Gujarat High Court
Manish Trading Company Through ... vs State Of Gujarat on 5 January, 2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR LEAVE TO APPEAL) NO. 3045
of 2023
In R/CRIMINAL APPEAL NO. 345 of 2023
With
R/CRIMINAL APPEAL NO. 345 of 2023
With
R/CRIMINAL MISC.APPLICATION NO. 3089 of 2023
In
R/CRIMINAL APPEAL NO. 350 of 2023
With
R/CRIMINAL APPEAL NO. 350 of 2023
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MANISH TRADING COMPANY THROUGH MANISHBHAI
JAGDISHBHAI PATEL
Versus
STATE OF GUJARAT
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Appearance:
MR ASHISH M DAGLI(2203) for the Applicant(s) No. 1
MR HIMANSHU C DESAI(6832) for the Respondent(s) No. 2,3
Ms. Vrunda C Shah, Addl. PUBLIC PROSECUTOR for the
Respondent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 05/01/2024
ORAL ORDER
1. Since in both these applications seeking Special Leave to
Appeal filed under Section 378(4) of the Code of Criminal
Procedure involves similar set of facts between the same parties
raising similar question of law, both these applications are
heard and decided by this common order.
2. In Criminal Miscellaneous Application No.3045 of 2023 ,
the original complainant- present applicant seeks permission of
this Court to prefer appeal against the impugned judgment and
order dated 30.04.2022 passed by the learned Additional
Judicial Magistrate, Vadodara in Criminal Case No.1323 of
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2013.
2.1. Similarly in Criminal Miscellaneous Application No.3089 of
2023, the original complainant- present applicant seeks
permission of this Court to prefer appeal against the impugned
judgment and order dated 30.04.2022 passed by the learned
Additional Judicial Magistrate, Vadodara in Criminal Case
No.1324 of 2013.
2.2. By the aforesaid impugned judgment and order, the
learned Magistrate has proceeded to record acquittal of the
present respondent- original accused for the offence alleged
under Section 138 of the Negotiable Instruments Act.
3. In brief the facts as emerged on record is that;
3.1. The appellant is an unregistered partnership firm. The
respondent accused is engaged in the business of extending
services in the name of Super Hospitality Services Private
Limited and applicant is engaged in wholesale business of
grains. It is the case of the original complainant -partnership
firm that because of the business relationship the parties were
known to each other since last five years. The complainant firm
used to provide goods on credit. Initially, the respondent -
accused used to make regular payment of the purchased goods
in time, however, since year 2010-11 to 2011-12, the
respondent- accused had failed to make payment of the goods
taken on credit and the complainant had raised the recovery of
such amount of Rs.4,10,708/- from the respondent accused.
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3.2. Against such outstanding amount, the respondent-accused
had handed over eight cheques of State Bank of India, Alkapuri
Branch, Vadodara between the period 22.10.2012 to 22.11.2012.
The details of such cheques are as under:
Date Cheque No. Amount
22.10.2012 187623 50,000/-
22.10.2012 187624 50,000/-
20.11.2012 187625 50,000/-
20.11.2012 187626 50,000/-
20.11.2012 187627 50,000/-
20.11.2012 187628 50,000/-
22.11.2012 187629 50,000/-
22.11.2012 187630 59589/-
3.3. The aforesaid cheques were drawn by the respondent no.1
in his capacity as Director of the Super Hospitality Services
Private Limited Company. It is further contended by the
complainant that the aforesaid cheques were presented for
realization of the outstanding amount. However, cheque bearing
no.187628, dated 20.11.2012 for an amount of Rs.50,000/- was
returned back. Similarly, cheque bearing no.187629, dated
22.11.2012 for an amount of Rs.50,000/- and cheque bearing
no.187630, dated 22.11.2012 for an amount of Rs.59589/- were
also returned back on 23.11.2012. The return of of such
cheques were reported by the concerned Bank by its
communication dated 24.11.0212. Thus, the complainant was
constrained to raise demand of the aforesaid outstanding
amount of three cheques by sending legal notice dated
10.12.2012 by registered Post AD upon the respondents-
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accused.
