S.P. MANI AND MOHAN DAIRY VERSUS DR. SNEHALATHA ELANGOVAN

S.P. MANI AND MOHAN DAIRY VERSUS DR. SNEHALATHA ELANGOVAN

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1586  OF 2022
(ARISING OUT OF SPECIAL LEAVE APPEAL (CRIMINAL) NO. 9811 OF 2021)
S.P. MANI AND MOHAN DAIRY ……APPELLANT(S)  
VERSUS
DR. SNEHALATHA ELANGOVAN           ......RESPONDENT(S)
J U D G M E N T
J.B. PARDIWALA, J.   
1. Leave granted.
1
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 never­ending 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
2
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 14­08­2017 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
3
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         13­02­2017 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   in­charge   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.
4
6. In such circumstances above, the High Court allowed the
application   filed   by   respondent   herein   and   terminated   the
proceedings as far as the respondent is concerned.
7. In view of the aforesaid, the appellant (original complainant)
is here before this Court with the present appeal.
Submissions on behalf of the Appellant
8. The   learned   counsel,   Mr.   E.R.   Kumar   appearing   for   the
appellant vehemently submitted that the High Court committed a
serious   error   in   passing   the   impugned   Order   quashing   the
proceedings against the respondent herein. He would submit that
the entire premise on which the High Court proceeded could be
termed as erroneous in law. The learned counsel would submit
that in the statutory notice issued to the respondent as well as in
the body of the complaint, there are specific averments that the
accused Nos. 02 and 03 respectively, being the partners of the
partnership firms, are in­charge and responsible for the day­today   affairs   of   the   firm.   He   pointed   out   there   are   specific
averments made in the complaint that the partners which include
the respondent herein are regularly looking after and actively
taking part in the day­to­day business of the firm. He further
pointed out that there is a specific averment that in order to
5
discharge the liability, the original accused No. 02 had issued the
cheque   within   the   knowledge   and   consent   of   the   respondent
herein. It is argued that if the substance of the allegation made in
the complaint fulfil the requirements of Section 141 of the NI Act,
the complaint is to proceed and is required to be tried with. The
learned   counsel   vociferously   argued   that   while   construing   a
complaint the Court should not adopt a hyper­technical approach
and quash the same.
9. The   learned   counsel   further   pointed   out   that   three
individual notices were issued under Section 138 of the NI Act
before the  filing of the complaint.  He would  submit  that  the
statutory notice was duly served upon the respondent herein.
However, the respondent thought fit not to give any reply to the
notice. It is argued that if the respondent had anything to say as
regards her role in the firm, she could have given an appropriate
reply that she is a sleeping partner and not involved into the dayto­day affairs of the firm. It is argued that respondent herein
could also have clarified in her reply that the firm had already
been dissolved much before the cheque was issued and in such
circumstances,   no   liability   could   be   fastened   on   her.   In   the
absence of any reply to the statutory notice, the respondent could
6
not have argued before the High Court for the first time about her
involvement in the affairs of the firm. The learned counsel would
submit   that   the   High   Court   committed   a   serious   error   in
accepting   such   submission   canvassed   on   behalf   of   the
respondent at the preliminary stage.
10. The   learned   counsel   further   submitted   that   once   the
necessary   averments   are   made   in   the   complaint,   the   onus
thereafter would shift on the accused to establish by producing
some unimpeachable and incontrovertible evidence which may
clearly indicate that the respondent herein as one of the partners
of the firm, could not have been concerned with the issuance of
the cheque in question.
11. In such circumstances referred above, the learned counsel
appearing for the appellant prays that there being merit in his
appeal, the same may be allowed and the impugned order passed
by the High Court may be quashed.
Submissions on behalf of the Respondent:
12. Ms.   Hari   Priya   Padmanabhan,   the   learned   counsel
appearing for the respondent (accused) on the other hand has
vehemently opposed the present appeal submitting that no error,
not to speak of any error of law, could be said to have been
7
committed by the High Court in passing the impugned order. She
would submit that mere bald averments in the complaint are not
sufficient to fasten the vicarious lability on the partner of the firm
as   envisaged   under   Section   141   of   the   NI   Act.   The   learned
counsel would submit that the case on hand is squarely covered
by   the   decision   of   this   Court   in   the   case   of  SMS
Pharmaceuticals   Ltd.   v.   Neeta   Bhalla,   (2005)   8   SCC   89.
