Gujarat High Court
Rajesh Gordhanbhai Yadav Partner Of ... vs State Of Gujarat on 25 January, 2024
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC. APPLICATION (FOR QUASHING &
SET ASIDE FIR/ORDER) NO. 21568 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE CHEEKATI
MANAVENDRANATH ROY
=================================================
Whether Reporters of Local Papers may be allowed
1 NO
to see the judgment ?
2 To be referred to the Reporter or not ? YES
Whether their Lordships wish to see the fair copy of
3 NO
the judgment ?
Whether this case involves a substantial question of
4 law as to the interpretation of the Constitution of NO
India or any order made thereunder ?
=================================================
RAJESH GORDHANBHAI YADAV PARTNER OF RUCHIL
ENTERPRISE
Versus
STATE OF GUJARAT
=================================================
Appearance:
SAKET A WAGHELA(8068) for the Applicant(s) No. 1,2
MR.MINHAJ M SHAIKH(6847) for the Respondent(s) No. 2
MS MAITHILI MEHTA, APP for the Respondent(s) No. 1
=================================================
CORAM:HONOURABLE MR. JUSTICE CHEEKATI
MANAVENDRANATH ROY
Page 1 of 15
Downloaded on : Wed Jan 31 20:32:48 IST 2024
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
Date : 25/01/2024
ORAL JUDGMENT
1. Rule. Learned counsel for the respective respondents waive
service. With the consent of the learned counsel for the parties, the
matter is taken up for final hearing today.
2. Heard the learned counsel for the petitioners, learned
Additional Public Prosecutor for the respondent No. 1 - State and
learned counsel for the respondent No. 2.
3. Outline facts of the case may be stated as follow:
3.1 The second respondent is doing business in supplying sand
and other construction material. It is stated that the second
respondent had supplied sand to the petitioners on credit basis and
towards payment of the amount due to the second respondent, the
petitioners had issued three cheques dated 21.08.2014, 26.08.2014
and 27.08.2014 to the second respondent towards discharge of the
said liability. When the second respondent presented the said
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
cheques in the bank for encashment, it was informed to the second
respondent that the said cheques were dishonoured on the ground of
'insufficient funds' in the said account. Thereafter, two legal notices
were given by the second respondent to the petitioners informing
them about the fact that the cheques were dishonoured. As the said
legal notices were not served upon the petitioners, third legal notice
was given by the second respondent to the petitioners. Although the
petitioners were called upon by the second respondent to pay the
cheque amounts within 15 days from the date of receipt of the said
legal notice, the second respondent has filed the complaint within 3
days from the date of issuance of legal notice. As the cheque
amount is not paid, the second respondent has filed the complaint
under Section 138 of the Negotiable Instruments Act, 1881 (NI Act)
in the Court of learned 9th Additional Senior Civil Judge, Vadodara.
3.2 The learned Magistrate has taken cognizance of the said case
after complying with the procedure as contemplated in law. Now,
the said case is pending before the trial Court.
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
4. While so, the present application under Section 482 of the
Criminal Procedure Code, 1973 (CrPC) has been filed seeking quash
of the said proceedings. The petitioners sought quash of the said
criminal proceedings on two principle grounds viz. that the second
respondent has supplied the sand on credit basis to the firm 'Ruchil
Enterprises' and the petitioners are the partners of the said firm and
the cheques were issued on behalf of the firm in the capacity of
partners of the said firm and as such, the firm has to be shown as
party to the complaint filed under Section 138 of the NI Act and
without impleading the firm as a party, that the complaint is filed
against the petitioners as partners of the said firm and as such, the
criminal proceedings are not maintainable without impleading the
firm as a party to the complaint.
4.1 The other ground is that, even though the third legal notice
was issued by the second respondent to the petitioners requesting
them to pay the cheque amounts within a period of 15 days from the
date of receipt of the said legal notice, without waiting till the expiry
of the said period of 15 days, the complaint was filed within 3 days
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
of the receipt of the said legal notice, which violates the mandate of
clause (c) of proviso of Section 138 of the NI Act and the present
criminal proceedings initiated against the petitioners are not
maintainable.
5. The learned counsel for the petitioners, at the time of hearing
the application, reiterated the above submissions and would pray to
quash the impugned criminal proceedings that are initiated against
the petitioners.
6. The learned counsel for the respondent No. 2 would submit
that even though sand was supplied by the second respondent to the
firm on credit basis, as the cheques were issued by the petitioners
themselves as partners of the said firm, even without impleading the
firm as a party to the complaint, still, the complaint is maintainable
against the partners of the firm who signed and issued the cheques.
