MANU/HY/0614/2018

Equivalent Citation: 2019 (2) ALD(C rl.) 675 , 2019 (1) ALT (C rl.) 416 (A.P.)

IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF

TELANGANA AND THE STATE OF ANDHRA PRADESH
Criminal Appeal No. 452 of 2006
Decided On: 24.10.2018
Appellants: Sri Sai Karuna Finance & Enterprises
Vs.
Respondent: N. Sandhyarani and Ors.
Hon'ble Judges/Coram:
U. Durga Prasad Rao, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Ch. Janardhan Reddy
For Respondents/Defendant: S. Ashok Anand Kumar and Public Prosecutor
Case Note:
Criminal - Dishonor of cheque - Acquittal - Sections 138 and 139 of
Negotiable Instruments Act, 1881 (NI Act) - Present appeal filed to
challenge judgment and order of acquittal passed in case for commission of
offence punishable under Section 138 of NI Act - Whether judgment and
order of acquittal under challenge deserve interference - Held, presumption
under Section 139 of NI Act can be discharged by raising preponderance of
probabilities - Burden of proof on accused is not heavy - He need not
disprove prosecution case on its entirety - He can discharge his burden
through direct or circumstantial evidence - Accused in present case
conclusively discharged said presumption - Courts below right in acquitting
accused of charge under Section 138 of NI Act - Impugned judgment and
order confirmed- Appeal dismissed. [26]
JUDGMENT
U. Durga Prasad Rao, J.
1 . The challenge in this Criminal Appeal at the instance of the complainant is the
judgment dated 12.05.2005 in Criminal Appeal No. 37/2004 passed by the learned
Sessions Judge, Nizamabad, whereunder the appeal was allowed and conviction and
sentence recorded in C.C. No. 170 of 1999 by the Additional Judicial Magistrate of
First Class, Nizamabad against the respondent for the offence under Section 138 of
Negotiable Instruments Act, 1881 (for short "N.I. Act") was set aside.
2. The parties in this appeal are referred as they were arrayed before the Trial Court.
3. The factual matrix of the case in brief is thus:
(a) M/s. Sri Sai Karuna Finance and Enterprises, who is the complainant is a
partnership firm engaged in finance business at Nizamabad. It filed C.C. No.
170 of 1999 before the Additional Judicial Magistrate of First Class, alleging
that the accused, who is the Proprietrix of Jaya Sree Gas Agencies of Bharat
Gas, Nizamabad for her business purpose borrowed ' 1,20,000/- from

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 complainant and issued a post-dated cheque No. 006615 dated 22.01.1999
for the said amount drawn on Andhra Bank, Nizamabad Branch in favour of
complainant and when complainant presented the said cheque with his
banker i.e., State Bank of India branch, Nizamabad on 22.01.1999 for
collection, the said cheque was returned with a memo stating "exceeds
arrangement" and thus the cheque was dishonoured. An intimation memo
was issued to the complainant on 23.01.1999. Following the mandatory
procedure laid under Section 138 of N.I. Act, the complainant issued
statutory notice on 27.01.1999 to accused but the accused refused to receive
the said notice and hence it was returned. Hence the complaint.
(b) During trial, PWs. 1 and 2 were examined and Exs. P.1 to P.8 were
marked on behalf of complainant. DWs. 1 to 3 were examined and Ex. D. 1
was marked on behalf of defence.
(c) The defence plea of accused in nutshell is that she is a war widow as her
husband, who worked as Captain in the Indian Military (Indian Peace Keeping
Force (IPKF)), died at Sri Lanka and the Government sanctioned her Gas
Agency under Military quota in 1996 at Nizamabad and she started the Jaya
Sree Gas Agency on 26.03.1996. She belongs to Srikakulam and she had no
experience in the said business and so she entrusted the management of her
Gas Agency to one Rama Krishna and Prasad, who worked as Manager and
Assistant Manager, respectively. One week after inauguration, she left for
Vizag due to health problem. At the request of both of them, she handed
over the blank cheque books and letter pads with her signatures to them in
the Nursing Home at Vizag. Both Rama Krishna and Prasad misused the blank
cheques, borrowed amounts from different persons and issued cheques
containing her signatures to make her liable. In March, 1999 on being
informed by her Sales Manager about the misdeeds of both Rama Krishna
and Prasad, she went to Nizamabad and removed them from service. She
came to know about the misuse of the blank cheques after the cases were
filed against her on the strength of the cheques. Thus her case is that she did
not borrow any amount and tender the disputed cheque to the complainant in
discharge of the debt.
