1 IN THE HIGH COURT OF BOMBAY AT GOA CRIMINAL APPEAL NO. 55 OF 2008 Shri Nilesh H. Shetye, major of age, H.No.251, C-9, Altinho Road, Panaji Goa – 403 001. ... Appellant V e r s u s 1. Shri Sharadchandra C. Salkar, M/s. Excel Sales and Services, Shop No.4, Yashoda Building, Dr. Gama Pinto Road, St. Inez, Panaji Goa – 403 001. 2. State Through Public Prosecutor, Panaji Goa. ... Respondents Mr. Sudesh Usgaonkar, Advocate for the Appellant. Mr. S. M. Singal, Advocate for the Respondent no.1. Ms. W. Coutinho, Public Prosecutor for Respondent no.2. Coram :- N. A. BRITTO, J. Date :- 29 th June, 2009. 2 ORAL JUDGMENT : This is a complainant's appeal and is directed against the acquittal of the accused under Section 138 of Negotiable Instrument Act, 1881 by judgment/order dated 12.3.2008. 2. The complainant and accused, both commerce graduates and having technical background had entered into the partnership business under the name and style 'M/s. Excel Sales and Services' for repairs of home appliances, electronic goods, spares on mutually agreed terms w.e.f. 21.1.2003. The agreement also provided for an arbitration clause. However, the partnership business did not even continue for a period of seven months, as the accused started the same business, in the same name, but individually stating that the management of Whirlpool had authorized him to do so on account of mis-management of the affairs of the firm. The partnership firm had opened an account with Karnataka Bank Ltd., Panaji. The accused thereafter opened an account with Corporation Bank, Panaji w.e.f. 31.7.2003 and started operating the same as that of his proprietorship business in 3 the same name. 3. A year later, the complainant on or about 22.7.2004 sent a letter to the accused calling upon the accused to make full and final settlement, as the accused had not made any payment inspite of assurance given. Thereafter, the complainant on or about 13.8.2005 sent a statutory demand notice. In the said notice, the complainant alleged that the accused had issued to him 11 cheques, all drawn on the Corporation Bank, Panaji, for a total amount of Rs. 1.7 lakhs with different dates stating that it would be convenient for him to arrange for their clearance/payment from his account in the Corporation Bank, Panaji, since the accused was not in a position to pay the said amount at one time. It was further stated that there were repeated requests by the accused to delay the presentation of the said cheques and as such the complainant deferred the presentation of the cheques for clearance but when the complainant deposited the said cheques on 23.7.2005 in an account maintained by him in HDFC Bank, Panaji, all the said cheques were returned unpaid with an endorsement that the account was 4 closed. The accused was called upon to pay the said amount of Rs. 1.7 lakhs. 4. The accused replied to the said letter by his reply of August, 2005. In the said reply, the accused has stated that he was looking after the technical aspects of the business while the administrative and financial affairs at the shop were carried out by the complainant who was not maintaining proper accounts and had incurred heavy liabilities for the firm. It was also alleged that the accused had reason to believe that there was siphoning of funds and total mis-management with malafide motives to cause heavy losses and burden to the accused and that the accused was in the process of assessing the actual losses with the help available accounting data with the accused. The accused has also stated that he reserved the right to take necessary action against the complainant including for the alleged offences of misappropriation and cheating. It was also stated in the said reply by the accused that the complainant had access to the documents including the cheques enumerated in the legal notice in an illegal and unfair 5 manner taking undue advantage of the situation in view of the fact that the complainant was sitting in the office. The accused also stated that he was normally keeping the cheque book of his proprietary concern in the same shop, duly signed, and the complainant had taken undue advantage of the situation and had gone even to the extent of encashing one cheque on the sly which led to bickering in the partnership but the partnership could not be dissolved as there were heavy liabilities. 5. The complainant then filed the complaint on the allegations that the said 11 cheques for a total sum of Rs. 1.7 lakhs were given to the accused in consideration of the discharge of the liabilities of the accused towards verbal final settlement. In other words, it is case of the complainant the subject cheques were issued to him by the accused towards his share in partnership business. The first cheque bore No. 325679 dated 15.4.2005 and is for a sum of Rs. 15,000/-. The cheques are serially numbered and last number is 325689 dated 24.6.2005 and is for Rs. 20,000/-. They are dated on weekly basis. 6 6. Be that as it may, the complainant in support of his complaint examined himself and two witnesses. The accused when examined under Section 313 of the Code stated that the subject cheques were stolen by the complainant from his office and further stated that the accounts were not settled. The accused also stated that the complainant filed a false case against him. In support of his defence, the accused examined six witnesses including Virendra Prabhadessai, a Chartered Accountant who has taken the accounts of the firm from 1.4.2003 to 31.3.2004 and shown a loss to the extent of Rs. 5,98,423.78. 