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Philip J. Versus Ashapura Minechem Ltd. and The State of Maharashtra

2016 (3) TMI 381 - BOMBAY HIGH COURT

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.

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ss 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. - CRIMINAL WRIT PETITION NO. 2909, 2910, 2914, 2915 OF 2013 - Dated:- 29-1-201 .....

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be maintainable. Hence, they are being decided by this common judgment. 2. By these petitions, the original accused is challenging the order dated 23rd July 2013 in Criminal Revision Petition No.7 of 2012 passed by the learned Additional Sessions Judge, Mangaon, Dist. Raigad, thereby confirming the order of issue of process dated 3rd January 2012 in Summary Case No. 312 of 2011 passed by the learned Judicial Magistrate, First Class, Shrivardhan under section 138 of the NI Act. 3. Brief facts, r .....

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nt no.1. The petitioner was to supply iron ore together with trucks and barges for loading the iron ore on board the ship. Under the contract, respondent no.1 paid ₹ 11.75 crores to the petitioner towards the purchase price. However, on 25th April 2011 the petitioner informed respondent no.1 company that his partnership firm is unable to provide iron ore. As a consequence of petitioner's failure, respondent no.1 has to pay ₹ 3.60 crores as damages of the vessel and ₹ 1.50 c .....

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espondent no.1 filed four private criminal cases against the petitioner in respect of the four dishonoured cheques. The learned Magistrate, after being satisfied, issued process against the petitioner for the offence under section 138 of the NI Act. The petitioner challenged the said order of issue of process by filing criminal revisions in the Court of Additional Sessions Judge, Raigad. However, as the revisions came to be dismissed, the petitioner is constrained to approach this Court under Ar .....

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eedings launched against the petitioner. It is submitted that undisputedly the transaction was entered into by respondent no.1 company with the petitioner's firm. However, the petitioner's firm is not joined as party to the complaint. The petitioner alone is sued in his capacity as a partner, without joining even the other partners of the partnership firm. According to learned counsel for the petitioner, therefore, the very complaint filed before the Trial Court is not at all maintainabl .....

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f the NI Act, arraigning of a company as an accused is imperative. According to learned counsel for the petitioner, in view of explanation to section 141 of the NI Act, the word company means any body corporate which includes firm or other association of individuals and director in relation to a firm means a partner in the firm. Hence, according to learned counsel for the petitioner, the law laid down by the Apex Court in the case of Aneeta Hada (supra) that arraigning of a company as an accused .....

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tted that legally speaking a partnership firm and a company registered under the Companies Act stand on two different footings. A partnership firm is not a juristic person. It is not a separate and distinct legal entity. As against it, a company is a separate juristic person. Hence, the law laid down in the case of Aneeta Hada (supra), which was in the context of a company, which is a separate juristic person, cannot be made applicable in the case of a partnership firm which is not a separate ju .....

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person; as the same is not the case in respect of a partnership firm, according to him, the law laid down by the Apex Court in the case of Aneeta Hada (supra) needs to be distinguished and cannot be made applicable in the case of a partnership firm. 7. In my considered view, in order to appreciate the rival submissions of the petitioner and respondent no.1, it would be useful to reproduce section 141 of the NI Act. 141. Offences by companies.(1) If the person committing an offence under section .....

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d 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. Notwithstanding anything contained in subsection (1), where any offence under this Act .....

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ludes a firm or other association of individuals; and (b) director , in relation to a firm, means a partner in the firm. Thus, explanation (a) to section 141 of the NI Act abundantly makes it clear that the word company used in the said section is not confined in its application only to the company registered under the Companies Act, but also to the body corporate and specifically includes a firm or other association of individuals. Explanation (b) further clarifies the position that the directo .....

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rtnership firm when the offences are committed by a company or a partnership firm as may be the case. 8. In the case of Aneeta Hada (supra), the question that arose for determination of the Apex Court was whether an authorised signatory of a company would be liable for prosecution under section 138 of the NI Act without the company being arraigned as an accused. As initially there was difference of opinion between the two learned Judges regarding interpretation of section 138 of the NI Act, refe .....

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ection 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant. 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear .....

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w 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 dragnet 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 (supra) which is a threeJudge Bench decision. Thus, the view expressed in Sheorata .....

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of a company as an accused is imperative. In view of explanation to section 141 of the NI Act referred to above, this legal position needs to be automatically made applicable in case of prosecution against a partnership firm also. Therefore, it has to be held that for maintaining prosecution against a partner under section 141 of the NI Act, arraigning of partnership firm as an accused is imperative. 10. However, as referred to above, according to learned counsel for the petitioner, a distincti .....

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unsel for the petitioner, the law which was made applicable to the company by the Apex Court in the case of Aneeta Hada (supra) cannot be made equally applicable to the partnership firm. 11. On the issue of rules relating to binding precedents, learned counsel for respondent no.1 has relied upon two judgments of the Apex Court in the cases of Union of India vs. Dhanwanti Devi, (1996) 6 SCC 44 and Oriental Insurance Co. Ltd. vs. Raj Kumari & Ors., AIR 2008 SC 403, which elaborate the circumst .....

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3. However, in my considered opinion, the conclusions drawn by the Apex Court in the case of Aneeta Hada (supra) are not based merely on the fact that the company is a separate legal entity and juristic person, but these conclusions are drawn on the basis of the fact that section 141 of the NI Act deals with vicarious liability. In paras 58 and 59 of the said judgment, referred above, the Apex Court has referred to the wording in section 141 of the NI Act and observed that commission of offence .....

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e firm can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. 14. Thus, the Apex Court has arrived at an irresistible conclusion that for maintaining the prosecution under section 141 of the NI Act, arraigning of the company as an accused is imperative, mainly and mostly on the basis of the vicarious liability of the directors of the company and not necessarily because the company is a juristic person and it has its ow .....

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y applicable in the case of partnership firm also. The partners are liable and sued in their vicarious liability. Whether the partnership firm is a juristic person or not is a different aspect. What is important is that a partner of the firm is arraigned as an accused in the dragnet on the touchstone of vicarious liability, as is done in the case of directors of the company. Therefore, there is no reason at all to make any distinction in respect of the law to be made applicable to partnership fi .....

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Court in Aneeta Hada (supra) to the partnership firm merely because in that judgment the Apex Court was considering the eventuality of nonjoining of the company. The basic premise of holding either the director or the partner liable for prosecution being the same that of the vicarious liability. Therefore, once the company is held to be essential party and that arraigning of a company as an accused is imperative for prosecution under section 141 of the NI Act, it necessarily follows that arraig .....

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