GST Helpdesk   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
GST - Acts GST Rules SGST - Acts GST Rates CGST Notif. SGST Notif. Customs Tariff Exempt Income
Extracts
Home List
← Previous Next →

2017 (4) TMI 874 - GUJARAT HIGH COURT

2017 (4) TMI 874 - GUJARAT HIGH COURT - TMI - Prosecution of offence alleged by virtue of Section 141 of the Negotiable Instruments Act - Held that:- The provisions of Section 138 of the Negotiable Instruments Act are enacted taking into consideration the currency of cheques for a period of six months from the date of issue or the reduced period of validity, whichever is earlier. Therefore, this provision of the Negotiable Instruments Act contemplates cheque with lesser period of validity than s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the complainant for encashment after the expiry of currency of three months and in such circumstances, the provisions of Section 138 of the Negotiable Instruments Act are not attracted in this case in view of Clause (a) of the proviso to Section 138 of the Negotiable Instruments Act. - CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE FIR/ORDER) NO. 19545 of 2016 With CRIMINAL MISC.APPLICATION NO. 19548 of 2016 - Dated:- 11-4-2017 - MR. J.B.PARDIWALA, J. FOR THE APPLICANT : MR NISHITH P TH .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Criminal Procedure, 1973, the applicant - original accused No.3 seeks to invoke the inherent powers of this Court, praying for quashing of the proceedings of the Criminal Cases Nos.1076 of 2015 and 1075 of 2015 respectively pending in the Court of the learned Judicial Magistrate First Class, Dhanera, District: Banaskantha. Both the criminal cases are relating to dishonour of cheques punishable under Section 138 of the Negotiable Instruments Act. 3 The applicant herein has been arraigned as an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n is whether the applicant herein can be prosecuted for the offence alleged by virtue of Section 141 of the Negotiable Instruments Act. 6 Indisputably, Mangalam Oil Industries i.e. the partnership firm, being a legal entity, has not been arraigned as an accused. In such circumstances, the decision of the Supreme Court in the case of Aneeta Hada vs. M/s. Godfather Travels and Tours Pvt. Ltd. [AIR 2008 SC (Supp) 1849] would come into play. However, Mr. Pandya, the learned counsel appearing for the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the N.I. Act. 7 This Court had an occasion to consider the question whether a partnership firm is a legal entity like a 'company' so far as the offence punishable under Section 138 of the Negotiable Instrument Act is concerned in the case of Oanali Ismailji Sadikot vs. State of Gujarat [(2016) 3 G.L.R. 1991]. I may quote the relevant observations: 8 Having heard the learned counsel appearing for the applicant and having considered the materials on record, the following questions fall .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g the proceedings by virtue of an application under Section 319 of the Cr. P.C.? • FIRST QUESTION: 9 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 appellants before the Supreme Court were partners of a firm, Bharat Industries, Chheharta. By a Notification, 15th May, 1946, the Chheharta Municipal Committee levied a profession tax under Section 61(1)(b) of the Punjab Municipal Act, 19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not on the partners individually. On such premises, it was pleaded that the Municipal Committee in levying the tax on the individual partners had exceeded its statutory powers under Section 61 (1)(b) of the Municipal Act. 9.1 The trial Court dismissed the suit, on appeal by the plaintiffs, the Additional District Judge, Amritsar, reversed the judgment of the trial Court and decreed the suit. The Municipal Committee carried a further appeal to the High Court. The learned Single Judge, who heard t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

part of the municipality any of the following taxes, namely:( 1) (a) .............. (i) to (iii) .......... (b) a tax on persons practising any profession or art or carrying on any trade or calling in the municipality. Explanation. A person in the service or person holding an office under the State Government or the Central Government or a local or other public authority shall be deemed to be practicing a profession within the meaning of this subsection." 9.2 The Supreme Court proceeded to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 person .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

