THE HON’BLE SRI JUSTICE K.S. APPA RAO CRL.PETITION No. 6202 of 2008 ORDER The Petition is filed under Section 482 of Cr.P.C. on behalf of the petitioners-accused Nos. 1 and 2 in C.C. No. 870 of 2007 on the file of the III Additional Chief Metropolitan Magistrate, Vijayawada for the alleged offence under Section 138 read with Section 142 of Negotiable Instruments Act (for short the ‘Act’) to quash the proceedings against the petitioners. The counsel appearing for the petitioners mainly urged that under Section 138 of Negotiable Instruments Act it is the “Drawer” of the cheque is liable for prosecution. However, under Section 141 of the Act, if the offence is committed by a Company or a Partnership firm, the directors/partners, who at the time of offence was committed, was incharge of and was responsible to the company for conduct of the business shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. It is submitted that vicarious penal liability on the Directors/Partners is only in case of the cheque in question was issued by a Company/Partnership Firm i.e. if an offence under Section 138 is committed by the Company/Partnership Firm. Counsel appearing for the petitioners further urged that in C.C.No. 870 of 2007, the cheque in question bearing No. 0059703, dated 11.12.2006 was issued by the 3rd accused on her account i.e. Proprietor of Sri Lakshmi Narayana Metal Works, being maintained by her with the Bank of India, Anakapalle. It is further urged that simply because the third accused is also arrayed as partner of the 1st accused firm, the other partners of the Firm can not be roped into the offence, in as much as Section 141 is not applicable unless and until the cheque in question was issued by the company/Partnership Firm in committing the offence under Section 138. Even otherwise, the allegations in the complaint will not disclose the ingredients to constitute an offence under Section 138 by the petitioners. So, continuation of the proceedings in C.C.No. 870 of 2007 against the petitioners amounts to abuse of process of law. So, the said proceedings are liable to be quashed in the interest of justice. Counsel appearing for the petitioners further that the Partnership Firm M/s Srinivasa Metal Works is no more doing the business and it is Sri Lakshmi Narayana Metal Works, a Proprietary Firm of Smt. A. Sujatha Lakshmi is running the business from 2001 onwards. So, no prosecution is maintainable against M/s Srinivasa Metal Works. In support of the said contention, the counsel appearing for the petitioners relied on a decision reported in ANIL HADA Vs. INDIAN ACRYLIC LTD.[1], wherein the apex Court held that: “Negotiable Instruments Act, 1881 Seections141 and 138 – Prosecution of drawer company held, not prerequisite for prosecution and conviction of its directors, officers and persons incharge under Section 141(1) and (2) – Finding that drawer company in fact committed offence under Section 138 however essential – Even though where drawer of cheque is accompany such company is the principal offender under Section 138 and other categories of persons mentioned in Section 141(1) and (2) only become liable if such company has in fact committed the offence, held, itisnot necessary that company itself be prosecuted –However, a finding that offence was committed by the company is the sine qua non for convicting the other persons – Such persons cannot escape penal liability simply because the company is not prosecuted as a result of some legal impediment – Judicial Magistrate suspending proceedings against accused company under winding-up orders – He also dismissing application of appellant accused director of company seeking quashing of proceedings against himself –Held, High Court rightly dismissed appellant’s revision petition – Words and phrases – “as well as”, “shall also” In support of the said contention, the counsel appearing for the petitioners relied on a decision reported in S. SULTAN & COMPANY Vs. CEMENT CORPORATION OF INDIA Ltd.