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TMI Blog2017 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... e partnership firm running in the name of Shhlok Enterprise. Indisputably, the partnership firm has not been arraigned as an accused in the complaint. In such circumstances, the applicant cannot be held vicariously liable under section 141 of the N.I. Act. The issue is squarely covered by the decision of the Supreme Court in the case of Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd., (2012) 5 SCC 661. 4. Section 141 of the Act is concerned with the offence by the company. It makes the other persons vicariously liable for the commission of an offence on the part of the company. Vicariously liability gets attracted when the condition precedent under section 141, namely, offence by the company stands satisfied. The issue whether a partnership firm is a legal entity within the meaning of section 141 of the N.I. Act is also no longer res integra after the pronouncement in the case of Oanali Ismailji Sadikot vs. State of Gujarat & Anr., 2016 (3) GLR 1991. I may quote the relevant observations made by this Court as under; " Before I proceed to answer the first question, let me look into the decisions relied upon by the learned counsel in that regard. In Munshi Ram (supra), the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in terms, a tax on "persons". The expression "persons" undoubtedly includes natural persons. The class of such taxable persons has been indicated by the Legislature with reference to their occupational activity. Thus, in order to be authorised, a tax under clause (b) of Section 61 (1) must satisfy two conditions: First, it must be a tax on "persons". Second, such persons must be practicing any profession or art or carrying on any trade or calling in the municipality. 16. There can be no dispute that the appellants are "person" and, as such, satisfy the first condition. Even the learned counsel for the appellants has candidly conceded that the individual partners are also "persons" within the meaning of the said clause (b). Controversy thus becomes narrowed down into the issue: Whether persons collectively doing business in partnership in the municipality, fulfill the second condition? That is to say, do such persons "carry on any trade or calling in the municipality" within the contemplation of clause (b)? 18. 'Partnership' as defined in Section 4 of the Indian Partnership Act, 1932, is the relation between persons who have agreed to share the profits of a business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether such trade is being carried on by him individually or in partnership with others. Thus, both the conditions necessary for levying a tax under clause (b) of sub-section (1) of Section 61 of the Municipal Act existed in this case. The appellants are "persons" and they are carrying on a trade in Chheharta Municipality. 9.3 By placing reliance on the observations made in para 18, the learned counsel submitted that a firm or partnership is not a legal entity separate and distinct from the partners. 10 In Mahabir Cold Storage (supra), the appeal before the Supreme Court was filed by the appellant assessee against the judgment of the Division Bench, Patna made in the Tax Case answering in favour of the Revenue and against the Assessee. In the said case, the assessee was a registered partnership firm. In para 11, the Court observed as under: 11. The crucial question, therefore, is whether the appellant is the owner of the machinery and plant in the relevant assessment year 1962-63. Acquisition of ownership is a condition precedent to avail of the development rebate under S. 33(1) of the Act.It is now fairly clear from the statement of facts that the old and the new partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk of the government and public undertakings was assigned to only those Chartered Accountant firms which were enrolled on the panel maintained by the appellant. The appellant through an advertisement invited applications from the firms of the Chartered Accountants for the purpose of empanelment for audit of the government companies. The respondent therein had submitted an application for enrollment on the panel, but the same was rejected on account of the fact that his firm was not a partnership firm, but a proprietary concern. Aggrieved, the respondent filed a writ application under Article 226 of the Constitution of India challenging the exclusion of the proprietary concerns from their empanelment as being discriminatory, arbitrary and violative of Article 14 of the Constitution. The learned Single Judge of this High Court allowed the writ petition. The Letters Patent Appeal before the Division Bench was also dismissed. The Comptroller and Auditor General preferred an appeal before the Supreme Court. The Supreme Court, while dismissing the appeal, observed in para 9 as under: 9. The appellant insists that it is only a smaller group of Chartered Accountants firms that would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is merely an association of persons for carrying on the business of partnership and in law the firm's name is a compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders. In Halsbury's Laws of England, Vol. 6 (3rd Ed), page 234, the law regarding the attributes of shares is thus stated : "A share is a right to a specified amount of the share capital of a company carrying with it certain rights and liabilities while the company is a going concern and in its winding up. The shares or other interest of any member in a company are personal estate transferable in the manner provided by its articles, and are not of the nature of real estate". 13 In V. Subramaniam (supra), the appeal before the Supreme Court arose of a suit filed before the Bombay City Civil Court instituted by the appellant praying for dissolution of an unregistered partnership firm between the appellant and the respondent. In that suit, a defence was taken that the suit was not maintainable in view of Sub-section (2A) of Section 69 of the Indian Partnership Act, 1932. The Bombay City Civil Court took t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence : [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d director, in relation to a firm, means a partner in the firm. 17 It is only the drawer of the cheque, who can be held responsible for an offence under Section 138 of the Act. Section 141 provides for the constructive liability. It postulates that a person, in charge of and responsible to the company, in the context of the business of the company, shall also be deemed guilty of the offence. The drawer can be a company, a firm or an association of individuals, but only those directors, partners, or officers can be held responsible for the offence punishable under Section 138 of the Act, who are responsible to the company firm for the conduct of its business. 18 The Legislature has thought fit to provide an explanation in Section 141 of the Act and the plain reading of the expression company as used in Sub-clause (a) of the explanation appended to Section 141 of the Act shows that it is an inclusive of any body corporate or other association of individuals. Though the heading of Section 141 of the Act reads offences by companies; according to the explanation to that Section, company means any body corporate and includes a firm or other association of individuals and director, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. Sarathi in 'Interpretation of Statutes' while dwelling on the various aspect of an Explanation observes as follows: "(a) The object of an explanation is to understand the Act in the light of the explanation. (b) It does not ordinarily enlarge the scope of the original section which it explains, but only makes the meaning clear beyond dispute." 22 Swarup in 'Legislation and Interpretation' very aptly sums up the scope and effect of an Explanation thus : "Sometimes an explanation is appended to stress upon a particular thing which ordinarily would not appear clearly from the provisions of the section. The proper function of an explanation is to make plain or elucidate what is enacted in the substantive provision and not to add or subtract from it. Thus an explanation does not either restrict or extend the enacting part; it does not enlarge or narrow down the scope of the original section that it is supposed to explain.......... The Explanation must be interpreted according to its own ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ambiguity in it.......... Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language and not on any a priori considerations." 28 Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is - (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an ..... 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