irm or partnership is not a legal entity separate and distinct from the partners. Firm is only a compendious description of the individuals who compose the firm. The crucial words in the definition of 'partnership' are those that have been underlined. They hold the key to the question posed above. They show that the business is carried on by all or any of the partners. In the instant case, admittedly, all the plaintiffappellants are carrying on the business in partnership. All the six pa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

well as collectively carrying on a trade in the Municipality. There is nothing in the language of Section 61 or the scheme of the Municipal Act which warrants the construction that persons who are carrying on a trade in association or partnership with each other cannot be individually taxed under clause (b) of Section 61 (1). On the contrary, definite indication is available in the language and the scheme of this statute that such partners can be taxed as persons in their individual capacity. As .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssly or by necessary implication, exclude or exempt persons carrying on a trade collectively in the municipality from being taxed as individuals. To attract liability to a tax under this clause, it is sufficient that the person concerned is carrying on a trade in the municipality, irrespective of 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 subsection (1) of Section 61 of the Mu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng 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 X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as 50 per cent shares of profit. Under the Indian Partnership Act, '1932 the partnership firm registered thereunder is neither a person nor a legal entity. It is merely acollective name for the individual members of the partnership. A firm as such cannot be a partner in another firm though its partners may be partners in another firm in their individual capacity. Either under the repealed Act or the Act, a firm is liable to be separately assessed to tax as well as all its partners in their c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee is entitled to development rebate under S. 33(1) of the Act. (Under S. 10(1)(vib) of the repealed Act). Section 33(1) gives right to development rebate only to the owner who has acquired the ship or installed the machinery or plant. The necessary implication is that the assessee who claims development rebate should continue to remain to be the owner of the ship or plant or machinery during the relevant previous assessment year/ years and the owner alone is entitled to the development re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ppellant insists that it is only a smaller group of Chartered Accountants firms that would be eligible for being brought on the panel for audit of public sector undertakings or Government concerns. The audit work of public sector undertaking, no doubt, is to be done by the qualified and efficient Chartered Accountants. Once a person is qualified, experienced and efficient, it is difficult to understand how he could be discriminated against only for the reason that he has chosen to act alone in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r who could be in his services as efficient as any partnership firm. It is often seen in many cases that some of the partners of the partnership firm are sleeping partners with no professional duties to discharge. A partnership concern is not a legal entity like company; it is a group of individual partners. In a partnership firm, it is the partner who will be assisted in carrying out the work but quite remains the eligible Chartered Accountant. It is the same situation as in a proprietary conce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

blic sector undertakings or of the Government concerns. 12 In Bacha F. Guzdar (supra), the argument before the Supreme Court was that the possession of the shareholders in a company was analogous to that of partners inter se. While holding the analogy is wholly inaccurate, the Supreme Court observed, in para 9, as under: 9. It was argued that the position of shareholders in a company is analogous to that of partners 'inter se.' This analogy is wholly inaccurate. Partnership is merely an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hts 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 re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Civil Procedure. The High Court, held that Subsection (2A) of Section 69 was not unconstitutional. The appeal came up before the Supreme Court. After noticing Section 69(1) and (2) of the Partnership Act as well as Subsection (2A) introduced by the Maharashtra Amendment 1984, the Court observed in paras 14 and 17 as under: 14. It may be mentioned that a partnership firm, unlike a company registered under the Indian Companies Act, is not a distinct legal entity, and is only a compendium of its .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tually deprives a partner in an unregistered firm from recovery of his share in the property of the firm or from seeking dissolution of the firm. 14 What is discernible from a conspectus of the authorities referred to above is that a partnership firm, unlike a company registered under the Indian Companies Act, is not a distinct legal entity or a juristic person, but is only a compendium of its partners. Even the registration of a firm would not make it a distinct legal entity like a company. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e was committed, was in charge of, and was responsible to the company 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 subsection 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 offe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at 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 to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. For the purposes of this section. (a) "company" means any body corporation and includes a firm or other association of i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ordingly. The offender in section 138 of the Act is the drawer of the cheque. He alone would have been the offender thereunder if the Act did not contain other provisions. It is because of section 141 of the Act that penal liability under section 138 is cast on other persons connected with the company. Three categories of persons can be discerned from the said provision who are brought within the purview of the penal liability through the legal fiction envisaged in the section. They are: (1) The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hall not be liable to punishment under this section. Subsection (2) further provides that where any offence under this Act has been committed by a company and it is provided 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 to be guilty of that offence and shall be liable to be proceeded a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he 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 Subclause (a) of the expla .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

