High Court rejected petitions challenging convictions under Section 138 NI Act. Court held unregistered firms can file criminal complaints and notices including interest/costs are valid if cheque amount is clear.
Revision petitions dismissed; sentences to run concurrently.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Criminal Revision No.249 of 2001 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
(i) Criminal Revision No.249 of 2001 Date of Decision 18.08.2010
M/s Rama Rice Mill and others
VERSUS
M/s Ram Dia Mal Shiv Dhan Mal, 102, New Anaz Mandi, Samalkha and another. ...... Respondents
(ii) Criminal Revision No.250 of 2001
M/s Rama Rice Mill and others
...... Petitioners
VERSUS
M/s Ram Dia Mal Shiv Dhan Mal, 102, New Anaz Mandi, Samalkha and another. ...... Respondents
Criminal Revision No.251 of 2001
M/s Rama Rice Mill and others
...... Petitioners
VERSUS
M/s Ram Dia Mal Shiv Dhan Mal, 102, New Anaz Mandi, Samalkha and another.
...... Respondents
CORAM:- HON'BLE MR. JUSTICE A.N.JINDAL
Present: Mr.N.K.Sanghi, Advocate, with Mr.Aditya Sanghi and Mr.Aditya Pal Singh, Advocates, for the petitioners.
Mr.S.S.Narula, Advocate, for respondent No.1.
Mr.Shakti Singh Chauhan, Asstt. Advocate General, Haryana, for respondent No.2-State.
A.N.JINDAL, J(ORAL):
This judgment shall dispose of three connected revision petition Nos.249 to 251 of 2001, arising out of three different judgments of even date i.e. 14.02.2001, passed by Additional Sessions Judge, Panipat, dismissing the appeal of the petitioners-accused (herein referred as 'the accused') against the judgments dated 29/30.08.1995, passed by Judicial Magistrate Ist Class, Panipat, convicting and sentencing them to undergo rigorous imprisonment for a period of nine months and to pay a fine of
Criminal Revision No.249 of 2001 2
Rs.4,000/- each, under Section 138 of the Negotiable Instruments Act.
The accused persons had purchased paddy from the complainant-respondent firm (herein referred as 'the complainant firm') and in respect of the part payment of which, the accused had issued three cheques bearing Nos.0018011, 0018012, 0018013 dated 01.10.1991, 05.10.1991 & 29.10.1991 for a sum of Rs.7,50,000/-, Rs.5,00,000/- and Rs.4,00,000/- respectively, in favour of the complainant, drawn on Union Bank of India, Bhapara, Samalkha. The complainant presented the said cheques with its bankers i.e. Punjab National Bank for collection and the said bank forwarded the cheques to Union Bank of India, Bhapara, Samalkha. Union Bank of India returned the cheques with the remarks “returned for insufficiency of funds”. Despite request, no payment could be made by the accused. However, on asking of the accused, the cheques were again presented with Punjab National Bank, Samalkha and the same were again returned with the remarks “unpaid for insufficiency of funds”. The complainant was informed about the same vide memo dated 30.10.1991. The complainant served notices dated 01.11.1991 and 04.11.1991 respectively, which were received by the accused persons on 06.11.1991 but to no response. Since the accused-petitioner No.2 had issued the cheques on behalf of the firm, as such, the three different complaints were filed by him against the firm as well as its partners.
After recording the preliminary evidence, the accused were summoned and served notice of accusation under Section 138 of the Negotiable Instruments Act to which contest was sought.
In order to substantiate the case, the complainant examined Surinder Kumar (PW1), Jai Bhagwan Chhokar Clerk of Punjab National
Criminal Revision No.249 of 2001 3
Bank, Samalkha (PW2), Om Parkash Chauhan, Head Cashier of Union Bank of India, Bhapara (PW3) and proved the cheques, notices and other relevant documents.
In their statements under Section 313 Cr.P.C., they denied the allegations. In defence, they examined Smt.Kanta Devi (DW1), Rajesh Kumar (DW2), Krishan Lal (DW3).
The accused were convicted in all the three cases. Their appeals also failed.
Arguments heard. Record perused. Learned counsel for the revision-petitioners has firstly contended that the complainant firm, being unregistered one, could not sue against the accused meaning thereby since the unregistered firm could not sue for recovering the amount, therefore, the same cannot be said to be legally enforceable liability,. As such, the complaint filed by the said unregistered firm is not maintainable.