He then contends that although the complaint was filed within three
days from the date of receipt of the third legal notice by the
petitioners, the mandate of clause (c) of proviso of Section 138 of
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
the NI Act was not violated as the other two legal notices were given
long back, beyond a period of 15 days and as such, on that ground,
the complaint cannot be quashed. So, he would pray to dismiss the
present application.
7. Thus, from the aforesaid submissions made by the learned
counsel for the petitioners and as per the grounds urged in the
application seeking quash of the complaint and the criminal
proceedings initiated thereon, the contention of the petitioners is two
fold: i) that as the impugned complaint was filed and the criminal
proceedings thereon were initiated without impleading the firm as an
accused, that the same are not maintainable under law and ii) that,
filing the complaint under Section 138 of the NI Act, without
waiting till expiry of 15 days' period as contemplated in clause (c) of
proviso of Section 138 of the NI Act, is bad in law and is liable to be
quashed.
7.1 So far as the first ground is concerned, admittedly, sand was
supplied by the second respondent on credit basis to the firm by
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
name 'Ruchil Enterprises'. Admittedly, the petitioners are the
partners of the said firm. The petitioners have also signed the
cheques in question for and on behalf of the firm in their capacity as
partners of the said firm. The same is evident from the cheques. It
is clear from the said cheques that the said cheques were issued by
the partners of the firm on behalf of 'Ruchil Enterprises'. Therefore,
when the sand was supplied on credit basis to the firm by name
'Ruchil Enterprises', and when the cheques in question towards
discharge of the said legally enforceable liability were issued by the
partners of the said firm, it is now well settled law that the firm has
to be shown as party to the complaint along with the partners who
issued the cheques. A complaint under Section 138 of the NI Act,
without impleading and showing the firm as an accused, is not
maintainable. Section 141 of the NI Act is relevant in the context to
consider. Section 141 of the NI Act deals with offence committed
by companies under Section 138 of the NI Act and it reads as under:
"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
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
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 punished accordingly:
Provided that nothing contained in this sub-section shall
render any person liable to punishment if he proves that 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 sub-section (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 attributable to, any
neglect on the part of, any director, manager, secretary or
other officer 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 relation to a firm, means a partner in the
firm."
7.2 Thus, reading of Section 141 makes it manifest that if the
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
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 punished accordingly. Thus, by a deeming
fiction, company is also made liable for prosecution and the
punishment. Explanation to Section 141 makes it clear that
"company" means any body corporate and includes a firm or other
association of individuals; and "director", in relation to a firm,
means a partner in the firm. Therefore, the requirement of
impleading the company as a party to the proceedings as
contemplated under clause (1) of Section 141 squarely applies to the
firm also in view of explanation appended to Section 141 as
discussed supra. Therefore, when the legal position is clear that if
the person committing an offence under section 138 is a firm, every
person who, at the time the offence was committed, was in charge
of, and was responsible to, the firm for the conduct of the business of
the firm, as well as the firm, shall be deemed to be guilty of the
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
offence and shall be liable to be proceeded against.
7.3 The Apex Court in the case of Himanshu v. B. Shivamurthy
and Another, (2019) 3 SCC 797 has ruled as follows:
"Where a cheque is issued by Director of company,
prosecution under Section 138 is not maintainable without
arraigning company as accused."
7.4 The same analogy applies to the case of a firm also in view of
the explanation appended to Section 141 of the NI Act. Therefore,
when a cheque was issued by a partner of the firm, prosecution
under Section 138 is not maintainable without arraigning the firm as
accused.
7.5 Again, the Apex Court recently in the case of Dilip
Hariramani v. Bank of Baroda, 2022 SCC OnLine SC 579
elaborately discussed the legal position in this regard and held in
paragraphs 15 and 16 as follows:
"15. The judgment in Dayle De'souza v. Government of India
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
through Deputy Chief Labour Commissioner (C) answered the
question of whether a director or a partner can be prosecuted
without the company being prosecuted. Reference in this
regard was made to the views expressed by this Court in State
of Madras v. C.V. Parekh on the one hand and the divergent
view expressed in Sheoratan Agarwal v. State of Madhya
Pradesh and Anil Hada v. Indian Acrylic Ltd. This
controversy was settled by a three Judge Bench of this Court
in Aneeta Hada (supra), in which, interpreting and
expounding the difference between the primary/substantial
liability and vicarious liability under Section 141 of the NI
Act, it has held:
"51. We have already opined that the decision in
Sheoratan Agarwal runs counter to the ratio laid down
in C.V. Parekh which is by a larger Bench and hence, is
a binding precedent. On the aforesaid ratiocination, the
decision in Anil Hada has to be treated as not laying
down the correct law as far as it states that the Director
or any other officer can be prosecuted without
impleadment of the company. Needless to emphasise,
the matter would stand on a different footing where
there is some legal impediment and the doctrine of lex
non cogit ad impossibilia gets attracted.
xx xx xx
59. 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 drag-
net on the touchstone of 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 which is
a three-Judge Bench decision. Thus, the view expressed
in Sheoratan Agarwal does not correctly lay down the
law and, accordingly, is hereby overruled. The decision
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
in Anil Hada is overruled with the qualifier as stated in
para 51. The decision in Modi Distillery has to be
treated to be restricted to its own facts as has been
explained by us hereinabove."
