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Suraj Theatre And Others v. Smt. Kakarla Bharathi And Another
Structured Summary of the Judicial Opinion
Factual and Procedural Background
This petition was filed under section 482 of the Criminal Procedure Code (Cr.P.C.) seeking quashment of the criminal proceedings in CC No. 220/95 before the III Metropolitan Magistrate, Vijayawada.
The complaint (filed by the first respondent through a General Power of Attorney holder) was under sections 138 and 142 of the Negotiable Instruments Act. It alleged that A-1 was a partnership firm (office at Vuyyuru, Krishna District); A-2 was the managing partner; and A-2 to A-5 were partners who were in charge of, responsible for and actively managing the firm's day-to-day business. The complaint alleged that the firm borrowed certain sums on dates in 1988, 1989 and 1994; executed promissory notes promising 30% interest per annum; and that a cheque dated 25-5-1992 for Rs. 1,50,000/- drawn on Indian Bank, Vuyyuru, was presented at Andhra Bank, Vijayawada and returned unpaid on 7-6-1995 for insufficiency of funds. A notice was issued to accused No.1 (the drawer/firm) and payment was not made, leading to complaint proceedings against the accused (including partners A-3 to A-5).
The petitioners moved under section 482 Cr.P.C. to quash those complaint proceedings.
Legal Issues Presented
- Whether the complaint is maintainable against partners A-3 to A-5—i.e., whether they can be proceeded against under Section 141 of the Negotiable Instruments Act as persons "in charge of, and responsible for, the conduct of the business" of the firm.
- Whether individual notice (as under Section 138(b) of the Negotiable Instruments Act) must be issued to each partner/person in charge before filing a complaint against them where a cheque issued on behalf of the firm has been dishonoured.
- Whether the question of existence of a legally enforceable debt (given that the cheque was for Rs. 1,50,000/- but the recovery suit/plaint was for a lesser amount) can be decided in proceedings under section 482 Cr.P.C., or whether that is a question of fact to be decided at trial (with reference to the presumption under Section 139 of the Negotiable Instruments Act).
Arguments of the Parties
Petitioners' Arguments
- The cheque was issued by A-2 on behalf of the A-1 firm; the partnership deed shows that A-2 (the managing partner) alone looked after the theatre/affairs of the firm and A-3 to A-5 were not responsible for management.
- The fifth petitioner is a woman and (the petitioners contended) it was absurd to suggest she looked after the firm's business; thus A-3 to A-5 should not be proceeded against and the complaint is not maintainable against them.
- The cheque was for Rs. 1,50,000/- but the recovery suit/plaint was for a lesser sum (Rs. 59,128/-), so there was no legally enforceable debt for the cheque amount.
- No notice was issued to petitioners 3 to 5 as required by Section 138(b) of the Act, making the complaint not maintainable against them.
Respondent's Arguments
- The complaint specifically alleges that petitioners 3 to 5 are partners who are in charge of and responsible for the conduct of the firm's business and are actively involved in management; hence Section 141 applies and the complaint is maintainable against them.
- Section 139 of the Negotiable Instruments Act creates a presumption that a cheque-holder received the cheque for discharge (in whole or part) of any debt or liability; the payments mentioned in the plaint and related issues are factual matters to be decided at trial, not in section 482 proceedings.