Having pondered over the contention, the same appears to be not persuasive. The case appears to have been filed with the assumption that the complainant firm M/s Ram Dia Mal Shiv Dhan Mal was a registered firm. Even in reply to the notice or at any stage of trial, the accused did not raise such objection with regard to non-registration of the complainant firm. Not only this, the two partners of the complainant-firm namely Kanta Devi and Rajesh Kumar, examined as DW1 and DW2 respectively, were not asked even a single question if the complainant firm was unregistered. Similarly Krishan Lal (DW3) has not deposed anything regarding the same.
Now coming to the interpretation of Section 69 (2) of the Indian Partnership Act, 1932, which reads as under:-
“ Effect of non-registration
Criminal Revision No.249 of 2001 4
xxx xxx (1)xxx
(2)No suit 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.
xxx xxx (3)Xxx
From bare perusal of the Section, the Act bars the right to sue by an unregistered firm regarding matters arising out of the contract. But the criminal liability, when the cheque is issued, may or may not arise out of the contract. The accused, in order to take shelter of the said Section has to show that the liability had arisen under a contract.
Merely because the partnership Act has excluded the right of unregistered firm to sue in certain matters, has not excluded the jurisdiction of the Criminal Court to entertain the complaint under Section 138 of the Negotiable Instruments Act. At the same time, the relevant provisions of Section 138 of the Act also do not create a bar for an unregistered firm to file the complaint.
The other ground support maintainability of such complaint is that there is no inhibition for anyone to set the law in motion. Kerala High Court in case Kerala Arecanut Stores versus M/s Ramkishore and Sons and another, AIR 1975 Kerala 144 answered about the maintainability of the complaint in case of dishonour of the check while making the following observations:-
“It is sufficient to state here for the purpose of this case that the right of action available to an indorsee of a cheque who comes
Criminal Revision No.249 of 2001 5
to hold the cheque in due course is based upon conferment on him by the statutory provisions the right to sue the maker of the cheque and also the endorser. If that be the case, the right that is sought to be enforced does not arise from a contract. It is not a suit by the endorsee to enforce a right arising out a contract and, therefore, the bar under Section 69(2) of the Partnership Act will not operate in such a case.”
The scope of Section 69 (2) of the Partnership Act is confined to the enforcement of a right arising out of a contract which is remedied by way of filing a suit but the provisions of Section 138 of the Negotiable Instruments Act are penal in nature, creating a penalty over the drawer of the cheque, if it is dishonoured. Even the partners of an unregistered firm or any holder of the cheque could file the complaint against its dishonour. Therefore, there could be no bar to criminal complaint, even if it is filed by an unregistered firm. The following observations were made in case
Gurcharan Singh versus State of U.P. And another 2002 (4) RCR (Criminal) 414 :-
“In a recent judgment rendered by the Supreme Court in BSI Limited Versus Gift Holdings Private Limited, 2000 SCC (Criminal) 538 : 2000 (1) RCR (Criminal) 596 (SC) the word
'suit' came to be interpreted for deciding maintainability of proceeding under Section 138 of the Act in view of the ban imposed by the Sick Industrial Companies (Special Provisions) Act. Under Section 22(1) of the aforesaid Act, it is provided that no suit for recovery of money or enforcement of any security against the industrial company or guarantee in respect
Criminal Revision No.249 of 2001 6
of any loan or advance granted to the industrial company shall lie if in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending adjudication. It was contended that the ban against maintainability of a suit for recovery of money would encompass prosecution proceedings also. Reliance was placed on the meaning of the word 'suit' as given in 'Bouvier's Law Dictionary'. Repelling such contention the Court observed that the word 'suit' envisaged in Section 22 (1) cannot be stretched to criminal prosecutions. A criminal prosecution is neither for recovery of money nor for enforcement of any security etc. Section 138 of the Act is a penal provision, the commission of which offence entails a conviction and sentence on proof of the guilt in duly conducted criminal proceedings. Once the offence under Section 138 is completed, the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability.”
The fact of non-registration of the partnership firm under Section 69 (2) of the Partnership Act is applicable only in cases involving the civil rights and it has no application to criminal cases. As regards the argument that the notice issued by the complainant being vague and for the excess amount than as allegedly involved in the cheques, the complaint is vitiated. In this regard, it may be observed that if the notice so issued
Criminal Revision No.249 of 2001 7
segregates the amount of cheques, interest and costs and lacks any ambiguity, then the notice cannot be said to be vague as to mislead the accused and the complaint is not vitiated and such objection cannot sustain. Similar view was taken by the Kerala High Court in case Abdul Gafoor
versus Abdurahiman 1999 (4) RCR (Criminal)271 .