Relying on the said decision of this Court, the learned counsel
would submit that the deeming fiction creating criminal lability
and vicarious lability are a departure from the usual principles of
criminal law and that a clear case should be spelt out and the
accused person should be made aware of the case alleged against
him or her. The learned counsel would submit that this would
therefore   necessarily   require   averments   in   addition   to   the
statement that the accused is in­charge of and responsible for
the affairs of the company/firm. 
13. The   learned   counsel   appearing   for   the   respondent   in
support of her aforesaid submissions has placed strong reliance
on the following decisions:
8
(i) Gunmala   Sales   Pvt.   Ltd.   v.   Anu   Mehta   &   Ors,
reported in (2015) 1 SCC 103;
(ii) National Small Industries Corporation v. Harmeet
Singh Paintal & Anr., reported in (2010) 3 SCC 330;
(iii) Sunita   Palita   &   Others   v.   M/s   Panchami   Stone
Quarry, reported in (2022) SC Online SC 945.
14. In such circumstances referred above, the learned counsel
appearing for the respondent prays that there being no merit in
this appeal, the same may be dismissed. 
Analysis 
15. Having heard the learned counsel appearing for the parties
and   having   gone   through   the   materials   on   record   the   only
question  that  falls for our  consideration  is whether the  High
Court committed any error in passing the impugned order?
16. Since   the   arguments   of   both   the   sides   have   proceeded
mainly on the averments made in the complaint and to analyze
the   case   before   us   in   proper   perspective,   it   is   necessary   to
scrutinize   the  statutory  notice   as   well   as  the   complaint.   The
statutory notice dated 14.08.2017 reads thus:­
“To,
9
1. Sira Marketing Service,
Represented by it's Partner/ Authorized Signatory, 
Rajesh, Old No.60, New No.30, 
28th Cross St, Indhira Nagar,
Adyar, Chennai­20. 
2. Rajesh,
Partner/ Authorized Signatory, 
Sira Marketing Service, 
Old No.60, New No. 30, 
28th Cross St, Indhira Nagar,
Adyar, Chennai­20. 
3. Dr. Mrs. Snehalatha Elangovan,
W/o. Elangovan, 
Partner / Authorized Signatory, 
Sira Marketing Service, 
Old No.60, New No.30, 
28th Cross St, Indhira Nagar, 
Adyar, Chennai­20. 
Sir,
Please take notice that we are instructed by our client
S.P.   Mani   and   Mohan   Dairy,   Represented   by   its
Managing   Partner:   R.Mohanasundaram,   No.34   &   84,
Jeevanantham Street, Kollampalayam, Erode­638 002 to
issue this notice to you. 
You  No.1  is  a Partnership Firm,  You  No.2  and  3  are
Partners and incharge and responsible for the day­to­day
affairs of You No. 1, you No.2 and 3 are regularly looking
after and actively taking part in the day­to­day business
of You No.1.
Our client is doing business in Milk and Milk Products:
You used to purchase Milk and Milk Products from our
client on credit basis. Our client is maintaining true and
correct   accounts.   As   per   accounts   maintained   by   our
client you have to pay a balance of Rs. 10,71,434.60 to
10
our   client.   In   order   to   discharge   the   part   of   the   said
balance amount and liability you No.2 on behalf of you
No.1 and with the knowledge and consent of you No.3
issued the following cheque which is drawn on TamilNad
Mercantile Bank Ltd., Thiruvanmiyur Branch, Chennai41.
 S.No.  Cheque Date  Cheque No.  Cheque Amount
   1.   05.05.2017       411618  Rs. 10,00,000/­ 
On   your   request   our   client   presented   the   above   said
cheque for collection on 13.06.2017 through HDFC Bank
Ltd.,   Sathy   Road   Branch,   Erode   and   the   same   was
returned as "Funds Insufficient" on 14.06.2017. Again on
your request our client presented the above said cheque
for collection on 20.07.2017 through HDFC Bank Ltd.,
Sathy Road Branch, Erode and the same was returned
as "Funds Insufficient" on 21.07.2017. Without sufficient
funds in your account, you have issued the above said
cheque. 
You issued the above said cheque assuring payment on
presentation of the same. At the time of issuing the said
cheque, you represented that you are having an account
in which you will have sufficient amount in your account.