3.4. According to the complainant, the aforesaid legal notice
though duly served as evident from the acknowledgment slip
received by the complainant on 5.12.2012 with an endorsement
of 10.12.2012 by the accused, the accused has chosen not to
make payment of aforesaid outstanding amount. The
complainant had, therefore, approached the Court of learned
Additional Judicial Magistrate, Vadodara by lodging complaint
under Section 138 of the Negotiable Instruments Act on
10.01.2013. The aforesaid complaints were registered as
Criminal Case No.1323 of 2013 and 1324 of 2013.
4. The learned Magistrate upon recording verification of
Manishbhai Jagdishbhai Patel who claims to be the partner of
complainant firm i.e. Manish Trading Company, proceeded to
issue summons upon the respondent -accused and summons
were duly served upon the respondent accused. The accused
had appeared before the learned Magistrate and his plea was
recorded wherein the accused has denied the case of the
complainant. The learned Magistrate had proceeded with the
summary trial of the complaint.
4.1. The said witness- Manishbhai Jagdishbhai Patel who
claims to be the partner of the complainant firm has entered into
the witness box and has given his evidence which is recorded at
Exh.7. The complainant has examined one witness viz.
Jagdishbhai Govardhanbhai Patel at Exh.34. Apart from the
aforesaid oral evidence, documentary evidence which mainly
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include three disputed cheques (Exhs.14 to 16), demand notice
(Exh.17), Postal window slip (Exhs. 18 & 19), Postal
acknowledgment slip (Exhs. 20 & 21) and different credit memo
issued in the name of Manish Trading Company (Exhs. 61 to
152).
4.2. On the other hand, the Director of the respondent no.1
Company i.e. Keshav Narayan Alava has appeared before the
trial Court and his statement is recorded under Section 313 of
the Code of Criminal Procedure. Apart from the denial to the
questions put to the respondents-accused, the defence is raised
by the accused that the complainant has misused the cheques
which were otherwise taken under coercion and a false
complaint is lodged to extort money.
5. The learned Magistrate after considering the aforesaid
evidence as well as statement made by the learned counsel
representing the respective parties has dismissed the complaint
holding it as not maintainable. The learned Magistrate has
noticed the fact that the disputed cheques were drawn in the
name of payee i.e. "Manish Trading Company" whereas the cause
title of the original complaint suggest that the complaint is
lodged by one Manish Jagdishbhai Patel in his capacity as
partner of "Manish Trading Company". According to the learned
Magistrate, the complaint is not filed through or on behalf of
aforesaid partnership firm as contended by the original
complainant before the trial Court. The learned Magistrate has
further taken into consideration the fact that no documentary
evidence has been brought on record to establish the fact that
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the Manish Trading Company is a registered Partnership Firm
and Manish Jagdishbhai Patel is partner of the said firm. With
such observations, learned Magistrate has dismissed the
complaint as not maintainable.
6.Being aggrieved and dissatisfied with the aforesaid order of
dismissing the complaint passed by the learned Magistrate
which has ultimately resulted into the acquittal of the
respondent -accused, belatedly the original complainant has
approached this Court seeking special leave to appeal under
Section 378(4) of the Code of Criminal Procedure. The
application seeking condonation of delay was filed separately
whereby this Court by order dated 13.07.2023 has condoned the
delay caused in filing Special Leave to Appeal along with appeal.
7. I have extensively heard Mr. Viral Vyas, learned advocate
who has appeared on behalf of Mr. Ashish Dagli, learned
advocate on record for the applicant and Mr. Himanshu Desai,
learned advocate who has appeared on behalf of the respondent
nos. 2 and 3 respectively. Noticing the issue involved in the
matter, lies in the narrow compass viz. with regard to
maintainability of the complaint at the instance of an
unregistered partnership firm, application seeking special leave
to appeal along with the appeal was finally heard with the
consent of the learned advocates for the respective parties. The
matter had reserved for orders.
8. Learned advocate for the applicant - original complainant
has contended before the Court learned Magistrate committed
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serious error in not appreciating the fact that cheques were
drawn in the name of proprietor firm i.e. "Manish Trading
Company", and the complaint filed by the Manish Jagdishbhai
Patel in his capacity as partner of the said firm was
maintainable. The documentary evidence brought on record by
the original complainant goes to suggest that the cheques were
issued for discharge of the legal liabilities incurred by the
respondent accused during the course of business transaction
with the said partnership firm and the cheques were returned
back on account of "insufficient fund". The factum of dishonour
of cheque has also been proved before the learned trial Court.
