Mrs. Meenakshi Sathish v. M/S. Southern Petroc...

Criminal Original Petition filed under Section 482, Cr.P.C seeking to call for the records in C.C Nos. 504, 461 and 679 of 2004 on the file of Judicial Magistrate I, Coimbatore and quash the same so far as the Petitioner herein is concerned.

JUDGMENT:

1. The Petitioner ranked as fourth accused in three cases under Section 138 read with Section 142 of the Negotiable Instruments Act in C.C Nos. 504, 461 and 679 of 2004 moves these respective Petitions seeking quashment of the said criminal proceedings.

2. The first respondent is the complainant in C.C Nos. 504, 461 and 679 of 2004. It is alleged that the first accused is a registered Partnership Firm consisting of accused 2 to 4 as its Partners. It carried on business in fertilizers, chemicals, etc. Accused 2 to 4 are in charge of and responsible for the conduct of the day to day affairs of the first accused-Firm. For the outstanding liability, the subject cheques bearing Nos. 595350 dated 1.12.2003 for a sum of Rs. 9,05,020/-, 599788 dated 26.12.2003 for a sum of Rs. 2,25,991/- and 599789 dated 31.12.2003 for a sum of Rs. 15,47,102/- were issued by the first accused-Partnership Firm. But, the cheques were returned dishonoured when presented for payment. The fourth accused, who is the Petitioner herein received statutory notice and gave reply stating that she was no more a Partner in the first accused-Partnership Firm. She had retired from the Partnership Firm as early as on 31.3.2001 But, the complainant has no knowledge about the retirement of the fourth accused from the first accused-Firm. No public notice was given about her retirement from the Partnership Firm. The third and fourth accused are the Partners who are in charge of day to day business along with the second accused and with their consent and knowledge, the cheques were issued. With the aforesaid allegations, the three cases were laid as against the first accused Partnership Firm and its Partners.

3. The Petitioner/fourth accused would contend that she had retired from the first accused Partnership Firm with effect from 1.4.2001 The records submitted to the Income Tax Department would reveal that she had retired from the Partnership Firm. The second and third accused have reconstituted the Partnership Firm after the retirement of the Petitioner herein. The cheques were issued on 1.12.2003, 26.12.2003 and 31.12.2003 subsequent to the retirement of the Petitioner from the Partnership Firm. Neither was she a signatory to the cheque nor was she a Partner continuing in the Partnership Firm. Her resignation from the Partnership Firm was intimated to the Sales Tax authorities. There is no specific allegation attributed to the Petitioner in the Complaint. Never was she in charge of and responsible for the conduct of the business of the Partnership Firm. Therefore, the Petitioner submits that the criminal proceedings under Section 138 read with 142 of the Negotiable Instruments Act initiated as against her will have to be quashed.

4. The complainant/first respondent has taken a stand that the complainant was not aware of the retirement of the Petitioner from the Partnership Firm. No publication in the Newspapers or in the Gazette was made as mandated under Section 72 of the Partnership Act. The complainant seriously disputes the claim of the Petitioner that she had already retired from the Partnership Firm. Therefore, the Petitions have been filed devoid of merits and they deserve dismissal.

5. Learned counsel appearing for the Petitioner would vehemently contend that the documents placed before this Court would clinchingly show that the Petitioner had already retired from the Partnership Firm even when the subject cheques were issued by the second accused on behalf of the first accused-Partnership Firm. Further, no averment is found to show that the Petitioner actively associated with the Partnership Firm in carrying on its business activities. Simple averment in the Complaint that the Petitioner was in charge of and responsible for the conduct of the Partnership Firm cannot be a basis for proceeding against the Petitioner under Section 138 read with 142 of the Negotiable Instruments Act. Therefore, the learned counsel appearing for the Petitioner contends that the criminal proceedings as against the Petitioner are liable to be quashed.

6. Learned Senior Counsel appearing for the first respondent/complainant would vehemently contend that no publication as contemplated under Section 72 of the Indian Partnership Act was made by the Petitioner who allegedly retired from the Partnership Firm. Therefore, in the eye of the third parties, the Petitioner, who was originally, a Partner of the Firm continues to be a Partner even after the dissolution of the Partnership Firm. Therefore, she cannot shirk her responsibility in view of the provision of Sections 45 and 72 of the Indian Partnership Act. He would further submit that sufficient averments have been made in the Complaint to show that the Petitioner was also at the helms of the Partnership Firm. Therefore, the disputed points will have to be raised only during the course of trial of the case, he further submits.

7. The Petitioner has produced the deed of reconstitution of the Partnership Firm dated 1.4.2001 It is found that the said deed of reconstitution was not a registered one. Therefore, such a document cannot be given much credence while exercising the power under Section 482 of the Code of Criminal Procedure. Only the Trial Court will have to go into the question whether there was such an unregistered deed of reconstitution of the Firm executed by and between the parties. A resignation letter alleged to have been sent to the Sales Tax Officer, Circle-II, Thirupunithura has also been filed by the Petitioner without any authentic seal over there. Therefore, the truth and validity of such a document cannot be decided by this Court. Of course, the Petitioner has produced the Income Tax Returns of the reconstituted Firm to show prima facie before the Court that the reconstituted Firm had filed Returns informing the Income Tax authorities that the Firm was already reconstituted consisting of the second and third accused alone. Of course, the said Returns also would show that the fourth accused does not continue in the original Partnership Firm constituted by accused 2 to 4.