7. The learned J.M.F.C., framed two points for determination. The first was whether cheques were issued in discharge of a legally enforceable liability and second whether the accused proved that the cheques were stolen and concluded that the cheques were not issued in discharge of an legally enforceable liability. As regards the second point, the learned J.M.F.C., did not accept the defence plea that the cheques were stolen by the accused contending that if the cheques were stolen the accused would have 7 filed a criminal complaint against the complainant for stealing the said cheques. However, what has been in fact answered in the first point by the learned J.M.F.C., is that the complaint was not maintainable in view of Section 69(2)-A of the Partnership Act, 1932, ( Act, for short ). 8. Heard Shri Sudesh Usgaonkar, learned Counsel on behalf of the Appellant/complainant and Shri S.M.Singbal,learned Counsel on behalf of the Respondent no.1/accused. There is no dispute that Section 69(2-A) was not in force in the State of Goa but was applicable only for the State of Maharashtra. 9. Section 69 of the said Act reads as follows :- “69.Effect of non-registration.-(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. 8 (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. (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect,- (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the Presidency-towns Insolvency Act, 1909 (3 of 1909 ) or the Provincial Insolvency Act, 1920 ( 5 of 1920 ) to realize the property of an insolvent partner. (4) This section shall not apply, - (a) to firms or to partners in firms which have no place of business in (the territories to which this Act extends), or whose places of business in ( the said territories), are situated in areas to which, by notification under (section 56), this Chapter does not apply, or (b) to any suit or claim of set- off not exceeding one hundred rupees in value which, in the Presidency- towns, is not of a kind specified in 9 section 19 of the Presidency Small Cause Courts Act, 1882 ( 5 of 1882 ), or, outside the Presidency-towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887 ( 9 of 1887),or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.” 10. The learned Trial Court held that the firm was not registered, and, therefore no suit could have been filed for the recovery of the amount which according to the complainant was his share in the partnership business, and, therefore the cheques could not have been said to be issued for a legally enforceable debt. The said conclusion was arrived at by the learned Trial Court relying on the decision in the case of Amit Dessai and another V/s M/s Shine Enterprises and another, 2000 Cri. L.J. 12386. 11. Shri S. Usgaonkar, learned Counsel appearing on behalf of the complainant, has submitted that what was applicable to the facts of the case in sub clause (a) of sub section 3 of Section 69 of the Act. According to him, the cheques represented the 10 amount which was payable to the complainant towards his share of partnership business for which a suit for accounts always could have been filed by the complainant. In other words, the contention of learned Shri S. Usgaonkar is that the complainant could sue for accounts of the firm and such a suit would not be barred as the provisions of sub section 1 and 2 would not apply to such a suit. On the other hand, Shri S. Singbal, learned Counsel appearing on behalf of the accused, has submitted that the case at hand was covered by sub section 1 of Section 69 of the Act which provides that no suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. 12. The judgment in the case of Amit Dessai and another ( supra ) proceeded on the basis that the complainant which was firm in that case had business dealing with the accused, and the 11 firm was not registered under the said Act as required under Section 69(2) and therefore what was held therein is that the suit could not be instituted by it and as such the debt was not legally enforceable against the accused. The ratio of that decision, is not at all applicable to the facts of the case at hand. It is the complainant's case that the subject cheques were given to the complainant towards his share in the partnership business. The complainant could have always sought for dissolution of the firm and for accounts with a view to get his share in the partnership business and being so, and as rightly submitted by the learned Counsel Shri S. Usgaonkar, the case of the complainant was covered by sub section (a) of sub section (3) of Section 39 of the Act. The complainant could have always enforced his right for accounts get what was due to him as a partner of the said firm and as such it could not be said that the said cheques were not issued towards legally enforceable debt. The conclusion of the learned Trial Court on the first point is erroneous. 