According to the learned advocate, there was sufficient
compliance of the mandatory provisions of Section 138 of the
Negotiable Instruments Act. In absence of any challenge to the
signature on the disputed cheque, the learned Magistrate ought
to have raised presumption in favour of the complainant and in
absence of any rebuttal of such presumption though the defence
of misuse of cheque was raised, the learned Magistrate ought to
have called upon the respondent-accused to lead some cogent
material to establish such defence. In absence of any defence
being established the presumption which had already arose in
favour of complainant firm had remained intact as being
unchallenged and in that case, offence under Section 138 of the
Negotiable Instruments Act was attracted.
9. During the course of arguments, learned advocate has
referred to the grounds raised in the memo of appeal. By
referring to the grounds, it was urged before this Court for the
first time that Manish Trading Company is a registered
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partnership firm and is registered with the Registrar of Firm and
even certificate of registration is issued by the Vadodara
Municipal Corporation which is with regard to existence of
establishment. He, therefore, urged this Court to remand the
matter back to the learned Magistrate to examine the case on
merits by directing to restore the complaint.
10. On the other hand, the aforesaid submissions of the
learned advocate for the appellants were objected by the learned
advocate on record for the respondent- original accused. It was
submitted by the learned advocate for the respondent that no
cogent material has been brought on record to satisfy that there
exists registered partnership firm in the name of "Manish
Trading Company" and that the applicant viz. Manish
Jagdishbhai Patel was partner of such firm. He further
submitted that as per Section 69(2) of the Indian Partnership
Act, learned Magistrate has rightly arrived at a conclusion that
the complaint at the instance of the aforesaid firm in absence of
any material being brought on record, to be not maintainable.
He, therefore, submitted that no arguable case is raised by the
applicant to grant special leave to appeal and has urged this
Court to dismiss the appeal.
11. Having heard the learned advocate for the respective
parties and having perused the impugned judgment and order
passed by the learned Magistrate. the only question which falls
for consideration of this Court in the present appeal is whether
the learned Magistrate committed any error in dismissing the
complaint as not maintainable in the facts of the case.
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Indisputably, it has transpired on record that the disputed
cheques have been drawn in the name of "Manish Trading
Company". As per the case of the complainant, the said trading
company is a registered partnership firm and the applicant viz.
Manish Jagdishbhai Patel is partner of the said firm. The learned
Magistrate has proceeded to dismiss the complaint holding that
no documentary evidence has been brought on record to
establish the very existence of the partnership firm and the fact
that the applicant -complainant is the partner of the said firm. In
other words, the question of law as to whether the prosecution of
the accused under Section 138 of the Negotiable Instruments Act
is hit by bar created by sub-section (2) of Section 69 of the
Indian Partnership Act, 1932 has been raised. The aforesaid
question of law is no more res integra in view of the various
decisions of the various High Courts as well as Hon'ble Supreme
Court.
12. It would be appropriate to re-visit the the relevant
provisions of Section 69 of the Indian partnership Act. Section
69 of the Indian Partnership Act reads as under:
69. Effect of non-registration
(1)No suit to enforce a right arising from a contract
or conferred by this Act shall be instituted in any
court by or on behalf of any person suing as a
partner in a firm against the firm or any person
alleged to be or to have been a partner in the firm
unless the firm is registered and the person suing is
or has been shown in the Register of Firms as a
partner in the firm.
(2) 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
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shown in the Register of Firms as partners in the
firm.
(3) The provisions of sub-sections (1) and (2) shall
apply also to a claim of set-off or other proceeding to
enforce a right arising from a contract, but shall not
affect,--
(a) the enforcement of any right to sue for the
dissolution of a firm or for accounts of a dissolved
firm, or any right or power to realise the property of
a dissolved firm, or
(b)the powers of an official assignee, receiver or
Court under the Presidency-towns Insolvency Act,
1909 (3 of 1909) or the Provincial Insolvency Act,
1920 (5 of 1920) to realise the property of an
insolvent partner.
