The Bombay High Court has dismissed an appeal challenging the acquittal of a partnership firm and its partners in a case filed under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). Justice Neela Gokhale upheld the findings of the Additional Sessions Judge, Pune, ruling that the complainant failed to establish the existence of a legal debt or liability between himself and the accused, and failed to make specific averments regarding the role of the partners in the complaint.
Background of the Case
The appeal was filed by Vijaykant Motilal Kothari (the Appellant) against the State of Maharashtra and Om Engineers and Builders along with its partners (Respondents No. 2 to 7).
According to the complaint, in July 2004, one Mr. Hirachand Raichand Pagaria took a hand loan of Rs. 56,50,000 from the complainant. The complainant alleged that the accused persons, being close friends of Mr. Pagaria, undertook to satisfy the loan amount. Consequently, Respondent No. 3 (Original Accused No. 2) allegedly issued a cheque dated January 31, 2006, for an amount of Rs. 78,00,000 drawn on Bank of Baroda, in favour of the complainant.
The cheque was dishonoured upon presentation. Following a legal notice which allegedly went unanswered, a complaint was filed. The Judicial Magistrate, First Class (JMFC), Pune, convicted the accused on March 1, 2008. However, the Additional Sessions Judge, Pune, allowed the appeal filed by the accused and set aside the conviction on January 31, 2011. The complainant then approached the High Court.
Arguments and Evidence
The complainant examined himself and three other witnesses, including bank officials and a witness to the handing over of the cheque. The complainant deposed that the accused had voluntarily undertaken the responsibility of Mr. Pagaria’s debt.
However, during cross-examination, the complainant admitted that he was “unable to specifically state which of the Accused was in charge of the affairs of the Firm at the relevant time.”
Court’s Observations and Analysis
Justice Dr. Neela Gokhale adjudicated the matter on two primary legal issues:
- Whether the offence under Section 138 of the NI Act is committed in the absence of evidence that the cheque was issued in discharge of a third party’s liability.
- Whether a partner can be prosecuted without specific averments in the complaint regarding their role.
On the Scope of Appeal Against Acquittal
Referring to Supreme Court precedents in Rajesh Prasad v. State of Bihar and H.D. Sundara & Ors. v. State of Karnataka, the Court reiterated that an appellate court should not disturb a finding of acquittal unless the judgment suffers from patent perversity or is based on a misreading of evidence. The Court noted the “double presumption of innocence” in favour of the accused after an acquittal by the trial court.
On Liability and Privity of Contract
The High Court observed that apart from the complainant’s “blanket statement” in the chief-examination, there was no documentary record to prove that the accused took over Mr. Pagaria’s liability. The Court noted:
“The Complainant is unable to explain how the amount of the hand loan of Rs. 56,50,000/- taken by Mr. Pagaria has risen to Rs. 78,00,000/-, which is the amount of the cheque dishonoured. There is no explanation regarding the rate of interest to justify the increase in the amount…”
The Court upheld the Sessions Court’s finding that the complainant “never had any financial relations with the Accused” prior to the cheque issuance and that there was no privity of contract between them.
On Vicarious Liability of Partners
Addressing the liability of the partners, the Court observed that the complaint contained only a bald averment that the accused were responsible for the day-to-day affairs of the firm. Relying on the Supreme Court’s decision in Kamalkishore Shrigopal Taparia v. India Ener-Gen Private Limited & Anr. (2025) and N.K. Wahi v. Shekhar Singh (2007), the Court held that mere designation is insufficient.
Quoting N.K. Wahi v. Shekhar Singh, the Court stated:
“To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction… But still, in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable.”
Decision
The High Court concluded that none of the accused had any legal debt or other liability towards the complainant. Furthermore, there was no evidence indicating which partner was responsible for the business conduct involving the alleged takeover of Mr. Pagaria’s liability.
Justice Gokhale held that the impugned judgment of acquittal did not suffer from patent perversity. Consequently, the appeal was dismissed.
Case Details:
- Case Title: Mr. Vijaykant Motilal Kothari vs. The State of Maharashtra & Ors.
- Case No.: Criminal Appeal No. 1120 of 2011
- Coram: Justice Neela Gokhale