derstanding between the individuals. It has to be understood in the context of body corporate and partnership firms. The principal of ejusdem generis gets attracted in such a case. Therefore, a sole proprietary concern is not a company within the meaning of company as defined under the explanation to Section 141 of the Act. 19 The Explanation to Section 141 makes it clear that wherever there is a reference under Section 141 to a company it has to be substituted by the word firm where the accused .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which indicates that in every complaint involving the dishonour of a cheque issued by a firm both the firm as well as its partners have to be compulsorily impleaded. In other words a complaint in which only the firm is made an accused and the partners are not would not be bad in law for that reason. Clearly that is not the intention of the Parliament. 20 A partnership firm is a separate legal entity in terms of the Indian Partnership Act 1932 and it is answerable in law in that capacity. That is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r because he is not aware as to who are the partners or is not interested in proceeding against the partners apart from the firm. 21 It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 tenor; that it is meant to explain and not vice v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rpose can be entertained unless it is to be inferred from the language used. An 'explanation' must be interpreted according to its own tenor." 24 The principles laid down by the aforesaid authors are fully supported by various authorities of the Supreme Court. In Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer [(1961) 1 SCR 902 : (AIR 1961 SC 315)], a Constitution Bench decision of the Supreme Court observed thus : "Now, the Explanation mus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t be so construed as to widen the ambit of the section." 26 In Hiralal Rattanlal etc. v. State of U.P. [(AIR 1973 SC 1034)], the Supreme Court observed thus : "On the basis, of the language of the Explanation this Court held that it did not widen the scope of clause (c). But from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rue 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 t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

der a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. The first question is answered accordingly in the affirmative. 8 Let me test the argument of Mr. Pandya from a different angle. Let me assume for the moment that the partnership firm is not a legal entity, and therefore, it is not necessary to arraign the partnership firm as an accused in the complainant. If that be so, then how can the other partners be prosecuted fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the other partners are to be held responsible for the dishonour, then they can be held responsible only by fastening vicarious liability under Section 141 of the Negotiable Instruments Act and this is permissible only if the firm is a legal entity. 10 On this ground alone, the proceedings deserve to be quashed so far as the applicant herein is concerned. 11 There is one more contention raised by Mr. Pandya, the learned counsel appearing for the complainant as regards the validity period of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

251, DBOD.AML BC. NO.47/14.01.001/201112 dated 4th November 2011 (w.e.f. 1st April 2012). According to Mr. Pandya, when the law provides six months, the same could not have been reduced to three months by the Reserve Bank of India by way of a Notification. According to Mr. Pandya, as per List I, which is styled as the Union List in the Seventh Schedule of the Constitution, all the items mentioned therein fall within the exclusive jurisdiction of the Union of India and item 45 in the List I of S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, at the first blush, appears to be attractive, yet if examined closely, cannot be accepted on the face of Clause (a) of the proviso to Section 138 of the Negotiable Instruments Act, which reads as under: "Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within the period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier." 12 From the above proviso, it is clear tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onths or within the period of validity of the cheque, whichever is earlier. Hence, a cheque, which is issued with the reduced validity period, has to be presented for encashment within the expiry of that period so as to attract the provisions of Section 138 of the Negotiable Instruments Act. Indisputably, in the case on hand, the cheque was presented by the complainant for encashment after the expiry of currency of three months and in such circumstances, the provisions of Section 138 of the Nego .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng bank where he has his account but to attract the criminal liability of the drawer of the cheque such collecting bank is obliged to present the cheque in the drawee or payee bank on which the cheque is drawn within the period of six months from the date on which it is shown to have been issued. In other words a cheque issued by (A) in favour of (B) drawn in a bank named (C) where the drawer has an account can be presented by the payee to the bank upon which it is drawn i.e. (C) bank within a p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