16. The provisions of Section 141 impose vicarious liability
by deeming fiction which presupposes and requires the
commission of the offence by the company or firm. Therefore,
unless the company or firm has committed the offence as a
principal accused, the persons mentioned in sub-section (1) or
(2) would not be liable and convicted as vicariously liable.
Section 141 of the NI Act extends vicarious criminal liability
to officers associated with the company or firm when one of
the twin requirements of Section 141 has been satisfied, which
person(s) then, by deeming fiction, is made vicariously liable
and punished. However, such vicarious liability arises only
when the company or firm commits the offence as the primary
offender. This view has been subsequently followed in Sharad
Kumar Sanghi v. Sangita Rane, Himanshu v. B. Shivamurthy
and Hindustan Unilever Limited v. State of Madhya Pradesh.
The exception carved out in Aneeta Hada (supra), which
applies when there is a legal bar for prosecuting a company
or a firm, is not felicitous for the present case. No such plea or
assertion is made by the respondent."
7.6 Therefore, in view of the settled law in this regard, as
discussed supra, as the complainant has not impleaded the firm as
accused in the complaint, the present complaint filed only against the
partners of the firm is clearly not maintainable in law.
7.7 Bombay High Court in the case of Satheesan Kuttappan v.
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
P.P. Sudhakaran and Another, 2023 SCC OnLine 2216, at
paragraphs 11, 12 and 15, has also clearly held after considering the
decision of the Apex Court in Himanshu (supra) that even in
respect of the firm which is not a registered firm, also a complaint
under Section 138 of the NI Act, without impleading the firm as
party to the complaint is not maintainable.
7.8 Apropos the second ground that without waiting till the expiry
of 15 days time after issuance of the legal notice or receipt of the
legal notice that the complaint was filed within 3 days from the date
of issuance of the legal notice is concerned, clauses (b) and (c) of
proviso of Section 138 mandates that: (b) the payee or the holder in
due course of the cheque, as the case may be, shall make 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
cheque as unpaid; and (c) if 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
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
of the receipt of the said legal notice, then a complaint has to be
made under Section 138 of the NI Act. Therefore, waiting for a
period of 15 days from the date of receipt of the legal notice to file
the complaint under Section 138 of the NI Act, is mandatory and a
condition precedent for filing the complaint under Section 138 of the
NI Act. In the instant case, the first two legal notices that were
issued by the second respondent were not served upon the
petitioners. Therefore, the third legal notice was issued in
compliance with clause (b) of proviso to Section 138 of the NI Act.
That was served on the petitioners. But, without awaiting for a
period of 15 days as contemplated in clause (c) of proviso to Section
138, the complaint in question was presented, within three days from
the date of receipt of legal notice by the petitioners. Therefore, on
that ground, the present complaint and the criminal proceedings
initiated thereon are clearly not maintainable. The Apex Court also,
in the case of Gajanand Burange v. Laxmi Chand Goyal, 2022
SCC OnLine SC 1711 has held that filing of complaint without
expiry of 15 days' period which is mandatory, is not maintainable.
NEUTRAL CITATION
R/CR.MA/21568/2019 JUDGMENT DATED: 25/01/2024
undefined
7.9 Thus, the complaint filed by the second respondent under
Section 138 of the NI Act and the criminal proceedings initiated
thereon are clearly unsustainable in law on the aforesaid two
grounds, which are urged by the petitioners. Therefore, the
continuation of the criminal proceedings against the petitioners in
the given facts and circumstances of the case would clearly amount
to abuse of process of Court and the law.
8. Ergo, present application deserves to be allowed and is
accordingly, allowed. The complaint and the criminal proceedings
pending before the learned 9th Additional Senior Civil Judge at
Vadodara in Criminal Case No. 43185 of 2014 under Section 138 of
the NI Act against the petitionerser are hereby quashed. Rule is
made absolute accordingly.
[ Cheekati Manavendranath Roy, J. ]
hiren
/97
