Gujarat High Court
Mitesh Gulabrai Sayani vs State Of Gujarat on 27 June, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 14590 of 2019
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MITESH GULABRAI SAYANI
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR PREMAL S RACHH(3297) for the Applicant(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2
MR. CHINTAN DAVE, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 27/06/2025
ORAL ORDER
1. By this petition under Section 482 of the Code of Criminal
Procedure (for short "the Code"), the petitioner seeks quashing of
the Criminal Case No.69185 of 2018 filed by the complainant
pending in the Court of learned Additional Chief Metropolitan
Magistrate, N.I.A. Court No.32, Ahmedabad and further proceedings
arising thereof.
2. Petitioner seeks following relief:-
"(A) YOUR LORDSHIPS be pleased to call for the records and
proceedings of Criminal Case No.69185/2018 from the court of
Ld. Additional Chief Metropolitan Magistrate, N.I.A.Court No.32,
Ahmedabad and after perusing the same be pleased to quash
the impugned complaint, qua the petitioner, in the interest of
justice;
(B) YOUR LORDSHIPS be pleased to stay the further
proceeding of Criminal Case No.69185/2018 pending in the
court of Ld. Additional Chief Metropolitan Magistrate,
N.I.A.Court No.32, Ahmedabad, pending the admission, hearing
and final disposal of this petition;"
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3. The brief facts of the case are as under:-
3.1. The petitioner was a partner in a registered partnership firm,
Deepak Seeds Industries, along with Mr. Gulabrai Vithaldas Rayani
and Mr. Dipak Gulabrai Rayani, engaged in the business of
manufacturing and trading edible oil. The firm availed a loan of
Rs.20,00,000/- from respondent No.2-Kotak Mahindra Bank on
29.05.2017, repayable in 13 monthly installments. At the time of
disbursement, the bank obtained blank and undated cheques signed
by the partners, including the petitioner, as security. Subsequently,
due to internal disputes among the partners, the petitioner retired
from the firm with effect from 01.06.2017, and this change was duly
recorded in the Register of Firms through Form G on 05.07.2017. It
is the case of the petitioner that the bank was duly informed about
his retirement in July 2017.
3.2. Thereafter, the remaining partners continued the business and
made repayments up to January 2018, depositing eight installments
totaling Rs.13,44,000/-. However, due to financial difficulties, the
firm defaulted on the remaining installments. The bank then
deposited one of the blank cheques -- bearing the signature of the
petitioner as an erstwhile authorized signatory -- which came to be
dishonoured on 11.04.2018 with the endorsement "Payment
Stopped by Drawer." The bank issued a statutory notice dated
18.04.2018 to the petitioner and thereafter, filed a complaint under
Section 138 of the Negotiable Instruments Act before the
Metropolitan Magistrate, Ahmedabad, on 29.09.2018, arraying only
the petitioner as an accused, without impleading the firm or the
continuing partners.
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3.3. It is the case of the petitioner that the complaint is not
maintainable in law, as the firm -- being the principal drawer of the
cheque -- has not been arraigned as an accused and the petitioner
had retired from the firm prior to the date of alleged dishonour. The
petitioner submits that the complaint constitutes an abuse of process
of law and that the proceedings against him are liable to be
quashed in exercise of the inherent powers under Section 482 of
the Code of Criminal Procedure.
4. Learned advocate for the petitioner submitted that the cheque
in question was issued by the partnership firm, Deepak Seeds
Industries, for repayment of a loan availed from respondent No.2-
Kotak Mahindra Bank. The petitioner was one of the partners of the
said firm at the relevant time. It was further submitted that, in view
of the provisions of Section 141 of the Negotiable Instruments Act,
1881 (for short, "the N.I. Act"), a partner cannot be held vicariously
liable unless the partnership firm itself is arraigned as an accused. In
support of this contention, reliance was placed on a recent
judgment of this Court in Abhishekbhai Prakashbhai Nathwani v.
State of Gujarat, rendered in Criminal Misc. Application No. 7067 of
2017.
4.1. Based on the above submissions, learned advocate for the
petitioner prayed for allowing the present petition.
5. It is noted that private respondent No.2-Kotak Mahindra
Bank, though served with notice, has chosen not to appear and
contest the present petition.
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6. Learned APP, appearing for the State, submitted that the
dispute is essentially of a private nature and appropriate orders may
be passed as this Court may deem fit in the facts and circumstances
of the case.