12 13. So also on the second point. The conclusion on the second point has been arrived at by the learned Trial Court without analyzing the evidence produced on record. The case of the complainant is that the accused had relented and verbally agreed to settle his share in the partnership business for a final lump sum of Rs. 1.70 lakhs and although the above settlement was on lower side he accepted it, as he did not want to involve himself in lengthy criminal and civil litigation against the accused particularly in view of the fact that the accused had taken exclusive control of the business, by ousting him. At the same time, the complainant had stated that the entire administration and account of the firm were looked after by the accused, a fact which has been disproved by the accused. In his cross examination, the complainant had admitted that Shridhar Shetye was his brother in law who was helping in the administrative work of the firm but he did not know whether the said Shridhar Shetye was handling accounts and financial matters. He stated that said Shridhar Shetye was appointed by both of them and besides there was another clerk by name Sarvesh Kamat but no appointments letters were 13 issued to them. The complainant had stated that he do not know whether the transactions of the firm in Karnataka Bank were done till 13.8.2003 nor did he check as a partner, the balance in the account of Karnataka Bank maintained by the firm. In further cross examination, the complainant stated that he used to keep the blank cheques signed by him in the office as a partner. He further stated that he used to ask the other partner or the staff members about the collection amount, expenditure and the bank statement, either daily, weekly or monthly but he used to go to office once in a week to check the vouchers pertaining to purchases but not pertaining to the sale. In further cross examination he admitted that he used to check the vouchers for sale, as well. He further stated that on comparison of vouchers of sales and purchases he would come to know the profit and expenditure of the firm but only note was taken in mind and proper records were maintained in the office both in terms of income and expenditure but further stated that proper records maintained by the firm were never entrusted to any chartered accountant. In further cross examination he stated that he cannot say anything to the question whether the 14 vouchers of the income and expenditure which he used to check were signed by the said Shridhar Shetye as authorized signatory. He also stated that profit and losses of the firm were not assessed by any chartered accountant till 31.12.2003. He admitted that the firm was authorized service provider of Whirlpool India. He denied the suggestion that staff were actually cheating the firm in collusion with the complainant. In further cross examination, he admitted that the Partnership Deed shows that he was working partner and further stated that profit and losses were to be shared 50% and also admitted that as per the Deed and understanding he had access to all the records and he used to check the records at any time. He admitted that while settling his share, profit and loss account of the firm was not completed for the said period but there was a rough calculation. When it was suggested to him that the profit and loss account was prepared on 31.3.2004 in which the net loss was calculated to Rs. 5,98,423.78, the complainant stated that he was not in picture at that time and he was not aware of the same. He admitted that there was no deed of retirement or deed of dissolution of the partnership firm. In further cross examination he 15 admitted that there was practice by which the partners used to keep blank cheques duly signed in the office and the cheques are written in his handwriting. He denied the suggestion that subject cheques were actually stolen from the office of the firm where the other partners had kept blank cheques, duly signed by him. Towards the end of his cross examination he admitted that he had not taken any legal steps for the dissolution of the firm or for referring the matter for arbitration in terms of partnership deed. He also admitted that he was liable for the losses or profits of the firm, if any, till 31.12.2003. 14. The complainant's witness Dattaram Naik stated that he was employed from August, 2003 as an accountant in the firm of the complainant and accused, both of whom were known to him earlier. He stated that he left the service in November, 2003. He also stated that he used to deposit daily cash collection in the Corporation Bank, Panaji, on slip written by his own handwriting and that as he found something fishy he had brought the fact to the notice of the complainant in November, 2003. 16 15. The complainant also examined Vijayalaxmi Dessai, PW3 the Manager of Karnataka Bank, Panaji Branch, who stated that the account of the firm which was opened on 23.1.2003 was operated up to 20.8.2003 and the last transaction was on 20.8.2003. 