Commercial Courts- Delay in preferring appeal-Whether could be condoned?

 

 

Commercial Courts- Delay  in preferring appeal-Whether could be condoned?

If the delay in filing written statement also cannot be condoned in all circumstances

The Supreme Court has dealt with the aforesaid aspect in a matter captioned ad as  M/s. Anvita Auto Tech Works Pvt. Ltd. v M/s. Aroush Motors 2025 INSC 1202. The Supreme Court has deliberated inter alia on the failure to file a written statement within the time stipulated under Rule 1(1) of Order VIII Code of Civil Procedure, 1908 (CPC) and whether the right to cross examination could be denied to a defendant, in case, the written statement was not filed within stipulated time, within the terms of Commercial Courts Act 2015 ( as amended and up to date)  and hence, the written statement was struck off from the record. It is also  discussed if in all cases, the time limit of 120 days in filing written statement is sacrosanct or any exception could be carved out.

The Supreme Court at the very outset had reiterated the words of the Hon’ble Justice V.R. Krishna Iyer:

“Procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice. It is the handmaid of justice and not its mistress”

It was thus observed, that, the object of the procedural rules is to advance the cause of justice and not to thwart it, and when the rigid adherence to technicalities of procedure causes injustice, courts have to come to the rescue by adopting a liberal approach. It was further observed that the courts cannot countenance a situation where substantial justice is sacrificed, at the altar of procedural rigidity. Where substantial justice is at stake, technicalities must give way to ensure that the litigant is afforded sufficient opportunity to defend. According to the Supreme Court the controversy of the present matter M/s Anvita Auto Tech (Supra) must be tested on the said principle.

To set out the facts the order dated 20.05.2025 in Commercial Appeal No. 19 of 2023  of Karnataka High Court was challenged by the appellant, which has affirmed the Judgement and decree dated 15.11.2022 passed by the Additional City Civil & Sessions Judge (Exclusive Commercial Court) in Original Commercial Suit No. 372 of 2021 filed by the Respondent No. 1-M/s. Aroush Motors for recovery of monies.

                             CHRONOLOGY

S.N	Stage of Commercial Suit (Com (OS No. 372/2021)	Date
1.	Institution of suit before the Commercial Court	18.06.2021
2.	Summons issued to defendant no.1 and 2	23.06.2021
3.	Summon served upon defendant no.1	17.07.2021
4.	Defendant no.1 entered appearance through counsel	07.08.2021
5.	The commercial court directed the defendant no.1 to file written statement by 07.09.2021	17.08.2021
6.	Application filed by the defendant no.1 for seeking extension of time in filing written statement	07.09.2021
7.	The completion of statutory period of 120 days in filing written statement as mandated under the second proviso to sub-rule 1 of Rule 1 of Order V and proviso to sub-rule (1) of  Rule (1) of Order VIII as per the special amendment in the Comme4rcail Courts Act 2015	14.11.2021
8.	Application was filed by defendant no.1 u/s 148 of CPC for enlargement of time in filing written statement	24.11.2021
9.	The plaintiff had preferred application for seeking striking off defence of defendant no.1 due to failure in filing written statement within statutory period of 120 time	06.12.2021
10.	Application filed by the defendant no.1 for seeking to place on record the written statement	07.01.2022
11.	Rejection of application filed by the defendant for seeking to place on record the written statement	22.03.2022
12.	The commercial appeal preferred by the defendant no.1 against the rejection of application for placing written statement on record	21.04.2022
13.	Process of recording of evidence adjourned at the instance of plaintiff	30.07.22 to 10.08.2022
14.	PW-1 was examined in chief and cross examination opportunity as NIL due to failure in filing written statement within stipulated time	19.08.2022
15.	Suit was partly decreed	15.11.2022

                     

The aforesaid chronology may be illustrated further with facts.                                           

BRIEF FACTS

(1)      The original Defendant No. 1-M/s. Anvita Auto Tech Works Pvt. Ltd. (Appellant-herein), had launched a flagship motorcycle by the name of CFMOTO in India in 2019 and invited applications for its dealership across the country including Bengaluru City. Plaintiff-M/s. Aroush Motors (Respondent No. 1-herein) applied and was provisionally appointed dealer under a Letter of Intent dated 03.09.2019. In consideration of the dealership, the plaintiff remitted a sum of Rs. 20,00,000/- (Rupees Twenty Lakhs Only) towards security deposit to Defendant No. 1, incurred expenditure of rent and interiors for setting up a showroom. Further, the plaintiff paid sum amount to Rs. 70,00,000/- (Rupees Seventy Lakhs Only) towards spare parts, software, equipment and initial stock of motorcycles. Moreover, additional sum of Rs. 5,00,000/- (Rupees Five Lakhs Only) was remitted to Defendant No. 1 and on the advice of Defendant No. 1, the plaintiff also remitted Rs. 7,06,900/- (Rupees Seven Lakhs Six Thousand Nine Hundred Only) to Defendant No. 2-Conair Equipment Pvt. Ltd (Respondent No. 2-herein) for service centre equipment being its authorised service provider.

(2)      The Defendant No. 1 supplied Nineteen (19) motorbikes of BS-IV Category to Plaintiff out of which the Eight (8) were sold. On 01.04.2020, the Government imposed ban on the sale of BS-IV Category vehicles, as such, Defendant No. 1 imposed prohibition upon sale of the such motorcycles but promised to supply Kits and Equipment to upgrade the motorcycles to BS-VI Category. Nevertheless, due to the inability of Defendant No. 1 to supply the same, the plaintiff’s business was stalled and is said to have sustained substantial loss, following which, the plaintiff terminated the dealership of Defendant No. 1 on 14.09.2020 alleging breach of obligations and sought recovery of monies invested by way of filing the present Commercial Original Suit (Com. O.S.) No. 372 of 2021 claiming a sum of Rs. 1,78,03,090/- (Rupees One Crore Seventy-Eight Lakhs Three Thousand Ninety Only) from Defendant No. 1 with an Interest of 18% (Eighteen Percent) and Rs. 7,06,900/- (Rupees Seven Lakhs Six Thousand Nine Hundred Only) from Defendant No. 2 with an Interest of 18% (Eighteen Percent) till the realization of payments along with 3 (Three) Interim Applications (IAs) No. I to III.

(3)      The defendant no/1 was duly served and hence appeared on 07.08.2021, but, still, did not file the Written Statement on the said date. Later on, the defendant no. 1 had moved an I.A. No. IV seeking extension of time to file Written Statement on 07.09.2021. However, in the meanwhile, the 3 (three) I.As which were filed with Com. OS No. 372 of 2021, were decided vide order dated 30.10.2021 wherein, IA No. 1 which sought direction to defendant no. 1 to take back the remaining motorcycles from possession of plaintiff was allowed, but the other two IAs which had sought for mandatory injunction against Defendant No. 1 & 2, respectively, to refund the monies were directed to be kept in abeyance for consideration along with main suit since the nature of relief was that of final in nature.

(4)      That on 14.11.2021, the time period of 120 days as prescribed under the law for filing Written Statement in a commercial suit had expired. The defendant No. 1 again preferred I.A. No. 5 under section 148 of the Code of Civil Procedure, 1908 seeking extension of time to file Written Statement. The plaintiff filed its objection to the application with another application under section 151 of CPC, thereby  seeking to strike out the defence. However, while the said applications were pending in objections, the defendant no. 1 on 07.01.2022 preferred yet another application along with Written Statement, seeking permission to file the same by seeking condonation of delay on the premise that the delay was due to non-residing of the defendant no. 1, in Bengaluru and COVID-19. The said IA came to be Rejected by order dated 22.03.2022 by the Trial Court and consequently, the Written Statement also came to be rejected. The Defendant No. 1 challenged the order of dismissal of IA by way of Commercial Appeal bearing No. 189 of 2021.