- The notice envisaged by Section 138(b) was issued to the drawer (the firm/first petitioner) and there is no requirement under Section 141 that individual notices must be issued to each person in charge before filing the complaint; compliance with Section 138(b) vis-à-vis the drawer/firm suffices.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Smt. Renu Vohra v. Shreyans Paper Mills Limited, 1993 (2) Crimes 1145 (Delhi High Court) | The decision supports the view that individual notice to every partner/person in charge is not required before proceeding against them under Section 141 where notice under Section 138(b) was issued to the drawer/firm. | The court relied on this decision as aligning with its conclusion that no individual notices need be given to all partners who are in charge and responsible for the firm's day-to-day business before filing complaint for cheque dishonour. |
| Anita v. Anilk Mehra, 1996 (1) Crimes 412 (Punjab & Haryana High Court) | Same view as above: authority for the proposition that individual notices to every partner are not required where notice to the drawer/firm was given. | The court cited this decision to reinforce the position that the Legislature did not intend Section 141 to require separate notice to every partner before commencing complaint proceedings for cheque dishonour on behalf of a firm. |
Court's Reasoning and Analysis
The court began by extracting and analysing Section 141 of the Negotiable Instruments Act. It observed that, by the terms of Section 141, where an offence under Section 138 is committed by a "company" (with the Explanation extending "company" to include a firm), every person who at the time of the offence was in charge of and responsible for the conduct of the business of the company or firm shall be deemed guilty and liable to be proceeded against. The statute, however, permits such persons to exonerate themselves by proving the offence was committed without their knowledge or despite their exercise of due diligence.
Applying that statutory framework, the court held that the complainant's allegation that petitioners 3 to 5 were partners who were in charge and responsible for the firm's day-to-day conduct raises a factual question: whether they were active partners or merely sleeping partners. The court stressed that this is a question of fact requiring evidence and must be determined at trial; it could not be resolved in proceedings under section 482 Cr.P.C., which are not the appropriate forum for deciding disputed factual issues.
On the contention relating to the cheque amount versus the suit amount, the court relied on Section 139 of the Negotiable Instruments Act, which creates a presumption that the cheque was issued for discharge (in whole or in part) of a debt or liability. The court noted that the plaint contains allegations of payments and deductions and concluded that these are matters of fact for trial; consequently the petitioners' contention that there was no legally enforceable debt could not be adjudicated under section 482.
Regarding notice requirements, the petitioners argued that no notice was issued to petitioners 3 to 5 as required by Section 138(b). The court rejected this argument. It held that Section 138(b) prescribes the notice to the drawer of the cheque (i.e., the firm), and Section 141 does not require separate individual notices to all persons in charge. The court reasoned that persons who are in charge and responsible for the firm's day-to-day affairs would necessarily be aware of a notice delivered to the firm/drawer and hence are properly subject to proceedings under Section 141 without separate notices. The court also relied on the statutory Explanation in Section 141 treating a firm as a "company" for these purposes and equating "Director" in relation to a firm with a partner, reinforcing that the legislative scheme did not contemplate individual notice to all partners.
Finally, the court noted supporting High Court decisions (Delhi and Punjab & Haryana) that took a similar view on the non-requirement of separate individual notices to partners in such cases, and it adopted the same position.
Holding and Implications
Holding: The petition to quash the complaint proceedings under section 482, Cr.P.C. was dismissed. The court concluded that the petitioners were not entitled to the relief sought.
Implications:
- Direct effect: The criminal proceedings in CC No. 220/95 before the III Metropolitan Magistrate, Vijayawada, will continue; petitioners 3 to 5 may be proceeded against under Section 141 if, at trial, it is shown they were in charge of and responsible for the conduct of the firm's business or if the presumption under Section 139 is not rebutted.
- On procedural law: The court affirmed that Section 138(b) notice need only be issued to the drawer (the firm) and that Section 141 does not require issuing separate notices to each partner/person in charge before filing a complaint for cheque dishonour where the cheque was issued on behalf of the firm.
- The opinion did not purport to lay down a novel legal precedent; it relied on existing High Court decisions and applied statutory text to the facts, and therefore no new broader legal principle beyond this application was claimed to have been set by the court in this opinion.
Disposition: Petition dismissed.
ORDER
1. This petition is filed under section 482, Cr.P.C. to quash the proceedings in CC No. 220/95 on the file of the III Metropolitan Magistrate, Vijayawada.
