TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 839
X X X X Extracts X X X X
X X X X Extracts X X X X
....Negotiable Instruments Act (for short NI Act) against the respondent on the allegation that it was a partnership firm having its office at Village Ranghri, Manali and Sh. Aakash Ahuja was a partner of the said firm, who had been duly authorised to present the complaint. It is submitted that the accused/ respondent had purchased construction material i.e. cement, steel etc. from 01.06.2015 to 29.09.2015 from the appellant-firm and having an outstanding liability of Rs. 5,00,000/- for which he issued and handed over cheque bearing No.378401 dated 24.9.2015 to the appellant. However, on presentation, the cheque was returned being dishonoured vide memo dated 24.9.2015 with remarks 'funds insufficient'. Even after issuance and receipt of legal notice dated 8.10.2015, no payment was made by the respondent. Hence, the complaint. 4. On the basis of the preliminary evidence adduced by the appellant, the respondent was summoned by the learned trial Magistrate vide order dated 23.11.2015 and on finding a prima-facie case, notice of accusation was put to the respondent, to which he pleaded not guilty and claimed trial. 5. In support of his case, the complainant-firm examined Aakash Ahuja as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 391of the Code of Criminal Procedure reads thus: "391. Appellate Court may take further evidence or direct it to be taken.- (1) In dealing with any appeal under this Chapter, the Appellate Court, if it thinks additional evidence to be necessary, shall record its reasons and may either take such evidence itself, or direct it to be taken by a Magistrate, or when the Appellate Court is a High Court, by a Court of Session or a Magistrate. (2) When the additional evidence is taken by the Court of Session or the Magistrate, it or he shall certify such evidence to the Appellate Court, and such Court shall thereupon proceed to dispose of the appeal. (3) The accused or his pleader shall have the right to be present when the additional evidence is taken. (4)The taking of evidence under this section shall be subject to the provisions of Chapter XXIII, as if it were an inquiry." 12. In M.M.T.C.Ltd. And another vs. Medchl Chemicals and Pharma (P)Ltd. And another (2002) 1 SCC 234, the Hon'ble Supreme Court held that the only eligibility criteria prescribed by Section 142 for maintaining a complaint under Section 138 is that the complaint must be by the payee or the holder in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that there may be occasions when different persons can represent the company. It has been held that it is open to the de jure complainant company to seek permission of the court for sending any other person to represent the company in the court. Thus, even presuming, that initially there was no authority, still the Company can, at any stage, rectify that defect. At a subsequent stage the Company can send a person who is competent to represent the company. The complaints could thus not have been quashed on this ground." 13. Likewise in Samrat Shipping Co. Pvt. Ltd. vs. Dolly George (2002) 9 SCC 455, the Hon'ble Supreme Court termed the dismissal of the complaint at the threshold by the Magistrate on the ground that the individual through whom the complaint was filed had not produced the certified copy of the resolution of the Board of Directors of the Company authorising him to represent the Company before the Magistrate has also not justified and termed this exercise to be "too hasty an action". It is apt to reproduce the observation as contained in para 3 of the judgment, which reads thus: "3. Having heard both sides we find it difficult to support the orders challenged befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use. {See Uday Shankar Triyar Vs. Ram Kalewar Prasad Singh, (2006) 1 SCC 75}. : (AIR 2006 SC 269 : 2005 AIR SCW 5851). 7. In view of the fact that in spite of arbitration award against the respondents, there was non-payment of amount by the respondents to the appellant-Federation, and also in the light of authorisation contained in Annexure-P/7, we are of the opinion that, in the facts and circumstances of the case, an opportunity should be given to the appellant-Federation to produce and prove the authorisation before the Trial Court, more so, when money involved is public money. We, therefore, set aside the judgments of the Courts below and remit the matters back to the Trial Court with a direction to conduct trial afresh taking into consideration the authorisation placed before us and dispose of the matter as expeditiously as possible in accordance with law." 15. Bearing in mind the aforesaid exposition of law, I am of the considered view that the appellant-applicant ought to be granted one chance to place and prove on record the partnership deed. Accordingly, Cr.M.P. No. 464 of 2018 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8. Learned Division Bench of the Kerala High Court in Kerala Arecanut Stores vs. Ramkishore and Sons, AIR 1975 Ker 144, was ceased of a question whether the suit by a partner of an unregistered firm for recovery of money claimed on dishonour of the cheque endorsed in favour of the firm would be maintainable or would be barred under Section 69 (2) of the Partnership Act, holding the suit to be maintainable. It was held as under: "10. Reference has been made to these provisions to indicate that the obligation of the drawer of a cheque as well as the indorser to the indorsee who is the holder in due course arises by virtue of statutory provisions. It is not as if there is any privity of contract between the maker of a cheque and the holder in due course. Any right of action available to such holder is not under any contract, for he would be a third Party to the contract and would not come within one of the exceptions enabling a third party to a contract to sue. But he is entitled to sue on his cheque by reason of the right conferred upon him by the statute. In fact, in the case of an indorsement of a pronote or of a cheque it is not an assignment of the debt as such but only of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a legally enforceable debt or other liability. Enforcement of legal liability has to be in the nature of civil suit because the debt or other liability cannot be recovered by filing a criminal case and when there is a bar of filing a suit by unregistered firm, the bar equally applies to criminal case as laid down in explanation (2) of Section 138 of the Negotiable Instruments Act. 16. Considering the above legal aspect, we hold that it is a fit case wherein this court can exercise the powers under section 482 Cr.P.C. for quashing the criminal case. Accordingly we quash C.C.No.88/97 which was filed against the petitioners herein and pending in the Court of the Judicial Magistrate of First Class, Madanapalle. Thus, the Criminal Petition is allowed." 