Suriya Moorthy and J. Vetrivel vs Mrs. B. Chandradevi

Malai Subramanian, J.—The petitioners who are accused 4 and 5 in C.C.No. 313/2000 pending on the file of Judicial Magistrate NO.I,

Madurai seek to quash the complaint pending against them for offence punishable under Sec.138 Negotiable Instruments Act. The petitioners are

admittedly partners of the 1st accused firm. The 1st accused firm issued two cheques signed by its Managing partner, the 2nd accused and the

cheques bounced and hence the complainant lodged a complaint against other partners also along with the firm.

The learned counsel for the petitioners contends that there is no material in the complaint to hold that the petitioners were also responsible to the

firm for the day today conduct of the business of the firm. He would further submit that the complaint does not even say that the petitioners are

responsible to the firm for the conduct of the business of the firm. Therefore, according to the learned counsel for the petitioners, Sec.141

Negotiable Instruments Act in letter in spirit is not attracted and therefore, the petitioners cannot be prosecuted and accordingly the proceedings

against the petitioners alone has to be quashed.

The learned counsel appearing for the respondent/complainant submits that since there is no dispute that the 1st accused is a partnership firm

and the petitioners are also the partners, the Indian Partnership Act comes to play in the official dealings of the petitioners'' firm. He also brings to

the notice of this Court Secs.12, 25 and 26 of the Partnership Act. Sec.12 says that every partner has a right to take part in the conduct of the

business. Sec. 25 says that every partner is liable, jointly with all the other partners and also severlaly, for all acts of the firm done while he is a

partner. Insofar as Sec.26 is concerned, it says that for any wrongful act or omission on the part of a partner acting in the ordinary course of the

business of the firm, the firm is also liable to the same extent as the partner. In view of these provisions, the learned counsel contends that at this

stage, liability of the partners viz., the petitioners cannot be decided and they have to prove before the trial Court that they were not in charge of

the affairs of the firm. In support of his contention, he relies on a ruling of the Apex Court reported in Smt. Katta Sujatha Vs. Fertilizers and Chem.

Travancore Ltd. and Another, , wherein the Apex Court has been pleased to hold thus:

In short the partner of a firm is liable to be convicted for an offence committed by the firm if he was in charge of and was responsible to the firm

for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or connivance of, or was attributable to

any neglect on the part of the partner concerned"".

The learned counsel for the petitioners relied on another ruling of the Apex Court reported in K.P.G. Nair Vs. Jindal Menthol India Ltd., ,

wherein the Apex Court has been pleased to hold as follows

In view of Section 141 a person other than the company can be proceeded against under those provisions only if tht person was in charge of and

was responsible to the company for the conduct of its business. Though words of Section 14(1) need not be incorporated in a complaint as magic

words but substance of the allegations read as a whole should answer and fulfil the requirements of the ingredients of the said provision (for being

proceeded against for an offence which he is alleged to have committed). On the above premise, it is clear that the allegations made in the

complaint do not either in express words or with reference to the allegations contained therein make out a case that at the time of commission of

the offence the appellant was in charge of and was responsible to the Company for the conduct of its business. Therefore, in this case the High

Court has misdirected itself and committed an error in coming to the conclusion that the requirements of Sec.141 are prima facie satisfied insofar as

the appellant is concerned. The proceedings in question for the alleged offence under Sec.138 as against the appellant are quashed"".

Insofar as the provisions of the Partnership Act is concerned, Sec.12 only recognises the right of a person to take part in the conduct of the

business. Right is different from liability. Just because a partner has got a right to take part in the day today affairs of the Company, the liability

cannot be fastened on him that too a criminal liability. Therefore, Sec.12 is of no avail to the respondent.

Insofar as Sec.25 is concerned, it of course says that every person is liable jointly with all the other partners and also severally, for all acts of the

firm done while he is a partner. This provision has to be conjointly considered along with Sec.141 of Negotiable Instruments Act. In the absence of

Sec.141 Negotiable Instruments Act, only a drawer of the cheque will be liable under Sec.138 Negotibale Instruments Act. It is Sec.141

Negotiable Instruments Act that provides for vicarious liability of the Directors of the Company or Firm as the case may be . Though Sec. 25 of

the Partnership Act makes a person liable to the act of the firm, it has to be read subject to the provisions made under Sec. 141 Negotiable

Instruments Act, which is a special provision. Sec.141 Negotiable Instruments Act overrides the provision found in Sec.25 of Partnership Act

which is general in nature.

Under Sec.141 of Negotiable Instruments Act if the main offender is the company or firm, 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 for the offence. If parliament decided to make partner of the firm or the Directors of the Company liable for any act of the

Company, so many words need not be incorporated in Sec.141 of the Act. The Parliament would have said that every partner or Director of a

Company liable jointly or severally for the act of the firm or company. The importance of Sec.141. is that the complainant has to establish a case

against the particular partner or Director that at the time of commission of the offence, he was in charge of and was responsible to the company for

the conduct of the business of the company. By virtue of Sec.141, it is the duty of the complainant to plead and prove that the petitioners are in

charge of the conduct of the business of the company at the time of the transaction in question.

Insofar as the rulings of the Apex Court are concerned, the Apex Court has clearly held in K.P.G. NAIR''S case that substance of the

allegations in the complaint read as a whole should answer and fulfil the requirements of the ingredients of Sub Section 1 or otherwise the

proceedings have to be quashed. By virtue of this ruling, if we examine the complaint, there is no allegation in the complaint that any of the

petitioners was in charge of the conduct of the business of the Company at the time of the issuance of the cheque. Therefore, on the face of it in the

absence of any factual allegations incriminating the petitioners to bring them within the mischief of Sec.141 Negotiable Instruments Act, I am

inclined to hold that further prosecution of these petitioners is not necessary.

The learned counsel for the respondent vehemently contends that the ruling of the Supreme Court in the case of K.P.G. Nair Vs. Jindal Menthol

India Ltd., has been whittled down by the ruling in the case of Smt. Katta Sujatha Vs. Fertilizers and Chem. Travancore Ltd. and Another, . It

does not appear to be so. What they say is that a partner of a firm is liable to be convicted for an offence committed by the firm if he was in charge

of and was responsible to the firm for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or

connivance of, or was attributable to any neglect on the part of the partner concerned. Two limbs are there in the provision. One applies to a pre

trial stage and the other to the stage when the evidence has been taken. Therefore, this ruling does not in any way over rule the ruling rendered by

the Supreme Court in K.P.G. Nair''s case. In fact it only acknowledges the said decision.

In view of the above discussion, the proceedings in sofar as the petitioners are concerned, stand quashed.