(4)This section shall not apply,--
(a)to firms or to partners in firms which have no
place of business in[the territories to which this Act
extends], or whose places of business in [the said
territories], are situated in areas to which, by
notification under [section 56], this Chapter does
not apply, or
(b) to any suit or claim of set-off not exceeding one
hundred rupees in value which, in the Presidency-
towns, is not of a kind specified in section 19 of the
Presidency Small Cause Courts Act, 1882 (5 of
1882), or, outside the Presidency-towns, is not of a
kind specified in the Second Schedule to the
Provincial Small Cause Courts Act, 1887 (9 of 1887),
or to any proceeding in execution or other
proceeding incidental to or arising from any such
suit or claim. State Amendment."
The plain reading of sub-section (2) of Section 69 of the
Act, 1932 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.
13. The aforesaid question fall for consideration before the
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Division Bench of the Andhra Pradesh High Court in the case of
Mr. Amit Desai and Another vs. M/s. Shine Enterprises and
Another reported in 2000 Cri.LJ 2386, the Court took a view
that enforcement of a legal liability has to be in the nature of
civil suit because the debt or other liability cannot be recovered
by filing a criminal case and when there is a bar of filing a suit
by an unregistered firm, the bar equally applies to criminal case.
13.1.Thus, the view originally prevailed was that unregistered
firm cannot enforce a debt against the third party as in view of
the bar created under Section 69(2) of the Act. The debt cannot
be termed as legally enforceable debt in view of explanation (2)
of Section 138 of the Act. It would be relevant to note that in
both the aforesaid cases the Courts have disagreed with the view
taken by the Kerala High Court in the case of Abdul Gafoor vs.
Abdulrahiman reported in (1999) 2 KLT 634 and in the case of
Gurucharan Singh vs. State of UP and Another of Allahabad
High Court reported in 2002 Cri. LJ3682.
13.2. Later on the Coordinate Bench of the Andhra Pradesh
High Court while disagreeing with the view taken by the earlier
Bench in the case of Mr. Amit Desai (supra) had referred to the
question for consideration before the Larger Bench. The Larger
Bench of the Andhra Pradesh High Court in the case of A V
Ramanaiah vs. M. Shekhara reported in ALR(Cri) 2009(2) 801.
After discussing the various case laws on the point arrived at a
conclusion that bar contained under Section 69 (2) of the Act of
1932 would not be attracted for initiating any action by or
against an unregistered partnership firm for the offence
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committed under Section 138 of the Negotiable Instruments Act.
13.3.Subsequently, the learned Single Judge of the High Court
of Mumbai in the case of Sai Accumulator Industries,
Sangamner vs. Sethi Brothers, Aurangabad reported in 2016(5)
Mh.LJ 936 while dealing with the appeal arising out of
complaint filed by an unregistered firm under Section 138 of the
Negotiable Instruments Act took a view that complaint was not
tenable in law in view of the bar under Section 69(2) of the Act,
1932. The learned Single Judge had followed the ratio laid down
by the Division Bench of the Andhra Pradesh High Court in the
case of AV Ramanaiah (supra) as recorded in para 9, which reads
as under:
"9. Disagreeing with the ratio in the case of Mr. Amit
Desai (supra), the coordinate Bench of the Andhra
Pradesh High Court referred the question for
consideration of the larger Bench. Accordingly, the
larger Bench of the Andra Pradesh High Court in the
case of AV Ramanaiah (supra) held that the Division
Bench in the case of Mr. Amit Desai (supra) has not
laid down a correct law. The larger Bench after
discussing various case laws on the point, came to the
conclusion that the bar contained under Section 69 of
the Act of 1932 would not get attracted for initiating
action by or against an unregistered partnership firm
for the offence committed under Section 138 of the NI
Act."
13.4. The Coordinate Bench of our High Court in the case of
Ruturaj Ayurvedic Gruh Udhyog and Another vs. Navnitlal and
Company Through Devang Manojbhai Gandhi and Another
reported in 2017(2) GLH 312 after taking into consideration the
aforesaid judgment of the Bombay High Court in the case of Sai
Accumulator Industries, Sangamner (supra) as well as Hon'ble
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Division Bench of the Kerala High Court in the case of Kerala
Arecanut Stores vs. Ramkishor and Sons and Another reported
in AIR 1975 Kerala 144 agreed with the view taken by the Kerala
High Court and held that the complainant though being
unregistered partnership firm is entitled to sue and held the
complaint to be maintainable. The Court has observed as under:
"12. In the case of Abdul Gafoor v. Abdurahiman, (1999)2
KERLT 634, a learned Single Judge of the Kerala High Court
considered the very same issue and held as under:
"The counsel for the revision petitioner submitted that
the 1st respondent being an unregistered partnership
firm, the above prosecution is not sustainable under
Section 69(2) of the Indian Partnership Act. The effect of
non-registration of the Partnership Firm under Section
69 of the Partnership Act is applicable only to cases
involving civil rights and it has no application to
criminal cases. Therefore, the contention of revision
petitioner that the prosecution in this case is not
sustainable under Section 69(2) of the Indian
Partnership Act is not acceptable."
