2025 (4) TMI 506 - HC - Indian Laws

Dishonour of Cheque - vicarious liability of petitioner having retired from the partnership - Section 138 read with Section 141 of the Negotiable Instruments Act (NI Act) - main thrust of the petitioner s argument is that he was not the person responsible for the conduct of the accused firm at the time of issuance of the subject cheque - HELD THAT - Concededly the petitioner at the time of the issuance of the security cheque was a partner in the accused firm. The subject cheque is claimed to be given in exchange of the cheque which was issued at the time when the petitioner being partner was the person responsible for the conduct of the accused firm. Whether the petitioner can be held liable for dishonor of the replaced cheque even if it is to be presumed that he had retired by that time is a mixed question of facts and law which cannot be decided at this stage without the evidence being led by the parties. Moreover the retirement of the petitioner from the accused firm is also disputed and is subject matter of other litigations initiated by other partners. The said fact thus is not of such sterling nature to be considered while exercising power under Section 482 of the CrPC. Therefore from the totality of facts it cannot be said at this stage that the petitioner was not the person responsible at the time of commission of offence committed by the accused partnership firm. To quash the proceedings by petition filed under Section 482 of CrPC the petitioner is to place some unimpeachable and uncontroverted evidence which is beyond suspicion or doubt. The factual issues that serve as defences in the case are not appropriate for determination under the powers conferred by Section 482 of the CrPC at this stage. It is well-established that this Court should refrain from expressing any views on disputed questions of fact in proceedings under Section 482 of the CrPC as doing so could pre-empt the findings of the trial court. Conclusion - Considering the material on record the documents adduced by the petitioner cannot be said to be of such sterling and unimpeachable quality that it merits the quashing of the summons and consequential proceedings thereof. This Court can exercise its jurisdiction only upon unimpeachable and uncontroverted evidence being placed on record however in the absence of such evidence the fact whether the accused person is responsible for the affairs of the accused company becomes a factual dispute which is to be seen during trial. This Court finds no reason to interfere with the impugned order passed by the learned Trial Court - Petition dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the petitioner, having retired from the partnership firm, can be held liable under Section 138 read with Section 141 of the Negotiable Instruments Act (NI Act) for a cheque issued by the firm after his retirement.
Whether the petitioner's retirement from the firm was properly communicated to the complainant as required under Section 32 of the Indian Partnership Act, 1932.
Whether the petitioner can seek quashing of the proceedings under Section 482 of the Code of Criminal Procedure (CrPC) based on the claim of non-involvement in the firm's affairs at the time of the cheque's dishonour.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability under Section 138 and 141 of the NI Act

Relevant legal framework and precedents: Section 138 of the NI Act deals with the dishonour of cheques due to insufficient funds, while Section 141 extends liability to individuals responsible for the conduct of a company's affairs. The court referenced precedents such as Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd. and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla to interpret these provisions.
Court's interpretation and reasoning: The court noted that for vicarious liability under Section 141, it must be shown that the accused was responsible for the conduct of the business at the time of the offence. The petitioner argued that he had retired before the cheque's issuance and dishonour, thus not liable.
Key evidence and findings: The petitioner presented a Modified Partnership Deed and a public notice as evidence of his retirement. However, the respondents disputed these documents, and the court found that the retirement was not communicated as per the required legal procedure.
Application of law to facts: The court determined that the petitioner's retirement and the authenticity of the documents were disputed facts that could not be resolved at this stage without a trial.
Treatment of competing arguments: The petitioner's argument of non-liability was countered by the respondents' claim of his continued involvement in the firm's affairs. The court held that the petitioner's liability could not be dismissed without a trial to examine these factual disputes.
Conclusions: The court concluded that the petitioner's liability under Section 138 and 141 could not be quashed at this stage, given the disputed facts regarding his retirement and role in the firm.

Issue 2: Communication of Retirement under Section 32 of the Indian Partnership Act

Relevant legal framework and precedents: Section 32 of the Indian Partnership Act requires a retiring partner to notify third parties of their retirement to absolve themselves of liability for the firm's actions.
Court's interpretation and reasoning: The court noted that the petitioner failed to follow the prescribed procedure to communicate his retirement to the complainant, as required by law.
Key evidence and findings: The petitioner's reliance on the Modified Partnership Deed and public notice was insufficient to establish proper communication of his retirement.
Application of law to facts: The court found that the petitioner's alleged retirement was not effectively communicated to the complainant, thereby not absolving him of liability.
Treatment of competing arguments: The respondents argued that the petitioner's retirement was not communicated, which the court found credible given the lack of evidence to the contrary.
Conclusions: The court concluded that the petitioner's failure to properly communicate his retirement meant he could not be absolved of liability under the NI Act.

Issue 3: Quashing of Proceedings under Section 482 of the CrPC

Relevant legal framework and precedents: Section 482 of the CrPC allows the High Court to quash proceedings to prevent abuse of process. The court referenced S.P. Mani & Mohan Dairy v. Snehalatha Elangovan and Gunmala Sales Private Ltd. Vs. Anu Mehta for guidance on exercising this power.
Court's interpretation and reasoning: The court emphasized that quashing requires unimpeachable evidence that the accused was not involved in the offence. The petitioner's evidence did not meet this standard.
Key evidence and findings: The court found that the petitioner's evidence of retirement and non-involvement was disputed and not of sterling quality to warrant quashing the proceedings.
Application of law to facts: The court determined that the factual disputes regarding the petitioner's role and retirement necessitated a trial, rather than quashing the proceedings at this stage.
Treatment of competing arguments: The petitioner's argument for quashing was countered by the respondents' evidence of his involvement, leading the court to decide that a trial was necessary to resolve these issues.
Conclusions: The court concluded that the petition did not meet the criteria for quashing under Section 482, as the evidence presented was insufficient to dismiss the proceedings.

3. SIGNIFICANT HOLDINGS

The court held that the petitioner's liability under Section 138 and 141 of the NI Act could not be dismissed at this stage due to disputed facts regarding his retirement and role in the firm.
The court emphasized the necessity of proper communication of retirement under Section 32 of the Indian Partnership Act to absolve a partner of liability.
The court reiterated that quashing proceedings under Section 482 of the CrPC requires unimpeachable evidence, which was not present in this case.
"The factual issues that serve as defences in the case are not appropriate for determination under the powers conferred by Section 482 of the CrPC at this stage."
The court dismissed the petition, allowing the trial to proceed to resolve the factual disputes.

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