Vicarious liability under Section 141 of the Negotiable Instruments Act applies to managing partners, making them liable for dishonoured cheques issued by the firm.

ORDER :

(Venkata Jyothirmai Pratapa, J.)

1. The instant petition under Section 482 of Code of Criminal Procedure, 1973,[for short 'Cr.P.C'] has been filed by the Petitioner/Accused No.4, seeking to quash the proceedings against him in C.C.No.154 of 2018 on the file of the Court of II Additional Judicial Magistrate of First Class, Nellore, which was registered for the offence punishable under Section 138 of the Negotiable Instruments Act,[for short 'the Act']

2. The facts which led to the filing of the present petition are:

a. Accused Nos. 2 to 5 have been running a Registered Partnership firm i.e., A.1-firm in the name and style of M/s. S.V.Medicals. Respondent No.2/Complainant is the son-in-law of Accused No.5.

b. At the request of Accused Nos. 2 to 4, complainant lent and made online transfer of an amount of Rs.7,30,000/- to A.1-firm on 03.12.2015, Rs.4,00,000/- and Rs.1,00,000/- on 05.01.2016 and Rs.3,50,000/- on 01.08.2016, in total to a tune of Rs.15,80,000/-. Thereafter, on the demand made by the Complainant, Accused No.5 along with Accused No.3 executed a demand promissory note on 01.08.2018 on behalf of A.1-firm in his favour, for an amount of Rs.15,80,000/- agreeing to repay the same with interest @24% per annum. Subsequently, on the demand of the Complainant, on 09.11.2017 Accused Nos. 2 and 5 have issued a cheque bearing No.001748 on behalf of A.1-firm for an amount of Rs.12,30,000/- drawn on Karur Vysya Bank, Tirupati Branch.

c. On 15.11.2017, when the Complainant presented the said cheque for encashment before his banker i.e., State Bank of India, Achari Street, Nellore, the same was returned unpaid with an endorsement "Funds Insufficient" vide memo dated 17.11.2017. Though the Complainant informed the same to all the Accused over phone, all the Accused failed to make payment due to him. Later, on 11.12.2017, the Complainant got issued a notice to all the Accused demanding to repay the amount due under the cheque. Having received the said notice, the Accused neither gave any reply nor paid any amount. Hence, the Complainant lodged a private complaint against all the Accused which was numbered as C.C.No.154 of 2018 on the file of the Court of II Additional Judicial Magistrate of First Class, Nellore.

3. Being aggrieved by the filing of the said case, Petitioner/ Accused No.4 filed the present petition seeking quashment of the same on the following grounds:

a. The liability to discharge the debt is only on the Managing Partner of the Firm, who is responsible for the conduct of the business and the Petitioner is no way concerned with the conduct of business and is ignorant of the transaction.

b. There was no liability established on the part of the Petitioner for discharge of the debt due to the Complainant.

c. The signature on the dishonoured cheque does not belong to the Petitioner.

d. The Complainant did not make any specific averments that make the Petitioner liable. Therefore, continuation of proceedings against the Petitioner is an abuse of process of law.

Arguments Advanced at the Bar

4. Heard Sri Malireddy Gowtham, learned counsel for the Petitioner, Ms.D.Prasanna Lakshmi, learned Assistant Public Prosecutor representing the State/Respondent No.1 and Sri Siva Prasad Reddy Venati, learned counsel for Respondent No.2.

5. Learned counsel for the Petitioner in elaboration to what was stated in the Petition, would submit that the Petitioner, who is one of the partners of A.1-Firm is arrayed as Accused No.4. Learned counsel further submits that the Petitioner is not a signatory and no allegations were made against him that he is responsible for the day-to-day affairs of the firm. Petitioner was incharge and was responsible to the Company for the conduct of the business. As such, no case is made out against the Petitioner. To buttress his contention, learned counsel has placed reliance on the judgment of the Hon'ble Apex Court in Ashok Shewakramani and Others v. State of Andhra Pradesh & Another, 2023 LiveLaw (SC) 622 and S.M.S.