(d) The Trial Court having regard to the fact that Ex. P.1-cheque contained
the signature of accused and she did not receive Ex. P.3-legal notice and give
any reply, opined that the presumption under Section 139 of N.I Act would
operate and thereby the burden would rest on her to rebut the presumption.
In that process, the Trial Court on appreciation of the defence evidence,
ultimately held that the accused failed to rebut the presumption and on the
other hand, the complainant successfully established its case and
accordingly, convicted her for the offence under Section 138 of N.I Act and
sentenced her to undergo simple imprisonment for a period of six(6) months
and to pay a fine of ' 5000/- and in default to suffer SI for three(3) months.
4 . Aggrieved, the accused filed Crl.A. No. 37 of 2004 before the Sessions Judge,
Nizamabad. The lower Appellate Court took a different view regarding the veracity of
the loan transaction and alleged issuance of Ex. P.1-cheque by the accused to the
complainant firm. Learned Appellate Judge observed that when the appellant was
contending that she never borrowed any amount from the complainant and disputing
about the contents of the cheque and the amounts mentioned therein, the Trial Court
was not justified in drawing the presumption under Sections 118 and 139 of N.I Act.
Then on appreciation of the evidence he expressed doubt about the genuinely of the
complainant's case, observing that the complainant being a partnership firm was

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 expected to maintain the relevant ledgers and promissory notes for lending amounts
to the parties but the complainant has not produced any such record to show that
accused borrowed money and in discharge of such legally enforceable debt, she
issued Ex. P.1-cheque. Learned Judge observed that for non-filing of the documents,
adverse inference can be drawn against the complaint under Section 114 of Indian
Evidence Act. He further observed that the complainant failed to examine one
Aravind, who was said to be present at the time of complainant allegedly lending
money to the accused. He observed, since loan was for huge amount of ' 1,20,000/-,
the complainant lending the amount without obtaining any document or promissory
note was unbelievable, particularly, when accused was not known to any of the
partners of the complainant firm and she was not a permanent resident of Nizamabad
and a stranger to the complainant company. He observed, merely because PW. 1
obtained gas connection from the agency of the accused, it cannot be believed that
the complainant would lend money without obtaining promissory note and the
signatures of accused on the concerned ledgers. The Appellate Court also observed
that the firm of the complainant was not registered by the date of filing of the
complaint i.e. 22.02.1999 but it was registered on 24.02.1999 with the Registrar of
Firms. On all these observations, the lower Appellate Court held that the complainant
failed to make out the ingredients of offence under Section 138 of N.I. Act and
accordingly, dismissed the complaint by allowing the appeal.
Hence the instant appeal by the complainant.
5 . Heard arguments of Sri Ch. Janardhan Reddy, learned counsel for appellant and
Sri S. Ashok Anand Kumar, learned counsel for 1st respondent.
6 . Severely fulminating the judgment of the lower Appellate Court, learned counsel
for appellant/complainant would argue that the appellate Court failed to notice that
since the accused was not disputing her signature on Ex. P.1-cheque, the
presumption under Section 139 of N.I Act would automatically apply whereby the
burden will be heavy on her to establish that she did not borrow any amount and
issue Ex. P.1 to complainant in discharge of legally enforceable debt. Instead, the
Court placed burden on the complainant and even then, the complainant discharged
his burden successfully by examining PWs. 1 and 2 and producing Exs. P.1 to P.8.
Merely because the complainant did not produce the promissory note and ledger
accounts in proof of lending money, that cannot be treated as a ground to discard its
case. PW. 1 clearly stated that though generally they will obtain promotes from the
borrowers, sometimes they will lend money on cheques. Hence non-filing of the
pronote or the ledger accounts is not a consequence for jettisoning complainant's
case which was otherwise established firmly. He would further argue that the defence
of the accused was a self-serving one rather than having any conviction, for, the
accused took the plea as if her staff members Prasad and Rama Krishna on whom she
reposed confidence and handed over blank signed cheques and signed letter pads
misused them and borrowed monies from different persons. However, she miserably
failed to produce any reliable evidence to vindicate her defence. She claimed as if
Prasad later showed repentance and issued Ex. D.1- affidavit narrating all the
misdeeds allegedly committed by him. Except producing Ex. D.1-affidavit and
examining DW. 3- advocate who notarised the said affidavit, the accused has not
examined the said Prasad or Ramakrishna to establish that they, for their needs,
borrowed amounts from the complainant and tendered the blank cheque signed by
accused to complainant as a security. Learned counsel strenuously argued that in the
absence of such evidence, the defence plea would not gather any mass. He further
argued that firm of the complainant was duly registered and doing money lending
business with proper licence and hence the accused is liable to be convicted. He thus
prayed to allow the appeal.

