TaxTMI 
TaxTMI 
2019 (7) TMI 1930
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....ies' and he was compelled to retire from the Partnership Firm. There were certain amounts due and payable to the respondent and towards the discharge of the said liability, the accused persons namely the petitioners issued a cheque for a sum of Rs.3,00,000/- (Rupees three lakhs only). The said cheque was dishonored on the ground of in-sufficiency of funds and after the issuance of the statutory notice, the respondent proceeded to file a complaint against the petitioners. 4. The petitioners who are shown as accused persons in this complaint, have filed this petition to quash the proceedings primarily on the ground that the cheque in question was drawn in favour of the respondent only on behalf of the partnership firm. Therefore, the complaint cannot be maintained without issuing the statutory notice to the partnership firm and making the partnership firm as an accused in the complaint. 5. The learned counsel for the petitioners submitted that the provisions of Section 141 of the Negotiable Instruments Act, which deals with offences by Companies, will equally apply to the partnership firm also by virtue of the explanation given under the said provision. The learned counsel furt....
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....r Section 138 of the Negotiable Instruments Act, cannot be maintained without issuing a statutory notice to the Company and without adding the Company as an accused, only as against the directors of the Company. The same law has been made applicable even to the partnership firm in N.Elangovan .Vs. C.Ganesan reported in 2014(4)MLJ (Crl) 517. 11. The issue involved in this case is that the partnership firm is an unregistered firm and therefore according to the learned counsel for the respondent, the firm need not be made as an accused and the complaint can be filed straight away against the partners. 12. Section 69(2) of the Indian Partnership Act, 1932 deals with the effect of non registration. Section 69(2) Act, specifically provides for a bar in maintaining a suit where (i) Suit is by an unregistered firm (ii) Suit is to enforce a right arising from a contract (iii) Suit is filed against a third party and (iv) persons suing are not shown in register of firms as partners in firm. It is to be borne in mind that the bar contemplated under Section 69(2) of the Indian Partnership Act will come into play only when the Suit is filed to enforce a right arising from a contract a....
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....by the unregistered firm referred to in Section 69(2) must not only be one entered into by the firm with the third party- defendant but must also be one entered into by the plaintiff firm in the course of the business dealing with the plaintiffs firm with such third party defendant. The Hon'ble Supreme Court has decided in "Haldiram Bhujjawala v. Anand Kumar Deepak Kumar, AIR 2000 SC 1287" that the real crux of the question is that the legislature, when it used the words 'arising out of a contract' in Section 69(2), it is referring to a contract entered into in course of business transaction by the unregistered plaintiff firm with its customers/defendants and the idea is to protect those in commerce, who deal with such a partnership firm in business. Such said third parties, who deal with the partners ought to be enabled to know what the names of the partners of the firm before they deal with them in business". It is evident that Section 69(2) is not attracted to any and every contract. 14. Admittedly, in this case, the Suit is not for enforcement of any right arising out of a contract entered into by or on behalf of the plaintiffs firm with the defendant in the course of bus....
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....gister of Firms". 14. This Court had taken note of the above judgment only to reiterate the settled position of law that the bar of Suit insofar as an unregistered firm is concerned will confine itself only to enforcement of a right arising from a contract. This cannot even be extended for enforcing a common law right. In the present case, this Court is dealing with a provision under the criminal law wherein, the learned counsel for the respondent is seeking to justify the fact that insofar as an unregistered firm is concerned, it is not necessary to make the firm as an accused since it does not qualify the status of a legal entity. It is trite law that when the provisions of criminal law are interpreted, the concept of strict construction will apply. Therefore, this Court cannot read the provisions of Section 69(2) of Indian Partnership Act into the provisions of Section 141 of the Negotiable Instruments Act. 15. It will be relevant to rely upon the judgments cited by the learned counsel for the petitioners. 16. The first judgment that was relied upon by the learned counsel for the petitioners is the case of Abdul Gafoor Vs Abdurahiman reported in 1999(4) Crimes 98, referred su....
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.... a contract. So, what is barred is a 'suit' that has been filed to enforce a right arising from a contract. In other words, the liability of a third person to the firm arising out of a contract cannot be enforced by way of suit if the firm is unregistered. The word 'suit' has not been defined in the aforesaid Act. It is, therefore, desirable to refer to 'Law of Lexicon' and the judicial pronouncements to ascertain the true meaning of word 'suit' in the legal context. 'Suit' means 'a proceeding Instituted in civil court by presentation of a plaint. The word 'suit' ought to be confined to such proceedings as, under that description, are directly dealt with in the Code of Civil Procedure, or such as by the operation of the particular Act which regulates them are treated as suits (See Law of Lexicon, 1997 Edition). The word 'suit' in common parlance means a process Instituted in a Court for recovery or protection of a right, enforcement of a claim, or to redress civil injuries. 9. Section 142 of the Act under caption "Cognizance of offences" provides that cognizance of the offence under Section 138 can be taken upon a 'co....
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....of action available to such holder is not under any contract. So he is entitled to sue on his cheque by reason of the right conferred upon him by the statute. That being so, action under Section 138 is not a suit by the indorsee to enforce a right arising out of a contract and, therefore, the bar under Section 69(2) of the Partnership Act will not operate in such a case. To the same effect is view of a learned single Judge of the said High Court in the case of Abdul Gafoor v. Abdurahiman, 1999 ISJ (Banking) 701. It is observed in the said case "the effect of non-registration of the partnership firm under Section 69 of the Partnership Act is applicable only to cases involving civil rights and it has no application to criminal cases." 10. In a recent judgment rendered by the Supreme Court in B.S.I. Ltd. and another v. Gift Holdings Put. Ltd. and another. 2000 (1) ACrR 683 (SC) : 2000 SCC (Cri) 538, the word 'suit' came to be interpreted for deciding maintainability of a proceeding under Section 138 of the Act in view of the ban imposed by the Sick Industrial Companies (Special Provisions) Act. Under Section 22(1) of the aforesaid Act. it is provided that no suit for recovery....