(5)      In the meanwhile, the Written Statement on behalf of Defendant No. 2 was also taken as NIL. The suit progressed subsequently to the stage of recording plaintiff’s evidence and on 30.07.2022, 10.08.2022 and on 19.08.2022 the examination-in-chief of PW1 was recorded and cross-examination of the defendant was taken as NIL by the Trial Court on the ground that defendant had failed to file their Written Statement within Stipulated time and the matter was posted for defendant’s evidence.

(6)      That eventually, the suit came to be partly decreed on 15.11.2022 wherein Defendant No.1 was directed to pay sum of Rs. 1,78,03,090/- (Rupees One Crore Seventy-Eight Lakhs Three Thousand Ninety Only) and Defendant No. 2 was directed to pay Rs. Rs. 7,06,900/- (Rupees Seven Lakhs Six Thousand Nine Hundred Only) with future interest of 9% (Nine Percent) per annum each from the date of suit till realization.

In the backdrop of the judgement and decree, the Commercial Appeal No. 189 of 2022 came to be dismissed as withdrawn.

The defendant No.1, being aggrieved by the judgement and decree of the Trial Court preferred Commercial Appeal No. 19 of 2023 before the Karnataka High Court and that came to be dismissed by the Impugned Order dated 20.05.2025.

Hence, the present appeal was preferred.

                             SUBMISSIONS of appellant (defendant no.1)

(i) The error in the impugned judgment loom large as the court below erred in rejecting the written statement dated 07.01.2022 which is in contravention of the orders passed by the Supreme  Court in Suo Moto Writ Petition (C) No. 3 of 2020 extending the limitation due to COVID-19 wherein the limitation period between 15.03.2020 to 28.02.2022 was waived off in all cases, including commercial disputes. The reliance was also placed on Babasaheb Raosaheb Kobarne & Anr. v. Pyrotek India Private Limited and Ors. 2022 SCC SC 1315 and Prakash Corporates v. Dee Vee Projects Limited (2022) 5 SCC 112.16.

(ii) The failure on the part of the defendant to file the Written Statement within the time permitted by the court would not tantamount to pronouncement of judgment against the defendant. In this context reliance was placed on Asma Lateef v. Shabbir Ahmad (2024) 4 SCC 696.17. The reliance was also placed on the decision of Supreme Court  in Ranjit Singh v. State of Uttarakhand, 2024 INSC 724 that even without filing of written statement, the right to cross-examine survives and not permitting the same has resulted in petitioner’s substantial rights being defeated without adjudication on merits.

(iii) The Order VIII Rule 10 CPC does not empower the court to automatically pass a decree, merely, because a written statement is not filed. The court must still assess whether a prima facie case is made out and in the present case, the decree was passed summarily without such satisfaction being recorded.

(iv) If the impugned decree is executed, it would cause severe and irreparable loss to the petitioner despite him not having had a fair opportunity to contest the claim and it is settled principle that procedural rules must not be used to defeat substantial justice.

SUBMISSION ON BEHALF OF THE RESPONDENT NO. 1- PLAINTIFF

(i) That the right of cross-examination on the part of defendant No. 1 stood forfeited on account of non-filing of written statement. It was rightly held by the high court that despite repeated and adequate opportunities afforded to the defendant No. 1, he wilfully chose not to exercise his right of cross-examination.

(ii) At no stage, during the proceedings before the trial court, did the defendant no. 1 Company opted to file an application for recall of the order closing the stage for cross- examination of PW1 nor did it file any appeal or writ petition challenging such order of closing the stage. The defendant No.1 had therefore acquiesced and is now estopped from raising such plea at this belated stage especially when defendant no. 1 did not take such a ground even in the memo of appeal.

(iii) The conduct of the defendant before the courts below revealed a syndrome of dilatory tactics, false pleadings, and abuse of process. The defendant no.1 failed to file the written statement within the statutory period and did not avail the opportunity of cross-examination and never challenged the orders closing its right to cross-examination at the first instance.

(iv) The present appeal is only a last-ditch attempt to obstruct & delay the lawful execution of the decree.

ISSUE FOR CONSIDERATION

The Supreme Court had issued notice, only the following issue:

“Whether the High Court was correct in observing that on account of non-filing of written statement by the defendant, his right to cross-examination is taken away?”

It was noted by the Supreme Court as per the chronology, that, though, the summons was served upon the defendant no. 1 company on 17.07.2021, they could not file the Written Statement up till 07.01.2022 which was long after the statutory period of 120 days had already expired on 14.11.2021. The law regarding the mandatory filing of Written Statement in a commercial dispute within the statutory period is clearly envisaged under Proviso to sub-rule (1) of Rule 1 of Order VIII Code of Civil Procedure, 1908 (CPC) and Second Proviso to Sub-rule (1) of Rule 1 of Order V CPC as amended by the Special Amendment under the Commercial Courts Act, 2015 is well settled. The said provisions impose an absolute embargo upon the courts to accept the written statement after the expiry of one hundred twenty (120) days. The said provisions may be perused as under:

“1. Written Statement —The defendant shall, within thirty days from the date of service of summons on him, present a Written Statement of his defence:

Provided that where the defendant fails to file written statement within the said period of thirty days, he shall be allowed to file the written statement on such other day, as may be specified by the court, for reasons to be recorded in writing and on payment of such costs as the court deems fit, but which shall not be later than one hundred twenty days from the date of service of summons and on expiry of one hundred twenty days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.”

In SCG Contracts (India) Pvt. Ltd. v. K.S. Chamankar Infrastructure Private Limited and Ors. (2019) 12 SCC 210 27 the Supreme Court has already fortified the mandatory nature of statutory period in filing WS in a commercial dispute and it was held that that timeline of 120 days’ fixed by the statute is not directory but rather mandatory, therefore, commercial courts cannot condone the delay beyond 120 days in filing the WS. However, the Supreme Court has proceeded further to hear the appeal in view of some other vital aspect and that could not have been brushed aside . The meticulous scrutiny of the chronological chart as mentioned supra shows that the limitation period for filing the WS commenced on 17.07.2021 and ended on 14.11.2021. It was held that both these dates fell at a time when our nation was in garb of global pandemic of COVID-19 which affected the lives of millions of people around the world as well our judicial systems. This court was conscious of the fact as to the difficulty faced by the litigants in approaching the courts physically and was of the view that the said pandemic should not become the reason to vandalise the rights of the litigants due to expiry of period of limitation who could have approached the court well within the time had it not been for the pandemic. Hence , the Supreme Court, In Re: Cognizance for Extension of Limitation (2022) 3 SCC 117 in Suo Moto Writ Petition (C) No. 3 of 2020 by exercise of its powers under Article 142 of the Constitution of India passed series of orders to exclude the period commencing from 15.03.2020 till 28.02.2022 for the purpose of computing the limitation period under any general or special laws in respect of all judicial or quasi-judicial proceedings. For the purpose of reference, the relevant portion of the order is extracted below:

“ I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings.

II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply

 

The Supreme Court has also held in Aditya Khaitan & Ors. v. IL & FS Financial Services Limited 2023 INSC 867 in a  similar situation, wherein, the High Court had disallowed the appellant to file the Written Statement in a commercial dispute on the premise that the same was beyond the mandatory statutory period of 120 days. This Court while relying upon the orders passed In Re: Cognizance for Extension of Limitation (Supra) allowed the appeal and directed the Written statement to be taken on record. Further, again in Babasaheb Raosaheb Kobarne & Anr. v. Pyrotek India Private Limited & Ors. 2022 SCC OnLine SC 1315 and Prakash Corporates v. Dee VeeProjects Limited (2022) 5 SCC 112 had allowed the appellant to file its written statement notwithstanding the fact that it was filed beyond the period of 120 days in the light of the COVID-19 pandemic, wherein the period of limitation was extended.

