# Mohnish Jain & Anr v. State of U.P. & Anr

- **Citation:** (2025) 5 ILRA 321
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2025-05-27
- **Case number:** Application U/S 528 BNSS No. 30850 of 2024
- **Bench:** Vikas Budhwar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/mohnish-jain-anr-v-state-of-u-p-anr-53370
- **Pages:** 32

## Headnote

Law
-
Bharatiya
Nagarik
Suraksha Sanhita, 2023 - Section 528 -
Criminal Procedure Code, 1973 - Section
482 - Negotiable Instruments Act, 1881 -
Sections 7, 8, 9, 138, 141 & 142 - Indian
Partnership Act, 1932 - Sections 2, 2(a),
4, 11, 18, 19 & 22 - The Insolvency And
Bankruptcy Code, 2016 - Section 14 -
Application
-
challenging
summoning
the
summoning orders and dismissal of criminal
revision -- under Section 138 of the NI Act,
1881 - dishonour of four cheques, due to
insufficient funds - Complaint Case - summon
orders - Criminal Revision - dismissed - plea
taken that the complaint was filed by a partner
without authorization from the firm, which was
the actual payee, - and the absence of firm
authorization violates Sections 19 and 22 of the
Indian Partnership Act - Additionally, they argue
that proceedings are barred under Section 14 of
322 INDIAN LAW REPORTS ALLAHABAD SERIES
the Insolvency and Bankruptcy Code - due to an
NCLT order placing firm under moratorium -
They also claim non-compliance with Section
141 of the NI Act - court finds that, the
revisional court failed to adequately consider
substantive legal objections, rendering its order
legally unsustainable - however, the judgment
ultimately affirms the maintainability of the
complaint under Section 138 of the NI Act -
court held that, (i) a partner, acting as an agent
of the firm, possesses implied authority to
initiate proceedings when the cheque is issued
in the firm's name - (ii) applicants being
Directors of the body corporate are not entitled
to any protection u/s 14 of the IBC and they
have no right to forestall the proceedings u/s
138 NI Act, - relies on authoritative rulings
including P. Mohanraj, Ajay Kumar Goenka, and
Rakesh Bhanot, court reiterates that disputed
facts and presumptions under Section 139 must
be adjudicated at trial - cautions against
premature quashing under Section 482 CrPC -
accordingly,
no
jurisdictional
error
was
committed by the trial court - consequently,
both applications are dismissed. (Para - 9, 10,
11)

Application Dismissed. (E-11)

List of Cases cited:

## Text

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5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
321
framework be enacted to meet the
transformative changes in online betting
and gaming. In the light of critical issue
raised herein, this Court, exercising its writ
jurisdiction and the authority vested in the
High Court, takes a suo motu cognizance
and hereby directs the State Government to
constitute a High-Powered Committee,
comprising Prof. K.V. Raju, Economic
Advisor to the Government of Uttar
Pradesh, as its chairperson, to examine all
relevant factors, particularly those outlined
above comprehensively to meet out the
legislative necessity arising from the
transformed
socio-technological
concerning online betting and gaming. The
Committee may include the Principal
Secretary, State Tax as Member Secretary,
besides other experts as Members. Their
collective input should be used to develop a
comprehensive
and
well-structured
legislative framework for regulating and
monitoring online gaming and public
betting.

25. So far as merits of the present
case is concerned, I find force in the
argument of learned counsel for the
applicants that the investigation has been
barred
by
section
155
(2)
Cr.P.C.,
therefore, the entire exercise undertaken by
the police stands vitiated in law, thus, the
impugned charge sheet dated 27.12.2022
arising out of Case Crime No. 69 of 2022,
under Section 3/4 Public Gambling Act,
1867, registered at P.S. Mantola, District
Agra, as well as impugned summoning
order dated 23.05.2023, passed by the
Judicial Magistrate-I, Agra are hereby
quashed with the liberty to police to initiate
fresh investigation after complying with
existing provisions of law.

26.
Accordingly,
the
present
application stands allowed.
27. The Registrar (Compliance) is
directed to transmit a copy of this order
forthwith
to
the
Chief
Secretary,
Government
of
Uttar
Pradesh
for
compliance.
---------
(2025) 5 ILRA 321
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: ALLAHABAD 27.05.2025

BEFORE

THE HON'BLE VIKAS BUDHWAR, J.

Application U/S 528 BNSS No. 30850 of 2024
With
Application U/S 528 BNSS No. 30822 of 2024

Mohnish Jain & Anr. ...Applicants
Versus
State of U.P. & Anr. ...Opposite Parties

Counsel for the Applicants:
Balbeer Singh, Sr. Advocate

Counsel for the Opposite Parties:
Abhinav Jaiwal, G.A., Ravi Anand Agarwal,
Shreya Gupta

