2019 (7) TMI 1930 - HC - Indian Laws

Dishonor of Cheque - partnership firms can be made as an accused or not - complaint can be filed straight away against the partners or not - vicarious liability - unregistered Partnership Firm can also be brought within the purview of Section 141 of the Negotiable Instruments Act or not - whether the Partnership Firm must be made as an accused along with the other partners, in order to maintain a complaint for an offence under Section 138 of the Negotiable Instruments Act? HELD THAT - This Court had an occasion to deal with a case where this bar Section 69(2) of the Indian Partnership Act, was sought to be invoked while enforcing a common law right. This Court dealt with the issue in detail and held that the bar Section 69(2) of the Indian Partnership Act, will not apply while enforcing a common law right. In the present case, this Court is dealing with a provision under the criminal law wherein, the learned counsel for the respondent is seeking to justify the fact that insofar as an unregistered firm is concerned, it is not necessary to make the firm as an accused since it does not qualify the status of a legal entity. It is trite law that when the provisions of criminal law are interpreted, the concept of strict construction will apply. Therefore, this Court cannot read the provisions of Section 69(2) of Indian Partnership Act into the provisions of Section 141 of the Negotiable Instruments Act. Section 142 of the Act under caption Cognizance of offences provides that cognizance of the offence under Section 138 can be taken upon a 'complaint' in writing made by the payee or the holder in due course of the cheque. The word 'complaint' defined in Section 2(d) of the Code of Criminal Procedure means any allegation made orally or in writing to a Magistrate, with a view to taking action under the said Code, that some person, whether known or unknown, has committed an offence, but does not include a police report. Since Section 138 is a penal provision, that prescribes punishment for bouncing of cheque on any of the grounds mentioned therein, the Legislature in its wisdom has used word 'complaint' and not 'suit' in Section 142 because a 'suit' can be maintained for recovery of money or for any other civil remedies. Section 141 of the Negotiable Instruments Act deals with the concept of vicarious liability, wherein for the offence committed by the Company or a partnership firm, the directors or the partners, as the case may, are deemed to be guilty of the offence when it is shown that they are in charge of and responsible for the conduct of the day-to-day affairs of the business or the firm, as the case may be - The registration or non-registration of the Partnership Firm will have no bearing insofar as 141 of the Negotiable Instruments Act is concerned. This Court is not in agreement with the submissions made by the learned counsel for the respondent. In this case admittedly, the cheque was given in the name of the Partnership Firm and after the cheque was dishonored, no statutory notice was issued to the Partnership Firm, and the Partnership Firm was not made as an accused in the complaint. Only the partners have been shown as accused persons in this complaint. Such a complaint is unsustainable and not in accordance with Section 141 of the Negotiable Instruments Act - petition allowed.

Summary

Issues Involved:
1. Whether an unregistered Partnership Firm can be brought within the purview of Section 141 of the Negotiable Instruments Act.
2. Whether a complaint under Section 138 of the Negotiable Instruments Act can be maintained against the partners without making the Partnership Firm an accused.

Detailed Analysis:

Issue 1: Applicability of Section 141 of the Negotiable Instruments Act to Unregistered Partnership Firms
The primary legal issue is whether an unregistered partnership firm can be included under Section 141 of the Negotiable Instruments Act, which deals with the liability of companies and firms. The petitioners argued that the law, as settled by the Hon'ble Supreme Court, requires that a complaint under Section 138 cannot be maintained against the directors of a company without making the company an accused. This principle extends to partnership firms, meaning that a complaint against the partners cannot be sustained unless the firm itself is made an accused. The respondent countered that Section 141 applies only to registered firms, implying that an unregistered firm does not qualify as a legal entity and thus does not need to be made an accused.

Issue 2: Requirement to Make the Partnership Firm an Accused
The petitioners contended that the cheque was issued on behalf of the partnership firm; hence, the complaint cannot proceed without including the firm as an accused. They relied on precedents from the Kerala and Allahabad High Courts, which held that the bar under Section 69(2) of the Indian Partnership Act applies only to civil suits and not to criminal prosecutions under Section 138 of the Negotiable Instruments Act. The petitioners emphasized that the registration status of the firm is irrelevant to the applicability of Section 141.

The respondent maintained that since the firm was unregistered, it did not need to be made an accused, and the complaint could directly proceed against the partners. The respondent argued that Section 69(2) bars suits by unregistered firms to enforce contractual rights but does not extend to criminal complaints under Section 138.

Court's Analysis and Judgment:
The court examined the legal principles and precedents, including the Supreme Court's ruling in Aneeta Hada v. Godfather Travels and Tours Private Limited, which established that a complaint under Section 138 cannot be maintained against company directors without making the company an accused. This principle was extended to partnership firms in N. Elangovan v. C. Ganesan.

The court also reviewed Section 69(2) of the Indian Partnership Act, which bars unregistered firms from filing suits to enforce contractual rights but does not apply to criminal prosecutions. The court referenced judgments from the Kerala and Allahabad High Courts, which clarified that the bar under Section 69(2) does not extend to criminal cases under Section 138 of the Negotiable Instruments Act.

The court concluded that the registration status of the partnership firm is immaterial for the applicability of Section 141 of the Negotiable Instruments Act. The complaint must include the partnership firm as an accused to proceed against the partners. Since the cheque was issued by the partnership firm and no statutory notice was issued to the firm, the complaint against the partners alone was unsustainable.

Conclusion:
The court quashed the proceedings in C.C.No.550 of 2012 pending before the Judicial Magistrate No.I, Villupuram, as the complaint did not comply with Section 141 of the Negotiable Instruments Act and the law laid down by the Supreme Court. The Criminal Original Petition was allowed, and the connected miscellaneous petitions were closed.