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 7 . In oppugnation, learned counsel for 1st respondent/accused argued that it is the
firm case of accused that she never approached complainant to borrow loan and she
did not issue Ex. P.1-cheque for any legally enforceable debt. Hence merely because
Ex. P.1 contains her signature it cannot be readily presumed that she issued the
cheque to complainant. Hence the presumption under Section 139 of N.I Act cannot
be drawn against her. The complainant failed to discharge his initial burden to show
that indeed the complainant firm lent a huge amount of ' 1,20,000/- to the accused.
As rightly observed by the lower Appellate Court, the complainant did not produce
any iota of documentary evidence such as promissory note, ledger accounts, etc.
Further, the complainant had also not examined one Aravind, who was said to be
present at the time of alleged loan transaction. Hence the lower Appellate Court
rightly held that the complainant failed to discharge its initial burden. Added to it, the
complainant was an unregistered firm as on the date of filing of the complaint and
therefore, the complaint was hit by Section 69 of Indian Partnership Act, 1932. He
further argued the firm had no money lending licence as on the date of alleged loan.
He placed reliance on several decisions, which will be discussed presently. He thus
prayed to dismiss the appeal.
8. The points for determination in this appeal are:
(i) Whether in the fact situation, the presumption under Section 139 of N.I.
Act is applicable against the accused?
(ii) If point No. 1 is held affirmatively, whether accused could successfully
thwart the presumption?
(iii) Whether the complaint is hit by Section 69 of Indian Partnership Act,
1932?
9. POINT No. 1; The admitted facts are that complainant is a partnership firm dealing
in finance business by lending monies. Accused is the Proprietrix of Jaya Sree Gas
Agencies. The accused is resident of Srikakulam and a war widow, whose husband
worked as Captain in Indian Military (IPKF) and died in Sri Lanka. The Gas Agency at
Nizamabad was allotted to her by the Government in the war widow quota and she
commenced the same in the year 1996, whereas the alleged loan transaction was on
10.11.1998. So by the date of alleged loan, she was a stranger to Nizamabad and
was visiting that place now and then. In the backdrop of these admitted facts, the
claim of the complainant is that the accused for her Gas Agency business borrowed '
1,20,000/- from the complainant on 10.11.1998 and in discharge of the loan, she
issued Ex. P.1-cheque. The accused denies it and her claim is that she never
borrowed any amount and the disputed cheque is one of the cheques that were
misused by her staff members i.e. Prasad and Ramakrishna. In that view, the
question is whether the presumption under Section 139 of N.I Act is applicable.
Section 139 of N.I Act reads thus:
"Section 139 - Presumption in favour of holder: It shall be presumed, unless
the contrary is proved, that the holder of a cheque received the cheque of the
nature referred to in Section 138 for the discharge, in whole or in part, of
any debt or other liability."
In my considered view, since the accused was not disputing her signature on Ex. P.
1- cheque, the presumption under Section 139 of N.I Act would squarely apply. My
view gets fortified by following decision.
10. In Rangappa v. Mohan MANU/SC/0376/2010 : 2010 (3) ALT (Crl.) 339 (SC) :
AIR 2010 SC 1898, the Apex Court happened to deal with the issue when and to what

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 extent the presumption under Section 139 of N.I Act is applicable. In that case, in a
complaint filed under Section 138 of N.I Act, the accused raised the defence that the
cheque in question was a blank cheque bearing his signature, which had been lost
and might fell into the hands of the complainant, which he misused to file the
complaint and there was no legally enforceable debt or liability between the parties.
The Apex Court referring various decisions, held that the presumption under Section
139 of N.I Act did apply even against the plea of accused that his lost cheque might
fell into the hands of complainant.