Criminal
Law
-
Bharatiya
Nagarik
Suraksha Sanhita, 2023 - Section 528 -
Criminal Procedure Code, 1973 - Section
482 - Negotiable Instruments Act, 1881 -
Sections 7, 8, 9, 138, 141 & 142 - Indian
Partnership Act, 1932 - Sections 2, 2(a),
4, 11, 18, 19 & 22 - The Insolvency And
Bankruptcy Code, 2016 - Section 14 -
Application
-
challenging
summoning
the
summoning orders and dismissal of criminal
revision -- under Section 138 of the NI Act,
1881 - dishonour of four cheques, due to
insufficient funds - Complaint Case - summon
orders - Criminal Revision - dismissed - plea
taken that the complaint was filed by a partner
without authorization from the firm, which was
the actual payee, - and the absence of firm
authorization violates Sections 19 and 22 of the
Indian Partnership Act - Additionally, they argue
that proceedings are barred under Section 14 of
322 INDIAN LAW REPORTS ALLAHABAD SERIES
the Insolvency and Bankruptcy Code - due to an
NCLT order placing firm under moratorium -
They also claim non-compliance with Section
141 of the NI Act - court finds that, the
revisional court failed to adequately consider
substantive legal objections, rendering its order
legally unsustainable - however, the judgment
ultimately affirms the maintainability of the
complaint under Section 138 of the NI Act -
court held that, (i) a partner, acting as an agent
of the firm, possesses implied authority to
initiate proceedings when the cheque is issued
in the firm's name - (ii) applicants being
Directors of the body corporate are not entitled
to any protection u/s 14 of the IBC and they
have no right to forestall the proceedings u/s
138 NI Act, - relies on authoritative rulings
including P. Mohanraj, Ajay Kumar Goenka, and
Rakesh Bhanot, court reiterates that disputed
facts and presumptions under Section 139 must
be adjudicated at trial - cautions against
premature quashing under Section 482 CrPC -
accordingly,
no
jurisdictional
error
was
committed by the trial court - consequently,
both applications are dismissed. (Para - 9, 10,
11)

Application Dismissed. (E-11)

List of Cases cited:

1. Criminal Revision Case No. 628 of 2023
(Pawan Kumar Jain & ors.Vs St. of U.P,

2. Porbandar Commercial and Cooperative Bank
Ltd. Vs Bhanji Lavji AIR 1984 (Guj) 106,

3. Govind Ram Chanani Vs Latha & ors.2009
SCC OnLine Kar 39,

4. Suresh Sharma Vs New Kolvell Industries
& ors.: Crl. Appeal No. 745 of 2007 dated
23.01.2009 High Court of Delhi at New
Delhi,

5. P.K. Selvaraj Vs Umadevi Sundaram Manu -
(TN)/5198/2021 Mad High Court,

6. Sushil Kumar Vs IBM Pvt. Ltd. - Crl. M.C.
122/2010 Delhi High Court,

7. Raghu Lakshminarayan Vs Fine Tubes, (2007)
5 SCC 103 (Supreme Court)
8. Ravindra Nathabajpe Vs Mangalore Special
Economic Zone Pvt. Ltd. & others, 2021 SCC
OnLine SC 806 (Supreme Court),

9. Ashok Shewakramani & ors.Vs St. of Andhra
Pradesh & anr.- 2023 SCC OnLine SC 958,

10. Bhupesh Rathod Vs Daya Shankar Prasad
Chaurasiya & anr.(2022) 2 SCC 355,

11. Vishnu Mittal Vs M/s. Shakti Traders
Company, SLP Crl. No. 1104 of 2022 decided on
17.03.2025

12. A.K. Ravi Nedungadi & ors.Vs St. of U.P. &
others, 6 Application u/s 482 No. 72 of 2020
decided on 13.10.2020 (Allahabad High Court),

13. Madras High Court Rangabashyam Vs VS
Rajeshwari - Crl. O.P. No. 13147 of 2015

14. Prem Raj Vs Poonamma Menon & anr.-
(2024) 6 SCC 143, ,

15. Alchemist Asset Reconstruction Company
Ltd. Vs M/s. Hotel Gaudavan Pvt. Ltd.: (2018)
16 SCC 94.

16. P. Mohanraj & ors.Vs M/s Shah Brothers
Ispat Pvt. Ltd. 2021 (0) Supreme (SC) 115,

17. Ajay Kumar Radheshyam Goenka (2023) 10
SCC 545,

18. Rakesh Bhanot Vs M/s. Gurdas Agro:
Criminal Appeal No. 1607 of 2025 decided on
01.04.2025,

19. Rathish Babu Unnikrishnan Vs The St. (Govt.
of NCT of Delhi) & Anr. : 2022 (0) Supreme (SC)
366,

20. ICDS Ltd. Vs Beena Shabeer (2002)Supp 1
SCR 488,

21. M/s M.M.T.C. Ltd. Vs Medchl Chemicals and
Pharma (P) Ltd. (2002) 1 SCC 234,

22. Abhishek Jain Vs St. of U.P. 2023 (0)
Supreme (All) 1581,

23. M/s Samrat Shipping Company Pvt. Ltd. Vs
Dolly George J.T. 1999 (10) SC 381,
5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
323
24. National Small Industries Corporation Ltd. Vs
St. (NCT of Delhi) & etc. (2008) 16 S.C.R. 83,

