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2025 Supreme(Online)(Mad) 42035
IN THE HIGH COURT OF JUDICATURE AT MADRAS
B. Pugalendhi, J
Murugan – Appellant
Versus
State of Tamil Nadu, Rep by the Inspector of Police, EOW Police Station, Karur District. – Respondent
Crl.OP(MD)Nos.7798, 7799 & 7800 of 2025 | Crl.MP(MD) Nos.5837,5838,5840,5841,5842 and 5843 of 2025
For the Appellants/Petitioners: Mr.K.Althar Sheriff
For the Respondents:Mr.A.S.Abul Kalaam Azad Government Advocate(Crl.side)
Liability under TNPID Act requires demonstrable involvement in deposit activities; mere partnership does not confer criminal responsibility without evidence of active management or misconduct.
Headnote:(A) Tamil Nadu Protection of Interests of Depositors (TNPID) Act - Section 5 - The case involves the criminal responsibility of partners in a firm regarding deposit collection from the public - Accused argues being a sleeping partner without knowledge of transactions conducted by managing partners - Court references previous judgments clarifying that liability for management is based on actively participating in fraudulent activities. (Paras 11, 12, 13)
(B) Quashing of proceedings - The court is reluctant to quash charges based on insufficient evidence of involvement or oversight responsibility in the firm's transactions, deferring the matter to trial - No evidence presented indicating the petitioner's direct involvement in financial misconduct. (Paras 2, 5)
Facts of the case:
Petitioner is accused in CC Nos.6, 7 & 8 of 2024 for financial misconduct under TNPID Act, highlighting the distinction between active and sleeping partners and roles in financial transactions.
Findings of Court:
The court finds that insufficient justification exists at this stage to quash the proceedings, indicating that full evaluation of evidence is necessary at trial.
Issues: Whether the petitioner, as a sleeping partner, holds liability under the act based on the lack of proof showing direct involvement in firm operations.
Ratio Decidendi: The court identifies that mere partnership does not imply culpability; active engagement with depositors or management is necessary for criminal liability under relevant statutes.
Result: Petitions dismissed, with permission for the petitioner to assert defenses during trial.
| Table of Content |
|---|
| 1. definition of liability of partners in financial misconduct cases. (Para 1 , 2) |
| 2. arguments emphasizing the petitioner’s minimal involvement. (Para 3) |
| 3. court’s decision on handling the case based on trial evidence. (Para 4) |
| 4. conclusions regarding quashing the proceedings. (Para 5) |
O R D E R
The petitioner/ accused in CC Nos.6,7 & 8 of 2024, on the file of the Special Court for TNPID Act cases, has moved these petitions to quash the above proceedings, which is pending as against him.
2.The learned counsel for the petitioner has made his submissions:
i. The petitioner is only a sleeping partner in the Firm, namely M/s.Sivaparvathi Financiers (A1) and he has nothing to do with the transactions, which have been conducted by the other accused A2 and A3, who are the Managing partners of A1 Company.
ii. A2 & A3 have collected deposits from the public and issued receipts without the knowledge of the other partners, including this petitioner.
iii.The receipts for payment made by the depositors have been signed by A2 and A3 alone and this petitioner has not made any endorsement in those receipts.
iv.The petitioner has relied on the complaint lodged by one of the directors of A1 Company, who is similar to that of this petitioner/ the other sleeping partner as against A2 and A3.
v. Without ascertaining the role played by the petitioner, the respondent police has mechanically filed the final report as against him and the same is now pending in CC Nos. 6, 7 & 8 of 2024, before the Special Court for TNPID Act Cases, Madurai District.
vi.In order to substantiate his contentions, the petitioner has relied on the Judgment of this Court, reported in 2013 SCC Online Madras 818, in S.Thamayanthi Vs. State of Tamil Nadu and the relevant paragraph is extracted as under:-
"11. The words "responsible for the management of affairs of the Financial Establishment" could be interpreted to mean that only those persons, who were responsible for collection of the deposits and failed to return the money or the interest on such deposit, are criminally liable. That is why the word "responsible" is expressed and not the word "management" alone is used. The severity of the punishment with imprisonment for a term, which may extend to 10 years and with fine, which may extend to Rs.1,00,000/- would only refer to those persons, who were responsible in collecting the amounts from the depositors on promise to give higher interest and failed to return the said deposit even after its maturity.
11.In the case arisen under Section 138 of the Negotiable Instruments Act in 2006-10-SCC-581 ( Ramamurthy Vs. R.B.S.Chinnabasavaradhya ), on the complaint lodged by the aggrieved person on dishonour of the cheque, he did not allege that the accused was in charge of and responsible for the conduct of the business of the company and the statement of the witnesses examined on the side of the complainant also did not speak about the charge that the accused was in charge of the affairs of the business of the Company. Therefore, the Honourable Supreme Court has held that the requirement of Section 141 of the Negotiable Instruments Act was not complied with and as a result of which, the criminal proceedings as against the 6th and 8th accused therein were ordered to be quashed.
12. It has been held in Srikanth Singh K Vs. North East Securities Limited (2008-1-MLJ-Crl-1098) as under:-
"4. It is not in dispute that for showing a vicarious liability of a Director of a Company, upon the complaint it is incumbent to plead that the accused was responsible to the Company for the conduct of the business of the Company. No such allegation having been made in the complaint petition, in our opinion, the High Court was not correct in passing the impugned judgement. The allegation contained in the complaint petition was that all the accused Directors participated in the negotiations for obtaining financial help for the accused No.1 which in our opinion would not give rise to an inference