(a) Regarding the extent of applicability of the presumption, differing with its
earlier decision in Krishna Janardhan Bhatt v. Dattatraya G. Hegde
MANU/SC/0503/2008 : (2008) 4 SCC 54, wherein it was held that existence
of legally enforceable debt is not a matter of presumption under Section 139
of N.I Act and that it merely raises a presumption in favour of holder of the
cheque that the same has been issued for discharge of any debt or other
liability, the Apex Court in Rangappa's case (supra), held thus:
"Para 14: In light of these extracts, we are in agreement with the
respondent-claimant that the presumption mandated by Section 139
of the Act does indeed include the existence of a legally enforceable
debt or liability. To that extent, the impugned observations in
Krishna Janardhan Bhat (supra) may not be correct. However, this
does not in any way cast doubt on the correctness of the decision in
that case since it was based on the specific facts and circumstances
therein. As noted in the citations, this is of course in the nature of a
rebuttable presumption and it is open to the accused to raise a
defence wherein the existence of a legally enforceable debt or
liability can be contested. However, there can be no doubt that there
is an initial presumption which favours the complainant. Section 139
of the Act is an example of a reverse onus clause that has been
included in furtherance of the legislative objective of improving the
credibility of negotiable instruments, x x x xx...."
So from the above jurisprudence, an analogy can be drawn to apply the presumption
under Section 139 of N.I Act to the instant case.
1 1 . POINT No. 2: Since point No. 1 is held affirmatively, it has now to be seen
whether the accused could dispel the presumption. In Rangappa's case (supra), while
observing that Section 139 of N.I Act casts a reverse onus on the accused, the Apex
Court has narrated as to how the said reverse burden can be discharged. It was
observed thus:
Para 14: x x x x.... While Section 138 of the Act specifies a strong criminal
remedy in relation to the dishonour of cheques, the rebuttable presumption
under Section 139 is a device to prevent undue delay in the course of
litigation. However, it must be remembered that the offence made punishable
by Section 138 can be better described as a regulatory offence since the
bouncing of a cheque is largely in the nature of a civil wrong whose impact
is usually confined to the private parties involved in commercial transactions.
In such a scenario, the test of proportionality should guide the construction
and interpretation of reverse onus clauses and the accused/defendant cannot
be expected to discharge an unduly high standard or proof. In the absence of
compelling justifications, reverse onus clauses usually impose an evidentiary
burden and not a persuasive burden. Keeping this in view, it is a settled
position that when an accused has to rebut the presumption under Section

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 139, the standard of proof for doing so is that of preponderance of
probabilities'. Therefore, if the accused is able to raise a probable defence
which creates doubts about the existence of a legally enforceable debt or
liability, the prosecution can fail. (Emphasis supplied). As clarified in the
citations, the accused can rely on the materials submitted by the complainant
in order to raise such a defence and it is conceivable that in some cases the
accused may not need to adduce evidence of his/her own."
Similarly, in M.S. Narayana Menon alias Mani v. State of Kerala and another
MANU/SC/2881/2006 : 2007 (1) ALT (Crl.) 103 (SC) : (2006) 6 SCC 39, the Apex
Court observed that the presumption under Section 139 of N.I Act can be discharged
by raising preponderance of probabilities and the burden of proof on accused is not
heavy and he need not disprove the prosecution case on its entirety, rather, he can
discharge his burden through direct or circumstantial evidence, for which, he can also
rely upon the evidence adduced by the complainant.
12.(a) Hence, it has now to be seen whether accused has discharged her burden to
stifle the presumption. The accused examined DWs. 1 to 3. DW. 1, who was the
Booking Clerk in the Gas Agency of accused, deposed that in the absence of accused,
Prasad and Ramakrishna managed the Gas Agency and they were removed from the
posts as they mismanaged the Gas Agency. After the accused took the charge, she
never alone went to any place but either himself or one Devendra Reddy
accompanied her to all places. He further stated that the complainant used to come to
Prasad to collect amounts daily. However, he never came to the Gas Agency
whenever accused was present. He affirmatively stated that the accused never went
to the finance company of the complainant. This witness used to go to the finance
company of the complainant along with Ramakrishna. He stated that at present he is
working as Manager in the said Gas Agency and he took charge after Ramakrishna
and Prasad were removed. He further stated that accused never took loan from the
complainant as per his knowledge. After he took charge of the post of Manager, the
accused never obtained loan from the complainant for her business purpose. In the
cross-examination, he admitted that he does not know as to how much amount was
taken by the accused from different banks but Ramakrishna and Prasad knew that
fact. He further admitted that he does not know the loan accounts of the accused. He
denied the suggestion that accused obtained loan of ' 1,20,000/- from the
complainant-finance company.