25. Ashutosh Ashok Parasrampuriya & anr.Vs
Gharrkul Industries Pvt. Ltd. & ors.AIR 2021 SC
4898.

26. C.I.T. Vs R.M. Chidambaram Pillai &
ors.1977 (1) SCC 431

27. Munshi Ram Vs Municipal Committee 1979
(3) SCC 83,

28. N Khadervali Saheb & anr.Vs N. Gudu Sahib
& ors.(2003) 3 Supreme Court Cases 229,

29. VS Subramaniam Vs Rajesh Raghuvandra
Rao (2009) 5 SCC 608,

30. Tanna and Modi Vs C.I.T. Mumbai (2007) 7
SCC 434.

31. Sanganer Dal and Flour Mill Vs F.C.I. &
ors.(1992) 1 SCC 145,

32. M/s Samrat Shipping Company Pvt. Ltd. Vs
Dolly George J.T. 1999 (10) SC 381,

33. Har. St. Cooperative Supply and Marketing
Federation Ltd. Vs Jayam Textiles & anr.(2014) 4
SCC 704,

34. Padmawati Finanace Vs Md. Yosuf Ali:
Criminal Appeal No. 3608 of 2009 decided on
05.07.2023.

35. M/s. Naresh Potteries Vs M/s Aarti Industries
& anr.SLP (Criminal) No. 8659 of 2023 decided
on 02.01.2025.

(Delivered by Hon'ble Vikas Budhwar, J.)

1.
Impugned
in
the
present
proceedings by way of leading application
preferred by Mohnish Jain, Pawan Kumar
Jain
and
connected
application
by
Siddharth Jain is an order dated 21.07.2023
passed by the Court of Additional Civil
Judge (J.D.), Court No. 4, Agra in
Complaint Case No 18168 of 2023,
whereby the applicants in both the
applications have been summoned under
Section 138 of the Negotiable Instrument
Act, 1881 and the order dated 24.07.2024
passed by the Court of Additional Sessions
Judge, Court No. 17, Agra in Criminal
Revision Case No. 628 of 2023 (Pawan
Kumar Jain and others Vs. State of U.P.)
whereby the revision preferred by the
applicants herein in leading application
against
the
summoning
order
dated
21.07.2023 has been dismissed.

2. A joint statement has been made
by the learned counsel for the parties that
they do not propose to file any additional
affidavit and the application be decided on
the basis of the documents available on
record. With the consent of the parties, the
applications are being decided at the fresh
stage.

3. Broadly, the facts are that the
opposite party no. 2, Rohit Agarwal, claims
himself to be a partner of a firm by the
name of M/s. Metal Products which is
engaged in manufacturing and supplying of
Bare/Insulated Copper and Aluminium
Wire. According to the opposite party no.
2, it had supplied bare/insulated copper and
Aluminium wire to M/s. Kotsons Pvt. Ltd.
which is a company registered under the
Companies Act. Allegation is that for the
discharge of liability which had accrued on
account of purchase of the bare/aluminium
wire, four cheques bearing no. 598081,
598082,
598083
and
598084
dated
01.12.2022 of Rs. 50,00,000/- each was
drawn on behalf of the company Kotsons
Pvt. Ltd. by one of the Director, Siddharth
Jain who is the applicant in the connected
application. The said cheques are stated to
have been presented in the bank of the
drawee/holder on 22.02.2023 which came
to be dishonored on 23.02.2023 on account
of insufficient funds. Statutory notices were
324 INDIAN LAW REPORTS ALLAHABAD SERIES
issued to the company, Kotsons Pvt. Ltd. as
well as the Director namely Mohnish Jain,
Pawan Kumar Jain (applicants in the
leading application) and Siddharth Jain (the
applicant in the connected application) on
20.03.2023 which is stated to have been
served upon the company as well as the
applicants in both the applications who are
Directors on 22.03.2023. Despite service of
the statutory notice, when the said
payments were not made so on 21.04.2023,
a complaint under Section 138 of the NI
Act came to be filed. The same led to
issuance of the order dated 21.07.2023
passed by Additional Civil Judge (J.D.),
Court No. 4, Agra in Complaint Case No.
18163 of 2023.

4.
Assailing
the
summoning
order dated 21.07.2023 passed by the
Court of Additional Civil Judge (J.D.),
Court No. 4, Agra, revision came to be
filed by the applicants in the leading
application (Pawan Kumar Jain and
Mohnish Jain) being Criminal Revision
No. 628 of 2023 which, on contest, came
to be rejected on 24.07.2024 by the
Court of Additional Civil Judge Court
No. 17, Agra.

5. As per the records, applicant in
the connected application has not preferred
revision
and
has
filed
the
present
Application under Section 528 of BNSS
No. 30822 of 2023.

6. The leading and connected
applications came to be entertained by this
Court wherein interim order was accorded
on 05.02.2025, since the interim orders in
leading and the connected applications are
verbatim the same, thus, for the sake of
brevity, the order dated 05.02.2025 passed
in Application u/s 528 of BNSS No. 30850
of 2024 is being quoted hereinunder.-
 "1. Heard Sri Gopal Swaroop
Charturvedi,
learned
Senior
Advocate
assisted by Sri Balbeer Singh, learned
counsel for the applicants and Sri Sunil Kr.
Kushwaha, learned A.G.A. for the State.