          The SUO MOTO exemption shall be applicable in all cases

It was thus held by the Supreme Court in Anvita Auto Tech Works Pvt. Ltd. (Supra), that the statutory period of 120 days commenced from date of service of summons on 17.07.2021 and as per section 9 of the General Clauses Act, 1897, the date of service had to be excluded therefore, from 18.07.2021, the 120 days’ period commenced and it ended on 14.11.2021. In the light of aforesaid discussion, it can be very well said that both the dates fell within the sweep of period between 15.02.2020 to 28.02.2022. In fact, during this period itself, to be precise on 24.11.2021 itself defendant No.1 had filed I.A. No.5 seeking enlargement of time to file written submission and subsequently on 07.01.2022 had filed IA No.VI/ 6A seeking permission to file written submission enclosing the written submission also. It was thus held that the High Court ought to have excluded the aforesaid period for the purpose of filing the written statement and ought to have permitted the defendant No.1 to file written statement on record and contest the suit on merits rather than dismissing the appeal.

                   RIGHT TO CROSS EXAMINATION shall continue

Moreover, the perusal of the records particularly, the order sheet of the trial court dated 19.08.2022 clearly reveal that after the examination-in-chief of PW1 was closed, the cross-examination of Defendant no. 1 was taken as “NIL” on the ground that defendant had failed to file their written statement within stipulated time. It was held that that the said reason is absolutely perverse and is contrary to the right of defence available to the defendant. The purpose of cross-examination is to elicit the truth from the witness and impeach its credibility. When the WS was not allowed to be taken on record, the denial of the right to cross- examine cannot be taken away by leaving the defendant in lurch and this has acted as final nail in the coffin to defendant’s right of defence. It was also held in Ranjit Singh v. State of Uttarakhand, 2024 INSC 724 that even when the defendant has not filed the Written statement, his right to cross-examine the plaintiff witnesses is not foreclosed. The relevant portion of the decision for easy reference is extracted herewith:

“5…….At this stage, we must clarify the legal position. Even if a defendant does not file a written statement and the suit is ordered to proceed ex-parte against him, the limited defence available to the defendant is not foreclosed. A defendant can always cross-examine the witnesses examined by the plaintiff to prove the falsity of the plaintiff’s case. A defendant can always urge, based on the plaint and the evidence of the plaintiff, that the suit was barred by a statute such as the law of limitation…..”

Thus, in the light of the aforesaid discussion, the Supreme Court was pleased to allow the appeal and consequently, the impugned judgment dated 20.05.2025 in Commercial Appeal No. 19 of 2023 and consequently the judgment and decree passed in commercial suit No.372/2021 by the Addl. City Civil and Sessions Judge (Exclusive Commercial Court) dated 15.11.2022 quo defendant No.1 (Appellant herein) was set aside and the matter was remanded back to the trial court to dispose of the same after allowing the appellant herein to file the Written Statement subject to payment of cost to the tune of Rs. 1,00,000/- (Rupees One Lakh Only) and to permit the appellant to exercise his right of cross-examination of plaintiff’s witnesses. The trial court was directed to dispose of the present commercial suit expeditiously and preferably within a period of Six (6) months.

                                      ------

                                      Anil K Khaware

    Founder & Senior Associate

    Societylawandjustice.com

 

 

Section 138 of NI Act: Can there be piecemeal settlement with one accused director/partner?

 

Section 138 of NI Act: Can there be piecemeal settlement with one accused director/partner?

The section 138 -147 of Negotiable Instruments Act 1881 (as amended and up to date) is a code in itself, in a sense, that myriads of issues are raised, while the process of trial begins and in the touchstone of law, the issues are deliberated and settled and judgments are passed. The discussion herein , however, shall be in narrow compass. What shall be the situation, if, in case of an accused  company, there are two directors representing the accused company and are arrayed as  a party, for their defining roles in issuing cheques and it is dishonoured for “insufficient funds”? Whether, the complaint can be settled in piecemeal manner with a Director/accused by receiving part of the cheque amount from one accused/director and whether, in such circumstances, the complaint against the other director could continue? In other words, if only part of the cheque amount could be paid by one of the director and the said director persuades the complainant, that he, having paid the dues towards his liability, the disputes could be compounded qua him and the complainant for remaining claim could pursue the complaint, against the other directors. Similarly, as a corollary, in case of an accused being a partnership firm, one of the partners pays part of the cheque amount, ostensibly part of his liability, while impressing upon the complainant to pursue the case against the other partner, allegedly, qua his share. Whether such a settlement, so to say, a piecemeal settlement u/s 138 of Negotiable Instruments Act, shall pass muster, and if it does, whether such complaints could be compounded against such partner/director and qua the alleged shares of other director/partner whether the proceedings could continue has been a moot point to deliberate herein.

Most recently, the Delhi High Court had dealt with such a situation in a matter reported as CRL.M.C. 2928/2021 & Crl.M.A. 18466/2021 SATISH KUMAR PAWA Vs STATE OF NCT OF DELHI

                   FACTS AS A PRELUDE TO THE PETITION

(i)       A petition was preferred by the accused partner under Section 482 of the Code of Criminal Procedure, 1973 against the Order dated 02.07.2019 of the learned ACMM, whereby Complaint under Section 138 of the Negotiable Instruments Act, 1988 filed by the Complainant in respect of dishonor of cheque of Rs.50 Lacs against the partners/Partnership Firm, was compounded qua one of the Partner, on receiving of Rs.25 Lacs from him, but continued against the second Partner/ Petitioner. The petitioner had challenged the order of partial compounding, on the premise that the liability of the two accused/ partners of the Partnership Firm (unregistered) was joint and several and thus, compounding in piecemeal manner, should not have been permitted. The petitioner had therefore, preferred the quashing of the Complaint against himself in terms of compounding of the offence. being the Partner of the Firm.

(ii)      To elucidate further, the complaint was  filed under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against Petitioner and Respondents No.3 & 4 i.e other partners. The ld  Metropolitan Magistrate took cognizance of the Complaint and issued summons to all the accused persons, namely, Petitioner, Respondent No.3/M/s Jagat Overseas and Respondent No.4/Mr. Sant Lal Aggarwal, on 19.11.2015, in response to which, Petitioner and Respondent No.4 appeared before the learned MM. The learned MM vide Order dated 07.03.2018 observed that “as unregistered partnership firm is only a compendious name under which the activity of the firm carried out and it is not a legal entity with respect to an unregistered partnership firm with respect to any act or omission attributable act the partners would be liable”.

(iii)      The notice under Section 251 Cr.P.C for the offence under Section 138 of the Negotiable Instruments Act, was framed against Satish Kumar Pawa and Sant Lal Aggarwal, the two Partners and not against the Firm, to which they pleaded not guilty. However, at the stage of Complainant’s evidence, the parties entered into settlement and eventually settlement was arrived at between the complainant and Respondent No.4/Sant Lal Agarwal. As per the settlement Rs 25,00,000/- was payable by the said accused and a sum of Rs.25,00,000/-, out of which Rs.20,00,000/- stood already paid and balance Rs.5,00,000/- was paid before the learned MM. The Complainant thus, compounded the offence under Section 138 N.I. Act qua Respondent No.4/Sant Lal Agarwal, who was acquitted of the offence. However, the Complaint was continued against the Petitioner Satish Kumar Pawa, the second Partner, even after compounding of the offence.