(b) On scrutiny, the evidence of DW. 1 is not much helpful to accused as he admitted
that he was not aware of the loan accounts of the accused. He was previously
working as Booking Clerk and after removal of Ramakrishna and Prasad, he was
appointed as Manager. Therefore, he cannot be expected to know whether or not the
accused has obtained the loan from the complainant. However, his evidence will help
to the extent that previously Ramakrishna and Prasad worked in the Gas Agency of
accused and due to some misdeeds committed by them, they were removed and he
was appointed as Manager.
(c) Then DW. 2 is the accused herself. She deposed in tune with her defence plea
stating that Ramakrishna and Prasad misused the blank signed cheques issued by
her. Her evidence, in my view is helpful to a limited extent that Ramakrishna and
Prasad committed misdeeds and they were removed by the accused. However, her
evidence cannot vouchsafe that either Ramakrishna or Prasad borrowed monies from
the complainant and issued the blank signed cheque of her to the complainant as a
security. That fact has to come from the horse mouth of either Prasad or
Ramakrishna. Though accused claimed that Prasad after repenting for his misdeeds,
gave Ex. D.1-affidavit, but did not examine him and on the other hand examined only

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 DW. 3, who claims to have notarised Ex. D.1. However, the evidence of DW. 3 is not
a substitute for the evidence of Prasad.
(d) Thus, the evidence of DWs. 1 to 3 could establish to the extent that Ramakrishna
and Prasad have cheated the accused but their testimony will not establish the
defence plea of accused that she never approached the complainant and borrowed
amount and issued Ex. P.1-cheque to the complainant. Of course, though not from
her own evidence, in my considered view, she could probablise her defence from the
vital defects in the prosecution evidence and other facts and circumstances as held in
M.S. Narayana Merlon's case (supra). I will discuss the same with reference to
complainant's evidence.
13.(a) PW 1 is the Managing Partner of complainant-Firm and PW 2 is the Branch
Manager, Andhra Bank. PW 1 deposed that the accused approached the finance
agency on 10.11.1998 and on her request loan of ' 1,20,000/- was given and accused
gave a cheque with a post date of 22.01.1999 drawn on Andhra Branch, Main Branch,
Nizamabad where she had account. He deposed that one Aravind was present when
he paid amount to accused. His further narration is that the cheque was bounded and
after issuing legal notice the complainant filed the complaint. In the cross-
examination he stated that as PW 1 used to go to gas agency of accused, he knew her
and hence amount was given to her. He further stated that as his house was nearer to
the house of accused, he used to take gas from the shop of accused. He admitted he
has not produced any record that he obtained gas connection from the shop of
accused. He stated that accused has given the cheque duly signed but he does not
know who filled the matter in Ex. P1. He opined that her staff members accompanied
her to the finance company and one of her staff members might have filled the
cheque. He stated that they will obtain promissory note from the borrower whenever
they advance amount. He stated that they would also advance loan if a person
deposits cheque and they enter the amount given to the borrowers in the ledger, but
they would not obtain the signatures of the borrower. He admitted that he has not
filed ledger pertaining to the company into the Court. He denied the suggestion that
he did not mention the date of advancement of loan as 10.11.1998 in the complaint.
He denied the further suggestion that accused never borrowed loan from their
company.
(b) PW 2's evidence is not much relevant except for the fact that accused was having
account in their branch and she was given a cheque book and Ex. PI-cheque was
received from SBI and the same was not honoured because the cheque amount
exceeds arrangement.
(c) So, when the above evidence is thoroughly scrutinized, admittedly the accused is
not a native or resident of Nizamabad and there was no much acquaintance between
her and complainant. The complaint claims to have obtained gas connection from
accused but did not produce any record. In such circumstances, it is highly
unbelievable that the complainant could lend a huge amount of ' 1,20,000/- only on
the basis of Ex. P. 1 without obtaining collateral documents like pronote or some
other loan agreement. The complainant is a finance firm and generally it is expected
to maintain accounts relating to its finance business. Therefore, there shall be entries
in the account books for the loan allegedly taken by the accused. However, the
complainant has not produced any iota of documentary evidence in support of Ex. P.1
that the accused tendered Ex. P.1-cheque in discharge of a legally enforceable debt.