2. The instant application has
been filed seeking quashing of the
impugned order dated 24.7.2024 passed in
Criminal Revision No. 628 of 2023 (Pawan
Kumar Jain and another vs. State of U.P.
and others) along with entire proceeding of
compliant case No. 18168 of 2023 (Rohit
Agrawal v. Kotsons Pvt. Ltd. and others),
under Section 138 N.I. Act, P.S. Hariparvat
Agra, District Agra, including cognizance
order dated 21.7.2023.

3. Contention of learned counsel
for the applicants is that the cheque in
question was issued in favour of the
partnership firm M/s Metal Products, but
the impugned complaint has been filed by
one
of
its
partners
without
any
authorization on behalf of the firm. It is
further submitted by the Senior Counsel
that the position of partnership firm is
different from the proprietorship concerned
as on bouncing of the cheque, issued in
favour of the proprietorship concerned, its
proprietor can file a complaint, but in the
case of partnership firm, a complaint can be
filed under Section 138 N.I. Act by the
partnership firm through its partner and the
partner can also file a complaint under
Section 138 N.I. Act on bouncing of the
cheque issued in favour of the partnership
firm but there should be authorization on
behalf of the firm. It is also submitted that
the cheque in question was issued in favour
of the firm, therefore, the firm is payee and
the partner cannot be treated as the payee
and he can be treated as the holder in due
course only after authorization on behalf of
the firm. In support of his contention,
learned Senior Counsel has relied upon the
judgement of the Apex Court in the case of
5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
325
Bhupesh
Rathod
vs.
Dayashankar
Prasad Chaurasia and another; (2022) 2
SCC 355.

4. Matter requires consideration.

5. Issue notice to opposite party
No.2.

6.
Learned
counsel
for
the
applicants is also permitted to make
personal service upon opposite party No. 2.

7. List in the week commencing
3.3.2025 as fresh.

8. Till the next date of listing, no
coercive action shall be taken against the
applicants in the aforesaid case."

7. Post issuance of notice upon the
opposite party no. 2-complainant, the
opposite party no. 2-complainant appeared
through its counsel and on 04.04.2025
made a statement at bar that she does not
propose to file any response to the
applications.
As
per
the
records,
a
supplementary affidavit came to be filed by
the applicants in the leading application
dated 28.04.2025 and and thereafter on
01.05.2025, the following orders were
passed in the leading application.-

"Heard Shri Gopal Swarup
Chaturvedi, Senior Advocate assisted
by Ms. Suruchi Kasliwal Multani and
Shri Balbeer Singh, learned counsel for
the applicant in leading and connected
applications and Sri S.K. Singh, learned
AGA for the State as well as Ms.
Shreya Gupta, counsel for opposite
party no. 2.

The Court has been apprised that
a supplementary affidavit dated 29.04.2025
has been filed which is available on record
on behalf of the applicants but Ms. Shreya
Gupta submits that she does not propose to
file any response to the same.

Arguments
concluded
and
judgment reserved."

Arguments
of
the
applicants
(leading and connected applications)

8. Shri Gopal Swarup Chaturvedi
Senior Advocate assisted by Suruchi
Kasliwal Multani and Shri Balbeer Singh
has
submitted
that
the
order
dated
21.07.2023 summoning the applicants
cannot be sustained for even a single
moment as the same suffers from infirmity
and
illegality.
Elaborating
the
said
submission, firstly, it is submitted that the
complaint itself was not maintainable
particularly when the same was filed by
one of the partners of Metal Products and
not by the firm and since the cheque was
drawn in favour of Metal Products being a
partnership firm, thus, the opposite party
no. 2-complainant was neither the drawee
nor payee or holder in due course. It is also
submitted that under Section 138 of the NI
Act, it is only the payee or the holder in due
course of the cheque who is competent to
issue a statutory demand notice and to file
complaint.

9. In a nutshell, it is submitted that
the opposite party no. 2-complainant only
being a partner of a partnership firm had no
authority under law to have either issued
demand notice or to have lodged complaint
under Section 138 of the NI Act. Secondly,
it has been submitted that even assuming
without admitting the opposite party no. 2
as a partner of a partnership firm could
have filed a complaint but there was no
authorization of the partnership firm so as
to authorize him to lodge proceedings
under Section 138 of the NI Act. Thirdly,
the bar contained under Sections 19 and 22
of the Indian Partnership Act, 1932 would
come in the way of lodging criminal
proceedings by a partner particularly when
there was no implied authority so enjoined
with the complainant as a partner to lodge
326 INDIAN LAW REPORTS ALLAHABAD SERIES
proceedings. Fourthly, the bar of Section
14 of the Insolvency and Bankruptcy Code,
2016 would apply particularly when the
company of which the applicants were the
Directors was under monetarium regime
vide order dated 09.06.2023 of National
Company Law Tribunal, New Delhi (III) in
the proceedings in IB-761(ND/2022) State
Bank of India Vs. M/s. Kotsons Pvt. Ltd.
Fifthly, though the cheque has been issued
on behalf of the company Kotsons Pvt. Ltd.
by
the
applicant
in
the
connected
application in the capacity of Director,
Siddhartha Jain but there have been
virtually no compliance of the provisions of
Section 141 of the NI Act with respect to
the recital in the complaint that every
person who at the time of offences
committed was incharge of and was
responsible to the company. Insofar as the
other applicants in the leading application
being Mohnish Jain and Pawan Kumar Jain
are concerned, since the said averments are
lacking
in
the
complaint,
thus,
the
proceedings ought to have been rejected
and there was no question of summoning
the applicants.