20. At this stage, it would be apposite to refer to the decision of the Hon'ble Supreme Court in BSI Ltd. vs. Gift Holdings Pvt. Ltd. (2000) 2 SCC 737, wherein the Hon'ble Supreme Court while clarifying the distinction between criminal and civil proceedings held that criminal prosecution is neither for recovery of money nor for enforcement of any security, Section 138 of the NI Act is a penal provision convicting and sentencing an offe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(Ker.) the Kerala High Court held that an unregistered Partnership firm can prosecute complaint under Section 138 of the Negotiable Instruments Act and the effect of non-registration of firm under Section 69 of the Partnership Act is applicable only to a case involving civil rights. Further, the Supreme Court in the case of BSI Limited and Anr. v. Gift Holdings Private Limited and Anr., 2000 SCC (Cri.) 538) has held that: "... A criminal prosecution is neither for recovery of money nor for enforcement of any security etc. Section 138 of the Negotiable Instruments Act is a penal provision the commission of which offence entails a conviction and sentence on proof of the guilt in duly conducted criminal proceedings. Once the offence under Section 138 is completed the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability". Again in the case of Gurcharan Singh v. State of Uttar Pradesh and Anr., 2002(4) Crimes 165 (All) the Allahabad High Court has followed the above said judgment of the Supreme Court. Therefore, in view of the above decisions of the Supreme Court as well as of the other Hig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t a contract by instituting a suit or other proceedings by an unregistered firm. The criminal complaint that has been filed cannot be treated as a suit or other proceedings to enforce any rights arising under a contract. Therefore, there is no bar to the criminal complaint that has been filed and the non-registration of the firm would not bar the prosecution of an accused on the ground that the firm was not registered." 24. Similar issue came up before Division Bench of Karnataka High Court in Gowri Containers vs. S.C. Shetty 2008 Cri. L.J. 498 and it was held as under: " 9. Now coming to the contention of the respondents that in view of the provisions of Section 69(2) of the Indian Partnership Act, the amount under the transaction was not legally enforceable debt, reliance has been placed by the respondents learned advocate on a Division Bench decision of Andhra Pradesh High Court in Amit Desai and Anr. v. Shine Enterprises and Anr. 2000 Criminal Law Journal 2386 wherein in respect of an unregistered partnership firm, on the ground that the suit cannot be instituted by an unregistered firm, it was held that the debt against the accused was not a legally enforceable debt. That w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch debt or liability not a legally enforceable debt or liability." 25. In Dabasree Das Baishnab vs. FI Multimedia Consultants, 2011 (1) Crimes (HC) 131, a learned Single Judge of High Court of Gauhati, held as under: "8............For the purpose of resolving the controversy raised in these petitions, I feel it appropriate to refer to the provisions of Section 69(2) of the Partnership Act which reads as follows: "No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm." 9. From a careful reading of Section 69(2) it appears that the said section prohibits institution of suits by or on behalf of an unregistered firm against a third party for enforcing the rights and liabilities arising from a contract. This Court in the case of Indrajit Gogli v. Auto Sales and Service Station, (2008) 3 GLR 440, while disposing a criminal petition filed under Section 82, Cr.P.C observed as follows: "More importantly, nothing contained in Section 69, prohibits prosecution, in terms of Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt made out with that Bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the Bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. (b) The payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the Bank regarding the return of the cheque as unpaid; and (c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice." 11. The above statutory provision of the NI Act provides that if the drawer fails to make the payment of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... arising from a contrat, hence civil proceedings for recovery of money would be barred by virtue of sub Section (2) of Section 69 of the Partnership Act. However, proceedings under Section 138 of the NI Act cannot be treated as civil suit for recovery of cheque amount with interest as was held by the Hon'ble Supreme Court in R Vijayan vs. Baby and another (2012) 1 SCC 260 wherein it was observed: "16.....It is sometimes said that cases arising under section 138 of the Act are really civil cases masquerading as criminal cases. The avowed object of Chapter XVII of the Act is to "encourage the culture of use of cheques and enhance the credibility of the instrument". In effect, its object appears to be both punitive as also compensatory and restitutive, in regard to cheque dishonour cases. Chapter XVII of the Act is an unique exercise which blurs the dividing line between civil and criminal jurisdictions. It provides a single forum and single proceeding, for enforcement of criminal liability (for dishonouring the cheque) and for enforcement of the civil liability (for realization of the cheque amount) thereby obviating the need for the creditor to move two different for a for relief.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....institutions (particularly private financiers) view the proceedings under section 138 of the Act, as a proceeding for the recovery of the cheque amount, the punishment of the drawer of the cheque for the offence of dishonour, becoming secondary." 27. The judgments in Abdul Gafoor vs. Abdurahiman, 1999 (2) Ker LT 634, Gurcharan Singh case (supra) and Beacon Industries (supra) were followed by the learned Single Judge of the Madras High Court in Karthick and Company vs. Vadivel Sizing and Weaving Mills (Pvt.) Ltd. (2013) 7 RCR, (criminal) 140 and it was held that even if the complainant remains to be unregistered firm, it is legally competent to lay complaint under Section 138 of the Act. 28. The issue in question recently came up before a learned Single Judge of Delhi High Court in Smt. Rani Kapoor vs. M/s Silvermount (2017) Vol. 242 DEL.363 and after taking into consideration all the aforesaid judgments including the judgment of the Hon'ble Supreme Court in BSI Ltd. (supra), it was held as under: "12. It is thus apparent that on finding of the guilt arrived at by the criminal Court the accused is liable to a sentence of imprisonment which may extend to two years, or fine or wit....