law. A combined reading of Sections 2, 72 and 138 of the Act would leave no doubt in our mind that the law mandates the cheque to be presented at the bank on which it is drawn if the drawer is to be held criminally liable. Such presentation is necessarily to be made within six months at the bank on which the cheque is drawn, whether presented personally or through another bank, namely, the collecting bank of the payee. 14 A learned Single Judge of this Court in the case of Arunbhai Nilkantharai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y on the part of the postal authority, the cheque might reach the paying bank after the expiry of the period of validity or six months, as the case may be, the holder of the cheque, in such circumstances, would be helpless. The learned Single Judge rejected the contention observing as under: 10...The contention must fail. In that case initiation of criminal action is view of nonfulfilment of the requirements of Sec. 138 of the Act would certainly be barred, but it will be open to the payee to in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ntingencies or delay that is likely to occur on the part of the collecting bank or the postal authorities. He cannot wait till the last day of the period of validity for presentment of the cheque, because proviso (a) to Sec. 138 makes it abundantly clear that if presentment of a cheque is not made within 6 months from the date on which the cheque is drawn or within the period of its validity whichever is earlier, the cause to lodge the complaint does not subsist or live on, for in that case the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Act, and is late by 4 days, one of the essential requirements of Sec. 138 of the Act for initiating penal action is not satisfied. When that is so, the complaint lodged cannot be entertained, the same has to be quashed, and the petitioner, who is the accused, in that case, is required to be discharged. 15 In taking the aforesaid view, I am supported by a decision of the Kerala High Court in the case of Kesavan Thankappan vs. State of Kerala [1999 Cri. L.J. 714]. I may quote the relevant obser .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed under Art. 283(2) of the Constitution and promulgated by the Governor of Kerala by notification No. 54282 dated 641983. 6. As per List 1 which is styled as Union List in 7th Schedule of the Constitution, all the items mentioned therein fall within the exclusive jurisdiction of the Union of India and item 45 in the list I of Schedule 7 is Banking and entry 46 therein is Bill of Exchange, Cheques etc. Therefore, the counsel for the appellant argued that banking comes within the exclusive jurisd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tice should be followed by the Treasuries. According to him, though the Treasury can regulate the period of validity of cheques, it will bind only the Treasuries and persons who are transacting with the Treasury by opening accounts with them and it cannot bind a person who has no dealings with the Treasury and in whose favour a Treasury cheque is issued. 8. The learned counsel for the appellant also argued that appendix 3 to Treasury Code Vol. II relates to rules regulating transactions in the T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lant argued that transaction in the banking Treasury is similar to the transaction in ordinary banks and the Treasury cheque drawn has to be treated as a cheque drawn on a bank for all purposes under S. 138 of the Negotiable Instruments Act and there cannot be any distinction between ordinary bank and the Treasury dealing with banking transactions. 9. The counsel for the appellant further argued that banking being Union subject in the first list of Schedule 7 of the Constitution, the Treasury Co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

currency to three months as provided under Rule 245(b) of Vol. I of the Treasury Code cannot be pressed into service in this case as against the prevailing banking practice of currency of cheques for six months as provided under the Negotiable Instruments Act. 10. Though the above arguments advanced by the counsel for the appellant are very attractive, they cannot be accepted on the face of clause (a) of the proviso to S. 138 of the Negotiable Instruments Act which reads as follows : "Prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version