Act, summarized its conclusion as under: "a) Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director;

b) If a petition is filed under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director;

c) In the facts of a given case, on an overall reading of the

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complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an armtwisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed;

d) No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great

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circumspection to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director."

47.Our final conclusions may be summarised as under:- a.) The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.

b.) The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or

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the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.

c.) Needless to say, the final judgement and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners 'qua' the firm. This would make them liable to

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face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal. d.) If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court."

17. Though huge amount is involved in the present cases filed by the complainant and applicants also might

have not paid huge dues of other persons, but in the

peculiar facts and circumstances of the present case,

ingredients of Section 138 read with Section 141 of the

NI Act are not satisfied qua the applicants in all these

cases. However, it is open for the complainant to file

appropriate civil as well as criminal proceedings,

whichever is permissible under the law against the

applicants.

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18. In view of above settled position of law and

after considering the facts as alleged in the complaints