Aggrieved, the petitioner had filed Petition seeking quashing of the Complaint under Section 138 read with Section 141 Negotiable Instruments Act, 1881 asserting that in view of Orders dated 07.03.2018 and 02.07.2019, the Complaint does not survive on account of compounding on behalf of the Partnership Firm.

                             TERMS OF SETTLEMENT

It is of pertinence to refer to terms of settlement before going further. The relevant part of Settlement Agreement reads as under:

“1. It is agreed between the parties that respondent no.2/Santlal Agarwal being an equal partner of respondent no. 1 firm, shall pay a sum of Rs. 25,00,000(Rupees Twenty-Five Lakh only) which is half of the total dishonoured cheque amount, to the complainant, towards full and final settlement of all disputes/claims arising out of instant complaint case against him.

2. It is further agreed between the parties that respondent no.2/Santlal Agarwal shall pay the aforesaid settled amount to the complainant in five equal monthly instalments of Rs. 5,00,000/-(Rupees Five Lakh only) each, by way of demand draft, before the referral court on 21st day of every English calendar month. The instalments would commence from January, 2019 itself. In case of holiday, the payment shall be made on the next working day.

3. It is agreed between the parties that in case of default, the respondent no.2 shall pay a sum of Rs. 15,000/- on one default and in case of second default, the settlement shall be revoked.

4. It is agreed between the parties that after realization of the aforesaid settled amount, the complainant shall be left with no claim/dues/ criminal or civil liability whatsoever against the respondent no.2/Santlal Agarwal qua the instant complaint case and he shall withdraw his claim against respondent no.2 accordingly. The complainant shall not recover the civil liability and criminal liability from the respondent ·no.2 in the present case and he shall also not file any claim against respondent ·no.2 with regard to the instant matter.

5. Both the parties have agreed on each and every term. recorded in the settlement agreement, after carefully reading over and fully understanding and appreciating the contents, scope and effect thereof as also the consequences of the breach thereof.

6. The terms have been settled between the parties of their own free will, volition and consent and without there being any undue pressure, coercion, influence, misrepresentation or mistake (both of law and fact), · in any form, whatsoever, and the settlement agreement has correctly recorded the said agreed terms.

7. Both the parties undertake that they will abide by and be bound by the agreed terms/stipulations of the settlement agreement.”             

CONTENTIONS OF THE PETITIONER

(i) The Petitioner had been impleaded as an accused by virtue of Section 141 of the N.I. Act, making him vicariously liable for the offence committed by the Partnership Firm; unless it is determined that the offence has been committed by the Partnership Firm, he as Partner, cannot be held liable for the offence.

(ii) Consequent upon acquittal of Respondent No.4 vide Order dated 02.07.2019, the Complaint does not survive against the Petitioner,  and the Complaint cannot be proceeded with against the Officers, Director of the Companies and Partners of the Firm.

(iii)  Admittedly, the cheque in question had been signed by Respondent No.4 on behalf of Respondent No.3/M/s Jagat Overseas, the Partnership Firm. Further, to secure the payment of the cheque amount, Respondent No.4 had signed the Promissory Note in favour of the Complainant. Since the offence has already been compounded with Respondent No.2 and he has been acquitted, no trial can proceed against the Petitioner alone and he cannot be held liable under Section 138 of the Act.

(iv) No loan was advanced by the Complainant to the Partnership Firm; rather it was the amount paid in discharge of its liability towards supply of rice/paddy. The mala fide Act of Respondent No.4 cannot be held binding upon the Petitioner. No letter was ever sent by the Firm to the Complainant qua admission of its liability. Neither the Partnership Firm nor the Petitioner had received the alleged legal Notice dated 18.04.2015 sent by the Complainant.

(v) The Respondent No.4 has in mala fide manner acted against the interest of Partnership Firm. The alleged Loan transaction and the issuance of Promissory Note was done by Respondent No.4, without prior consent of the Petitioners, which is in contravention of the terms and conditions of Clause-10 of Deed of Partnership dated 01.01.1995. Therefore, the sole responsibility of the transaction was on Respondent No.4, against whom the offence has already been compounded and the Complaint does not survive against the Petitioner.

(vi) The Petitioner and Respondent No.4 are the Partners having equal share in the ratio of 50% each. However, he has never been engaged in the day-to-day affairs of the Partnership Firm. Furthermore, the Petitioner at the relevant time and even as on given dates, did not have access to the place of business. For these illegal and mala fide acts of Respondent No.4, the Petitioner has already preferred Arbitration proceedings, which have been stayed by the Supreme Court.

(vii) The reliance were placed in support of a judgment reported as  Dilip Hariramani Vs. Bank of Baroda, 2022 SCC OnLine SC 579.

 Hence, a prayer is made for quashing of the Complaint.

                             SUBMISSIONS OF THE COMPLAINANT

(i)       The Petitioner is admittedly one of the partners and the second partner Mr. Sant Lal Agarwal, have 50% share in Respondent No.3/Firm, which has not been disputed. He admits himself to be one of the Partnership Firm and is responsible for day-to-day affairs of the Firm; he may have separate action against Respondent No.4 in regard to his acting against the interest of the Firm, but the Complainant has no concern with it as he had dealt with the Firm through its Partner/ Respondent No.4.

(ii)      The assertion that since no separate Notice under S.251 NI Act has been framed on the Partnership Firm, he cannot be held vicariously liable for the acts of the Firm, is also not tenable under Law as being a Partner in the Firm, he has equal responsibility for the affairs of the Partnership Firm.

(iii)      On behalf of the Complainant that under Section 257 Cr.P.C., it is the discretion of the Complainant to withdraw the Complaint against one or the other accused persons. The Complainant has exercised his discretion under Section 257 Cr.P.C. and withdrawn the Complaint against one Partner on account of settlement with him.

(iv)      As per Section 25 of the Partnership Act, 1932 clearly enjoins that the liability of each partner is joint and several. Therefore, the Petitioner being a partner in the Partnership Firm, is severally liable for the amount due from the Firm.

Therefore, it was submitted that the impugned order does not suffer from any infirmity and the present petition should be dismissed.

The core legal issue

(A)      whether in a case under Section 138 of N.I. Act, against the Partnership Firm, compounding by one partner would be in discharge of the entire liability of the Partnership Firm or it can be apportioned to the partners individually?

(B)      Whether a Partnership Firm is a legal entity, which can sue or be sued in its own name?

(C)      Whether compounding of Offence by one Partner would result in complete discharge of the Liability of the Partnership Firm against all the Partners?

In the light of the core issues, the factual matrix has to be recapitulated. The Complaint under Section 138 of N.I. Act was filed against the Respondent No. 3/M/s Jagat Overseas, the Partnership Firm in which the Petitioner/Satish Kumar Pawa and the Respondent No.4/Sant Lal Agarwal were the two partners, having their share in the ratio of 50:50. The averments in the Complaint were that the Partnership Firm/ Respondent No. 3/M/s Jagat Overseas, had issued Post-dated Cheque of Rs. 50,00,000/- under the signatures of Respondent No. 4/Sant Lal Agarwal, the partner, drawn on State Bank of India, which on presentation, was dishonored for “funds insufficient”.

The Cheque in question, that the liability incurred was by the Partnership Firm and the Cheque had also been issued for and on behalf of the Partnership Firm under the signatures of Respondent No.4 Sant Lal Agarwal, one of the partners.

The moot point was that whether a criminal case can be filed against an unregistered Partnership Firm. The  Section 69 of the Partnership Act provides for the effect of non-registration. Clause (2) of Section 69 states that 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. Section 69 of the Partnership Act clearly stipulates the filing of Suits which are confined to proceedings under Code of Civil Procedure and not to criminal offences. The word “Suit‟ in common parlance means a process instituted in the Court for recovery or protection of right or enforcement of a claim or redressal of civil injuries. It does not encompass any criminal liability.

