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A. Jafferullah v. T. Stanes And Co. Ltd.
Structured Summary of the Opinion (Pratap Singh, J.)
Factual and Procedural Background
The accused (petitioner) in C.C. No. 356 of 1990 before Judicial Magistrate No. III, Coimbatore, filed a petition under section 482 of the Criminal Procedure Code seeking to call for the records and quash the criminal complaint. The respondent had filed a private complaint under section 138 of the Negotiable Instruments Act alleging that the complainant supplied goods on credit and that, as on 31 March 1990, the accused owed Rs. 1,11,465.45. To satisfy part of that liability, the accused issued a cheque dated 31 March 1990 for Rs. 48,000 in favour of the complainant. The cheque was presented through the complainant's bankers and was dishonoured on the ground that it exceeded the arrangement. The bankers intimated the complainant on 20 June 1990; by notice dated 27 June 1990 the complainant called upon the accused to pay within 15 days; the accused received the notice on 3 July 1990 but did not pay, and the complaint followed.
The complaint names the accused as "Mr. A. Jafferullah, Managing Partner, Gudalur Pest Control Agencies" with an address in Gudalur Bazaar. The cheque bore the signature of A. Jafferullah and was signed "For Gudalur Pest Control Agencies", indicating the cheque was issued by him in his capacity as managing partner on behalf of the partnership firm. The criminal proceedings below were initiated against A. Jafferullah alone without impleading the partnership firm as an accused.
Legal Issues Presented
- Whether a complaint under section 138 of the Negotiable Instruments Act against a managing partner alone, without impleading the partnership firm (which the managing partner purported to represent), is maintainable.
- Whether the provisions analogous to section 141 of the Negotiable Instruments Act (and compared provisions in other statutes) require that a company/firm must be prosecuted before its officers (or managing partner) can be prosecuted, or whether officers may be prosecuted independently.
- Which precedents govern the question where there appear to be differing formulations in earlier decisions and how to choose between them when deciding whether to quash proceedings.
Arguments of the Parties
Petitioner's (Accused's) Arguments
- The complaint is filed only against A. Jafferullah, described as the managing partner of Gudalur Pest Control Agencies, but the partnership firm itself has not been prosecuted and was not impleaded as an accused.
- Because the cheque was issued in the capacity of managing partner on behalf of the firm, there has been no proper compliance with section 141 of the Negotiable Instruments Act and therefore the complaint is liable to be quashed.
Respondent's (Complainant's) Arguments
- It is not necessary that the firm also be arrayed as an accused when the managing partner is prosecuted; the managing partner can be prosecuted individually.
- The complaint consistently alleges that only the accused committed the offence, and therefore impleading the partnership firm is unnecessary to sustain a complaint against the managing partner.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sheoratan Agarwal v. State of M.P., 1984 SCC (Cri) 620 | Interpretation of section 10 of the Essential Commodities Act — whether persons/officers of a company can be prosecuted separately irrespective of prosecution of the company. | The court recounts that the Supreme Court held that if contravention is by a company, the company, persons in charge, and officers (with consent/connivance) may be prosecuted; there is no statutory compulsion that the person-in-charge or officer cannot be prosecuted unless the company is prosecuted. |
| U.P. Pollution Control Board v. Modi Distillery, 1987 SCC (Cri) 632; [1988] 63 Comp Cas 77 | Interpretation of section 47 of the Water (Prevention and Control of Pollution) Act — language similar to section 141 of the Negotiable Instruments Act; whether officers can be prosecuted without prosecuting the company. | The opinion describes the Supreme Court's treatment of a High Court order that had quashed proceedings against officers when the company was not prosecuted. The judge records the Supreme Court's analysis and concludes that this authority is to be followed and supports the view that a prosecution against officers alone (in the relevant circumstances) cannot be sustained; the court follows this precedent. |
| Govindanaik v. West Patent Press Co. Ltd., AIR 1980 Kar 92 (Full Bench) | Rule about conflicting decisions of the Supreme Court: where two Supreme Court decisions on a question of law cannot be reconciled and both Benches consist of equal numbers of judges, the later decision should be followed by High Courts. | The court cites this principle in support of preferring the later-applied precedent (Modi Distillery) where there are potentially conflicting rulings, and thus follows the Modi Distillery outcome. |
| Gujarat Housing Board v. Nagajibhai, AIR 1980 Guj 81 (Full Bench) | Same principle as in Govindanaik regarding which of conflicting Supreme Court decisions should be followed when Benches have equal numbers of judges. | The court cites this authority for the same proposition about following the later conflicting Supreme Court decision; it supports the court's selection of precedent. |
| S. Krishnamoorthy v. B.S. Kesavan, [1994] 80 Comp Cas 755; [1994] MLJ (Crl) 147 | Local precedent followed by this court on the question of prosecuting a managing partner without impleading the firm. | The judge notes that in that earlier decision he followed U.P. Pollution Control Board v. Modi Distillery and held that a prosecution against the managing partner alone cannot be sustained; he follows that earlier ruling in the present matter. |
Court's Reasoning and Analysis
The court began from the factual position that the cheque in question was issued by A. Jafferullah in his capacity as managing partner and was signed "For Gudalur Pest Control Agencies", indicating it was issued on behalf of the partnership firm rather than in his purely personal capacity. Despite that fact, the complaint proceeded only against him and did not implead the partnership firm.
