2017 (2) TMI 178 - HC - Indian Laws

Prosecution against the partners - Offence punishable under Section 138 of the Negotiable Instruments Act - Held that - 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. 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 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.

Issues Involved:
1. Whether the proceedings of the Criminal Case should be quashed against the applicant.
2. Whether the partnership firm needs to be arraigned as an accused for maintaining prosecution against a partner under Section 141 of the Negotiable Instruments Act.

Detailed Analysis:

1. Quashing of Proceedings:
The applicant, one of the partners of Varsani Construction Company, sought to quash the proceedings of Criminal Case No.1834 of 2014 under Section 138 of the Negotiable Instruments Act, arguing that he did not sign the dishonored cheque and that the partnership firm was not arraigned as an accused.

2. Legal Requirement for Arraigning the Partnership Firm:
The court considered whether the absence of the partnership firm as an accused invalidated the prosecution against the partner. The court referred to the Supreme Court’s decision in Aneeta Hada v. Godfather Travels & Tours Private Limited, which held that for maintaining prosecution under Section 141 of the Negotiable Instruments Act, arraigning the company (or partnership firm) as an accused is imperative. This principle is based on the concept of vicarious liability, where the liability of individuals (partners or directors) is contingent on the liability of the firm or company.

The court emphasized that the vicarious liability under Section 141 necessitates the inclusion of the legal entity (company or partnership firm) as an accused. The court stated, "for maintaining the prosecution against the director under Section 141 of the Negotiable Instruments Act, arraigning of a company as an accused is imperative."

3. Applicability to Partnership Firms:
The court extended the principle from Aneeta Hada to partnership firms, stating that the partners are liable based on their vicarious liability towards the firm. The court concluded that "arraigning of a partnership firm as an accused is imperative for prosecution against the partners under Section 141 of the Negotiable Instruments Act."

4. Impleading the Partnership Firm:
The complainant's counsel argued that the partnership firm could be impleaded as an accused at this stage or a fresh complaint could be filed. The court rejected this argument, citing Oanali Ismailji Sadikot v. State of Gujarat, which established that such impleading at a later stage is not permissible.

5. Conclusion:
The court allowed the application, quashing the proceedings of Criminal Case No.1834 of 2014. The court held that without the partnership firm being arraigned as an accused, the prosecution against the partner could not be maintained. The court stated, "The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable."

The court concluded by making the rule absolute to the extent of quashing the proceedings and permitting direct service.

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