10. Seventhly, it has been argued
that though in the revision preferred by the
applicants in the leading application against
the summoning order, several legal grounds
were taken which goes to the root of the
matter but the revisional court has not
considered any of the grounds except one
relating to the fact that the opposite party
no. 2-complainant had the authority to
lodge criminal proceedings. Thus, it is
submitted that the revisional order is illegal
as it skips to consider the legal grounds
taken by the applicants.

11. In order to buttress the
aforesaid submissions, reliance has been
placed upon the following judgments (1)
Porbandar Commercial and Cooperative
Bank Ltd. Vs. Bhanji Lavji AIR 1984
(Guj) 106, (2) Govind Ram Chanani Vs.
Latha and others 2009 SCC OnLine Kar
39, (3) Suresh Sharma Vs. New Kolvell
Industries and others: Crl. Appeal No.
745 of 2007 dated 23.01.2009 High Court
of Delhi at New Delhi, (4) P.K. Selvaraj
Vs.
Umadevi
Sundaram
Manu
(TN)/5198/2021 Mad High Court, (5)
Sushil Kumar Vs. IBM Pvt. Ltd. Crl.
M.C. 122/2010 Delhi High Court, (6)
(2007) 5 SCC 103 (Supreme Court)
Raghu Lakshminarayan Vs. Fine Tubes,
(7) Ravindra Nathabajpe Vs. Mangalore
Special Economic Zone Pvt. Ltd. &
others, 2021 SCC OnLine SC 806
(Supreme Court), (8) 2023 SCC OnLine
SC 958 Ashok Shewakramani & others
Vs. State of Andhra Pradesh & another,
(9) Bhupesh Rathod Vs. Daya Shankar
Prasad Chaurasiya and another (2022) 2
SCC 355, (10) Vishnu Mittal Vs. M/s.
Shakti Traders Company, SLP Crl. No.
1104 of 2022 decided on 17.03.2025 (11)
A.K. Ravi Nedungadi and others Vs.
State of U.P. & others, Application u/s
482 No. 72 of 2020 decided on 13.10.2020
(Allahabad High Court), (12) Crl. O.P.
No. 13147 of 2015 Madras High Court
Rangabashyam Vs. V. Rajeshwari, (13)
(2024) 6 SCC 143, Prem Raj Vs.
Poonamma Menon and another, (14)
Alchemist
Asset
Reconstruction
Company Ltd. Vs. M/s. Hotel Gaudavan
Pvt. Ltd.: (2018) 16 SCC 94.

Argument of the counsel for the
opposite party no. 2-complainant

12. Countering the submissions so
made on behalf of the learned counsel for
the applicants Ms. Shreya Gupta, learned
counsel who appears for the opposite party
no. 2-complainant has submitted that the
5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
327
order dated 21.07.2023 summoning the
applicants under Section 138 of the NI Act
as well as the order rejecting the revision
does not suffer from any illegality and no
interference is called for. Submission is that
the complainant/opposite party had the
competence and the authority to lodge
criminal proceedings as he was one of the
partners of the partnership firm and he
being the agent of the firm had the right to
lodge complaint. It is also submitted that
even if it is assumed though not admitted
that the complainant/opposite party no. 2
being a partner had no authorization in his
favour then the complaint cannot be
rejected
outrightly
as
opportunity
to
produce authorization can be given at a
later stage as the same is a curable defect. It
is next contended that none of the other
partners of the partnership firm, Metal
Products have come forward to state that
they
have
not
authorised
the
complainant/opposite party no. 2 to lodge
the complaint, thus, the contention so
raised by the counsel for the applicants is
superfluous. It is also contended that the
opposite party no. 2-complainant who acted
as an agent of the partnership firm had an
implied
authority
to
lodge
complaint/proceedings. It is also contended
that the partnership is an association of
partners and the rights and liabilities of the
partners are equal and one and for the
benefit of firm in order to augment revenue
and resources, the actual amount due and
payable can also be realised by any of the
partners
while
lodging
criminal
proceedings under Section 138 of the NI
Act. Submission is also that there are
specific recitals contained in the complaint
itself as per the requirement of Section 141
of the NI Act and the applicants being the
Directors were, in fact, incharge of and
were responsible to the company for the
conduct, affairs and the business. So far as
the question of bar of Section 14 of the IBC
is concerned, it is submitted that the
protection under the said provision only
stands attracted in case of Corporate Debtor
i.e., company Kotsons Pvt. Ltd. and not
against the Directors. Lastly, it is submitted
that this Court may not interfere at this
stage particularly when only summons have
been issued that too in the present
proceedings as law is well crystallized that
the investigation cannot be throttled in the
present proceedings at the summoning
stage. Reliance has been placed on the
following judgments.-

