Hem Lata vs State of Punjab and anr.

H. S. Brar, J.

This is a petition filed by Hem Lata under section 482 of the Code of Criminal Procedure, for quashing First Information Report No. 120 of 1983 dated October 18, 1984 Police Station City Khanna under Section 420 Indian Penal Code, consequently and, the order Sub Divisional Judicial Magistrate, Khanna, dated February 19, 1987 framing charge against the petitioner.

Briefly stated the facts are that the petition'' petitioner Hem Lata entered into a partnership with one Gurnam Singh son of Hazura Singh, and Smt. Harjinder Kaur wife of Gurjinder Singh to carry on a business of sale/resale of tractor and tractor parts under the name and style of Messrs Rajan Enterprises at Bharat Nagar Chowk, Ludhiana. The Partnership Deed was duly executed on January 8, 1980. Soon after the execution of the Partnership Deed, the partnership agreement was modified by a written agreement, on February 6, 1980. In clause (1) of the modified agreement, dated February 6, 1980 it is stated, that the business of the Firm Messrs Rajan Eenterprises shall be carried on by Shri Gurnam Singh, the party of the 1st and Smt. Harjinder Kaur and Smt. Hem Lata parties of the 2nd and 3rd parts shall be sleeping partners only and they shall not interfere in the working of the partnership business. Some where in March 1983 the abovesaid Firm Messrs Rajan Enterprises opened a Cash Credit Account with a limit of Rupees three and a half lakh on pledge basis, to secure the credit, the Partnership Firm pledged some tractors and spare parts either in the showroom or elsewhere under the control of State Bank of Patiala, Khanna. The Firm Messrs Rajan Enterprises took loan from the Bank. There was default in payment of the loan by the Partnership Firm and the Bank filed a civil suit for recovery of Rs. 5,63,100.40 against the Partnership Firm, the partners and the guarantors. The suit of the Bank was decreed by the Subordinate Judge First Class, Khanna, vide his judgment and decree dated January 20, 1989. The Bank also lodged a first Information Report with Police Station City Khanna under sections 379, 380, 406, 409 and 420, Indian Penal Code, read with sections 109 and 120B, Indian Penal Code, against the petitioner, the other partners and two other persons. Consequently, the Sub Divisional Judicial Magistrate Khanna, vide his order. dated February 19, 1987, charged the petitioner along with five others under sections 420 and 120B, Indian Penal Code.

The learned counsel for the petitioner wants this Court to quash the First Information Report as well as the order of the learned Sub Disional Judicial Magistrate, dated February 19, 1987 mainly on there grounds. Firstly, that the person who was entrusted with the business of the Firm and was responsible to the Firm for the conduct of the business could only be prosecuted for the offence complained of and not the other partners; and particularly not the sleeping partners. Secondly, that it is a case of civil liability only and no criminal proceedings could be launched against the petitioner, particularly so when a decree for Rs. 5,63,100.40 has been passed against the Firm. Thirdly, that the charge framed under Secs. 420 and 120B, Indian Penal Code, is not substantiated against the petitioner as no dishonest intention has been shown of the petitioner at the time when the loan was granted.

I need not dilate upon all the three grounds, as the I petition succeeds on the first ground alone. A perusal of the agreement, Annexure P 1, with the petition shows that the business of Messrs Rajan Enterprises was to be carried on by Shri Gurnam Singh partner and the other two partners, namely, the petitioner Hem Lala and Smt. Harjinder Kaur were to be the sleeping partners only and it is specifically stated in the agreement that the sleeping partners shall not interfere in the working of the partnership business.

Learned counsel for respondent No. 2 State Bank of Patiala, has stated that the petitioner is also liable for the criminal liability as under section 25 of the Indian Partnership Act, every partner is liable jointly with all the other partners and also severally for all acts of the Firm done while he is a Partner. I do not agree with argument forward by the learned counsel for the respondent Bank, as this case does not concern with a civil liability but with a criminal liability under the penal provisions. There is no vicarious liability in criminal law unless the statute takes that also within its fold. The petitioner in this case is also being persecuted mainly because she is a partner of Firm Messrs Rajan Enterprises. The petitioner cannot be fastened with criminal liability as she happens to be a partner of the Firm. I draw this conclusion of mine from the observations in Sham Sundar and others v. State of Haryana, 1989(2) Recent C.R. 494 . The relevant portion of the judgment is reproduced as under :

"It is.true that under Indian Partnership Act, 1981, a ''firm'' or `partnership'' is not entity, but is merely an association of persons agreed to carry on business. It is only a collective name for individuals, carrying on business in partnership. The essential characteristic,. of a firm is that each partner is a representative of other partners; Each of the partners is an agent as .well as a principal. He is an agent in so far as be can bind the other partners by his acts within the scope of the partnership agreement. He is a principal to the extent that he is bound by acts, of other partners. In fact every partner is liable for an act partner of the firm. Section 2(a) of the Partnership Act defines an "Act of firm" to mean any act or omission by all the partners, of by any partner or agent of the firm which gives rise to a right enforceable by or against the firm.

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It is, therefore, necessary to add an emphatic note of caution in this regard. More often it common that some of the partners of a firm may not even be knowing of what is going on day to day in the firm. There may be partners better known as sleeping partners, who are not, required to take part in the business of the firm. ''There may be ladies and minors who were admitted for the benefit of partnership. They may not know anything about the business of the firm. "

The learned counsel for the respondent Bank has also cited Kshetra University and another v. State of Haryana and another, AIR 1977 SC 2229 and has argued on its basis that interference under section 482 of the Code of Criminal Procedure should not be lightly resorted to.'' There is no dispute with the proposition of law laid down by the Supreme Court but here it is a case in which if proceedings are allowed to go on against the petitioner who is merely a sleeping partner of the Firm, it will cause a grave injustice to her and it will amount to an abuse of the process of the Court.

In the light of my discussion above, I quash First Information Report No. 120 of 1983 dated October 18, 1984 Police Station City Khanna under section 420, Indian Penal Code, and order of the Sub Divisional Judicial Magistrate Khanna, dated February 19, 1987, famine charge against the petitioner, qua the petitioner. The petition is consequently allowed.