8. Section 45 of the Partnership Act, 1932 reads as follows:

“Liability for acts of Partners done after dissolution — (1) Notwithstanding the dissolution of a Firm, the Partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the Firm if done before the dissolution, until public notice is given of the dissolution:

Provided that the estate of a Partner who dies, or who is adjudicated an insolvent, or of a Partner who, not having been known to the person dealing with the Firm to be a Partner, retires from the Firm, is not liable under this Section for acts done after the date on which he ceases to be a Partner.”

There might have been dissolution of a Partnership Firm. But, in the eye of law, the Partners would continue to be liable to the third parties who had not been put on public notice about the dissolution of the Firm and retirement of the Partner from the Partnership Firm so far as the activity of one of the Partners in the Partnership Firm is concerned.

9. Section 72 of the said Act reads as follows:

“Mode of giving public notice — A public notice under this Act is given —

(a) Where it relates to the retirement or expulsion of a Partner from a registered Firm, or to the dissolution of a Registered Firm, or to the election to become or not to become a Partner in a registered Firm by a person attaining majority who was admitted as a minor to the benefits of Partnership, by notice to the Registrar of Firms under Section 63, and by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the Firm to which it relates has its place of business, and

(b) in any other case, by publication in the Official Gazette, and in at east one vernacular newspaper circulating in the district where the Firm to which it relates has its place or principal place of business.”

Admittedly, the first accused-Firm is an unregistered Partnership Firm. Therefore, Section 72(b) of the Partnership Act, 1932 squarely applies to the case on hand. In a case where the Partnership Firm was not a registered one, then the retirement of a Partner shall be published in the Official Gazette and also in one of the vernacular Newspapers which has wide circulation in the District where the Firm has its place of business.

10. The conjoint reading of Section 45 and Section 72 of the Partnership Act, 1932 makes it clear that even in a case where the Partnership Firm was an unregistered one, in order to save the third parties who are dealing in business with the Partnership Firm, public notice in the Official Gazette and also in the local newspaper about the retirement of a Partner is very much required for the purpose of putting the third parties to notice about its reconstitution and the cessation of liability of the Partner who had already retired.

11. In this case, as rightly pointed out by the learned Senior Counsel appearing for the complainant, the Petitioner, who allegedly retired from the Partnership Firm on the basis of the unregistered deed of reconstitution, has not chosen to give any public notice as mandated under Section 72 of the Partnership Act, 1932 to shirk her liability as contemplated under Section 45 of the said Act. Therefore, even assuming for the sake of argument that the fourth accused had already left the Partnership Firm, she is liable for the acts of the reconstituted Partnership Firm as her retirement was not published in terms of Section 72(b) of the said Act.

12. Now, the Court will have to see whether there is sufficient averment as against the Petitioner herein to prosecute her under Section 138 of the Negotiable Instruments Act. It has been averred in the Complaint laid under Section 138 read with 142 of the Negotiable Instruments Act that the Petitioner was also in charge of and responsible for the conduct of the day to day affairs and business of the first accused-Firm. It has also been alleged that only with the consent and knowledge of the Petitioner herein, the cheques were issued.

13. The learned counsel appearing for the Petitioner cited an authority in Katta Sujatha v. Fertilizers & Chemicals Travancore Limited, (2002) (7) SCC 655, wherein the Honourable Supreme Court has held that when there is no allegation that a Partner was in charge of and was responsible for the conduct of the business of the Partnership Firm and that the offence was committed with her consent or connivance or that the same was attributable to any neglect on her part in the matter of issuance of the subject cheque, a Complaint against her cannot be sustained. On a careful perusal of the Complaint, it is found that those two requirements as contemplated in the aforesaid authority have been specifically pleaded in the present Complaints where the Petitioner has been arrayed as fourth accused.

14. The Honourable Supreme Court in N.K Wahi v. Shekhar Singh and Others, 2007 (2) Supreme 811, has observed as follows:

“To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the Complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to who the Directors are incharge and responsible for the conduct of the business of the Company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the Court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that Complaint would not be entertainable.”

In the aforesaid judgment, the Honourable Supreme Court has ruled that the simple averment that the accused Directors were responsible for carrying on the business of the Company and the liability of the accused persons jointly and severally is not sufficient to hold that they are vicariously liable for the liability of the Company.

15. The question may arise as to what sort of parts played by the Partners concerned will have to be adverted to in the Complaint. When it is a matter of commercial transaction, it may be a case where such Partnership would have proceeded in clinching a commercial contract between the parties. He or she may be involved in mobilising loan from the complainant. She might have involved in preparing some documents clinching the transaction. She might have also signed the cheque on behalf of the Firm or Company as the case may be. Such active involvement of the Partner in the affairs of the Firm can be highlighted in the Complaint to show prima facie that a Partner or a Director of a Partnership Firm or a Company, as the case may be, was responsible for the conduct of its business.

16. The averment found in the Complaint that the Petitioner also was in charge of and responsible for the conduct of the business and the vague allegation that the cheque was issued with her consent and knowledge are not sufficient pleadings to show prima facie that she was responsible for the conduct of the business of the Company.

17. Though the Petitioner could not establish that she is not liable for the act of the other Partners of the Firm right from her alleged date of retirement, the Court find that the Petitioner cannot be prosecuted with the aforesaid vague allegations which does not indicate her active role in the business of the Partnership Firm. A sleeping Partner who had not played any active role in the business of the Partnership Firm cannot be directed to face the criminal liability under Section 138 read with 142 of the Negotiable Instruments Act.

18. In view of the above, the criminal proceedings as against the Petitioner ranked as fourth accused in C.C Nos. 504, 461 and 679 of 2004 on the file of Judicial Magistrate I, Coimbatore stand quashed. The Criminal Original Petitions stand allowed. The connected Miscellaneous Petitions stand closed.