But you purposely allowed the same to be dishonoured
with   an   intention   to   cheat   and   defraud   our   client.
Therefore,   you   have   committed   an   offence   punishable
U/S 138 of the Negotiable Instruments Act. 
You   are   hereby   called   upon   to   pay   the   above   said
amount   of   Rs.10,00,000/­due   under   the   above   said
cheque dated 05.05.2017 within is days from the date of
receipt of this notice. Please note that on your failure to
make   the   payment   within   the   above­mentioned   time,
legal action will be taken against you under section 138
of the Negotiable Instruments Act 1881 and thereupon
you will be held liable for all the costs and consequences
arising thereof.”           [Emphasis
supplied]
11
17. At the cost of repetition, we may state that there is no
dispute that the aforesaid notice issued to the respondent was
duly acknowledged by her, however, the respondent thought fit
not to give any reply to the same. The acknowledgement receipt
has also been placed on record. The learned counsel appearing
for the respondent fairly submitted that her client was in receipt
of the notice however, no reply has been given to the same.
18.  The complaint filed under Section 138 of the NI Act reads
thus:­
“The complainant is a Partnership Firm registered under
the   Partnership   act   and   carrying   on   business   in   the
above   said   address.   The   Partners   of   the   said   firm
resolved   that   D.   Gokulnath,   S/o.   M.   Dhanapal   the
Manager of the said complainant who knows personally
about each and every transaction of this case to be and
he is authorized to represent the firm in this case. A copy
of power of attorney is produced herewith. 
The  accused  No.1  is  a  Partnership Firm, the  accused
No.2 and 3 are Partners and in­charge and responsible
for   the   day­to­day   affairs   of   the   accused   No.1,   the
accused   No.2   and   3   are   regularly   looking   after   and
actively taking part in the day­to­day business of the
accused No.1.
The   complainant   is   doing   business   in   Milk   and   Milk
Products. The accused used to purchase Milk and Milk
Products   from   the   complainant   on   credit   basis.   The
complainant is maintaining true and correct accounts. As
per   accounts   maintained   by   the   complainant,   the
12
accused have to pay a balance of Rs.10,71,434.60 to the
complainant.  In order to discharge the part of the said
balance amount and liability the accused No.2 on behalf
of   the   accused   No.   1   and   with   the   knowledge   and
consent of the accused No.3 issued the following cheque
which   is   drawn   on   TamilNad   Mercantile   Bank   Ltd.,
Thiruvanmiyur Branch, Chennai­41.
 S.No.   Cheque Date   Cheque No.   Cheque Amount 
 1.    05.05.2017 411618      Rs. 10,00,000/­
On the request of the accused the complainant presented
the   above   said   cheque   for   collection   on   13.06.2017
through HDFC Bank Ltd., Sathy Road Branch, Erode and
the   same   was   returned   as   "Funds   Insufficient"   on
14.06.2017. Again, on the request of the accused the
complainant   presented   the   above   said   cheque   for
collection on 20.07.2017 through HDFC Bank Ltd., Sathy
Road   Branch,   Erode   and   the   same   was   returned   as
"Funds   Insufficient"   on   21.07.2017.   Without   sufficient
funds in their account accused have issued the above
said cheque.
The   accused   issued   the   above   said   cheque   assuring
payment   on   presentation   of   the   same.   At   the   time   of
issuing the said cheque, the accused represented that
they   are   having   an   account   in   which   they   will   have
sufficient   amount   in   their   account.   But   the   accused
purposely allowed the same to be dishonoured with an
intention   to   cheat   and   defraud   the   complainant.
Therefore,   the   accused   have   committed   an   offence
punishable u/s 138 of the Negotiable Instruments Act. 
Thereupon the complainant issued a lawyer notice on
14.08.2017 to the accused calling upon them to pay the
above said sum of Rs.10,00,000/­ due under the said
cheque dated 05.05.2017 within 15 days from the date
of receipt of this notice. The accused received the above
said notice on 16.08.2017. But they failed to pay the
above said cheque amount within 15 days. Hence the
13
accused has committed an offence punishable u/s 138
r/w.   142   of   Negotiable   Instruments   Act   1881   as
amended by Act 55 of2002. 
The   complainant   submits   that   he   had   produced   the
relevant documents relating to this offence. 
