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2017 (5) TMI 21 - HC - Indian LawsPartner liability - Proceedings of the Criminal Case arising from a complaint filed under section 138 of the N.I. Act. - Liability of authorized signatory of a company to be prosecuted under Section 138 of the Negotiable Instruments Act - Held that - It appears from the materials on record that the cheque, which came to be dishonoured, was issued by the applicant herein in his capacity as one of the partners of the partnership firm running in the name of Shhlok Enterprise. Indisputably, the partnership firm has not been arraigned as an accused in the complaint. In such circumstances, the applicant cannot be held vicariously liable under section 141 of the N.I. Act. The issue is squarely covered by the decision of the Supreme Court in the case of Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd., (2012 (5) TMI 83 - SUPREME COURT OF INDIA). Section 141 of the Act is concerned with the offence by the company. It makes the other persons vicariously liable for the commission of an offence on the part of the company. Vicariously liability gets attracted when the condition precedent under section 141, namely, offence by the company stands satisfied. The issue whether a partnership firm is a legal entity within the meaning of section 141 of the N.I. Act is also no longer res integra after the pronouncement in the case of Oanali Ismailji Sadikot vs. State of Gujarat & Anr., 2016 (3) TMI 290 - GUJARAT HIGH COURT 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. Thus this application succeeds and is hereby allowed. The further proceedings of the Criminal Case pending in the court of the learned 4th Addl. Senior Civil Judge & Addl. Chief Judicial Magistrate, Surat are hereby quashed.
Issues Involved:
1. Quashing of proceedings under section 482 of the Code of Criminal Procedure, 1973. 2. Vicarious liability under section 141 of the Negotiable Instruments Act, 1881. 3. Legal entity status of a partnership firm under section 141 of the Negotiable Instruments Act, 1881. Issue-wise Detailed Analysis: 1. Quashing of Proceedings under Section 482 of the Code of Criminal Procedure, 1973: The applicant-original accused sought to invoke the inherent powers of the High Court under section 482 of the Code of Criminal Procedure, 1973, to quash the proceedings of Criminal Case No. 48946 of 2015. The case was pending in the court of the learned 4th Addl. Senior Civil Judge & Addl. Chief Judicial Magistrate, Surat, arising from a complaint filed under section 138 of the Negotiable Instruments Act, 1881. The respondent No.2, despite being served with the notice of rule issued by the Court, chose not to remain present either in person or through an advocate to oppose the application. 2. Vicarious Liability under Section 141 of the Negotiable Instruments Act, 1881: The cheque that was dishonored was issued by the applicant in his capacity as one of the partners of the partnership firm named Shhlok Enterprise. However, the partnership firm was not arraigned as an accused in the complaint. Therefore, the applicant could not be held vicariously liable under section 141 of the N.I. Act. This issue was covered by the Supreme Court decision in Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd., (2012) 5 SCC 661, which established that for vicarious liability to be attracted, the company or firm itself must be prosecuted. 3. Legal Entity Status of a Partnership Firm under Section 141 of the Negotiable Instruments Act, 1881: Section 141 of the N.I. Act deals with offenses by companies and makes other persons vicariously liable for the commission of an offense by the company. The condition precedent under section 141 is that the offense must be committed by the company. The High Court referred to the case of Oanali Ismailji Sadikot vs. State of Gujarat & Anr., 2016 (3) GLR 1991, which clarified that a partnership firm is not a legal entity separate from its partners. The court cited various judgments to reinforce that a firm is merely a collective name for its partners and does not have a separate legal existence. The court explained that under section 141, the term "company" includes a firm or other association of individuals, and "director" in relation to a firm means a partner in the firm. Therefore, the complaint must include the firm as an accused to hold the partners vicariously liable. The court concluded that the applicant could not be held responsible under section 138 of the N.I. Act because the firm was not made an accused. Conclusion: In view of the above analysis, the application succeeded, and the proceedings of Criminal Case No. 48946 of 2015 pending in the court of the learned 4th Addl. Senior Civil Judge & Addl. Chief Judicial Magistrate, Surat, were quashed. The rule was made absolute to the aforesaid extent, and direct service was permitted.
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