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SUPREME COURT OF INDIA
Surya Kant, J.B. Pardiwala, JJ.
S.P. Mani and Mohan Dairy - Appellant
Versus
Dr. Snehalatha Elangovan – Respondent
Criminal Appeal No.1586 of 2022 (Arising Out of Special Leave Appeal (Criminal) No. 9811 of 2021)
Decided On : 16-09-2022
(A) Negotiable Instruments Act, 1881 – Sections 138 and 141 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheque – Offence by company – Offence means an aggregate of facts or omissions which are punishable by law and can consist of several parts, each part being committed at different time and place involving different persons – Provisions of Section 138 would require a series of acts of commission and omission to happen before offence of dishonour of cheque can be constituted for the purpose of prosecution and punishment – Different persons can be incharge of company when each of series of acts of commission and omission essential to complete commission of offence by company were being committed – Time of commission of offence of dishonour of cheque cannot be on stroke of a clock or during 15 days after demand notice has to be construed as the time when each of acts of commission and omission essential to constitute offence was committed – Word “every” points to possibility of plurality of responsible persons at the same point of time as also to possibility of a series of persons being in charge when sequence of events culminating into commission of offence by company were taking place. (Paras 29 and 30)
(B) Negotiable Instruments Act, 1881 – Sections 138 and 141 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheque – Offence by company – While quashing proceedings High Court proceeded on footing that mere averments in complaint as regards role of respondent as a Partner in firm is not sufficient – High Court should not interfere under Section 482 of Code at instance of accused unless it comes across some unimpeachable and incontrovertible evidence to indicate that Director/partner of a firm could not have been concerned with issuance of cheques – When company or firm is drawee of cheque, such company or firm is principal offender and fiction created by Legislature – When offence is attributed to a juristic person or a body made up of several individuals and liability to be prosecuted and punished is extended to embroil by legal fiction certain human beings, that legal fiction has to be so interpreted and applied that individuals intended to be embroiled may not escape liability by mere fact of having not been in charge at the time when one of other of events essential to complete offence by company happened – Court should not adopt an interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure – Impugned order passed by High Court set aside. (Paras 31, 40 and 49)
(C) Negotiable Instruments Act, 1881 – Sections 138 and 141 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheque – Offence by company – Primary responsibility of complainant is to make specific averments in complaint so as to make accused vicariously liable – For fastening criminal liability, there is no legal requirement for complainant to show that accused partner of firm was aware about each and every transaction – Complainant is supposed to know only generally as to who were in charge of affairs of company or firm – Final judgement and order would depend on evidence adduced – Criminal liability is attracted only on those who at the time of commission of offence, were in charge of and were responsible for conduct of business of firm – But vicarious criminal liability can be inferred against partners of a firm when it is specifically averred in complaint about status of partners ‘qua’ firm – This would make them liable to face prosecution but it does not lead to automatic conviction – They are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal – If any Director wants process to be quashed by filing a petition under Section 482 of Code on the ground that only a bald averment is made in complaint and that he/she is really not concerned with issuance of cheque, he/she must in order to persuade 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 trial would be abuse of process of Court. (Para 47)
Facts of the case:
Present appeal is at the instance of the original complainant of complaint filed under Section 138 of the Negotiable Instruments Act, 1881 and is directed against the order passed by the High Court of Madras dated 16.02.2021 in the Criminal Original Petition No. 1063 of 2021 filed by the respondent herein (accused no.03) under Section 482 of the Code of Criminal Procedure, whereby High Court allowed the application and quashed the criminal proceedings initiated against the respondent herein - Seminal issue raised and requires to be settled in present case is one relating to a person liable to be proceeded against under the provisions of sub-section (1) of Section 141 for being incharge of and responsible to the company “at the time offence was committed.”
Findings of Court:
When in view of the basic averment process is issued complaint must proceed against the Directors or partners as case may be. But, if any Director or Partner 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 is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention.