Further, complainant has not examined the Aravind who was present at the time of
alleged loan transaction. Further, curiously the complainant has not charged any
interest for the alleged loan amount. The complainant claims to have lent huge
amount of ' 1,20,000/- on 10.11.1998 and Ex. P1 was issued with a post date of

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 22.01.1999. So, there is a gap of two months 12 days. The complainant being a
finance company there was no reason for not charging any interest. Thus, non-
production of any supporting documents to Ex. P1, besides non-charging interest
creates a grave suspicion of complainant's case. These facts, coupled with Rama
Krishna and Prasad cheating the accused as revealed in the defence evidence would
probablise the defence theory.
14. In John K. John v. Tom Varghese and others MANU/SC/8039/2007 : 2008 (1)
ALT (Crl.) 444 (SC) : AIR 2008 SC 278 under similar circumstances, the Apex Court
observed thus:
"Para-10: x x x x... It has been found by the High Court as of fact that the
complainant did not approach the court with clean hands. His conduct was
not that of a prudent man. Why no instrument was executed although a huge
sum of money was allegedly paid to the respondent was a relevant question
which could be posed in the matter. It was open to the High Court to draw its
own conclusion therein. Not only no document had been executed, even no
interest had been charged. It would be absurd to form an opinion that
despite knowing that the respondent even was not in a position to discharge
his burden to pay installments in respect of the prized amount, an advance
would be made to him and that too even after institution of three civil suits."
So, this point is concerned, I hold that defence had successfully dispelled
presumption and established her defence.
15. POINT No. 3: It is to be noted, accused contended that complainant-Firm had no
money lending licence issued under Andhra Pradesh (Telangana Area) Money Lenders
Act, 1349-Fasli as on the date of alleged loan and also that the firm was not
registered with the Registrar of Firms by the date of complaint and hence the
complaint was hit by Section 69 of Indian Partnership Act, 1932.
(a) The first contention is concerned, Ex. P7-licence dated 12.01.1998 issued by
Mandal Revenue Officer, Nizamabad would show that the Government have issued
money lending licence to the complainant's firm for a period of one year from
21.01.1998 to 20.01.1999. Ex. P7 contains an entry that the said licence was
renewed for a period of one year w.e.f. 21.01.1999 to 20.01.2000. On the reverse of
Ex. P7, two more entries are available showing the licence was renewed from
21.01.2000 to 20.01.2001 and from 21.01.2001 to 20.02.2002. The alleged loan is
10.11.1998 and complaint was filed on 22.02.1999. Thus, Ex. P7 depicts that firm
had had money lending licence by the dates of alleged loan and complaint and hence
there is no force in the contention.
(b) The next contention of course, relates to want of registration of firm. Ex. P6 is the
partnership deed dated 12.05.1997 of complainant's firm which shows that the said
firm started its money lending business at Nizamabad under the name and style M/s.
Sri Karuna Finance and Enterprises w.e.f. 17.04.1997. The partnership deed contains
'at will' clause. Be that it may, Ex. P8 is the certificate dated 24.02.1999 issued by
the Registrar of Firms acknowledging the receipt of statement prescribed by Section
58(1) of Indian Partnership Act from the complainant-firm and entering of said
statement in the register of firms. Thus, it is clear complainant's firm was not
registered as on the date of alleged loan i.e. 10.11.1998 and also the date of
complaint i.e. 22.02.1999.
(c) The effect of non-registration is dealt with in Section 69 of Partnership Act which
reads thus:
"Section-69: Effect of non-registration.-
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 "Section-69: Effect of non-registration.-
(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.
(3) x x x
(4) x x x x
16. Since the word 'suit' is employed in sub-section (2) imposing an embargo to
institute the suit by an unregistered firm, there was a dichotomy of opinion among
different High Courts as to whether the bar engrafted in sub-section (2) also applies
to criminal proceedings particularly private complaints lodged by an unregistered
firm.
