1. Complaint under Section 138 read with Section 141, NI Act — Vicarious liability of a partner in a partnership firm — Challenge to maintainability of the complaint. (Para 2 , 4 )
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2023 Supreme(SC) 1028
SUPREME COURT OF INDIA
C.T. Ravikumar, Sanjay Kumar, JJ.
Siby Thomas – Appellant
Versus
M/s. Somany Ceramics Ltd. – Respondent
Criminal Appeal No. 3139 of 2023 (@ Special Leave Petition (Crl.) No.12 of 2020)
Decided On : 10-10-2023
Advocates appeared:
For the Appellant(s) : Mr. Wills Mathews, Adv. Mr. Dhanesh M Nair, Adv. Mr. Paul John Edison, Adv. Ms. Shweta Garg, AOR
For the Respondent(s): Mr. Vipin Kumar Jai, AOR
For the Appellant(s) : Mr. Wills Mathews, Adv. Mr. Dhanesh M Nair, Adv. Mr. Paul John Edison, Adv. Ms. Shweta Garg, AOR
For the Respondent(s): Mr. Vipin Kumar Jai, AOR
Important Points
IMPORTANT POINT
Dishonour of cheque – Offence by Partnership Firm – Only that person who, at the time offence was committed, was in charge of and was responsible to company for conduct of business of company as well as company alone shall be deemed to be guilty of offence and shall be liable to be proceeded against and punished.
Dishonour of cheque – Offence by Partnership Firm – Only that person who, at the time offence was committed, was in charge of and was responsible to company for conduct of business of company as well as company alone shall be deemed to be guilty of offence and shall be liable to be proceeded against and punished.
Subject
Criminal Law - Negotiable Instruments Act
Act Referred
Headnote
Negotiable Instruments Act, 1881 – Section 138 read with Section 141 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheque – Offence by Partnership Firm – Vicarious liability would be attracted only when ingredients of Section 141(1) of NI Act, are satisfied – Merely because somebody is managing affairs of company, per se, he would not become in charge of conduct of business of company or person responsible to company for conduct of business of company – Only that person who, at the time offence was committed, was in charge of and was responsible to company for conduct of business of company as well as company alone shall be deemed to be guilty of offence and shall be liable to be proceeded against and punished – It is not averred anywhere in complaint that appellant was in charge of conduct of the business of company at relevant time when offence was committed – Averments in complaint filed by respondent are not sufficient to satisfy mandatory requirements under Section 141(1) of NI Act – Appellant has made out a case for quashing criminal complaint – Criminal complaint stand quashed only in so far as appellant is concerned. (Paras 11, 12, 16 and 17)
Facts of the case:
Vide impugned order High Court declined to quash complaint under Section 138 read with Section 141 of Negotiable Instruments Act, 1881 qua appellant in exercise of power under Section 482 of Code of Criminal Procedure. Question is whether averments are sufficient to prosecute appellant under Section 138 of NI Act. Appellant has also got a contention that he retired from partnership firm much prior to issuance of cheque in question.
Findings of Court:
Impugned order is set aside and the subject Criminal Complaint filed by respondent stand quashed only in so far as the appellant is concerned.
Result : Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Appellant claims retirement prior to cheque issuance and lack of mandatory averments under Section 141(1), NI Act; Respondent argues general averments of responsibility are sufficient. (Para 4 , 5 , 6 )
3. The court found the complaint lacked specific averments detailing the appellant's role in conducting the business at the time of the offence, rendering vicarious liability unsustainable. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 )
4. Vicarious liability under Section 141(1), NI Act requires specific averments that the person was both in charge of and responsible for the conduct of the business. (Para 15 , 16 )
5. Appeal allowed — Impugned order set aside — Criminal complaint quashed against the appellant. (Para 17 )
6. What are the mandatory averments required to hold a person vicariously liable under Section 141(1) of the NI Act?
The complaint must specifically aver that the person was in charge of, and was responsible to the company or firm for the conduct of its business at the relevant time when the offence was committed. (Para 8 , 11 , 15 , 16 )
7. Is a general statement that a partner is responsible for day-to-day business sufficient for prosecution under Section 141(1) of the NI Act?