7. The issue raised in the present petition by the learned
advocate for the petitioner is no longer res-integra. As evident from
Annexure-A, respondent No.2-Kotak Mahindra Bank, after
completing the formalities of issuing a statutory notice, filed a
complaint under Section 138 of the Act against the petitioner, who
is stated to be a partner of Deepak Seeds Industries. According to
the averments in the complaint, the cheque in question was issued
by Deepak Seeds Industries towards repayment of loan installments
in respect of Loan Agreement No. 152626158 dated 29.05.2017.
Annexure-C indicates that under the said agreement, a loan of
Rs.20,00,000/- was disbursed to Deepak Seeds Industries. The
cheque in question, forming part of the record at Annexure-F, was
drawn by the said partnership firm and bears the signature of the
petitioner as an authorized signatory.
7.1. This Court, while referring to Section 141 of the N.I. Act, has
addressed an identical issue in the case of Abhishekbhai
Prakashbhai Nathwani (supra), and has categorically dealt with the
legal position in paragraphs 6 to 10 of the said judgment, which are
as under:-
"6. To appreciate the arguments canvassed by learned advocate
Mr.Limbani, at the outset, I may refer to Section 141 of the N.I.
Act :
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""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 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
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 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 corporation and
includes a firm or other association of individuals;
and
(b) "director", in relation to a firm, means a partner
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in the firm."
7. Sub-section (1) of Section 141 of the Act derives that if a
person committing an offence under the section is a company
every person who at the time 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. Explanation (a)
states that 'company' means any body corporate and includes a
firm or other association of individuals and Explanation (b)
'director' in relation to a firm means a partner in the firm. Thus, it
is manifestly clear that beside the director or in case of firm, a
partner, company or firm, as the case may be, is also accused in
the matter. In the present case, the statutory notice issued under
Section 138(B) is given to Abhishek Prakash Nathwani, who is
petitioner and partner in Nathwani Polymers, but it is given in his
individual capacity and the partnership firm is not joined as party
to whom the statutory notice under Section 138(B) is issued.
Perusal of the complaint filed before the jurisdictional Court
(Annexure-C), it is also filed against Abhishek Prakash Nathwani.
At this time, the complainant joined him as partner of Nathwani
Polymers, but again what is missing is arraignment of Nathwani
Polymers, partnership firm as accused. Manifestly, Section 141 of
the N.I. Act is breached in the present case. Prosecution against
the partner of the partnership firm is not maintainable without
arraigning partnership firm as accused.
8. The coordinate Bench in case of Oanali Ismailji Sadikot
(supra), addressed the identical issue while framing following three
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questions :
"8. Having heard the learned counsel appearing
for the applicant and having considered the
materials on record, the following questions fall for
my consideration:
(I) Whether a partnership firm is a legal entity like
a company so far as the offence punishable under
Section 138 of the Negotiable Instruments Act is
concerned?
(II) Is the prosecution of the partners of
a firm, by virtue of Section 141 of the Act,
maintainable in the absence of the partnership
firm being impleaded or arraigned as an accused?
(III) When the complaint under Section 138 of the
Act has the initial defect in its sustainability, can
such defect be cured by amending the
proceedings by virtue of an application under
Section 319 of the Cr. P.C.?"
9. The relevant paragraphs of judgment in case of Oanali
Ismailji Sadikot (supra), are as under :
"16. Sub-section (1) of Section 141 of the Act
provides that if a person committing an offence
under the section is a company, every
person who, at the time 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.
The offender in section 138 of the Act is the drawer
of the cheque. He alone would have been the
offender thereunder if the Act did not contain other
provisions. It is because of section 141 of the Act
that penal liability under section 138 is cast on other
persons connected with the company. Three
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categories of persons can be discerned from the said
provision who are brought within the
purview of the penal liability through the
legal fiction envisaged in the section. They
are: (1) The company the principal offender
which committed the offence, (2) Every one who
was in charge of and was responsible for the
business of the company, (3) Any other person
who is a director or a manager or a secretary or
officer of the company, with whose connivance or
due to whose neglect the company has committed
the offence. However, if a person proves that the
offence was committed without his knowledge, or
that he had exercised all due diligence to
prevent the commission of such offence, he shall
not be liable to punishment under this section. Sub-
section (2) further provides that where any offence
under this Act has been committed by a company
and it is provided 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. The
Explanation to the section defines 'company' as
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.