17. In Amit Desai and another v. Shine Enterprises and State MANU/AP/0776/2000 :
2000 Crl.L.J. 2386 a Division Bench of this Court dealt with the issue whether a
private compliant filed under Section 138 of NI Act can be quashed under Section
482 Cr.P.C. at the instance of accused on the ground that complainant- Firm was not
registered under Section 69 of Partnership Act. Repelling the contention of
respondent/complainant that the bar engrafted in Section 69 would be applicable
against civil suits but not criminal cases the DB observed thus:
"Para-13: x x xx... Explanation to Section 138 of the Negotiable Instruments
Act specifically laid down that the debt or other liability means a legally
enforceable debt or other liability. Enforcement of legal liability has to be in
the nature of civil suit because the debt or other liability cannot be recovered
by filing a criminal case and when there is a bar of filing a suit by
unregistered firm, the bar equally applies to criminal case as laid down in
explanation (2) of Section 138 of the Negotiable Instruments Act."
In that process, the Division Bench differed with the ruling of a learned single Judge
of a High Court of Kerala Abdul Gafoor v. Abdurahiman MANU/KE/1020/1999wherein
it was held that the bar under Section 69 of Partnership Act is applicable only to civil
rights but not criminal cases.
The DB accordingly quashed the criminal case.
1 8 . Later, the High Court of Bombay (Aurangabad Bench) in Sai Accumulator
Industries Sangamner v. Sethi Brothers Aurangabad MANU/MH/0577/2016 : 2017 (3)
Crimes 42 (Bombay) following the decision of the A.P. High Court held thus:
"Para-9: Perusal of Section 138 of the Act shows that it has to be a
transaction which relates to legally enforceable debt or other liability. It is
quite clear that under Section 69(2) of the Partnership Act, the complainant,
unregistered partnership could not have legally enforced the debt. If being
unregistered partnership it cannot legally enforce the debt, it is not legally
enforceable debt and would go out of the purview of Section 138 of the N.I.
Act. When complaint was filed complainant was not a registered partnership
and thus could not have, at that time, filed the complaint. In this view of the
matter, the reasonings recorded by the Hon'ble High Court in the matter of
Mr. Amit Desai, supra, appear to be apt for consideration of the present
matter. Adopting the said view in the matter of Mr. Amit Desai, supra, I find

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 that the trial Court did not err while rejecting the complaint and acquitting
the accused. I do not find myself persuaded by the Judgments in the matter
of Abdul Gafoor and Gurcharan Singh (supra). There is no reason to interfere
in the acquittal recorded by the trial Court, which is possible view of the
matter."
In that process, the High Court of Bombay was not persuaded by the judgment of
High Court of Kerala in Abdul Gafoor's, case (supra) and High Court of Allahabad in
Gurucharan Singh v. State of UP and another 2002 Crl.L J 3682 : 2003 (1) ALD (Crl.)
121 : 2002 (6) ALT 2.3 (DN OHC).
19. The High Courts of AP and Bombay have laid stress on the explanation to Section
138 of NI Act which says that for the purpose of said section "debt or other liability
means "legally enforceable debt or other liability''' which cannot be enforced in
criminal case and in case civil suit is to be filed bar under Section 69 of Partnership
Act would attract and therefore, the said bar equally applies to criminal case under
Section 138 of NI Act.
We will now peruse the decisions expressing contra opinion.
20. In Abdul Gafoor's case (supra) the revision petition who was convicted for the
offence under Section 138 of NI Act took the plea that the prosecution was not
sustainable under Section 69(2) of Partnership Act as the 1st respondent was an
unregistered partnership firm. Reiterating the contention, learned single Judge held
that the fact of non-registration of partnership firm under Section 69 of Partnership
Act was applicable only to cases involving civil rights and which has no application to
criminal cases. As already noted, the High Courts of AP and Bombay not agreed with
the same.
2 1 . In Kerala Arecanut Stores v. Ramkishore and Sons and another
MANU/KE/0039/1975 : AIR 1975 Kerala 144a Division Bench of High Court of Kerala
was engaged with the question whether an unregistered firm in whose favour a
cheque was endorsed can maintain a suit for recovery of money. The Division Bench
opined that there was no privity of contract between the maker of the cheque and the
unregistered firm who is the holder in due course. Any right of action available to
such holder was not under any contract, for he was a third party to the contract. It
must be said the above decision has no direct bearing on the issue.
22. In Beacon Industries rep. by its Partner v. Anupam Ghosh MANU/KA/0541/2003
the High Court Karnataka referred several decisions including AP and Supreme Court
and held that Section 69 (2) of Partnership Act has no application to criminal cases.
