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SUPREME COURT OF INDIA
AJAY RASTOGI, SANJIV KHANNA, JJ.
Dilip Hariramani – Appellant
Versus
Bank of Baroda – Respondent
Criminal Appeal No. 767 of 2022 (Arising Out Of Special Leave Petition (Criminal) No. 641 of 2021)
Decided On : 09-05-2022
(A) Negotiable Instruments Act, 1881 – Section 138 read with Section 141 – Dishonour of cheque – Offence by Firm – Vicarious liability of Partner of Firm – A person who does not bear out requirements of ‘in charge of and responsible to company for conduct of its business’ is not vicariously liable under Section 141 of NI Act – Burden is on prosecution to show that person prosecuted was in charge of and responsible to company for conduct of its business – Onus under sub-section (2) to Section 141 of NI Act is on prosecution and not on person being prosecuted – It is an admitted case of respondent Bank that appellant had not issued any of three cheques, which had been dishonoured, in his personal capacity or otherwise as a partner – In absence of any evidence led by prosecution to show and establish that appellant was in charge of and responsible for conduct of affairs of firm, conviction of appellant has to be set aside – Appellant cannot be convicted merely because he was a partner of firm which had taken loan or that he stood as a guarantor for such loan – Partnership Act, 1932 creates civil liability – Guarantor's liability under Indian Contract Act, 1872 is a civil liability – Appellant may have civil liability and may also be liable under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – However, vicarious liability in criminal law in terms of Section 141 of NI Act cannot be fastened because of civil liability – Vicarious liability under sub-section (1) to Section 141 of NI Act can be pinned when person is in overall control of day-to-day business of company or firm – In present case, Firm has not been made an accused or even summoned to be tried for offence – Impugned judgment of High Court confirming conviction and order of sentence passed by Sessions Court, and order of conviction passed by Judicial Magistrate First Class set aside. (Paras 7, 8, 11, 12 and 15)
(B) Negotiable Instruments Act, 1881 – Section 141 – Dishonour of cheque – Vicarious liability – Provisions of Section 141 impose vicarious liability by deeming fiction which presupposes and requires commission of offence by company or firm – Unless company or firm has committed offence as a principal accused, persons mentioned in sub-section (1) or (2) would not be liable and convicted as vicariously liable – Section 141 of NI Act extends vicarious criminal liability to officers associated with company or firm when one of twin requirements of Section 141 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished – However, such vicarious liability arises only when company or firm commits offence as primary offender. (Para 14)
Facts of the case:
Issues raised in this appeal by the appellant, Dchallenging his conviction under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, are covered by decisions of this Court on the aspects of (i) vicarious criminal liability of a partner; and (ii) whether a partner can be convicted and held to be vicariously liable when the partnership firm is not an accused tried for the primary/substantive offence.
Findings of Court:
Demand notice issued on 04th November 2015 by the Bank, through its Branch Manager, was served solely to authorised signatory of the Firm. The complaint dated 07th December 2015 under Section 138 of the NI Act before Court of Judicial Magistrate, Balodabazar, Chhattisgarh, was made against authorised signatory of the Firm and the appellant. Thus, in the present case, the Firm has not been made an accused or even summoned to be tried for the offence.
Result : Appeal allowed.
JUDGMENT
Sanjiv Khanna, J.
Leave granted.
2. The issues raised in this appeal by the appellant, Dilip Hariramani, challenging his conviction under Section 1381[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 extend 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 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 or other liability” means a legally enforceable debt or other liability.] read with Section 141 of the Negotiable Instruments Act, 1881,2[Hereinafter referred to as the ‘NI Act’,] are covered by the decisions of this Court on the aspects of (i) vicarious criminal liability of a partner; and (ii) whether a partner can be convicted and held to be vicariously liable when the partnership firm is not an accused tried for the primary/substantive offence.
3. We are not required to refer to the facts extensively. Suffice it is to notice that the respondent before us – Bank of Baroda, had granted term loans and cash credit facility to a partnership firm – M/s. Global Packaging, 3[Hereinafter referred to as ‘the Firm’], on 04th October 2012 for Rs. 6,73,80,000/-. It is alleged that in part repayment of the loan, the Firm, through its authorised signatory, Simaiya Hariramani, had issued three cheques of Rs. 25,00,000/- each on 17th October 2015, 27th October 2015 and 31st October 2015. However, the cheques were dishonoured on presentation due to insufficient funds. On 04th November 2015, the Bank, through its Branch Manager, issued a demand notice to Simaiya Hariramani under Section 138 of the NI Act. On 07th December 2015, the respondent Bank, through its Branch Manager, filed a complaint under Section 138 of the NI Act before the Court of Judicial Magistrate, Balodabazar, Chhattisgarh, against Simaiya Hariramani and the appellant. The Firm was not made an accused. Simaiya Hariramani and the appellant, as per the cause title, were shown as partners of the Firm. Paragraph 8 of the complaint, which relates to the vicarious culpability, states:
“8. That, both accused No. 1 and accused No. 2 are partners of the indebted firm. Accused No. 1, as a partner of the debtor firm, issued a under the obligation of the debtor firm. Thus, under Section 20 of the Partnership Act 1932, accused No. 2 is equally responsible for the underlying authority and liability of the deemed partners.”
Other than the paragraph mentioned above, no other assertion or statement is made to establish the vicarious liability of the appellant.
4. The respondent Bank had produced as witness - Prashant Ku
(1) Dishonour of cheque – Vicarious liability in criminal law in terms of Section 141 of NI Act cannot be fastened because of civil liability.(2) Dishonour of cheque – Vicarious liability arises only....
A partner cannot be held liable under Section 138 of the NI Act without the partnership firm being arraigned as an accused, reaffirming the necessity of a separate legal entity in cheque dishonour ca....
(1) Dishonour of cheque – Offence by company – For fastening criminal liability, there is no legal requirement for complainant to show that accused partner of firm was aware about each and every tran....
Section 141 of N.I. Act deals with offences by companies.
The main legal point established in the judgment is the requirement to join all necessary parties as accused under the provisions of the Negotiable Instrument Act, and the vicarious liability of comp....
Directors cannot be prosecuted under Section 138 of the NI Act without the company being joined as an accused, as vicarious liability requires the company to be a party to the proceedings.
Prosecution against a partner of a partnership firm under Section 138 of the N.I. Act is not maintainable without including the firm as an accused, affirming the principle of vicarious liability.
Maintaining prosecution under section 138 of the NI Act requires arraigning the company as an accused, and the vicarious liability of individuals associated with the company is contingent upon the co....
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