17. It is only the drawer of the cheque, who can
be held responsible for an offence under Section
138 of the Act. Section 141 provides for the
constructive liability. It postulates that a
person, in charge of and responsible to the
company, in the context of the business of
the company, shall also be deemed guilty of the
offence. The drawer can be a company, a firm
or an association of individuals, but only
those directors, partners, or officers can be held
responsible for the offence punishable under
Section 138 of the Act, who are responsible
to the company - firm for the conduct of its
business.
18. The Legislature has thought fit to
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provide an explanation in Section 141 of
the Act and the plain reading of the
expression "company" as used in Sub-clause
(a) of the explanation appended to Section
141 of the Act shows that it is an inclusive of any
body corporate or "other association of individuals".
Though the heading of Section 141 of the Act reads
"offences by companies"; according to the
explanation to that Section, "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".
The term "other association of individuals"
should not be understood to refer even to
informal understanding between the individuals. It
has to be understood in the context of body
corporate and partnership firms. The
principal of ejusdem generis gets attracted in
such a case. Therefore, a sole proprietary
concern is not a company within the meaning of
"company" as defined under the explanation to
Section 141 of the Act.
19 The Explanation to Section 141 makes it clear that
wherever there is a reference under Section 141 to a
company it has to be substituted by the word firm
where the accused is a partnership firm and the
provision has to be read as if it refers to
the firm. What this means is that a
complaint can be filed for the offence
under Section 138 Negotiable Instruments Act
not only against the partnership firm on whose
behalf the cheque was issued but also against an
individual partner or person who, at the time of the
commission of the offence, was in charge of the
affairs of the firm or responsible to it for the conduct
of its business. There is nothing in the provision
which indicates that in every complaint involving
the dishonour of a cheque issued by a firm both the
firm as well as its partners have to be compulsorily
impleaded. In other words a complaint in which
only the firm is made an accused and the partners
are not would not be bad in law for that reason.
Clearly that is not the intention of the Parliament.
20. A partnership firm is a separate legal entity in
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terms of the Indian Partnership Act 1932 and it is
answerable in law in that capacity. That is how
under various statutes like the Income Tax Act 1961,
the Central Excises Act 1944, the Sales Tax
Laws and Section 141 Negotiable Instruments
Act, a firm can be proceeded against as such. It is
perfectly possible for a complainant,
aggrieved by the dishonour of a cheque
issued by or behalf of a firm, to file a complaint for
the offence under Section 138 Negotiable
Instruments Act only against the firm. The
complainant may choose not to proceed against the
individual partners as accused either because he is
not aware as to who are the partners or is not
interested in proceeding against the partners apart
from the firm.
21. It is now well settled that an Explanation
added to a statutory provision is not a substantive
provision in any sense of the term but as the plain
meaning of the word itself shows it is merely meant
to explain or clarify certain ambiguities which
may have crept in the statutory provision.
Sarathi in 'Interpretation of Statutes' while dwelling
on the various aspect of an Explanation observes as
follows:
"(a) The object of an explanation is to understand
the Act in the light of the explanation.
(b) It does not ordinarily enlarge the scope of the
original section which it explains, but only makes
the meaning clear beyond dispute."
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28. Thus, from a conspectus of the authorities
referred to above, it is manifest that the object of an
Explanation to a statutory provision is
(a) to explain the meaning and intendment of the
Act itself,
(b) where there is any obscurity or
vagueness in the main enactment, to clarify the
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same so as to make it consistent with the dominant
object which it seems to subserve,
(c) to provide an additional support to the dominant
object of the Act in order to make it meaningful and
purposeful,
(d) an Explanation cannot in any way interfere with
or change the enactment or any part thereof but
where some gap is left which is relevant for the
purpose of the Explanation, in order to suppress the
mischief and advance the object of the Act it can
help or assist the Court in interpreting the true
purport and intendment of the enactment, and
(e) it cannot, however, take away a statutory right
with which any person under a statute has
been clothed or set at naught the working
of an Act by becoming an hindrance in the
interpretation of the same.
The first question is answered accordingly in the
affirmative."
10. After answering question No.1 in aforesaid terms, for
question No.2, the coordinate Bench held as under :
"30. Thus, it has been laid down in unequivocal
words in the aforesaid decision that for maintaining
the prosecution against the director under Section
141 of the Negotiable Instruments Act, arraigning of
a company as an accused is imperative. In view of
explanation to Section 141 of the Negotiable
Instruments Act referred to above, this legal position
needs to be automatically made applicable in
case of prosecution against a partnership firm
also. Therefore, it has to be held that for maintaining
prosecution against a partner under Section
141 of the Negotiable Instruments Act,
arraigning of partnership firm as an accused
is imperative.