13. Even by plain reading of Section 69(2) of the Partnership
Act leaves no scope for doubt that what is barred by the said
section is the institution of a suit to enforce a right arising
from a contract or conferred by the Partnership Act by or on
behalf of any person suing as a partner in a firm against the
firm, or any person alleged to be or to have been a partner in
the firm unless the firm is registered and the person in suit
is or has been shown as a partner in the register of firms.
14.A careful reading of Section 69(2) of the Partnership Act
clearly shows that an unregistered partnership firm is barred
from filing a civil suit and there is no bar as such to file a
private complaint and it is purely criminal liability on the
part of the person who has issued the cheque. Even if the
cheque issued by a partner of an unregistered firm for legally
recoverable debt or otherwise and if such cheque
dishonoured when it was presented for encashment, it
amounts to a criminal liability. Therefore, the dismissal of a
complaint by the Trial Court by relying on the decision of the
Andhra Pradesh High Court referred to above is incorrect.
Whenever a complaint is presented under Section 138 of the
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Negotiable Instruments Act, it is the duty of the learned
Magistrate to take note of the cognizance and record the
sworn statement of the complainant and his witnesses and
after hearing if there is any prima facie case then it is the
duty of the Court to issue summons to the accused.
15. In the case of BSI Limited and another v. Gift Holdings
Private Limited, reported in (2000)2 SCC 737, the Supreme
Court held thus :
"... A criminal prosecution is neither for recovery of
money nor for enforcement of any security etc.
Section 138 of the Negotiable Instruments Act is a
penal provision the commission of which offence
entails a conviction and sentence on proof of the guilt
in duly conducted criminal proceedings. Once the
offence under Section 138 is completed the
prosecution proceedings can be initiated not for
recovery of the amount covered by the cheque but for
bringing the offender to penal liability."
16. Again in the case of Gurcharan Singh v. State of Uttar
Pradesh and Another, 2002(4) Crimes 165 (All), the
Allahabad High Court has followed the above said judgment
of the Supreme Court.
17. Therefore, in view of the above decision of the Supreme
Court as well as of the other High Courts, the contention of
the applicants that filing of a criminal complaint by a partner
of an unregistered firm is hit by Section 69(2) of the
Partnership Act cannot be accepted. The said section has no
application to the criminal cases. Under these circumstances
it could be said that Section 69(2) of the Partnership Act is
applicable only where the civil rights are invoked and not in
criminal cases. Nonregistration of the firm has no legal
bearing on the criminal case.
18. Mr.Mangukiya, the learned counsel submits that his
client may be given one opportunity to cross-examine the
complainant."
In view of the aforesaid legal position, the issue with regard
to the maintainability of complaint at the instance of
unregistered partnership firm is thus held maintainable.
14. Having held so, the question which arise for consideration
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of this Court in the facts of the case is with regard to
maintainability of complaint in the form and manner it is
presented before the learned Magistrate. Though the learned
advocate for the applicant has made attempt to contend that the
firm is registered partnership firm and the applicant is one of the
partner of the said firm, no documentary evidence as contended
before this Court has been placed on record for consideration. In
absence of such document, the very fact of holding authority for
lodgement of complaint at the instance of the payee trading
company i.e. "Manish Trading Company" is not established. In
absence of any material about the existence of the firm and the
applicant being the partner of the said firm, the very fact of
lodging the complaint in his capacity as payee/ holder in due
course is required to be dealt with before examining the merits of
the case. In the facts and circumstances of the case when the
applicant is not payee/ holder in due course, the complaint
cannot be entertained at the behest of such applicant under
Section 138 of the Act. Hence, no arguable case is made out to
consider for grant of leave to appeal and is hereby refused.
Consequently, the appeals also fail.
(NISHA M. THAKORE,J)
KAUSHIK J. RATHOD