(1) P. Mohanraj and others Vs.
M/s Shah Brothers Ispat Pvt. Ltd. 2021
(0) Supreme (SC) 115, (2) Ajay Kumar
Radheshyam Goenka (2023) 10 SCC 545,
(3) Rakesh Bhanot Vs. M/s. Gurdas
Agro: Criminal Appeal No. 1607 of 2025
decided on 01.04.2025, (4) Rathish Babu
Unnikrishnan Vs. The State (Govt. of
NCT of Delhi) & Anr. : 2022 (0)
Supreme(SC) 366, (5) ICDS Ltd. Vs.
Beena Shabeer (2002)Supp 1 SCR 488,
(6) M/s M.M.T.C. Ltd. Vs. Medchl
Chemicals and Pharma (P) Ltd. (2002) 1
SCC 234, (7) Abhishek Jain Vs. State of
U.P. 2023 (0) Supreme (All) 1581, (8)
Bhupesh
Rathod
vs.
Dayashankar
Prasad Chaurasia and another; (2022) 2
SCC 355, (9) M/s Samrat Shipping
Company Pvt. Ltd. Vs. Dolly George J.T.
1999 (10) SC 381, (10) National Small
Industries Corporation Ltd. Vs. State
(NCT of Delhi) & etc. (2008) 16 S.C.R.
83,
(11)
Ashutosh
Ashok
Parasrampuriya
and
another
Vs.
Gharrkul Industries Pvt. Ltd. & others
AIR 2021 SC 4898.

Statutory provisions:

Partnership Act, 1932
328 INDIAN LAW REPORTS ALLAHABAD SERIES

2. Definitions.-In this Act,
unless there is anything repugnant in the
subject or context,-

 (a) an"act of a firm" means any
act or omission by all the partners, or by
any partner or agent of the firm which
gives rise to a right enforceable by or
against the firm;

4. Definition of "partnership",
"partner", "firm" and "firm name"-
"Partnership" is the relation between
persons who have agreed to share the
profits of a business carried on by all or any
of them acting for all.

Persons who have entered into
partnership with one another are called
individually "partners" and collectively "a
firm", and the name under which their
business is carried on is called the "firm
name".

11. Determination of rights and
duties of partners by contract between
the partners Agreements in restraint of
trade.-(1) Subject to the provisions of
this Act, the mutual rights and duties of the
partners of a firm may be determined by
contract between the partners, and such
contract may be expressed or may be
implied by a course of dealing.

Such contract may be varied by
consent of all the partners, and such
consent may be expressed or may be
implied by a course of dealing.

 (2)
Notwithstanding
anything
contained in section 27 of the Indian
Contract Act, 1872 (9 of 1872), such
contracts may provide that a partner shall
not carry on any business other than that of
the firm while he is a partner.

12.
The
conduct
of
the
business.-Subject to contract between the
partner-

(a) every partner has a right to
take part in the conduct of the business;

(b) every partner is bound to
attend diligently to his duties in the conduct
of the business;

(c) any difference arising as to
ordinary
matters
connected
with
the
business may be decided by a majority of
the partners, and every partner shall have
the right to express his opinion before the
matter is decided, but no change may be
made in the nature of the business without
the consent of all the partners; and

(d) every partner has a right to
have access to and to inspect and copy any
of the books of the firm.

18. Partner to be agent of the
firm.- Subject to the provisions of this
Act, a partner is the agent of the firm for
the purposes of the business of the firm.

19. Implied authority of partner
as agent of the firm.-

(1) Subject to the provisions of
section 22, the act of a partner which is
done to carry on, in the usual way, business
of the kind carried on by the firm, binds the
firm. The authority of a partner to bind the
firm conferred by this section is called his
"implied authority".

(2) In the absence of any usage or
custom of trade to the contrary, the implied
authority of a partner does not empower
him to-

(a) submit a dispute relating to
the business of the firm to arbitration,

(b) open a banking account on
behalf of the firm in his own name,

(c) compromise or relinquish any
claim or portion of a claim by the firm,

 (d) withdraw a suit or proceeding
filed on behalf of the firm,

(e)admit any liability in a suit or
proceeding against the firm,

(f) acquire immovable property
on behalf of the firm,
5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
329

 (h) transfer immovable property
belonging to the firm, or

(g) enter into partnership on
behalf of the firm.

22. Mode of doing act to bind
firm.-In order to bind a firm, an act or
instrument done or executed by a partner or
other person on behalf of the firm shall be
done or executed in the firm name, or in
any other manner expressing or implying
an intention to bind the firm."

Negotiable Instrument
Act, 1881

 "7. "Drawer" "Drawee".-The
maker of a bill of exchange or cheque is
called the "drawer"; the person thereby
directed to pay is called the "drawee".

"Drawee in case of need".-
When in the Bill or in any indorsement
thereon the name of any person is given in
addition to the drawee to be resorted to in
case of need such person is called a
"drawee in case of need."

 "Acceptor".-After the drawee
of a bill has signed his assent upon the bill,
or, if there are more parts thereof than one,
upon one of such parts, and delivered the
same, or given notice of such signing to the
holder or to some person on his behalf, he
is called the "acceptor".

"Acceptor for honour".- When a
bill of exchange has been noted or
protested for non-acceptance acceptance or
for better security,] and any person accepts
it supra protest for honour of the drawer or
of any one of the indorsers, such person is
called an "acceptor for honour''.