31. The conclusions drawn by the
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Supreme Court in the case of Aneeta Hada
(supra) are not based merely on the fact that the
company is a separate legal entity and juristic
person, but these conclusions are drawn on the
basis of the fact that Section 141 of the
Negotiable Instruments Act deals with the vicarious
liability. In paras 58 and 59 of the said judgment,
referred above, the Supreme Court has referred to
the wordings in Section 141 of the
Negotiable Instruments Act and observed that
commission of offence by a company is
an express condition precedent to attract the
vicarious liability of others. It was further held that
the words "as well as the company" appearing in the
section make it unmistakably clear that when a
company is 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. It was
further observed that the other categories of
offenders like directors or partners of the firm can
only be brought in the dragnet on the touchstone
of vicarious liability as the same has been
stipulated in the provision itself.
32. Thus, the Supreme Court has arrived at an
irresistible conclusion that for maintaining the
prosecution under Section 141 of the Negotiable
Instruments Act, arraigning of the company as an
accused is imperative, mainly on the basis of the
vicarious liability of the directors of the company
and not necessarily because the company is a juristic
person and it has its own respectability.
That was an additional circumstance
considered by the Apex Court while
holding that arraigning of a company as an
accused is imperative, but the main basis for
arriving at its conclusion was the vicarious
liability which the directors or partners of the
firm can have towards the company and
hence without joining the company on the
touchstone of vicarious liability they cannot be
prosecuted.
33. Therefore, the ratio laid down in the case of
Aneeta Hada (supra) can be made equally
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applicable in the case of a partnership firm also. The
partners are liable and sued in their vicarious
liability. Whether the partnership firm is a juristic
person or not is a different aspect. What is
important is that a partner of the firm is arraigned as
an accused in the dragnet on the touchstone of
vicarious liability, as is done in the case of directors
of the company. Therefore, there is no reason at all
to draw any distinction in respect of the law
to be made applicable to a partnership firm and
the company.
34. Moreover, the Legislature has already
made it clear that the company includes any
body corporate which includes a firm or other
association of individuals and director in relation
to a firm means a partner in the firm. On this
count also, when Section 141 of the Negotiable
Instruments Act and explanation thereto does not
make any distinction between the company
and the partnership firm, there is absolutely
no reason to draw such distinction while making
applicable the law laid down by the Apex Court in
Aneeta Hada (supra) to the partnership firm merely
because in that judgment the Apex Court was
considering the eventuality of nonjoining of the
company. The basic premise of holding either
the director or the partner liable for prosecution
being the same that of the vicarious liability.
Therefore, once the company is held to be an
essential party and that arraigning of a company as
an accused is imperative for prosecution under
Section 141 of the Negotiable Instruments Act, it
necessarily follows that arraigning of a partnership
firm is also imperative for prosecution against the
partners under Section 141 of the Negotiable
Instruments Act. The prosecution launched against
only one of the partners of the partnership firm,
without joining the partnership firm, cannot be
maintainable.
35. In view of the specific provisions of the Act
itself, it is very difficult for the Court to take a view
that a partnership firm for the purpose of Section
138 read with Section 141 of the Act is not a legal
entity, and therefore, it need not be made
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an accused in the complaint. The decisions
relied upon by the learned counsel appearing for the
petitioner are of no avail in any manner.
Thus, the first question is answered
accordingly.
36. The second question is answered
accordingly."
7.2. In view of the settled legal position and the undisputed fact
that the firm, which is the principal drawer of the cheque, has not
been arraigned as an accused, this Court is of the considered
opinion that the prosecution initiated against the present petitioner
is not legally sustainable. Continuation of the proceedings would
result in a miscarriage of justice, and no fruitful purpose would be
served by compelling the petitioner to undergo trial.
7.3. Resultantly, the present petition is ALLOWED. The
proceedings of Criminal Case No. 69185 of 2018, pending before
the Court of the Additional Chief Metropolitan Magistrate, N.I. Act
Court No.32, Ahmedabad, and all consequential proceedings arising
therefrom, are hereby quashed and set aside qua the petitioner.
Rule is made absolute. Direct service is permitted.
(J. C. DOSHI,J)
MANISH MISHRA