The court examined the statutory provision relevant by analogy — section 141 of the Negotiable Instruments Act — and reproduced its text concerning offences by companies (and the liability of persons in charge or officers). The judge compared section 141 with corresponding provisions in other statutes (section 10 of the Essential Commodities Act and section 47 of the Water (Prevention and Control of Pollution) Act) and reviewed authoritative decisions construing those provisions.
The court summarized Sheoratan Agarwal (1984) as holding that where a contravention is by a company, the company, persons in charge, and specified officers may be prosecuted and that there is no statutory condition that the person-in-charge or officer cannot be prosecuted when the company is not prosecuted.
The court then considered U.P. Pollution Control Board v. Modi Distillery and described the sequence of events and the apex court's treatment of a High Court order that quashed proceedings against company officers when the company itself was not prosecuted. The opinion records the Supreme Court's approach and treats the Modi Distillery decision as the controlling precedent to follow on the present facts. The judge invoked authorities (Govindanaik and Gujarat Housing Board) on the selection of precedent where there are conflicting Supreme Court decisions and concluded that Modi Distillery should be followed.
The judge also referred to his own previous decision in S. Krishnamoorthy v. B.S. Kesavan, where he had followed Modi Distillery and held that prosecution against a managing partner alone could not be sustained. Applying that reasoning to the present facts (cheque issued for and on behalf of the partnership firm but complaint launched only against the managing partner), the court concluded that the complaint could not be sustained in the absence of impleading the partnership firm.
Holding and Implications
DISPOSITION: The petition under section 482 CrPC is allowed. All further proceedings in C.C. No. 356 of 1990 on the file of Judicial Magistrate No. III, Coimbatore, are quashed.
Implications:
- The direct, immediate effect is the termination (quashing) of the criminal proceedings pending in C.C. No. 356 of 1990 against A. Jafferullah.
- The court applied and followed existing precedents (notably U.P. Pollution Control Board v. Modi Distillery as interpreted by the court) to conclude that a prosecution against the managing partner alone, in the circumstances of this case (cheque issued on behalf of the partnership firm and the firm not impleaded), could not be sustained.
- The opinion does not purport to lay down a new broad precedent beyond applying and aligning with the cited authorities; it resolves the dispute before the court by quashing the present proceedings on the basis of the reasoning and precedent described.
This summary has been prepared strictly from the content of the provided opinion and does not add information beyond what appears in that text.
Pratap Singh, J.:— The accused in C.C No. 356 of 1990, on the file of Judicial Magistrate No. III, Coimbatore, has filed this petition under section 482 of the Criminal Procedure Code, praying to call for the records in the above case and quash the same.
2. The short facts are: The respondent has filed the private complaint against the petitioner for the offence under section 138 of the Negotiable Instruments Act (which I shall hereafter refer to as “the Act”). The allegations in it are briefly as follows:
The complainant supplied goods to the accused on credit and as per the accounts maintained by the complainant, the accused owe to the complainant a sum of Rs. 1,11,465.45 as on March 31, 1990. Towards a portion of the said liability, the accused issued a cheque dated March 31, 1990, for Rs. 48,000 in favour of the complainant. The complainant presented the cheque for collection through his bankers. The cheque was dishonoured on the ground that it exceeds the arrangement. The above fact was intimated to the complainant by the bankers on June 20, 1990. By notice dated June 27, 1990, the complainant called upon the accused to pay the cheque amount within 15 days of the receipt of notice. The accused received the notice on July 3, 1990. He had not paid the amount. Hence the complaint.
3. Mr. C.S Dhanasekaran, learned counsel appearing for the petitioner, would submit that the complaint is filed against A. Jafferullah, managing partner, Gudalur Pest Control Agencies, Gudalur Bazaar, Gudalur, and that the firm of which the accused is the managing partner has not been prosecuted and that it had not been arrayed as one of the accused and as such there is no proper compliance with section 141 of the Act and hence the complaint is liable to be quashed. Per contra, Miss P. Srimathi, learned counsel appearing for the respondent, would submit that it is not necessary that the firm also should be arrayed as one of the accused if the managing partner is to be prosecuted and that the managing partner by himself can be prosecuted. Learned counsel would add that throughout the complaint it has been stated that only the accused had committed an offence and while so there is no necessity for arraying the partnership firm as one of the accused to sustain a complaint as against this accused. I have carefully considered the submissions made by learned counsel. In this case, the accused has been described as follows:
Mr. A. Jafferullah,
Managing Partner,
Gudalur Pest Control Agencies,
346/1, Calicut Road,
Gudalur Bazaar,
Gudalur-643 211.
