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2018 (9) TMI 839 - HC - Indian LawsDishonor of cheque due to insufficiency of funds - section 138 of Negotiable Instruments Act - Held that - It is abundantly clear that an unauthorised partnership firm cannot approach the Court for enforcement of any right arising from a contrat, hence civil proceedings for recovery of money would be barred by virtue of sub Section (2) of Section 69 of the Partnership Act. However, proceedings under Section 138 of the NI Act cannot be treated as civil suit for recovery of cheque amount with interest. The proceedings under Section 138 of the N.I. Act, are not recovery proceedings. Therefore, even an unregistered Partnership firm can maintain a complaint under Section 138 of the Act. Appeal allowed.
Issues Involved:
1. Whether the application to place on record the partnership deed can be allowed after acquittal due to failure to establish partnership and authorization. 2. Whether a partner of an unregistered partnership firm can maintain a complaint under Section 138 of the Negotiable Instruments Act. Detailed Analysis: Issue 1: Application to Place Partnership Deed on Record The High Court addressed whether the appellant's application to introduce the partnership deed after the trial court's acquittal of the respondent could be allowed. The trial court had acquitted the respondent under Section 138 of the Negotiable Instruments Act (NI Act) because the managing partner of the appellant had failed to establish his partnership and authorization to file the complaint. The court referred to Section 391 of the Code of Criminal Procedure, which allows the appellate court to take additional evidence if necessary. The court cited several precedents, including the Supreme Court's rulings in M.M.T.C. Ltd. vs. Medchl Chemicals and Pharma (P) Ltd. and Samrat Shipping Co. Pvt. Ltd. vs. Dolly George, which emphasized that procedural defects, such as lack of initial authorization, can be rectified at a later stage. The court concluded that the appellant should be granted an opportunity to place and prove the partnership deed, thus allowing the application under Section 391 Cr.P.C. Issue 2: Complaint by Partner of Unregistered Partnership Firm The second issue was whether a partner of an unregistered partnership firm can maintain a complaint under Section 138 of the NI Act. The court examined Section 69 of the Partnership Act, which bars suits by unregistered firms to enforce rights arising from contracts. However, it noted that different High Courts had varied interpretations on this matter. The court referred to multiple judgments from various High Courts, including Kerala, Andhra Pradesh, Karnataka, Punjab and Haryana, and Gauhati, which provided differing views on whether an unregistered firm could pursue a complaint under Section 138 of the NI Act. The court also considered the Supreme Court's ruling in BSI Ltd. vs. Gift Holdings Pvt. Ltd., which clarified that criminal prosecution under Section 138 is not for the recovery of money but for penal liability. The court observed that most High Courts, except Andhra Pradesh, held that proceedings under Section 138 of the NI Act are not civil suits for recovery and thus can be maintained by unregistered firms. The court highlighted the Supreme Court's decision in R. Vijayan vs. Baby, which stated that Section 138 proceedings serve both punitive and compensatory purposes, blurring the line between civil and criminal jurisdictions. Based on the majority view and Supreme Court precedents, the court concluded that an unregistered partnership firm could maintain a complaint under Section 138 of the NI Act. Consequently, the criminal prosecution initiated by the complainant was not barred by Section 69 of the Partnership Act. Conclusion: The appeal was allowed, setting aside the trial court's judgment. The case was remitted back to the trial Magistrate to afford the appellant an opportunity to present evidence regarding the partnership and authorization. The respondent would have the right to cross-examine and present evidence. The parties were directed to appear before the trial Magistrate on a specified date. The appeal and any pending applications were disposed of accordingly.
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