The Section 142 of N.I. Act deals with “cognizance of offence‟ and provides that the Complaint under Section 138 of NI Act in writing, can be made by the Payee or holder in due course. The Legislature in its wisdom, has used the word ‘Complaint’ and not ‘Suit’ in Section 142 of N.I. Act thereby indicating that the bar created for maintaining a Suit in Section 69 of the Partnership Act by or against an unregistered Firm, cannot be stretched and applied to maintain a criminal proceeding under Section 138 of N.I. Act.

                             LEGAL PRECEDENTS

The Supreme Court in B.S.I. Ltd. and Another vs. Gift Holdings Pvt. Ltd. and Another, 2000 SCC (Cri) 538, interpreted the word “Suit’ while deciding maintainability of a proceeding under Section 138 of NI Act in the context of ban imposed by the Sick Industrial Companies (Special Provisions) Act. It provides that no Suit for Recovery of Money or Enforcement of any security against the Industry, Company or Guarantee in respect of any loan or advance granted to the Industrial Company shall lie if in respect of the Industrial Company, an inquiry under Section 16 is pending or any scheme referred to under Section 17, is under preparation or consideration. The Court observed that the word “Suit‟ envisaged in Section 22(1) cannot be stretched to criminal prosecution as it is neither for recovery of money nor for enforcement of any security, etc. Section 138 of NI Act is a penal provision for commission of an offence which entails conviction and sentence on proof of the guilt in duly conducted criminal proceedings. Once the offence under Section 138 of NI Act is completed, the prosecution initiated is not for recovery of the amount covered by the Cheque, but for bringing the offender to penal liability.

The registration or non-registration of the Partnership Firm would have no bearing insofar as Section 141 of NI Act is concerned. The same has been held by the Karnataka High Court in the case of Gowri Containers vs. S C Shetty, ILR 2007 Kar 4586.

The Kerala High Court in Abdul Gafoor vs. Abdurahiman, 1999 (4) Crimes 98, held that Section 138 is not a Suit and the bar of Section 69(2) of the Partnership Act would not operate in such cases. It was further observed that the effect of non-registration of a Partnership Firm, is applicable only to the cases involving civil rights and has no application to criminal cases.

It was therefore held by the hon’ble Delhi High Court in SATISH KUMAR PAWA  (Supra)  on the basis of the aforesaid discussion that the Complaint under Section 138 of NI Act was not maintainable as the Partnership Firm was unregistered, is not tenable in law.

 

B. Whether a Partnership Firm is a legal entity, which can sue or be sued in its own name?

It is a matter of record that M/s Jagat Overseas was a Partnership Firm, in discharge of whose liabilities, the Cheque had been issued under the signatures of Respondent No. 4/Sant Lal Agarwal. It is not in dispute that the Complaint under S.138 NI Act was filed against the Respondent No. 3/M/s Jagat Overseas and the two Partners. The Section 141 of N.I. Act provides that where offences are committed by the Company, then every person at the time of offence committed was in charge of and was responsible to the Company for the conduct of its business as well as the Company shall be deemed to be guilty of the offence.

Explanation to Section 141 reads as under: -

“Explanation.— (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.”

Section 141 of N.I. Act read with Explanation, therefore, makes it abundantly clear that when an offence is committed by a Company or a Firm, every member who is responsible and in charge of the affairs of the Company/Firm is guilty of the offence committed under Section 138 of NI Act.

The situation, though , became somewhat piquant owing to the fact that the ld Metropolitan Magistrate, while framing a Notice under Section 251 of Cr.P.C., 1973 on 07.03.2018, observed that the Partnership Firm is not a separate entity but it is only a compendium of persons, and did not frame a Notice against the Partnership Firm, but only against Respondent No. 4/Sant Lal Agarwal and the Petitioner/Satish Kumar Pawa separately by describing them as the partner of the Respondent No. 3/M/s Jagat Overseas.

                                      LAW

Thus, the Notice under Section 251 N.I. Act was framed on 18.04.2018 only against the two partners and not the Partnership Firm, which has not been challenged by either Party. The Supreme Court in Aneeta Hada vs M/s Godfather Travels & Tours Pvt. Ltd., AIR 2012 SC 2795, after referring to judgments in Iridium India Telecom Ltd. v. Motorola Inc and Ors., 2004 (1) BOM CR 479 and Standard Chartered Bank and others v. Directorate of Enforcement and others, AIR 2006 SC 1301, has observed that :

“the Company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a Company commits an offence, then certain categories of persons in charge as well as the Company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain.”

According to the Supreme Court “for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative.”  The relevant paras of the judgment are reproduced as under: -

“the common proposition of law that has emerged for consideration is whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for brevity 'the Act') without the company being arraigned as an accused. Be it noted, these two appeals were initially heard by a two-Judge Bench and there was difference of opinion between the two learned Judges in the interpretation of Sections 138 and 141 of the Act and, therefore, the matter has been placed before us.

It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant”. 

The supreme court while applying the doctrine of strict construction has held that “ we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section 8 make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. [59] In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [(1970) 3 SCC 491] which is a three- Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [(1984) 4 SCC 352], does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [(2000) 1 SCC 1] is overruled with the qualifier as stated in paragraph 37. The decision in Modi Distilleries [AIR 1988 Supreme Court 1128] has to be treated to be restricted to its own facts as has been explained by us hereinabove.”

The Supreme Court has reiterated in Anil Gupta vs Star India Pvt. Ltd., 2014 (10) SCC 373, Himanshu vs B. Shivamurthy & Anr., (2019) 3 SCC 797, and recently in Bijoy Kumar Moni vs Paresh Manna & Anr., 2024 INSC 1024.

What therefore emerged is that it is settled that in the absence of Company being arraigned as an accused, the Directors cannot be held liable for the offence committed by a company. Since the Notice under S.251 Cr.P.C. has not been framed against the Partnership Firm, this itself is a sufficient ground for discharge of the Petitioner.

 

C. Whether compounding of Offence by one Partner would result in complete discharge of the Liability of the Partnership Firm against all the Partners?

According to the petitioner, the Partnership Firm defines the group of persons who form a Partnership Firm and the liability of the partners is joint and several and thus, compounding done by one partner for the liability of the Partnership Firm, would result in compounding of the entire case and cannot be apportioned to the Partner who was not a party to the compromise, by leaving his liability to the extent of his share in the Partnership Firm.

In the present case, one partner, the Respondent No. 4/Sant Lal Agarwal has compromised the matter with the Complainant vide Mediated Settlement Agreement dated 17.01.2019, wherein the Respondent No. 4/Sant Lal Agarwal, being equal partner of Respondent No. 3/M/s Jagat Overseas, the Partnership Firm, agreed to pay a sum of Rs. 25,00,000/- which is half of the dishonored cheque amount, to the Complainant “towards full and final settlement of all disputes/claims arising out of instant complaint case against him”. The said Compromise has been accepted by the learned Metropolitan Magistrate vide Order dated 02.07.2019 and the case has been directed to be continued against the Petitioner/Satish Kumar Pawa.

The question arise as to whether such partial compounding by one partner for the liabilities of the Partnership Firm, would result in total discharge of all liabilities or it can be apportioned in the manner it was done by the Respondent No. 4/Sant Lal Agarwal and the Complainant?.

To delve the issue further, it is worthwhile to refer to  Section 25 of the Partnership Act which provides that every partner is liable, jointly with all the other partners and also severally, for all acts of the Firm done while he is a partner. It reads as under:

“25. Liability of a partner for acts of the firm: - Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.”