No, mere bald or cursory statements that a person is in charge of or managing the day-to-day affairs are insufficient; the complaint must specifically spell out how the person was responsible for the conduct of the business. (Para 14 , 15 )
8. How should the phrase 'in charge of, and was responsible to the company for the conduct of the business' in Section 141(1) be interpreted?
The words 'was in charge of' and 'was responsible to the company for the conduct of the business' must be read conjunctively, not disjunctively, due to the use of the word 'and' between them. (Para 16 )
JUDGMENT :
C.T. RAVIKUMAR, J.
1. Leave granted.
2. This Appeal by accused No.4 in the complaint filed by the respondent herein under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (for short ‘the NI Act’) is directed against the order dated 06.12.2019 in CRM-M No.52299 of 2019 passed by the High Court of Punjab and Haryana at Chandigarh. As per the impugned order the High Court declined to quash the complaint qua the appellant in exercise of the power under Section 482 of the Code of Criminal Procedure (for short ‘Cr.PC’).
3. Heard the learned counsel appearing for the petitioner and learned counsel appearing for the respondent.
4. Virtually, the appellant set up twin grounds to seek quashment of the complaint against him; firstly, that he had resigned from the partnership firm on 28.05.2013 whereas the cheque in question was issued on 21.08.2015 and secondly, that the complaint is devoid of mandatory averments required to be made in terms of sub-Section 1 of Section 141 of the NI Act, as relates him. The High Court found that the contention in regard to the maintainability of the complaint against the appellant, owing to his retirement from the partnership firm prior to the issuance of the cheque in question, is a matter of evidence and ultimately, the appellant would have to lead evidence and prove that fact. Consequently, it was held that the complaint could not be rejected qua the appellant at the initial stage in exercise of the powers under Section 482 Cr.PC.
5. The learned counsel appearing for the petitioner contended that even if it is taken that the factum of his retirement from the partnership firm on 28.5.2013 was prior to the cheque in question on 21.8.2015 is a matter of evidence, the complaint as against the appellant is liable to be quashed owing to the absence of mandatory averments required to be made in terms of Section 141 (1) of the NI Act, in the complaint. In other words, it is submitted that though the respondent had specified or elaborated the role of some of the accused in the complaint as relates the appellant averments elaborating/specifying his role in the day-to-day affairs of the partnership firm much-less mandatorily required averments for his prosecution are conspicuously absent in the complaint. To drive home the contentions that the learned counsel for the appellant drew our attention to paragraphs 3 to 6 of the complaint. Learned counsel for the appellant relied on the decisions of this Court in Anita Malhotra v. Apparel Export Promotion Council & Anr., (2012) 1 SCC 520 and a decision of Two-Judge Bench of this Court in Criminal Appeal No. 879 of 2023 titled Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr., 2023 INSC 692 and connected cases dated 03.08.2023 to buttress the said contentions.
6. Per Contra, learned counsel appearing for the respondent would submit that paragraphs 3 and 4 of the complaint would reveal that the averments thereunder are sufficient to satisfy the mandatory requirement in terms of Section 141 of the NI Act, qua the appellant as well. In order to support his contention the learned counsel relied on the decision of a two-Judge Bench of this Court in S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan, 2022 SCC OnLine SC 1238.
7. In view of the rival contentions as above it is apposite to refer to the averments in paragraph 3 and 4 of the complaint, which is annexed to the SLP. They read thus:
“3. That the accused No.1 is a partnership-firm with the name and style of M/s Tile Store, having its office at 5-654/B, Jyothis Complex, By-pass Road, Eranhipalam, Calicut-673006 (Kerala), while accused No.2 to 6 are the partners of the accused No.1. The accused No.2 to 6 being the partners are responsible for the day to day conduct and business of the accused No. 1.
4.That the accused No.1 through its partners i.e. accused No.2 to 6, on the basis of the authority vested in them approached to the complainant for purchasing the ceramic tiles, sani