[2], wherein it was held thus: “Negotiable Instruments Act 1881- Sections 138,141 and 142 – Prosecution against whom – Cheques drawn by 2nd petitioner in his individual capacity but not for or on behalf of firm-1st petitioner – Offence if committed by company/firm its director and persons in charge of its affairs can be proceeded against but not vice versa – So when cheque issued by director/partner of company/firm is dishonoured, company/firm of which he is director/partner cannot be made liable under Section 138 of Act by invoking Section 141 of that Act – 1st petitioner cannot be said to have committed offence under Section 138 of Act for dishonour of cheques issued by 2nd petitioner on account maintained by him – Complaint as against 1st petitioner liable to be quashed” The counsel appearing for the petitioners further relied on another decision reported in B.S.K. PRASAD Vs. LAXMI VESSELS, HYDERAAD & ANOTHER[3] “Negotiable Instruments Act, 1881 – Sections 138 and 141 – Offence by company – Complaint filed against A1 and petitioner (A2) described as Director and Managing Director of Company – Company not made accused – Complaint does not disclose as to who issued dishonoured cheque but Xerox copy of cheque (filed with petition) shows that it was drawn by A1 in his individual capacity but not for and on behalf of company of which petitioner is Managing Director – Hence 1st respondent-Complainant cannot invoke aid of sec141 of Act to make petitioner vicariously liable as Managing Director for offence committed by Company under Section 138 of Act – Complaint against petitioner liable to be quashed – Criminal Petition allowed. The counsel appearing for the 2nd respondent while replying to the said arguments urged that the Court below has rightly taken the complaint on file having found prima facie case against the petitioners-appellants that there are no grounds to quash the proceedings. Now the point for consideration is whether the petitioners are entitled to quash the proceedings as prayed for? As seen from the record, in the complaint the 1st accused M/s Srinivasa Metal Works was brought under the coverage of Employees State Insurance Act and allotted the Code No. 62- 32970-57. 2nd petitioner is the Managing Partner of 1st accused and 3rd accused is the partner and they are persons in-charge and is responsible for conduct of the business of the 1st accused. It is further alleged that the accused is liable to pay the contribution and the complainant-Corporation has issued demand notice and the accused has discharged the said liability, issued cheque bearing No. 0059703, dated 11.12.2006 for Rs. 27,000/- drawn on Bank of India, Anakapalle. On presentation of cheque, the same was returned with endorsement “Payment stopped for the drawer”. So after issuance of notice, filed a complaint for the alleged offence under Section 138 of Negotiable Instruments Act. The petitioners have appeared before the learned Magistrate and they were served with the papers in C.C.No. 870 of 2007. It is an admitted fact that accused no.3 who issued cheque is a partner of the 1st accused M/s Srinivasa Metal Works and the same was brought under the Employees State Insurance Act. It is brought to the notice that the partnership firm M/s Srinivasa Metal Works is no more doing the business and it is Sri Lakshmi Narayana Metal Works, a Proprietary Firm of Smt. A. Sujatha Lakshmi is running the business from 2001 onwards. It is the main contention of the petitioner herein that no prosecution is maintainable against M/s Srinivasa Metal Works as the same firm was not in existence on the date of filing of the complaint. The fact remains that as per the averments in the complaint, that on demand notice in discharge of the said liability, the cheque in question dated 11.12.2006 for Rs. 27,000/- was drawn. The subject matter of cheque was issued by Smt. A. Sujatha Lakshmi. The truth or otherwise of the existence of the contention raised by the petitioners about the winding up of M/s Srinivasa Metal Works and Sri Lakshmi Narayana Metal Works, a Proprietary Firm of Smt. A. Sujatha Lakshmi is running the business from 2001 onwards will be decided in due course of time after adducing evidence by the concerned. Since admittedly, Smt. A. Sujatha Lakshmi was a partner of M/s Srinivasa Metal Works, the liability of accused No.1 will be decided in due course of trial. Therefore, any finding on the subject matter is premature and it cannot be said that under what circumstances said Smt. A. Sujatha Lakshmi has issued the subject matter of cheque dated 11.12.2006. Therefore, I see no grounds to quash the proceedings. Accordingly, the Criminal Petition is dismissed. ___________________ 7.4.2011 CHV [1] (2000)1 S.C.C. 1 [2] 2005(1) A.L.D. (Crl.) 647(AP) [3] 2004(2) ALD (Crl.) 428 (AP)