2016 (3) TMI 381 - HC - Indian Laws

Maintainability of prosecution launched under section 138 of the Negotiable Instruments Act against a partner alone without joining the partnership firm - Held that - As supported by the judgment of the Delhi High Court in Vijay Power Generators Ltd. vs. Sumit Seth, 2014 (5) TMI 1088 - DELHI HIGH COURT , wherein also it has been held that unless the partnership firm is prosecuted and convicted, the partner thereof cannot be convicted with the aid of section 141 of the NI Act. Considering that by allowing this writ petition, this Court is quashing the process issued against the petitioner for not joining the partnership firm, the interests of justice require that liberty be given to the respondent no.1 to move before the Court of competent jurisdiction for appropriate relief with a petition under section 14 of the Limitation Act seeking exclusion of the period during which he was prosecuting this case. As a result, all the four writ petitions are allowed. The process issued against the petitioner alone for the offence under section 138 read with section 141 of the NI Act without joining the partnership firm stands quashed and set aside. However, it will be open for the respondent no.1 to move the Court of competent jurisdiction for appropriate relief with a petition under section 14 of the Limitation Act seeking exclusion of the period during which he was prosecuting this case.

Issues Involved:
1. Maintainability of prosecution under Section 138 of the Negotiable Instruments Act (NI Act) against a partner without joining the partnership firm.
2. Interpretation and application of Section 141 of the NI Act in context to partnership firms.
3. Vicarious liability and the necessity of arraigning the partnership firm for prosecution of partners.
4. Distinction between a company and a partnership firm regarding legal proceedings under the NI Act.
5. Application of legal precedents and binding nature of judgments.

Issue-wise Detailed Analysis:

1. Maintainability of Prosecution under Section 138 of the NI Act Against a Partner Without Joining the Partnership Firm:
The primary issue in these writ petitions is whether a prosecution launched under Section 138 of the NI Act against a partner alone, without joining the partnership firm, is maintainable. The petitioner challenged the order of issue of process on the ground that the partnership firm was not made a party to the complaint, and only one partner was sued.

2. Interpretation and Application of Section 141 of the NI Act in Context to Partnership Firms:
Section 141 of the NI Act deals with offenses by companies and includes any body corporate, firm, or other association of individuals. The explanation to Section 141 clarifies that "company" includes a firm, and "director" in relation to a firm means a partner in the firm. The court emphasized that the Legislature explicitly included firms within the scope of "company" under Section 141, making it clear that the provision applies to partnership firms as well.

3. Vicarious Liability and the Necessity of Arraigning the Partnership Firm for Prosecution of Partners:
The court referred to the Supreme Court's judgment in Aneeta Hada vs. Godfather Travels & Tours Private Limited, which held that for maintaining prosecution under Section 141 of the NI Act, arraigning the company as an accused is imperative. The court noted that this principle of vicarious liability applies equally to partnership firms. The partners are liable and sued in their vicarious capacity, and without joining the partnership firm, the prosecution against a partner cannot be maintained.

4. Distinction Between a Company and a Partnership Firm Regarding Legal Proceedings Under the NI Act:
The respondent argued that a partnership firm is not a juristic person like a company and thus stands on a different footing. However, the court held that the distinction between a company and a partnership firm is irrelevant in the context of vicarious liability under Section 141 of the NI Act. The court emphasized that the main basis for the Supreme Court's conclusion in Aneeta Hada was the concept of vicarious liability, which applies to both companies and partnership firms.

5. Application of Legal Precedents and Binding Nature of Judgments:
The court relied on the judgment of the Delhi High Court in Vijay Power Generators Ltd. vs. Sumit Seth, which held that unless the partnership firm is prosecuted and convicted, the partner cannot be convicted under Section 141 of the NI Act. The court also referred to the principles of binding precedents and the need to apply the ratio of judgments to similar facts, reinforcing that the law laid down in Aneeta Hada applies to partnership firms as well.

Conclusion:
The court concluded that for maintaining prosecution under Section 141 of the NI Act against a partner, arraigning the partnership firm as an accused is imperative. The prosecution launched against only one partner, without joining the partnership firm, cannot be maintained. Consequently, the process issued against the petitioner was quashed and set aside. However, the respondent was given liberty to move the competent court for appropriate relief with a petition under Section 14 of the Limitation Act, seeking exclusion of the period during which the case was prosecuted.

Disposition:
All four writ petitions were allowed, and the process issued against the petitioner alone for the offense under Section 138 read with Section 141 of the NI Act, without joining the partnership firm, was quashed and set aside. The writ petitions were disposed of accordingly.

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