It must be noted that the judgment of Apex Court in BSI Limited and others v. Gift
Holdings Private Limited and others MANU/SC/2443/2000 : (2000) 2 SCC 737 was in
a different context. In the said case, the Apex Court was dealing with Companies and
their Directors struggling themselves to get extricated from the catch of prosecution
filed against them under Section 138 of NI Act, moved the Company Board for
Industrial Finance and Reconstruction (for short 'BIFR') to declare it as sick industrial
company. When the proceedings were pending before the BIFR under Section 16 of
Sick Industrial Companies (Special Provisions) Act, 1985 (for short "SICA") a
declaration was made by the order passed by BIFR in terms of Section 22(3) of SICA.
Basing on the said order, the appellant/BSI contended before the Supreme Court that
it was not liable to be prosecuted in view of embargo contained in Section 22(1) of
SICA. The Apex Court observed Section 138 of NI Act was introduced in 1988 when
SICA was already in vogue and Parliament did not think it necessary to exclude
companies falling under Section 22 of SICA from the operation of NI Act. More

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 significantly, when Section 22(1) of SICA was amended in 1994 by inserting the
words "and no suit for the recovery of money or for enforcement of any security
against industrial company or of any guarantee in respect of any loans or advance
granted to industrial company", Parliament did not specifically include prosecution
proceedings within the ambit of the said ban. The Apex Court ultimately concluded
that if the commission of offence under Section 138 of the NI Act was completed
before the commencement of proceedings under Section 22(1) of SICA there was no
hurdle in any of the provisions of SICA against the maintainability and prosecution of
a criminal complaint duly instituted under Section 142 of the NI Act.
2 3 . Thus, a close scrutiny of above decision would show that the Honourable
Supreme Court was dealing with the rights of third parties to launch criminal
prosecution against the company who was under the proceedings of SICA but it was
not a case of right of the company to proceed against the third parties.
2 4 . In Sai Accumulator Industries Sangamner's case (supra), the High Court of
Bombay discussed this aspect and observed that the judgment of Honourable Apex
Court was in different context and there is a sea difference between right to
prosecute and right not to be prosecuted unless provisions are complied. Therefore,
the decision of High Court of Karnataka in Beacon Industries (9 supra) which was
based on the judgment in BSI Limited (11 supra) cannot be followed as the latter
judgment was rendered on a different footing.
2 5 . The High Court of Allahabad in Gurucharan Singh (supra) and High Court of
Delhi in Rani Kapoor v. Silvermount MANU/DE/1868/2017 have expressed the view
that the bar created for maintaining the suit in Section 69 of Partnership Act by an
unregistered firm cannot be stretched and applied to maintain the criminal
proceedings under Section 138 of NI Act.
26. So, on a conspectus of the above jurimetrics, the High Court of AP and High
Court of Bombay held that a private complaint under Section 138 of NI Act is not
maintainable at the instance of an unregistered firm in view of explanation to Section
138 of NI Act where it is mentioned that "debt or other liability" means "legally
enforceable debt or other liability". Whereas the judgments of other High Courts
mostly went on the premise that since in Section 69(2) of Partnership Act the word
'suit' is only mentioned, criminal prosecution is not barred thereby. Some of the
decisions were rendered basing on the Apex Court judgment in BSI Limited (11
supra). If Section 69 of Partnership Act alone is taken into consideration, it would
appear as if suits alone are barred and not criminal prosecution. However, the
explanation to Section 138 of NI Act cannot be ignored because the matter under
consideration is in respect of a private complaint filed under Section 138 of NI Act.
So far as the judgment of Apex Court is concerned, as already stated supra, it was
rendered in a different context.
27. So, in my view, the judgments of High Courts of Bombay and Andhra Pradesh
alone can be considered and followed. Even otherwise, the judgment of Division
Bench of this Court is a binding precedent for me. The net result is the complaint in
the instant case is hit by Section 69 of Indian Partnership Act.
This point is answered accordingly.
28. In the result, in view of my findings in points 1 to 3, there are no merits in the
Criminal Appeal and accordingly, the same is dismissed by confirming the judgment
in Criminal Appeal No. 37 of 2004 on the file of Sessions Judge, Nizamabad.
As a sequel, miscellaneous applications pending, if any, shall stand closed.

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