2021 (7) TMI 123 - HC - Indian Laws

Dishonor of Cheque - illegality in the order of issuance of process or not - the contention in the memo of revision is that the learned Magistrate committed a jurisdictional error in taking cognizance of the offence - HELD THAT - The cheque is issued by a firm, which is not arraigned as accused. Indeed, since the statutory notice was not served, the firm could not be arraigned as accused. The private limited company, which has no nexus whatsoever with the dishonoured cheques, was arraigned as accused 1. The fact that Ramanarao Bolla is a Director of the private limited company as well as a partner of the firm, is of scant significance considering that the company is a distinct legal entity and the mere fact that one of the Director is also a partner of a firm which issued the dishonoured cheque cannot be the basis of the implication of the company in the alleged offence. The petition is dismissed.

Summary

Issues:
- Jurisdictional error in taking cognizance of the offence under Section 138 of the Negotiable Instruments Act, 1881.
- Implication of a private limited company in a criminal case involving dishonoured cheques issued by a partnership firm.

Analysis:
1. Jurisdictional Error in Taking Cognizance:
The petitioner filed a Summary Criminal Case under Sections 138 read with Section 142 of the Negotiable Instruments Act, 1881, against accused individuals alleging dishonoured cheques. The Sessions Judge quashed the order of issuance of process, citing that the firm which issued the cheque was not arraigned as an accused. The accused contended that the statutory notice was not served to the partnership firm, leading to a jurisdictional error in taking cognizance of the offence. The learned Sessions Judge allowed the revision and quashed the process order, emphasizing the need for proper notice to the correct entity responsible for the dishonoured cheques.

2. Implication of Private Limited Company:
The core issue revolved around whether a private limited company could be implicated in a criminal case involving dishonoured cheques issued by a partnership firm. The accused argued that the company and the partnership firm were distinct legal entities, and the mere overlap of a director being a partner in the firm did not justify implicating the company. The Sessions Judge noted the distinction between the partnership firm and the private limited company, highlighting that the statutory notice was wrongly issued to the company instead of the firm. The judge referenced legal precedents to support the position that the liability of the partnership firm could not be transferred to the private limited company without proper legal procedures being followed.

3. Legal Precedents and Decision:
The judgment referenced legal precedents such as Aneeta Hada v. Godfather Travels and Tours Private Limited and Himanshu v. B. Shivamurthy to establish the principle that each legal entity must be held accountable separately. The court upheld the Sessions Judge's decision to quash the process order, emphasizing the need for precision in identifying the correct entity responsible for the dishonoured cheques. The court dismissed the petition, affirming that the private limited company's involvement in the case lacked legal basis due to the absence of proper notice and jurisdictional errors in the process of arraignment.

In conclusion, the judgment focused on the fundamental legal principles governing the implication of entities in criminal cases involving dishonoured cheques, emphasizing the importance of serving statutory notices to the correct entities and maintaining distinct legal identities. The decision underscored the need for precision and adherence to legal procedures to ensure accountability and fairness in such cases.