"Payee".-The person named in
the instrument, to whom or to whose order
the money is by the instrument directed to
be paid, is called the "Payee".

8. "Holder".-The "holder" of a
promissory note, bill of exchange or cheque
means any person entitled in his own name
to the possession thereof and to receive or
recover the amount due thereon from the
parties thereto. Where the note, bill or
cheque is lost or destroyed, its holder is the
person so entitled at the time of such loss or
destruction.

9. "Holder in due course".-
"Holder in due course" means any person
who
for
consideration
became
the
possessor of a promissory note, bill of
exchange or cheque if payable to bearer, or
the payee or indorsee thereof, if 1[payable
to order,] before the amount mentioned in it
became payable, and without having
sufficient cause to believe that any defect
existed in the title of the person from whom
he derived his title.

138. Dishonour of cheque for
insufficiency, etc., of funds in the
account.-Where any cheque drawn by a
person on an account maintained by him
with a banker for payment of any amount
of money to another person from out of that
account for the discharge, in whole or in
part, of any debt or other

liability, is returned by the bank
unpaid, either because of the amount of
money standing to the credit of that account
is insufficient to honour the cheque or that
it exceeds the amount arranged to be paid
from that account by an agreement made
with that bank, such person shall be
deemed to have committed an offence and
shall, without prejudice to any other
provision of this Act, be punished with
imprisonment for [a term which may be
extended to two years'], or with fine which
may extend to twice the amount of the

cheque, or with both:

Provided that nothing contained
in this section shall apply unless-

(a) the cheque has been presented
to the bank within a period of six months
from the date on which it is drawn or
330 INDIAN LAW REPORTS ALLAHABAD SERIES
within the period of its validity, whichever
is earlier;

(b) the payee or the holder in due
course of the cheque, as the case may be,
makes a demand for the payment of the
said amount of money by giving a notice;
in writing, to the drawer of the cheque,
[within thirty days] of the receipt of
information
by
him
from
the
bank
regarding the return of the cheque as
unpaid; and

(c) the drawer of such cheque
fails to make the payment of the said
amount of money to the payee or, as the
case may be, to the holder in due course of
the cheque, within fifteen days of the
receipt of the said notice.

Explanation.-For the purposes
of this section, "debt of other liability"
means a legally enforceable debt or other
liability.

141. Offences by companies.-
(1) If the person committing an offence
under section 138 is a company, every
person who, at the time the offence was
committed, was in charge of, and was
responsible to, the company for the conduct
of the business of the company, as well as
the company, shall be deemed to be guilty
of the offence and shall be liable to be
proceeded
against
and
punished
accordingly:

Provided that nothing contained
in this sub-section shall render any person
liable to punishment if he proves that the
offence
was
committed
without
his
knowledge, or that he had exercised all due
diligence to prevent the commission of
such offence:

Provided further that where a
person is nominated as a Director of a
company by virtue of his holding any office
or employment in the Central Government
or State Government or a financial
corporation owned or controlled by the
Central
Government
or
the
State
Government, as the case may be, he shall
not be liable for prosecution under this
Chapter.

(2)
Notwithstanding
anything
contained in sub-section (1), where any
offence under this Act has been committed
by a company and it is proved that the
offence has been committed with the
consent or connivance of, or is attributable
to, any neglect on the part of, any director,
manager, secretary or other officer of the
company, such director, manager, secretary
or other officer shall also be deemed to be
guilty of that offence and shall be liable to
be
proceeded
against
and
punished
accordingly.

Explanation.-For the purposes
of this section, -

(a) "company" means any body
corporate and includes a firm or other
association of individuals; and

(b) "director", in relation to a
firm, means a partner in the firm.

142. Cognizance of offences.-
(1)Notwithstanding anything contained in
the Code of Criminal Procedure, 1973 (2 of
1974),-

(a) no court shall take cognizance
of any offence punishable under section
138 except upon a complaint, in writing,
made by the payee or, as the case may be,
the holder in due course of the cheque;

(b) such complaint is made within
one month of the date on which the cause
of action arises under clause (c) of the
proviso to section 138:

Provided that the cognizance of a
complaint may be taken by the Court after
the prescribed period, if the complainant
satisfies the Court that he had sufficient
cause for not making a complaint within
such period;

(c) no court inferior to that of a
Metropolitan Magistrate or a Judicial
5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
331
Magistrate of the first class shall try any
offence punishable under section 138.

(2) The offence under section 138
shall be inquired into and tried only by a
court within whose local jurisdiction,-

(a) if the cheque is delivered for
collection through an account, the branch
of the bank where the payee or holder in
due course, as the case may be, maintains
the account, is situated; or

(b) if the cheque is presented for
payment by the payee or holder in due
course, otherwise through an account, the
branch of the drawee bank where the
drawer maintains the account, is situated.

Explanation.-For the purposes
of clause (a), where a cheque is delivered
for collection at any branch of the bank of
the payee or holder in due course, then, the
cheque shall be deemed to have been
delivered to the branch of the bank in
which the payee or holder in due course, as
the case may be, maintains the account."

