Negotiable Instruments Act, 1881 – ss.138 and 141 – Partnership firm – Cheque dishonour case – Vicarious liability of the partners – Held: Burden is on Board of Directors or officers in charge of the affairs of the company /partners of a firm to show that they were not liable to be convicted – Existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm – Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm – But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners ‘qua’ the firm – This would make them liable to face the prosecution but it does not lead to automatic conviction – Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal.
Code of Criminal Procedure, 1973 – s.482 – Negotiable Instruments Act, 1881 – s.138 and 141 – Partnership firm – Cheque dishonour case against Director / partner of the firm – Interference by High Court u/s.482 CrPC – Scope – Held: High Court should not interfere u/s.482 CrPC at the instance of an accused unless it comes across some unimpeachable and incontrovertible evidence to indicate that the Director/partner of a firm could not have been concerned with the issuance of cheques – In a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/partner provided the Director/partner is able to adduce some unimpeachable and incontrovertible evidence beyond suspicion and doubt – If any Director wants the process to be quashed by filing a petition u/s.482 CrPC on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention – He/she must make out a case that making him/her stand the trial would be an abuse of process of Court – Abuse of Court.
Notice – Statutory Notice – Negotiable Instruments Act, 1881 – s.138 and 141 – Partnership firm – Cheque dishonour case against a partner of the firm – No reply given by respondent-accused to statutory notice served upon her by appellant-complainant – Effect – Held: It is essential for the person to whom statutory notice is issued u/s.138 to give an appropriate reply – The person concerned is expected to clarify his or her stance – If the person concerned has some unimpeachable and incontrovertible material to establish that he or she has no role to play in the affairs of the company/firm, then such material should be highlighted in the reply to the notice as a foundation – Once the necessary averments are made in the statutory notice issued by the complainant in regard to the vicarious liability of the partners and upon receipt of such notice, if the partner keeps quiet and does not say anything in reply to the same, then the complainant has all the reasons to believe that what he has stated in the notice has been accepted by the noticee. Negotiable Instruments Act, 1881 – s.141 – Difference between sub-section (1) and (2) of s.141 – Discussed. Allowing the appeal, the Court
HELD:1. The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section
(1) of Section 141 of the Negotiable Instruments Act, 1881 clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment. [Para 47][666-C-E]
2. The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section
141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm. [Para 47][666-E-H; 667-A-B]
3. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners ‘qua’ the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal. [Para 47][667-C-D]
4. If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court. [Para 47][667-E-F]
N Rangachari v. Bharati Sanchar Nigam Limited AIR (2007) SC 1682 : [2007] 5 SCR 329; Anil Hada v. Indian Acrylic Ltd. (2000) 1 SCC 1 : [1999] 5 Suppl. SCR 6; Monaben Ketanbhai Shah v. State of Gujarat (2004) 7 SCC 15 : [2004] 3 Suppl. SCR 411; K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 : [2009] 9 SCR 1144; Sunita Palita v. M/s Panchami Stone Quarry (2022) SC Online SC 945; Ashutosh Ashok
Parasrampuria v. Gharrkul Industries Pvt. Ltd. (2021) SCC Online SC 915; Gunmala Sales Pvt. Ltd. v. Anu Mehta & Ors. (2015) 1 SCC103 : [2014] 10 SCR 1117; Rallis India Ltd v. Poduru Vidya Bhusan & Ors. (2011)
13 SCC 88 : [2011] 5 SCR 289 – relied on.
SMS Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC
89 : [2005] 3 Suppl. SCR 371; National Small Industries Corporation v. Harmeet Singh Paintal & Anr. (2010) 3 SCC 330 : [2010] 2 SCR 805; Sunita Palita & Others v. M/s Panchami Stone Quarry (2022) SC Online SC 945; Municipal Corporation of Delhi v. Ram Kishan Rohtagi (1983) 1 SCC 1 : [1983] 1 SCR 884; U.P. Pollution Control Board v. Modi Distillery (1987) 3 SCC
684 : [1987] 3 SCR 798; P. Rajarathinam v. State of Maharashtra (2000)10 SCC 529; K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 : [1999]
3 Suppl. SCR 271; Assistant Commissioner, AssessmentII Bangalore and Ors. v.Velliappa Textiles Ltd. and Ors. AIR (2004) SC 86 : [2003] 3 Suppl. SCR 763; Sabhitha Ramamurthy v. RBS Channabasavaradhya AIR (2006) SC 3086 : [2006] 6 Suppl. SCR 126; S. K. Alagh v. State of Uttar Pradesh (2008) 5 SCC 662 : [2008] 2 SCR 1088; Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd. (2010) 10 SCC 479 : [2010] 12 SCR 551; GHCL Employees Stock Option Trust v. India Infoline Limited (2013) 4 SCC 505 : [2013]
5 SCR 27 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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