The Firm is not a legal entity; it is a collective or compendious name for all the partners. In other words, a Firm does not have any existence away from its partners, though by virtue of S.141 NI Act, it can be sued in its name. A Decree in favour of or against a Firm has the same effect as a Decree in favour of or against the partners. When the Firm incurs a liability, it can be assumed that all the partners were incurring that liability and so the partners remain liable jointly and severally for all the acts of the Firm. Therefore, the liability of the partners is joint and several.

In Ashutosh vs State of Rajasthan & Ors., AIR 2005 SC 3434, it had been observed by the Supreme Court that it is open to a creditor of the Firm to recover the debt from any one or more of the partners. Each partner shall be liable as if the debt of the Firm has been incurred on his personal liability.

Therefore, when there is a compromise by one partner, it has to be for and on behalf of the Partnership Firm and there cannot be any partial settlement with one partner, as has been done in the present case.

The Complainant has sought to justify partial compounding and the withdrawal of the Complaint qua Respondent No. 4 under Section 257 of the Cr.P.C. which empowers withdrawal of Complaint against one or more accused persons.

Sections 257 of Cr.P.C. reads as under:

“257. Withdrawal of complaint — If a complainant, at any time before a final order is passed in any case under this Chapter, satisfies the Magistrate that there are sufficient grounds for permitting him to withdraw his complaint against the accused, or if there be more than one accused, against all or any of them, the Magistrate may permit him to withdraw the same, and shall thereupon acquit the accused against whom the complaint is so withdrawn.”

The Delhi High Court in SATISH KUMAR PAWA (Supra) has held as under:

“59.No doubt, Section 257 empowers a Complainant to withdraw the case on sufficient grounds against ‘all or any of the accused persons’, but it has to be understood in the right perspective. As already discussed above, the liability was that of the Partnership Firm, against whom, in the first instance, the Notice under Section 251 of Cr.P.C. has not been framed. Furthermore, as already held above, the liability was that of the Partnership Firm for which both Respondent No. 4/Sant Lal Aggarwal and the Petitioner/Satish Kumar Pawa were jointly and severally liable for the liability incurred by the Firm. The Settlement with one partner could not have been apportioned in the manner it has been done in the present case”.

60. Consequently, when the Complaint is withdrawn under Section 257 by the Complainant as against Respondent No. 4/Sant Lal Aggarwal, the same is essentially withdrawn against the Partnership Firm, which is originally liable for the debt owed to the complainant.

61. In view of Section 25 of the Partnership Act, the Partners, accused persons herein, are jointly and severally liable for the acts of the Partnership Firm/M/s Jagat Overseas.

62.  In the present case, both the partners, namely, Petitioner/Satish Kumar Pawa and the Respondent No. 4/Sant Lal Agarwal, were jointly and severally responsible for the liability incurred by the Partnership Firm, meaning thereby that each is liable for the entire liability individually as well as jointly. The partners may have agreed to be entitled to the share profit & loss in a particular ratio, but their legal liability towards the third person is joint and several and there can be no apportionment.

In the Mediated Settlement Agreement dated 17.01.2019 itself, it has been noted that the Compromise is towards all the existing liabilities of the Partnership Firm which also acknowledges that the payment made by the Respondent No. 4/Sant Lal Agarwal in discharge of his liabilities of the Partnership Firm.

The liability of Sh. Sant Lal was not limited to his 50% as has been erroneously assumed, but is towards the entire liability. Once this compounding has been accepted by the Complainant, the necessary implication shall be that it is for and on behalf of the Partnership Firm.

Therefore, once the matter stands compromised for whatever the amount, the offence is compounded towards all the existing liabilities of the Partnership Firm; nothing survives in the Complaint which has to be necessarily disposed of as compromised against the second partner/Petitioner as well. Thus, Section 257 of Cr.P.C. do not come to the rescue of the Complainant/Respondent No. 2 in the case herein.

The Petition was thus allowed and the Complaint Case No. 10445/2016 under Section 138 of N.I. Act filed by the Respondent No. 2 was quashed/disposed of as compounded and the Petitioner/Satish Kumar Pawa was acquitted.

                                      ----

                             Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

LIFE OF Anticipatory bail: SHALL IT CONTINUE post charge sheet

 

LIFE OF Anticipatory bail: SHALL IT CONTINUE post charge sheet

In a criminal case, if a F.I.R is registered and if person is accused of having committed non bailable offence, the accused shall be entitled to seek anticipatory bail, provided, the accused is able to satisfy the courts of law i.e Sessions Court or the High Court, as the case may be, that, he is falsely implicated and that he may not be involved in the alleged offence or the innocence could be pleaded on variety of other aspects and if prima facie, the courts are satisfied, then, the accused may be admitted to anticipatory bail. Such bails, if and when granted could be conditional or even unconditional.  In case, the alleged offence relates to the imprisonment of Seven (7) years or less, then, in terms of Section 35(3) of Bhartiya Nyaya Suraksha Sanhita (BNSS) 2023 ,   a notice to the accused shall have to be issued and unless, there are reasons to be recorded in writing, the accused persons shall, generally, not be arrested by the Investigating Officer. In any case, with a view to secure itself, the accused in the concerned F.I.R shall have to approach the courts for anticipatory bail for any non bailable offence, that the accused may be alleged to have committed.

However, there are yet another interesting dimension in this regard i.e in case after the granting of anticipatory bail, if charge sheet is filed and some other additional and grave sections are added in the charge sheet, whether, the police may arrest the accused due to the reasons as aforesaid, or whether, the permission from the court shall have to be obtained. If so, whether, yet again, the accused shall have to seek fresh bail from the court, in view of change in circumstances i.e addition of new sections in the charge sheet. The discussion herein shall revolve around that.

Recently, the Supreme Court, in a matter, reported as 2026 INSC 145 and  captioned as Sumit Vs State of U.P & Anr  (Criminal Appeal No. 830/2026) CRIMINAL APPEAL NO. 830 OF 2026 (Arising out of SLP(Crl.)No.1536/2026) have comprehensively dealt with such issues.

BRIEF FACTS

(i)     To set out the facts of Sumit Vs State of UP (Supra),  in brief, the above appeal arises from the order passed by the High Court of Allahabad dated 07.01.2026 in Criminal Misc. Anticipatory Bail Application No.11038/2025, by which the anticipatory bail application preferred by the appellant came to be rejected.

(ii)    The First Information Report bearing No.560/2024 came to be registered with the Akbarpur Police Station, District Kanpur Dehat, State of Uttar Pradesh for the offence punishable under Section 80(2)/85 BNS and Sections 3 and 4 respectively of the Dowry Prohibition Act, 1961.

(iii)   The appellant before the Supreme Court was the brother-in-law (Devar) of the deceased. The deceased was married to the brother of the appellant, past 7 months and died, allegedly died under mysterious circumstances at her matrimonial home. Accordingly, the FIR came to be lodged by the mother of the deceased.

(iv)   The appellant before the Supreme Court was apprehending arrest and had earlier, preferred an application before the High Court seeking anticipatory bail being application no.3992/2025. The anticipatory bail was granted by the high court. The operative part of the order [passed by the high court was as under:

“The applicant will cooperate during the investigation and trial and will not misuse the freedom of bail. In case of violation of the above conditions, the Investigating Officer/Prosecutor shall issue notice to the applicant shall be at liberty to file an appropriate application for cancellation of the anticipatory ball granted”.

What is evident from above is that the anticipatory bail was granted by the High Court as prayed for but the same was limited only up to filing of the chargesheet. Once the chargesheet was filed, the protection earlier granted came to an end and in such circumstances, the appellant, once again prayed for anticipatory bail by way of a fresh application which came to be rejected by the High Court.

