1. On a reference made by the learned Single Judge for placing the matter before the appropriate bench, this matter is posted before this Bench.
2. The petitioners herein were the accused in C.C.No.88/97 filed by the complainant-first respondent herein in the Court of the Judicial Magistrate of First Class, Madanapalle, Chittoor District. The present petition has been filed by the accused-petitioners herein for quashing the same under section 482 Cr.P.C.
3. The complainant had made the following averments in his complaint. It was averred by the complainant that the complainant is doing business in Madanapalle Town under the name and style of M/s. Shine Enterprises. It is a partnership firm. It is the further case of the complainant that the complainant had a commercial dealing with the accused. They were purchasing non-alcoholic beverage drink called "PEPUP" black label since 1996. They had deposited a sum of Rs.10,000/- as a caution deposit with the accused.
4. It is the further case of the complainant that they were local distributors at Madanapalle. The first stock purchased by them was sold successfully. They placed an order of second consignment with the accused and a demand draft of Rs.1,67,328/- was given to the accused for supply of non-alcoholic drink on 14-06-1996.
5. It is the further case of the complainant that when they received the second consignment, there was a pressure from the local police and therefore the stock could not be sold. So, they returned the commodity to the accused by despatching through a lorry bearing RTA Registration No. AAA 4445 at Madras branch. The accused had sent a credit note for Rs.1,55,080/- and promised to return the value of the stock returned to them. The accused issued a cheque drawn on Co-operative Bank of Ahmedabad Limited, Ahmedabad for Rs.1,65,080/-. The cheque was dated 6-02-1997. The complainant presented the said cheque to their financier ie., Canara Bank, Madanapalle branch for encashment but the cheque was returned on 22-2-1997 with an endorsement
" funds are insufficient"
.
6. It is the further case of the complainant that they issued a legal notice dated 25-2-1997 to the accused calling upon the accused to pay the amount due under the cheque within a period of 15 days from the date of receipt of the order. But there was no response. Therefore, the complainant was constrained to file a complaint against the accused under sections 138 and 142 of the Negotiable Instruments Act.
7. On presentation of the complaint, summons were issued to the accused. Having come to know that the criminal case is filed against them, they approached this court for quashing the proceedings under section 482 Cr.P.C.
8. The main contention was raised on behalf of the accused petitioners herein that the complaint is not maintainable because of the fact that the complainant firm is not registered under section 69 (2) of the Partnership Act, 1932. Section 69 of the Partnership Act reads as under:
"69.EFFECT OF NON-REGISTRATION:-
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
(2) No suits 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.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set off or other proceeding to enforce a right arising from a contract, but shall not affect---
(a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm; or
(b) the powers of an official assignee, receiver or court under the Presidency - towns Insolvency Act, 1909 (3 of 1909), or the Provincial Insolvency Act, 1920 (5 of 1920), to realise the property of an insolvent partner.
(4) This section shall not apply---
(a) to firms or to partners in firms which have no place of business in (the territories to which this Act extends), or whose place of business in (the said territories) are situated in areas to which, by notification under (section 56), the Chapter does not apply, or
(c) (b) to any suit or claim or set-off not exceeding one hundred rupees in value which, in the Presidency towns, is not of a kind specified in Section 19 of the Presidency Small Cause Courts Act, 1882 (15 of 1882), of outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Causes Courts Act, 1887 (9 of 1887) or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim"
With this legal provision on record it was contended by the learned counsel for the accused-petitioners herein that in order to maintain a criminal case under section 138 of the Negotiable Instruments Act, explanation to section 138 of Negotiable Instruments Act place an important role. Explanation to Section 138 of the said Act reads as under:
For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability."
9. It was contended by the learned counsel Mr. J. V. Suryanarayana appearing for the petitioners that the complaint is not maintainable because of the fact that the complainant's firm is not registered under the Indian Partnership Act. The fact that the complainant firm is not registered under the Partnership Act is not disputed. The learned counsel further submitted that unless the firm is registered, the unregistered firm has no legal rights to file a suit or recovery of money arising out of the contract. Therefore, the debt or liability cannot be recovered by the complainant's Firm by filing the suit and therefore the amount due under the cheque is not legally enforceable debt and as such the complaint under section 138 of the Negotiable Instruments Act is not maintainable.
10. In support of his contention, the learned counsel Mr. J.V. Suryanarayana relied upon a ruling reported in Delhi Development Authority v. Kochhar Construction Work and Another1 wherein their Lordships were pleased to hold that if the partnership is not registered as required under section 69 (2) of Partnership Act, the suit instituted by unregistered firm is void ab initio it means that the unregistered firm cannot legally enforce the right accrued to them during the process of law.
11. The learned counsel further relied upon a ruling reported in M/S. Shreeram Finance Corporation v. Yasin Khan and Others (1) wherein their Lordships held in Para (6) of the judgment as under:
"6.In the present case the suit filed by the appellants is clearly hit by the
provisions of sub-section (2) of S.69 of the said Partnership Act as on the date when the suit was filed, two of the partners shown as partners as per the relevant entries in the Register of Firms were not, in fact, partners, one new partner had come in and two minors had been admitted to the benefit of the partnership firm regarding which no notice was given to the Registrar of Firms. Thus, the persons suing, namely, the current partners as on the date of the suit were not shown as partners in the Register of Firms. The result is that the suit was not maintainable in view of the
provisions of sub-sec.(2) of Sec.69 of the said Partnership Act and the view taken by the trial court and confirmed by the High Court in this connection is correct. Although the plaint was amended on a later date that cannot save the suit. Reference has been made to some decisions in the judgment of the trial court: however, we 2do not find it necessary to refer to any of them as the position in law, in our opinion, is clear on a plain reading of sub-sec.(2) of S.69 of the said Partnership Act."
12. The learned counsel Mr. C. Padmanabha Reddy while rebutting the above arguments relied upon a ruling reported in Raptakos Brett & Co. Ltd. v. Ganesh Property. 3 We have gone through the entire judgment and we are of the considered view that their Lordships did not express any opinion regarding to the consequences of legal proceedings U/s.138 of the Negotiable Instruments Act filed by the unregistered partnership firm. Therefore, we hold that the said ruling has no application in the present set of facts.
13. The learned counsel Mr. C. Padmanabha Reddy further relied upon a ruling reported in Kerala Arecanut Stores v. M/s. Ramkishore and Sons & Another (3). Their Lordships of Kerala High Court were pleased to hold that a suit by a partner for recovery of money on dishonour of cheque endorsed in favour of the firm is not barred. The learned counsel further relied upon a ruling reported in Abdul Gafoor vs. Abdurahiman 5. The learned Single Judge of Kerala High Court was pleased to hold that section 69 (2) of the Partnership Act is applicable only where the civil rights are invoked and not in criminal cases. Non-registration of the firm has no legal bearing on the criminal case. With due respect to the learned Single Judge of Kerala High Court, we prefer to deffer with the views expressed by him. Explanation to section 138 of the Negotiable Instruments Act specifically laid down that the debt or other liability means 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.
14. 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.
15.Thus, the Criminal Petition is allowed.