The next issue, raised by the counsel for the petitioner, is that the notices issued by the complainant which include the principal, interest and the costs, being of the excess amount than that involved in the cheque is not valid, therefore, the trial is vitiated. The counsel has not disputed the fact that the notice contains the principal, costs and interest and the amount claimed on the aforesaid three heads has been segregated. In such circumstances, the accused cannot be said to have been misled and he cannot be said to have not understood the contents of the notice. If the amount claimed is clear unambiguous , as mentioned in the notice, then the accused also cannot be said to have been prejudiced. A similar view was taken by the Apex Court in case Suman Sethi versus Ajay K.Churiwal 2000 (1) RCR (Criminal) 780 wherein it was observed as under:-
“In the notice in question the “said amount” i.e. the cheque amount has been clearly stated. Respondent No.1 had claimed in addition to the cheque amount incidental charges and notice charge. These two amounts are severable. In the notice, it was clearly stated that on failure to comply with the demand necessary legal steps will be taken up. If respondent No.1 had paid the cheque amount, he would have been absolved from the criminal liability under Section 138. Regarding other claims, a civil suit would be necessary.”
Criminal Revision No.249 of 2001 8
As a matter of fact, the object of the notice is to give a chance to the drawer of the cheque to rectify neglect or omission. Though, in the notice, demand for compensation, interest, charges of notice and costs etc. is also made. Drawer will be absolved from his liability under Section 138 of the Negotiable Instruments Act if he makes the payment of the amount covered by the cheque of which he was aware. If the amount of cheque has been clearly mentioned, then the claim with regard to interest, costs or the charges of notice would not in any way invalidate the notice issued to him and that also do not cause any prejudice to the accused. As regards the fact findings, both the Courts below have reached the conclusion that the cheques issued by the accused in favour of the complainant-firm were dishonoured by the bank for want of insufficiency of funds and the accused did not respond despite the legal notice issued to him in time, therefore, without delving deep into the findings of fact which need not be interfered at the revisional stage, it would be suffice to say that the accused failed to discharge the legally enforceable liability towards the complainant.
As regards the plea that according to DW1 Kanta Devi and DW2 Rajesh Kumar, the amount had already been paid by the accused, the factum with regard to issuance of cheque stands proved and it is also proved that the firm stood dissolved two years prior to the filing of the complaint as such they having been frustrated were motivated to make such statement due to friction between the partners and by joining hands with the accused. If one of the partners of the complainant-firm is siding with the accused than the version in the complaint, which is supported by the documentary evidence, cannot be disbelieved. The factum of payment has not been proved by the accused by any documentary evidence. No other argument
Criminal Revision No.249 of 2001 9
has been raised.
Resultantly, finding no merit in the petitions, same are dismissed. It is further directed that the sentences in all the three petitions shall run concurrently.
Copy of the judgment be sent to Chief Judicial Magistrate, Karnal, for compliance.
(A.N.Jindal) Judge
18.08.2010 mamta-II
3 issues framed by the court
Whether an unregistered partnership firm can file a criminal complaint under Section 138 of the Negotiable Instruments Act despite Section 69(2) of the Indian Partnership Act barring suits?
Whether a legal notice under Section 138 is valid if the demand includes principal, interest, and costs in addition to the cheque amount?
Whether the High Court can interfere with the factual findings of the courts below regarding the dishonour of cheques and lack of response?
Colour shows how this judgement treated each authority
Kerala Arecanut Stores versus M/s Ramkishore and Sons and anotherRelied on¶44
Kerala Arecanut Stores versus M/s Ramkishore and Sons and another, AIR 1975 Kerala 144 · Who else cites this
Gurcharan Singh versus State of U.P. And anotherExplained¶49
Gurcharan Singh versus State of U.P. And another 2002 (4) RCR (Criminal) 414
BSI Limited Versus Gift Holdings Private LimitedExplained¶50
BSI Limited Versus Gift Holdings Private Limited, 2000 SCC (Criminal) 538 · Who else cites this
Abdul Gafoor versus AbdurahimanReferred¶56
Abdul Gafoor versus Abdurahiman 1999 (4) RCR (Criminal)271
Suman Sethi versus Ajay K.ChuriwalRelied on¶58
Suman Sethi versus Ajay K.Churiwal 2000 (1) RCR (Criminal) 780
2 provisions across 2 enactments
M/s Rama Rice Mill and others
M/s Ram Dia Mal Shiv Dhan Mal and another
A.N. Jindal
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
