Gujarat High Court

Darshak Ashvinbhai Chaniyara vs State Of Gujarat on 8 January, 2024

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     R/CR.MA/4524/2020                                      ORDER DATED: 08/01/2024

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          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
     R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
                    FIR/ORDER) NO. 4524 of 2020
                               With
           R/CRIMINAL MISC.APPLICATION NO. 3046 of 2020
                               With
           R/CRIMINAL MISC.APPLICATION NO. 4712 of 2020
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                         DARSHAK ASHVINBHAI CHANIYARA
                                    Versus
                              STATE OF GUJARAT
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Appearance:
MR PRATIK Y JASANI(5325) for the Applicant(s) No. 1
MR ANKUR Y OZA(2821) for the Respondent(s) No. 2
MR MANAN MEHTA, APP for the Respondent(s) No. 1
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 CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                                  Date : 08/01/2024

                               COMMON ORAL ORDER

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.7029 of 2019 pending before the learned Chief

Judicial Magistrate, Bhavnagar 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 order.

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3. The facts giving rise to these applications, as

stated in the applications, are such that the impugned

complaint is filed by the respondent no.2 inter alia stating

that his partnership firm is engaged in the business of

trading in various kinds of irons and the petitioners who are

the partners of partnership firm names Kamnath Enterprise,

were doing regular business with his firm and the said firm

used to purchase goods from respondent no.2 on credit basis

and the said firm used to make payment at a later point of

time and as per the books of accounts of respondent no.2,

there was an outstanding amount from the applicants' firm

for which the applicants' firm issued cheques, which were

deposited by respondent no.2 and the same were dishonoured

with an endorsement `payment stopped by drawer'. Therefore,

the respondent no.2 issued the notice and as the amount was

not paid, the applicant filed the impugned complaint; it is

this complaint which is prayed to be quashed by filing these

applications.

4. Heard learned advocates for the parties.

4.1 Learned advocate 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,

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by drawing attention to the notice correspondence that even

the notice is issued to the partners only and no notice is

issued to the partnership firm. He submitted that the

cheques in question were issued for and on behalf of the

partnership firm i.e. Kamnath Enterprise, however, the said

is not arraigned as an accused in the complaint; that Section

141 of the NI Act is not invoked in this complaint and the

firm has not been joined as an accused and therefore the

partners alone cannot be held vicariously liable for the same;

that the complaint is fundamentally defective in substance;

that there is no provision in the Code for permitting

amendment in the complaint, particularly, when the

amendment is changing the entire nature of the complaint.

He, therefore, submitted that the impugned complaint is

required to be quashed.

4.2 Learned advocate for the applicants, has relied on

the following citations, in support of his submissions:

(1) Aneeta Hada V/s Godfather Travels and Tours reported in

2012(5) SC 661;

(2) Himanshu V/s B.Shivamurthy & Anr. Reported in 2019(3)

SCC 797;

(3) Manojbhai Ramnikbhai (Rojvadiya) Kuvadiya Partner of

Milan Tyres V/s The State of Gujarat & Anr. Decided in

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Criminal Miscellaneous Application No.13523 of 2019 to 13527

of 2019;

(4) Madhu Unnikrishnan Menon V/s The State of Gujarat &

Anr., reported in 2022(4) GLH 533;

(5) Navinbhai Hargovindbhai Patel V/s The State of Gujarat

& Anr., reported in 2023(0) AIJEL-HC 247019;

(6) Deepak Chhindalal Sharma V/s The State of Gujarat &

Anr. Decided in Criminal Miscellaneous Application

No.5468/2019 with 5470/2019 and 5472/2019;

(7) Alka Khandu Avhad V/s Amar Shyamprashad Mishra

reported in 2021(4) SCC 675.

5. 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 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.

6. Per contra, learned APP for respondent no.1-state and learned advocate for the respondent no.2-complainant

have opposed these applications and submitted that this

Court should not exercise its inherent powers by interfering

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with the proceedings of recovery of huge amount and the

proceedings initiated under Section 138 of the Act are

perfectly justified.

7. Learned advocate Mr.Tolia for respondent no.2 has

submitted that the demand notice was sent to the present

applicants at the address of Kamnath Enterprise (partnership

firm) and it was accepted by the partners of the firm and

they are in complete knowledge of the whereabouts of the

partnership firm; that there is no dispute with regard to the

issuance of the cheques towards the legal and valid dues,

transactions between the parties and signature on the

dishonoured cheques; that the said provisions clearly stipulate

that when a person which is a company and/or partnership

firm commits an offence, then certain categories of

persons/partners/directors would be deemed to be liable for

the offences under Section 138 of the NI Act; that in the

present case, a notice can be said to have been issued/served

upon the firm/the concern and the respondent no.2 may be

permitted to carry out amendment to the complaint by

adding name of the firm in the list of the accused; that the

partnership name and address are mentioned in the contents

of the notice and therefore these applications be dismissed as

the ingredients of Section 138 of the NI Act are made out.

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8. I have considered the rival submissions and

perused the material on record.

9. At the outset, the provisions of Sections 138 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 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

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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."

139. Presumption in favour of holder.--It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability."

10. Now, if the facts of the present case are perused,

it transpires that the partnership firm is not arraigned as an

accused in the complaint filed under Section 138 of the NI

Act though the cheques are issued by the applicants in the

capacity of partners of the partnership firm; 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

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notice correspondence is not done with the partnership firm.

Therefore, the ingredients of Sections 138 of the NI Act are

not satisfied qua the present applicants; that the Section 141

of the NI Act is not invoked though the cheques are issued

by the partnership firm; even though the presumption under

Section 139 is believed to be made out in the present case,

it is against the partnership firm as the transactions were

with the partnership firm and not the applicants who are the

partners of the firm; on perusal of the impugned cheque, the

applicants of Criminal Miscellaneous Application Nos.3046 of

2020 and Criminal Miscellaneous Application No.4524 of 2020

are not signatory of the cheque and the applicant of Criminal

Miscellaneous Application No.4712 of 2020 has signed the

said cheque in the capacity of partner of the partnership

firm-Kamnath Enterprise; that there is no provision under

the Code permitting amendment in the complaint filed under

the NI Act as they are time bound proceedings and special

legislation enacted for a specific purpose and therefore the

submission of learned advocate for the respondent no.2 to

permit amendment of adding the partnership firm as accused

in the complaint cannot be accepted.

11. At this stage, it is fruitful to refer to the

judgment rendered by the Hon'ble Apex Court in the case of

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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 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

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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 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,

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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 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

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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 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

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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 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."

12. 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)

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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]

[(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

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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."

13. In view of above settled position of law and after

considering the facts as alleged in the complaints and

circumstances of the present case, it transpires that

continuation of further proceedings pursuant to the said

complaint will cause greater hardships to the applicants and

no fruitful purpose would be served if such further

proceedings are allowed to be continued. The Court must

ensure that criminal prosecution is not used as instrument of

harassment or for seeking private vendetta or with ulterior

motive to pressurise accused or to settle the score.

14. Resultantly, all these applications are allowed qua

the present applicants. The Criminal Case No.7029 of 2019