2. The facts in giving rise to the filing of this petition are briefly as follows :
The first respondent represented by the General Power of Attorney Holder, filed a complaint against the petitioners under sections 138 and 142 of the Negotiable Instruments Act alleging that A-1 is a partnership firm with its office at Vuyyuru, Krishna District. A-2 is the Managing partner and A-2 to A-5 are the partners of the said firm. It is further stated that A-2 to A-5 as partners of the A-1 firm, are incharge and responsible and playing active role in the management and in day to day conduct of business of A-1 firm. It is further alleged that A-1 borrowed Rs. 30,000/-, Rs. 21,000/- and Rs. 30,000/- on 28-11-1988, 7-12-1989 and 28-9-1994 respectively and executed promissory notes promissing to pay interest at 30% per annum and issued cheque dt. 25-5-1992 for Rs. 1,50,000/- in favour of the complainant drawn on Indian Bank, Vuyyuru and the same was presented for collection at Andhra Bank, Vijayawada but it was returned on 7-6-1995 due to insufficiency of funds. The complainant got issued notice to the accused No. 1 and the accused failed to pay the amount. It is further alleged that the offence was committed with the active connivance and negligence of all the accused and hence, they are liable for punishment.
3. Now the petitioners filed this petition to quash the proceedings.
4. The learned counsel for the petitioner submitted that the cheque was issued by A-2 on behalf of A-1 firm and the fifth petitioner is a woman and it is absurd to contend that she is also looking after the business of the firm and the partnership deed clearly shows that A-2, the Managing partner, is looking after the affairs of the theatre and others are no way responsible for the management and the affairs of the firm and hence the complaint is not maintainable against A-3 to A-5.
5. But the learned counsel for the respondent submitted that the other partners are also looking after the business of the first petitioner firm and it is specifically mentioned in para 5 of the complaint that the petitioners 3 to 5 are partners of the firm, incharge and responsible for conduct of the business and also playing active role in the management and affairs of A-1 firm, therefore, in view of the said allegation it cannot be said that the complaint is not maintainable against them, in view of Section 141 of the Negotiable Instruments Act.
6. It is useful to extract Section 141 of the Negotiable Instruments Act to appreciate the rival contentions of both parties and reads as follows :
"......... (1) If the person committing and offence under section 138 is a company, every person who, at the time the offence 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 sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge or that he had exercised due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved 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 against and punished accordingly.
Explanation :- For the purpose of this Section :
(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.
7. Thus it is clear from the perusal of the above provision that every person who at the time of commission of offence was incharge and responsible for the conduct of the business of the company or firm, as well as the company or firm shall be deemed to be guilty of the offence and shall be liable to be proceeded against them. But the said person can be exonerated if he proves that the said offence was committed without his knowledge or that he exercised due diligence to prevent the commission of the said offence. Sub-section (2) further provides that if it is proved that the offence was committed with the consent or connivance 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 the offence and shall be proceeded against them. The respondent-complainant specifically alleged that the petitioners 3 to 5 are partners of the firm and are incharge and responsible for daytoday conduct of the business and playing active role in the management and affairs of the firm. The contention of the petitioner is that the petitioners 3 to 5 are sleeping partners and the 5th petitioner is a woman and it is absurd to contend that she was also looking after the business of the firm, but when there is specific denial with regard to the said allegations of the complaint and it is question of fact whether petitioners 3 to 5 are sleeping partners or responsible for daytoday conduct of business and can be decided only during the trial of the case after adducing necessary evidence by both the parties.
8. The learned counsel for the petitioners submitted that the cheque was issued for Rs. 1,50,000/- and the suit was filed for lesser amount of Rs. 59,128/- and thus there is no legally enforceable debt. But the learned counsel for the respondent submitted that under section 139 of the Negotiable Instruments Act there is a presumption that the holder of the cheque received the said cheque of the nature referred to under Section 138 of the Act, for the discharge in whole or in part, of any debt or other liability until the contrary is proved. He further submitted that some payments are mentioned in the plaint and those aspects can be decided only during the trial of the case and cannot be decided in a proceedings under section 482, Cr.P.C.
