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TMI Blog2025 (3) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... Order of partial compounding, present Petition has been filed to challenge the partial compounding on the assertion that the liability of the two accused/ partners of the Partnership Firm (unregistered) was joint and several and thus, should not have been permitted. Quashing of the Complaint is therefore, sought by the Petitioner against himself in terms of compounding of the offence being the Partner of the Firm. 3. Briefly stated, Respondent No. 2/Mr. Anup Kuma, Karta of a Hindu Undivided Family (HUF), who is in the business of investment in Shares and Rental Properties, was approached by Respondent No. 4 Mr. Sant Lal Aggarwal, on behalf of Respondent No. 3/M/s Jagat Overseas (unregistered Partnership Firm) for providing a friendly loan. Because of their cordial relations, he acceded to their request and extended a friendly loan of Rs. 50,00,000/- and transferred the money through RTGS No. 033519 to the account of Respondent No. 3. In order to secure the loan, Respondent No. 2, Mr. Sant Lal Aggarwal, Partner of M/S Jagat Overseas, executed a Demand Promissory Note dated 20.01.2012 for a sum of Rs. 50,00,000/- and a Receipt acknowledging having received Rs. 50,00,000/- from Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,00,000/-, out of which Rs. 20,00,000/- stood already paid and balance Rs. 5,00,000/- was paid before the learned MM. The Complainant thus, compounded the offence under Section 138 N.I. Act qua Respondent No. 4/Sant Lal Agarwal, who was acquitted of the offence. However, the Complaint was continued against the Petitioner Satish Kumar Pawa, the second Partner, even after compounding of the offence. 12. The Petitioner has thus, filed the present Petition seeking quashing of the Complaint under Section 138 read with Section 141 Negotiable Instruments Act, 1881 asserting that in view of Orders dated 07.03.2018 and 02.07.2019, the Complaint does not survive on account of compounding on behalf of the Partnership Firm. 13. Learned Counsel for the Petitioner has submitted that Petitioner had been impleaded as an accused by virtue of Section 141 of the N.I. Act, making him vicariously liable for the offence committed by the Partnership Firm; unless it is determined that the offence has been committed by the Partnership Firm, he as Partner, cannot be held liable for the offence. Consequent upon acquittal of Respondent No. 4 vide Order dated 02.07.2019, the Complaint does not survive again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Hence, a prayer is made for quashing of the Complaint. 20. Respondent No. 2/Complainant in its Reply has asserted that Petitioner is admittedly one of the partners and the second partner Mr. Sant Lal Agarwal, have 50% share in Respondent No. 3/Firm, which has not been disputed. The allegation of the Petitioner that Respondent No. 4 was working against the interest of the Firm, is not tenable. He admits himself to be one of the Partnership Firm and is responsible for day-to-day affairs of the Firm; he may have separate action against Respondent No. 4 in regard to his acting against the interest of the Firm, but the Complainant has no concern with it as he had dealt with the Firm through its Partner/ Respondent No. 4. 21. The assertion that since no separate Notice under S.251 NI Act has been framed on the Partnership Firm, he cannot be held vicariously liable for the acts of the Firm, is also not tenable under Law as being a Partner in the Firm, he has equal responsibility for the affairs of the Partnership Firm. 22. It is further submitted on behalf of the Complainant that under Section 257 Cr.P.C., it is the discretion of the Complainant to withdraw the Complaint against one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to proceedings under Code of Civil Procedure and not to criminal offences. The word 'Suit' in common parlance means a process instituted in the Court for recovery or protection of right or enforcement of a claim or redressal of civil injuries. It does not encompass any criminal liability. 31. Section 142 of N.I. Act deals with 'cognizance of offence' and provides that the Complaint under Section 138 of NI Act in writing, can be made by the Payee or holder in due course. The Legislature in its wisdom, has used the word 'Complaint' and not 'Suit' in Section 142 of N.I. Act thereby indicating that the bar created for maintaining a Suit in Section 69 of the Partnership Act by or against an unregistered Firm, cannot be stretched and applied to maintain a criminal proceeding under Section 138 of N.I. Act. 32. The Apex Court in B.S.I. Ltd. and Another vs. Gift Holdings Pvt. Ltd. and Another, 2000 SCC (Cri) 538, interpreted the word 'Suit' while deciding maintainability of a proceeding under Section 138 of NI Act in the context of ban imposed by the Sick Industrial Companies (Special Provisions) Act. It provides that no Suit for Recovery of Money or Enforcement of any security again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to be guilty of the offence. 39. Explanation to Section 141 reads as under: - "Explanation.- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm." 40. Section 141 of N.I. Act read with Explanation, therefore, makes it abundantly clear that when an offence is committed by a Company or a Firm, every member who is responsible and in charge of the affairs of the Company/Firm is guilty of the offence committed under Section 138 of NI Act. 41. The difficulty arose when the learned Metropolitan Magistrate while framing a Notice under Section 251 of Cr.P.C., 1973 on 07.03.2018, observed that the Partnership Firm is not a separate entity but it is only a compendium of persons, and did not frame a Notice against the Partnership Firm, but only against Respondent No. 4/Sant Lal Agarwal and the Petitioner/Satish Kumar Pawa separately by describing them as the partner of the Respondent No. 3/M/s Jagat Overseas. 42. Thus, the Notice under Section 251 N.I. Act was framed on 18.04.2018 only against the two partners and not the Partnership Firm, which has not been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section 8 make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. [59] In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [(1970) 3 SCC 491] which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al compounding by one partner for the liabilities of the Partnership Firm, would result in total discharge of all liabilities or it can be apportioned in the manner it was done by the Respondent No. 4/Sant Lal Agarwal and the Complainant. 53. Section 25 of the Partnership Act provides that every partner is liable, jointly with all the other partners and also severally, for all acts of the Firm done while he is a partner. It reads as under: "25. Liability of a partner for acts of the firm: - Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner." 54. The Firm is not a legal entity; it is a collective or compendious name for all the partners. In other words, a Firm does not have any existence away from its partners, though by virtue of S.141 NI Act, it can be sued in its name. A Decree in favour of or against a Firm has the same effect as a Decree in favour of or against the partners. When the Firm incurs a liability, it can be assumed that all the partners were incurring that liability and so the partners remain liable jointly and severally for all the acts of the Firm. Therefore, the liability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Partnership Firm/M/s Jagat Overseas. 62. In the present case, both the partners, namely, Petitioner/Satish Kumar Pawa and the Respondent No. 4/Sant Lal Agarwal, were jointly and severally responsible for the liability incurred by the Partnership Firm, meaning thereby that each is liable for the entire liability individually as well as jointly. The partners may have agreed to be entitled to the share profit & loss in a particular ratio, but their legal liability towards the third person is joint and several and there can be no apportionment. 63. It is pertinent to note that in the Mediated Settlement Agreement dated 17.01.2019 itself, it has been noted that the Compromise is towards all the existing liabilities of the Partnership Firm which also acknowledges that the payment made by the Respondent No. 4/Sant Lal Agarwal in discharge of his liabilities of the Partnership Firm. Relevant part of Settlement Agreement reads as under: "1. It is agreed between the parties that respondent No. 2/Santlal Agarwal being an equal partner of respondent no. 1 firm, shall pay a sum of Rs. 25,00,000(Rupees Twenty-Five Lakh only) which is half of the total dishonoured cheque amount, to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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