Result : Appeal allowed.
JUDGMENT :
J.B. PARDIWALA, J.
1. Leave granted.
2. This appeal is at the instance of the original complainant of a complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (for short, “the NI Act”) and is directed against the order passed by the High Court of Madras dated 16.02.2021 in the Criminal Original Petition No. 1063 of 2021 filed by the respondent herein (accused no.03) under Section 482 of the Code of Criminal Procedure (for short, “the Code”), whereby the High Court allowed the application and quashed the criminal proceedings initiated against the respondent herein in the court of the Judicial Magistrate Fast Track Court No.-II, Erode.
3. There are some legal issues with a never-ending debate. The debate on such legal issues goes on and on despite there being plethora of case law on the subject. The NI Act by now is almost three decades old. Section 141 of the NI Act is on the statute past more than three decades. There are various decisions of this Court and High Courts explaining the true purport of Section 141 of the NI Act. However, the debate on Section 141 of the NI Act is never ending. The present litigation is also one in which we have been called upon to look into Section 141 of the NI Act.
FACTUAL MATRIX
4. The facts of this case are plain and simple. The appellant herein (original complainant) is engaged in the business of milk and milk products. The respondent herein is one of the partners of a Partnership Firm running in the name of Sira Marketing Services. The firm used to purchase milk and milk products from the appellant/complainant on credit basis. The appellant has to recover an amount of Rs. 10,71,434.60/- (Rs. Ten Lakh Seventy One Thousand Four Hundred Thirty Four and Sixty paise) from the partnership firm. The firm issued a cheque duly signed by the original accused No. 02 (partner/authorised signatory) in favour of the appellant for the amount of Rs. 10,00,000/- (Rs. Ten Lakh only) dated 05.05.2017. The cheque came to be dishonoured as there was no sufficient balance in the account maintained by the firm. No sooner, the bank intimated the appellant herein that the cheque could not be cleared due to insufficient funds than the appellant herein issued a statutory notice dated 14-08-2017 to the firm and the two partners of the firm. Despite service of notice to the firm as well as the two partners (accused persons) the amount was not paid to the appellant and therefore, the appellant was left with no other option but to file the complaint in the Judicial Magistrate Fast Track Court No. II, Erode for the offence punishable under Section 138 r/w 141 of the NI Act which came to registered as the STC No. 583 of 2017.
5. The respondent herein (original accused No. 03/partner) preferred an application under 482 of the Code in the High Court and prayed that the criminal proceedings instituted against her may be quashed as she has no liability under the law. The principal argument of the respondent herein before the High Court was that much before the cheque came to be issued, the firm had been dissolved. The accounts of the firm were also settled on 13-02-2017 following the dissolution. The High Court quashed the proceedings against the respondent herein mainly on the ground that there was nothing to indicate as to how and in what manner the respondent at the relevant point of time was in-charge and responsible for the conduct of the business of the firm. The High Court took the view that the complaint can be prosecuted as against the respondent herein only if the allegations made in the complaint fulfils the requirements of Section 141 of the NI Act. The High Court took the view that merely by reciting the words used under Section 141 of the NI Act in the complaint no vicarious liability can be fastened on the partner of the firm.
6. In such circumstances above, the High Court allowed the a
(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....
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.
Clear and specific averments are necessary in criminal complaints under N.I. Act to hold individuals vicariously liable; mere association with a firm or vague allegations are insufficient.
The main legal point established in the judgment is the necessity of arraigning the company as an accused for maintaining the prosecution under Section 141 of the NI Act, and the requirement of speci....
Dishonour of cheque – Offence by company – For maintaining prosecution under Section 141 of NI Act, arraigning of company as an accused is imperative and non-impleadment of company would be fatal for....
The main legal point established in the judgment is the requirement for specific averments and unimpeachable evidence to establish vicarious liability of directors in cases of cheque bounce under Sec....
Section 141 of N.I. Act deals with offences by companies.
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