According to the Supreme Court, As regards the principles, regarding exercising discretion of granting anticipatory bail, either, the Court may grant anticipatory bail or may decline. However, once having exercised its discretion in favour of the accused upon consideration of the overall matter, there may be no good reason for the High Court to restrict it up to the stage of filing of the chargesheet.

It is also relevant in the context that in the earlier order passed by the High Court, the High Court was pleased to observe that having regard to the nature of the allegations, the role of the applicant and all the facts and circumstances of the case, the accused could be said to have made out a case for grant of anticipatory bail. If that was so, the High Court could have indicated, while, declining to grant anticipatory bail, as to what was so particular or what was so gross, that, the High Court thought fit not to grant anticipatory bail, subsequently after filing of charge sheet.

POSITION OF LAW

(i)     In Bharat Chaudhary and Anr. vs. State of Bihar and Anr. reported in (2003)8 SCC 77, the Supreme Court has held that there is no restriction in Section 438 Cr.P.C. to grant anticipatory bail even when charge sheet has been filed and cognizance is taken. The relevant part of the said decision reads as under:

“7. From the perusal of this part of Section 438 of CrPC, we find no restriction in regard to exercise of this power in a suitable case either by the Court of Session, High Court or this Court even when cognizance is taken or a charge-sheet is filed. The object of Section 438 is to prevent undue harassment of the accused persons by pre-trial arrest and detention. The fact, that a court has either taken cognizance of the complaint or the investigating agency has filed a charge-sheet, would not by itself, in our opinion, prevent the courts concerned from granting anticipatory bail in appropriate cases. The gravity of the offence is an important factor to be taken into consideration while granting such anticipatory bail so also the need for custodial interrogation, but these are only factors that must be borne in mind by the courts concerned while entertaining a petition for grant of anticipatory bail and the fact of taking cognizance or filing of a chargesheet cannot by itself be construed as a prohibition against the grant of anticipatory bail. In our opinion, the courts i.e. the Court of Session, High Court or this Court has the necessary power vested in them to grant anticipatory bail in non-bailable offences under Section 438 of CrPC even when cognizance is taken or a charge-sheet is filed provided the facts of the case require the court to do so.”...

(ii)    The Delhi High Court in a matter reported as 2004 SCC OnLine Del 53, dealt with somewhat similar question, as to, whether Section 170 Cr.P.C prevents the Trial Court from taking a charge-sheet on record, unless the accused is taken into custody. The Delhi High Court observed as under:

“15. Word “custody” appearing in this section does not contemplate either police or judicial custody. It merely connotes the presentation of accused by the investigating officer before the Court at the time of filing of the charge-sheet whereafter the role of the Court starts. Had it not been so the investigating officer would not have been vested with powers to release a person on bail in a bailable offence after finding that there was sufficient evidence to put the accused on trial and it would have been obligatory upon him to produce such an accused in custody before the Magistrate for being released on bail by the Court”.

16. In case the police/investigating officer thinks it unnecessary to present the accused in custody for the reason that the accused would neither abscond nor would disobey the summons as he has been cooperating in investigation and investigation can be completed without arresting him, the IO is not obliged to produce such an accused in custody”.

(iii)   The above view was reiterated in Ravindra Saxena vs. State of Rajasthan, reported in (2010) 1 SCC 684. In the said case the High Court had rejected the application seeking anticipatory bail on the ground that the chargesheet had been filed, such approach was held to be erroneous. The Court observed that a Constitution Bench in Shri Gurbaksh Singh Sibbia and Others vs. State of Punjab, reported in (1980) 2 SCC 565, clearly held that the anticipatory bail can be granted at any time so long as the applicant has not been arrested:

“7. We are of the considered opinion that the approach adopted by the High Court is wholly erroneous. The application for anticipatory bail has been rejected without considering the case of the appellant solely on the ground that the challan has now been presented”.

8. We may notice here that the provision with regard to the grant of anticipatory bail was introduced on the recommendations of the Law Commission of India in its Forty-first Report dated 24-9- 1969. The recommendations were considered by this Court in a Constitution Bench decision in Gurbaksh Singh Sibbia v. State of Punjab [(1980) 2 SCC 565 : 1980 SCC (Cri) 465].

Upon consideration of the entire issue, the Supreme Court laid down certain salutary principles to be followed in exercise of the power under Section 438 CrPC by the Sessions Court and the High Court. It is clearly held that the anticipatory bail can be granted at any time so long as the applicant has not been arrested. When the application is made to the High Court or the Court of Session it must apply its own mind on the question and decide when the case is made out for granting such relief.”

(iv)    In Sushila Aggarwal & Ors. vs. State (NCT of Delhi) & Anr reported in (2020) 5 SCC 1, the following questions were referred to the larger Bench of five judges:

i.      Whether the protection granted to a person under Section 438 CrPC should be limited to a fixed period so as to enable the person to surrender before the trial court and seek regular bail?

ii.     Whether the life of an anticipatory bail should end at the time and stage when the accused is summoned by the court?

The Constitution Bench answered the reference as under:

Regarding Question 1,

The Supreme Court held that the protection granted to a person under Section 438 CrPC should not invariably be limited to a fixed period; it should enure in favour of the accused without any restriction on time. Normal conditions under Section 437(3) read with Section 438(2) should be imposed; if there are specific facts or features in regard to any offence, it is open for the court to impose any appropriate condition (including fixed nature of relief, or its being tied to an event), etc.

Regarding Question 2

It is held that the life or duration of an anticipatory bail order does not end normally at the time and stage when the accused is summoned by the court, or when charges are framed, but can continue till the end of the trial. Again, if there are any special or peculiar features necessitating the court to limit the tenure of anticipatory bail, it is open for it to do so.”

The Supreme Court in Sumit Vs State of U.P & Anr (Supra) has also referred to the following observations made by the Constitution Bench in paras 77.3 and 77.4 respectively of Sushila Aggarwal (supra) are also relevant which reads as under:

“77.3. In these circumstances, the mere fact that an accused is given relief under Section 438 at one stage, per se does not mean that upon the filing of a chargesheet, he is necessarily to surrender or/and apply for regular bail. The analogy to “deemed bail” under Section 167(2) with anticipatory bail leads this Court to conclude that the mere subsequent event of the filing of a charge-sheet cannot compel the accused to surrender and seek regular bail. As a matter of fact, interestingly, if indeed, if a charge-sheet is filed where the accused is on anticipatory bail, the normal implication would be that there was no occasion for the investigating agency or the police to require his custody, because there would have been nothing in his behaviour requiring such a step. In other words, an accused, who is granted anticipatory bail would continue to be at liberty when the chargesheet is filed, the natural implication is that there is no occasion for a direction by the court that he be arrested and further that he had cooperated with the investigation.

77.4. At the same time, however, at any time during the investigation were any occasion to arise calling for intervention of the court for infraction of any of the conditions imposed under Section 437(3) read with Section 438(2) or the violation of any other condition imposed in the given facts of a case, recourse can always be had under Section 439(2).”

According to the Supreme Court there should not be a misconception that in every nonbailable and cognizable offence the police is required to invariably arrest a person, even if it is not essential for the purpose of investigation. Rather, the law is otherwise. In normal and ordinary course, the police should always avoid arresting a person and sending him to jail, if it is possible for the police to complete the investigation without his arrest and if every kind of cooperation is provided by the accused to the investigating officer in completing the investigation. It is only in cases of utmost necessity, where the investigation cannot be completed without arresting the person, for instance, a person may be required for recovery of incriminating articles or weapon of offence or for eliciting some information or clue as to his accomplices or any circumstantial evidence, that his arrest may be necessary. Such an arrest may also be necessary if the investigating officer concerned or officer in charge of the police station thinks that presence of the accused will be difficult to procure because of grave and serious nature of crime as the possibility of his absconding or disobeying the process or fleeing from justice cannot be ruled out.