16. On the other hand, the accused in his evidence stated that the complainant had appointed one Shri Shridhar Shetye, who was brother in law as a manager and entrusted him work of administration and accounting. He stated that due to mis- management there were complaints from the customers, dealers etc., and thereafter the service manager of Whirlpool by name Munneswaran came down to Goa and inquired with him about mis-management and to whom he disclosed the correct facts and thereupon the said Munneswaran put forward a proposal of conducting business of the firm by him as proprietor or else to discontinue the association and as such he had no other option then to continue the business of the firm as proprietor under the same name and opened a new account with Corporation bank from 22.8.2003 as per instructions of Munneswaran. He further stated 17 that the firm was not dissolved and the complainant was visiting the office regularly and he had no objection for the complainant to sit in the office and the complainant took advantage of the same and caused theft of the blank signed cheques from the office drawer which were kept in the office including the counter foil and he came to know about the theft of one cheque bearing No. 0325677 dated 9.3.2005 was honoured whereupon the accused gave stop instructions to the Corporation Bank and somewhere in the month of April, 2005 opened a new account in ICICI bank, Panaji, after closing the account with Corporation Bank. The accused stated that he did not lodge police complaint of theft as the complainant was still as a partner in business and he told the complainant to appoint a chartered accountant and make final settlement and dissolution of the partnership firm to which the complainant always neglected. The accused stated that the said cheques were obtained by the complainant by manipulation and fraud to cheat him and the same were not given towards any debt or liability but were taken by the complainant by way of theft. The accused amongst the other witness examined one Peter 18 Gonsalves/DW4 who stated that he was conducting the business of spare parts of Whirlpool in Goa and as he was not able to handle the business he handed over the same to the complainant and the accused who agreed to do the same on partnership business. He stated that all dealings were finalized by the complainant, in the capacity of managing partner of the firm. He also stated that consideration of the same was given to him in three cheques on behalf of the firm 'Excel Sales and Services' which were signed by the complainant. He has given the details of the said cheques, and he further stated that the said cheques were not honoured by the bank for insufficient funds. He also stated that on his visit to Goa, he came to know that from August, 2003 the said business was run by the accused in the capacity of a proprietor. In cross examination, he stated that the business of the complainant was closed about six to seven months from the time of starting it. He denied that what he had stated was false. 17. The accused also examined Vijay Raut/DW5 who stated that he was appointed by the complainant who was 19 managing the affairs at the relevant time, and for day to-day matters such as spares, accounting etc., he used to contact the complainant who was acting as Manager and he was acting as a service agent from February, 2003 and was dealing with the complainant said Shridhar Shetye, and, thereafter from September, 2003 he started dealing with the accused. Virendra Prabhudessai/DW6 a chartered accountant, examined on behalf of the accused, stated that on going through the available documents and supporting vouchers he made up the accounts of the firm from the period 1.4.2003 to 31.3.2004 and although the books of accounts were not maintained for the said period, the same could not be submitted to the Income Tax Department in the absence of signature of second partner, the complainant. He further stated that based on the accounts the firm had losses to the tune of Rs. 5, 98,423.78. The statement of accounts was not allowed to be produced through him as the same was not relied upon by the accused nor put to the complainant during his cross examination. From defence evidence and cross examination of complainant, what comes out very clearly is that it is the complainant who was 20 looking after the management and accounts of the firm along with his brother in law, the said Shridhar Shetye and therefore the complainant's case that it was the accused who was in charge of administration and accounts, is proved to be false. Complainant therefore could not be unaware of the profits or losses the firm was making. 18. Shri Usgaonkar, learned Counsel appearing on behalf of the complainant, submits that the subject cheques came to be given to the complainant after the letter dated 22.7.2004 ( Exhibit 27) and were given by the accused towards the share of the complainant in the partnership business. The learned Counsel submits that the accused failed to prove that cheque bearing No. 0325677 was ever encashed by the complainant. The learned Counsel further submits that the accused also failed to examine the said Munneswaran at whose instance, according to the accused, the accused had discontinued the business in partnership and started the same as proprietorship business. The learned Counsel therefore submits that the case of the accused that the cheques were 21 stolen by the complainant cannot be accepted and in fact it is the accused who played fraud upon the complainant by discontinuing the partnership business without the knowledge of the complainant and converting the same into proprietorship business. The learned Counsel further submits, that in case cheque bearing No. 0235677 dated 9.3.2005 was honoured then the accused would have immediately ask for the return of the remaining cheques or file a police complaint against the complainant, and this fact shows that the story of the accused cannot be believed. 19. On the other hand, Shri Singbal, the learned Counsel on behalf of the accused has