4. The cheque dated March 31, 1990, for Rs. 48,000 has been issued by A. Jafferullah, in his capacity as managing partner. He has signed in the cheque “For Gudalur Pest Control Agencies”. So it is not as if the cheque was issued by Jafferullah in his personal capacity; but only on behalf of Gudalur Pest Control Agencies, in his capacity as managing partner of the said firm. For that issuance of cheque, which was ultimately dishonoured for exceeding the arrangement, this complaint is filed against him alone, without impleading the partnership firm as one of the accused.
5. Section 141 of the Act reads as follows:
“141. Offences by companies—(1) If the person committing an 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 all 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.”
6. In Sheoratan Agarwal v. State of M.P, 1984 SCC (Cri) 620, the apex court had occasion to consider section 10 of the Essential Commodities Act, 1955, and as to whether the persons or officers of the company can each be separately prosecuted under sub-section (1) or (2) of section 10 irrespective of whether the company itself is prosecuted or not. section 10 of the Essential Commodities Act, 1955, reads as follows:
“(1) If the person contravening an order made under section 3 is a company, every person who, at the time the contravention 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 contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.
(2) Notwithstanding anything contained in sub-section (1), where an 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.”
7. It is in pari materia with section 141 of the Negotiable Instruments Act. After considering section 10, the Supreme Court had held that if the contravention of the order made under section 3 is by a company, the persons who may be held guilty and punished are (1) the Company itself, (2) every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, whom, for short, we shall describe as the person in charge of the company, and (3) any director, manager, secretary or other officer of the company with whose consent the offence has been committed. Any one or more or all of them may be prosecuted. The conniving officer may individually be prosecuted. One, some or all may be prosecuted. There is no statutory compulsion that the person-in-charge or an officer of the company may not be prosecuted unless he be-ranged alongside the company itself. Section 10 does not lay down any condition that the person-in-charge or an officer of the company may not be separately prosecuted if the company itself is not prosecuted. Each or any of them may be separately prosecuted or along with the company.
8. In U.P Pollution Control Board v. Modi Distillery, 1987 SCC (Cri) 632; [1988] 63 Comp Cas 77, the apex court had occasion to consider section 47 of the Water (Prevention and Control of Pollution) Act, 1974, for an offence under section 44 of the said Act. The language of the said section 47 is the same as section 141 of the Negotiable Instruments Act and section 10 of the Essential Commodities Act. In that case, the prosecution was launched against the chairman, vice-chairman, managing director and other members of the board of directors of the company under section 47 of the Act, without the company being prosecuted. A single judge of the Allahabad High Court quashed the proceedings on the ground that there can be no vicarious liability of the chairman, vice-chairman, managing director and other members of the board of directors of the company under section 47 of the Act unless there was a prosecution of the company. The learned judge had held that the complaint suffered from serious legal infirmities and quashed the proceedings. Aggrieved by that order, the U.P Pollution Control Board took up the matter to the apex court. In para 6 of the judgment, the apex court had held as follows (at page 82 of 63 Comp Cas):
“Although as a pure proposition of law in the abstract the learned single judge's view that there can be no vicarious liability of the chairman, vice-chairman, managing director and members of the board of directors under sub-section (1) or (2) of section 47 of the Act unless there was a prosecution against Modi Industries Limited, the company owning the industrial unit, can be termed as correct, the objection raised by the petitioners before the High Court ought to have been viewed not in isolation or vacuum but in the conspectus of facts and events.”
9. Thus, on the question as to whether there can be any prosecution of the managing director and others, without the company being arrayed as an accused, the High Court's view was upheld by the Supreme Court. Mr. C.S Dhanasekaran would submit that both the rulings of the apex court were by two judges and in such a situation, the later judgment will prevail. In this regard, he relied upon Govindanaik v. West Patent Press Co. Ltd., AIR 1980 Kar 92 [FB]. In it, it was held that if two decisions of the Supreme Court on a question of law cannot be reconciled and if both the Benches of the Supreme Court consist of an equal number of judges, the later of the two decisions should be followed by High Courts and other courts. In Gujarat Housing Board v. Nagajibhai, AIR 1980 Guj 81 [FB], it was held that when there are two conflicting decisions of the Supreme Court consisting of an equal number of judges, the later of the two decisions should be followed by the High Courts and other courts. In view of the above, the ruling in U.P Pollution Control Board v. Modi Distillery, 1987 SCC (Cri) 632; [1988] 63 Comp Cas 77 is to be followed. When that be so, this complaint against the managing partner alone, without impleading the partnership firm as one of the accused cannot be sustained. In S. Krishnamoorthy v. B.S Kesavan, [1994] 80 Comp Cas 755; [1994] MLJ (Crl) 147, I have followed U.P Pollution Control Board v. Modi Distillery, 1987 SCC (Cri) 632; [1988] 63 Comp Cas 77 and have held that a prosecution against the managing partner alone cannot be sustained. Hence, I accept the submission made by Mr. C.S Dhanasekaran.
10. In the result, the petition is allowed and all further proceedings in C.C No. 356 of 1990, on the file of the Judicial Magistrate No. III, Coimbatore, shall stand quashed.
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