(v) The aforesaid decision of the Delhi High Court received endorsement of the supreme Court in Siddharth vs. State of Uttar Pradesh & Anr., reported in (2022) 1 SCC 676, wherein it was observed as under:

“9. We are in agreement with the aforesaid view of the High Courts and would like to give our imprimatur to the said judicial view. It has rightly been observed on consideration of Section 170 CrPC that it does not impose an obligation on the officer-in-charge to arrest each and every accused at the time of filing of the charge-sheet. We have, in fact, come across cases where the accused has cooperated with the investigation throughout and yet on the charge-sheet being filed nonbailable warrants have been issued for his production premised on the requirement that there is an obligation to arrest the accused and produce him before the court. We are of the view that if the investigating officer does not believe that the accused will abscond or disobey summons he/she is not required to be produced in custody. The word “custody” appearing in Section 170 CrPC does not contemplate either police or judicial custody but it merely connotes the presentation of the accused by the investigating officer before the court while filing the chargesheet”.

The Supreme Court has consistently held, that personal liberty is an important aspect of the constitutional mandate. The occasion to arrest an accused during investigation arises when custodial investigation becomes necessary or it is a heinous crime or where there is a possibility of influencing the witnesses or accused may abscond. Merely, because an arrest can be made because it is lawful does not mandate that arrest must be made. A distinction must be made between the existence of the power to arrest and the justification for exercise of it [Joginder Kumar v. State of U.P., (1994) 4 SCC 260 : 1994 SCC (Cri) 1172] . If arrest is made routine, it can cause incalculable harm to the reputation and self-esteem of a person. If the investigating officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout cooperated with the investigation we fail to appreciate why there should be a compulsion on the officer to arrest the accused.

In Sumit Vs State of UP (Supra) in para 12 it is held as under:

“When the appellant has joined the investigation, investigation has completed and he has been roped in after seven years of registration of the FIR we can think of no reason why at this stage he must be arrested before the chargesheet is taken on record. We may note that the learned counsel for the appellant has already stated before us that on summons being issued the appellant will put the appearance before the trial court.”

(vi) The Supreme Court in Satender Kumar Antil vs. CBI reported in (2022) 10 SCC 51 said in clear terms that the mandate laid down in Siddharth (supra) should be strictly complied with.

In Md. Asfak Alam vs. State of Jharkhand and Another reported in 2023 SCC OnLine SC 892 under a similar situation where the appellant therein had been granted interim protection nby the High Court under Section 438 CrPC and the charge-sheet was filed before the application seeking pre-arrest bail was finally heard, the High Court rejected the pending anticipatory bail and directed the appellant to surrender before the competent authority and seek regular bail. In this backdrop, it was observed as under:

“14. ……What appears from the record is that the appellant cooperated with the investigation both before 8-8-2022, when no protection was granted to him and after 8-8-2022, when he enjoyed protection till the filing of the charge-sheet and the cognizance thereof on 1-10-2022. Thus, once the charge-sheet was filed and there was no impediment, at least on the part of the accused, the court having regard to the nature of the offences, the allegations and the maximum sentence of the offences they were likely to carry, ought to have granted the bail as a matter of course. However, the court did not do so but mechanically rejected and, virtually, to rub salt in the wound directed the appellant to surrender and seek regular bail before the trial court. Therefore, in the opinion of this Court, the High Court fell into error in adopting such a casual approach. The impugned order of rejecting the bail and directing the appellant, to surrender and later seek bail, therefore, cannot stand, and is hereby set aside…...”

The position of law is therefore, well settled:

(i) once anticipatory bail is granted, it ordinarily continues without fixed expiry. The filing of a charge-sheet, taking of cognizance, or issuance of summons does not terminate protection unless special reasons are recorded. The Constitution Bench in the case of Sushila Aggarwal (supra) held that duration is a matter of judicial discretion and cannot be confined by arbitrary timelines. In the case of Siddharam Satlingappa Mhetre vs. State of Maharashtra, reported in (2011)1 SCC 694, this Court similarly cautioned that anticipatory bail should not hinge on procedural milestones.

The risk management can be taken care of by way of imposing conditions of cooperation, attendance, and non-tampering, not by imposing time limits. Where circumstances change, modification or cancellation may be sought under the BNSS, 2023, but expiry clauses inserted at inception are unsustainable.

In Sumit Vs State of UP (Supra) it is held as under:

27. In such circumstances referred to above, the impugned order passed by the High Court is set aside.

28. We order that in the event of arrest of the appellant in connection with the offence enumerated above, he shall be released on anticipatory bail subject to the terms and conditions that the Investigating Officer deem fit to impose.

29. Once the appellant is released by the Investigating Officer, he shall thereafter appear before the Trial Court and furnish fresh bail bond.

The Supreme Court has thus concluded in the following terms::

30. Before we close this matter, we would like to clarify something important. Take a case, wherein an accused has been released on bail, pending the investigation, and later upon completion of the investigation, chargesheet is filed with addition of new cognizable and non-bailable offences, then what would be the position?

It is held in para 31 of Sumit Vs State of UP (Supra) as under: 

31. The aforesaid question was looked into and answered by this Court in Pradeep Ram vs. State of Jharkhand and another reported in 2019 Crl. L.J. 3801, wherein this Court after discussing various decisions, more particularly, the decision in Prahlad Singh Bhati vs. NCT Delhi and another reported in (2001) 4 SCC 280 held that with the addition of a new cognizable and non bailable offence, more particularly of a serious nature, the accused becomes disentitled to the liberty earlier granted to him in relation to the offences for which the FIR came to be registered.

32. In such circumstances, the correct approach of the Court concerned should be to apply its mind afresh as to whether the accused is entitled for grant of bail in the changed circumstances.

33. In Prahlad Singh Bhati (supra), the FIR initially was registered under Sections 306 and 498A of the IPC respectively. But, subsequently, the chargesheet showed that the accused had committed offence under Sections 302 of the IPC. This Court took the view that with the change of the nature of the offence, the accused could be said to have become disentitled to the liberty granted to him in relation to the offence for which the FIR was registered, more particularly, if the offence is altered for an aggravated crime.

The Supreme Court in para no. 34 had recorded the conclusion:

34. In such circumstances referred to above, we arrive at following conclusions in respect of a circumstance whereafter the grant of bail to an accused, further cognizable and nonbailable offences are added:-

(i) The accused can surrender and apply for bail for newly added cognizable and non-bailable offences. In the event of refusal of bail, the accused can certainly be arrested.

(ii) The investigating agency can seek order from the court under Sections 437(5) or 439(2) of Cr.P.C. respectively for arrest of the accused and his custody.

(iii) The Court, in exercise of its power under Sections 437(5) or 439(2) of Cr.P.C. respectively, can direct for taking into custody the accused who has already been granted bail after cancellation of his bail. The Court in exercise of its power under Section 437(5) as well as Section 439(2) respectively can direct the person who has already been granted bail to be arrested and commit him to custody on addition of graver and non-cognizable offences which may not be necessary always with order of cancelling of earlier bail.

(iv) In a case where an accused has already been granted bail, the investigating authority on addition of an offence or offences may not proceed to arrest the accused, but for arresting the accused on such addition of offence or offences it needs to obtain an order to arrest the accused from the Court which had granted the bail.

From the aforesaid discussion, the vista of anticipatory bail as regards its continuity, post charge sheet and circumstances of that has been duly explained including in the very recent judgment of Supreme Court in Sumit Vs State of UP (Supra). The aforesaid judgment has recorded various judgments in its historical perspective including that of the constitution bench judgment of Supreme Court in Sushila Aggarwal (Supra).  

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                                                Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com