2018 (4) TMI 1911 - HC - Indian Laws

Dishonor of cheque - absence of indictment of partnership firm as co-accused for the offence punishable under section 138 of the N.I. Act - Is it permissible to go beyond section 141 of the N.I. Act for interpretation of the expression firm applied in Explanation to section 141 of the N.I. Act? - HELD THAT - The clear legislative intent is again demonstrated in clause (b) of section 141 of the N.I. Act, when it defines directors in relation to a firm, to mean a partner in the firm. The conscious departure from the provisions of Partnership Act is thus made loud and clear and when intention is loud and clear, the provisions of Partnership Act are irrelevant for interpreting the expression company in explanation (a) to section 141 of the N.I. Act. The expression company used in explanation (a) to Section 141 is not to be understood in the limited sense of it being only a juristic person but would include even non juristic persons as intended by the legislature. It is not permissible to go beyond the language used in section 141 and therefore even in absence of registration of the partnership firm, section 141 shall have to be complied with in its later spirit - the petitioners are ordered to be acquitted - petition allowed.

Summary

Issues Involved:
1. Whether the prosecution under Section 138 of the Negotiable Instruments Act (N.I. Act) is maintainable without indicting the partnership firm as a co-accused.
2. Interpretation of the term "firm" under Section 141 of the N.I. Act and its implications on vicarious liability.

Issue-wise Detailed Analysis:

1. Maintainability of Prosecution Without Indicting the Partnership Firm:
The court examined whether the prosecution under Section 138 of the N.I. Act is maintainable without indicting the partnership firm as a co-accused. The judgment referred to the legal principle established in Aneeta Hada v. Godfather Travels and Tours Private Limited, where it was held that for maintaining the prosecution under Section 141 of the N.I. Act, arraigning the company as an accused is imperative. This principle was extended to partnership firms, concluding that for maintaining prosecution against a partner under Section 141 of the N.I. Act, arraigning the partnership firm as an accused is also imperative. The court emphasized that the vicarious liability of partners or directors is contingent upon the indictment of the firm or company itself.

2. Interpretation of "Firm" Under Section 141 of the N.I. Act:
The judgment delved into the interpretation of the term "firm" under Section 141 of the N.I. Act. The court noted that the explanation to Section 141 explicitly includes a firm within the definition of a "company." This inclusion signifies the legislative intent to treat firms similarly to companies for the purposes of vicarious liability under the N.I. Act. The court rejected the argument that the firm, not being a juristic person, could be excluded from prosecution. It held that the clear legislative intent is to include firms within the purview of Section 141, thereby making the indictment of the firm essential for prosecuting its partners.

The court further clarified that the distinction between a company and a firm, as argued by the respondents, does not hold, as the legislative language in Section 141 is unequivocal. The court emphasized that the term "company" in the context of Section 141 includes both juristic and non-juristic entities, such as firms, thereby necessitating their inclusion in prosecutions under the N.I. Act.

Conclusion:
The court concluded that the prosecution against the partners without indicting the partnership firm is not maintainable under Section 141 of the N.I. Act. Consequently, the impugned judgment and order were quashed, and the petitioners were acquitted. The court ordered the return of the record and proceedings to the lower court.