Analysis:

13. I have heard learned counsel
for the parties and perused the record
carefully.

14. Before embarking an inquiry
upon the tenability of the arguments so
made across the bar it would be apposite to
discuss the import and impact of the
various provisions of the Indian Partnership
Act, 1932 and the law on the said subject.

15. To begin with Section 18
provides that the partner is the agent of the
firm for the purposes of business of the
firm.

16. Section 2(a) defines an act of
the firm which means any act or omission
by all the partners, or by any partner or
agent of the firm which gives rise to a right
enforceable by or against the firm. Section
19 further provides for implied authority of
a partner as the agent of a firm according to
which subject to the provisions under
Section 22 of the Act, the act of a partner
which is done to carry on, in the usual way,
business of the kind carried on by the firm,
binds the firm. The authority of a partner to
bind the firm conferred by the said section
is called an implied authority. Various acts
have been mentioned in sub-section (2) of
Section 19, that in absence of any usage or
custom of trade to the contrary the implied
authority of partner does not empower him
to- (a) submit a dispute relating to the
business of the firm to arbitrator, b) open a
bank account on behalf of the firm in his
own name; c) compromise or relinquish
any claim or portion of a claim by the firm;
(d) withdraw a suit or proceedings filed on
behalf of the firm; e) admit any liability in
a suit or proceedings against the firm; (f)
acquire immovable property on behalf of
the firm, g) transfer of immovable property
belonging to the firm, (h) enter into the
partnership on behalf of the firm. Further
Section 22 provides that in order to bind a
firm, an act or instrument done or executed
by a partner or other person on behalf of
the firm shall be done or executed in the
firm's name or in any manner expressing or
implying an intention to bind the firm.

17. As a matter of fact, Section 4
deals with the definition of "partnership"
"partner" "partnership firm" and firm's
name according to which partnership is a
relationship between persons who have
agreed to share the profits of business
carried on by all or any of them acting for
all.

18. Section 11 deals with the
determination of the rights and the duties of
332 INDIAN LAW REPORTS ALLAHABAD SERIES
the partners by contract between the
partners, wherein subject to the provisions
of the Act, the mutual rights and the duties
of the partners of the firm are to be
determined by the conduct between the
partners
and
such
contract
may
be
expressed or may be implied by course of
dealing and the such contract may be varied
by consent of all partners and such consent
may be expressed or may be implied by a
course of dealing.

19. The question as to whether the
partnership is a legal person or not has been
a matter of consideration for umpteen
number of times before the courts of law.
In C.I.T. Vs. R.M. Chidambaram Pillai
and others 1977 (1) SCC 431 the
following was observed as under:-

"17. The necessary inference
from the premise that a partnership is only
a collective of separate persons and not a
legal person in itself leads to the further
conclusion that the salary stipulated to be
paid to a partner from the firm is in reality
a mode of division of the firm's profits, no
person being his own servant in law since a
contract of service postulates two different
persons."

20.
In
Munshi
Ram
Vs.
Municipal Committee 1979 (3) SCC 83, it
was observed as under.-

17. "Partnership" as defined in
Section 4 of the Indian Partnership Act, 1932,
is the relation between persons who have
agreed to share the profits of a business
carried on by all or any of them for the
benefit of all. The section further makes it
clear that a firm or partnership is not a legal
entity separate and distinct from the partners.
Firm is only a compendious description of the
individuals who compose the firm. The
crucial
words
in
the
definition
of
"partnership" are those that have been
underlined. They hold the key to the question
posed above. They show that the business is
carried on by all or any of the partners.

21. In N Khadervali Saheb and
another Vs. N. Gudu Sahib and others
(2003) 3 Supreme Court Cases 229, it was
observed as under.-

"A partnership firm is not an
independent legal entity, the partners are the
real owners of the assets of the partnership
firm. Actually the firm name is only a
compendious name given to the partnership
for sake of convenience. The assets of the
partnership belong to and are owned by the
partners of the firm. So long as partnership
continues each partner is interested in all the
assets of the partnership firm as each partner
is owner of the assets to the extent of his
share in the partnership."

Further in V. Subramaniam Vs.
Rajesh Raghuvandra Rao (2009) 5 SCC
608, the Hon'ble Apex Court held as under.-

"11. It may be mentioned that a
partnership firm, unlike a company registered
under the Indian Companies Act, is not a
distinct
legal
entity,
and
is
only
a
compendium of its partners. Even the
registration of a firm does not mean that it
becomes a distinct legal entity like a
company. Hence the partners of a firm are coowners of the property of the firm, unlike
shareholders in a company who are not coowners of the property of the company."

22. In Tanna and Modi Vs. C.I.T.
Mumbai (2007) 7 SCC 434.-

"19. Under the Partnership Act, a
partner represents a firm. He has an implied
5 All. Mohnish Jain & Anr. Vs. State of U.P. & Anr.
333
authority in terms of Section 19 thereof
and, thus, any action taken by a partner of a
firm vis-à-vis the firm, unless otherwise
specified, binds the firm itself."

23. A Coordinate Bench of this
Court in Abhishek Jain Vs. State of U.P.
2023 (0) Supreme (all) 1581 has followed
the said law.

23.