9. It appears that there is considerable force in the contention of the learned counsel for the respondent. Admittedly the cheque was issued by A2 on behalf of A1 firm, the respondent/complainant filed a suit for recovery of some amount. It appears from the plaint copy filed in this Court that some payments were said to have been made and the said amounts were deducted and filed the suit for the balance of the amount and therefore it cannot be said that there is one legally enforceable debt, even otherwise it is a question of fact to be decided during the trial of the case and cannot be decided in proceedings under section 482, Cr.P.C. There is also presumption under section 139 of the n.i. act that the holder of the cheque received the said cheque of the nature referred to under section 138 of the n.i. act for the discharge. It is settled principle of law that questions of fact cannot be decided in a proceedings under section 482, Cr.P.C.
10. The learned counsel for the petitioners further submitted that no notice was issued to the petitioners 3 to 5 as provided under Section 138(b) of the Act and in that view of the matter also the complaint is not maintainable.
11. But the learned counsel for the respondent submitted that the cheque was issued on behalf of the first petitioner firm by the second petitioner and the cheque was dishonoured and notice as contemplated under Section 138(b) of the Act was issued to the first petitioner firm, the drawer of the cheque and thus there is sufficient compliance of Section 138(b) of the Act. He further submitted that it is not provided in Section 141 of Negotiable Instruments Act that notice need be issued to every person who is responsible and incharge of the affairs of the company before filing the complaint.
12. Therefore, it appears that on a combined reading of Sections 138 and 141 of the Act that if the offence is committed by a company, every person, who at the time of commission of the offence, was incharge of and was responsible 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 proceeded with and punish accordingly. Thus the liability of the persons incharge of the company with regard to the dishonour of the cheque issued on behalf of the company is fastened by virtue of Section 141 of the Act. The notice contemplated under Section 138(b) is the notice to be issued to the drawer of the cheque only but not to others.
13. It is significant to note that Section 141 of the Negotiable Instruments Act does not prescribe that notice need be given to the persons who are incharge and responsible for the conduct of the business with regard to the dishonour of the cheque issued on behalf of the company before filing of the complaint, in view of the fact as they were incharge of the daytoday business of the firm, as the notice was received on behalf of the firm or the company with regard to the issuance and dishonour of the cheque and also demanding the payment of the said amount payable under the cheque and necessarily follows that they are fully aware and must have knowledge of the said aspects and hence, deemed to be guilty of the said offence and liable to be proceeded against and punished accordingly. Therefore, in the aforesaid circumstances, the Legislature in its wisdom has not prescribed the issuance of individual notice to all the partners or the persons who are incharge of the daytoday conduct of the business of the firm or company, as the case may be, before filing the complaint as provided under section 138 of the Negotiable Instruments Act relating to issue of notice to the drawer of the cheque. I think it is difficult to accept the contention of the learned counsel for the petitioner that complaint is not maintainable as no individual notices were issued to the partners or persons incharge and responsible for the conduct of the daytoday business of the company or the firm. The explanation appended to Section 141 of the Act clearly shows that the company means any body corporate and includes a firm or other association of individuals and a 'Director' in relation to a firm means a partner in the firm. Therefore, it follows, in view of the foregoing discussion that no individual notices need be given to all the partners who are incharge and responsible for the conduct of the daytoday business of the firm before filing a complaint with regard to the dishonour of cheque issued on behalf of the firm particularly when a notice contemplated under Section 138(b) of the Act was complied with. The same view was taken by the Delhi High Court in a decision Smt. Renu Vohra v. Shreyans Paper Mills Limited, 1993 (2) Crimes 1145 and also by the Punjab and Haryana High Court in a decision Anita v. Anilk Mehra, 1996 (1) Crimes 412.
14. Therefore, in the light of the foregoing discussion, it emerges that the liability of the petitioners 3 to 5 depends upon whether they are incharge and responsible for the conduct of the daytoday business of the first petitioner firm and no notice need be issued to each of the partners before filing the complaint for the dishonour of the cheque issued on behalf of the first petitioner firm. The petitioners are not entitled to the relief sought for.
15. In the result, the petition fails and is accordingly dismissed.
16. Petition dismissed.
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