He further submits that he has filed this complaint within
one month from the date of expiry of 15 days grace time
given   in   the   notice   for   the   payment   of   above   said
cheque's amount. The above said cheque was presented
for   collection   through   HDFC   Bank   Ltd.,   Sathy   Road
Branch,   Erode   which   is   situated   in   Erode
Karungalpalayam Police Station limit. Hence this Hon'ble
court is having jurisdiction to cognizance the offence.
A court fee of Rs.5,000/­ is paid under Tamilnadu Court
Fee Act. 
It is therefore, prayed that this Hon'ble Court may be
pleased to take this case on file, issue summon to the
accused, enquire the matter, punish the accused with
maximum   sentence   and   direct   the   accused   to   pay
compensation   to   the   complainant   u/s   357   CPC   and
render justice.”           [Emphasis
supplied]
19. Thus,  from the aforesaid the  following averments  in the
complaint are evident:­
(a) Accused No.1 is a Partnership Firm, the accused Nos. 2 and
3 resply are the partners and in charge and responsible for
the day­to­day affairs of the firm, the accused Nos. 2 and 3
14
are regularly looking after and actively taking part in the
day­to­day business of the firm;
(b) In order to discharge the part liability, the accused No. 2 on
behalf of the firm and with the consent and knowledge of the
accused No. 3 issued the cheque drawn on the Tamilnad
Mercantile Bank Ltd., Thiruvanmiyur Branch, Chennai­41.
20. The aforesaid averments are not only found to be read in the
complaint but in the notice too.
21. We   shall   now   proceed   to   look   into   the   impugned   order
passed by the High Court. The same order reads thus:­
“This criminal original petition has been filed to quash
the proceedings in STC No. 583 of 2017, pending on the
file   of   the   Judicial   Magistrate   Fast   Track   Court   No.II
Erode. 
2. The   respondent   has   filed   a   complaint   under
Section   138   of   the   Negotiable   Instruments   Act.   The
petitioner has been arrayed as A~ 3 in the complaint.
This   quash   petition   has   been   filed   primarily   on   two
grounds. The first ground is that the Partnership Firm
was  dissolved  during  February 2017  and  the  subject
cheque   is   said   to   have   been   issued   by   A~2   on
05.05.2017, after the dissolution of the Partnership Firm.
The   2nd   ground   that   has   been   raised   is   that   the
allegations made in the complaint does not satisfy the
requirements   of   Section   141   of   the   Negotiable
Instruments Act. 
3. Heard   Mr.   K.   Kannan,   learned   counsel   for   the
petitioner and Mr. M. Guruprasad, learned counsel for
the respondent. 
15
4.  Insofar   as   the   first   issue   that   is   raised   by   the
petitioner, the same cannot be gone into by this Court
and it is a factual issue which can be decided only in the
course of trial. 
5. Insofar as the second issue is concerned, it will be
beneficial   to   extract   the   relevant   portion   from   the
complaint filed by the respondent hereunder: 
"The   accused   No.   1   is   a   Partnership   Firm,   the
accused No.2 and 3 are Partners and in­charge and
responsible for the day­to­day affairs of the accused
No. 1, the accused No.2 and 3 are regularly looking
after   and   actively   taking   part   in   the   day­to­day
business of the accused No. 1. 
The complainant is doing business in Milk and Milk
Products. The accused used to purchase Milk and
Milk Products from the complainant on credit basis.
The   complainant   is   maintaining   true   and   correct
accounts.   As   per   accounts   maintained   by   the
complainant, the accused have to pay a balance of
Rs. 10,71,434. 60/­ to the complainant. In order to
discharge the part of the said balance amount and
liability the accused No.2 on behalf of the accused
No.1 and with the knowledge and consent of the
accused No. 3 issued the following cheque which is
drawn   on   Tamil   Nadu   Mercantile   Bank   Ltd.,
Thiruvanmiyur Branch, Chennai­41.” 
S.No.   Cheque Date    Cheuqe No.    Cheque Amount
1.    05.05.2017     411618         Rs. 10,00,000/­
6. In the present case, A~ 1 is the Partnership Firm
and   A~2   who   is   the   partner   is   the   signatory   of   the
cheque. The petitioner A~ 3 has been roped in as an
accused   since   she   is   a   partner   of   A~   1   Firm.   The
complaint can be prosecuted as against the petitioner
only if the allegations made in the complaint satisfies the
16
requirements   of   Section   141   of   the   Negotiable
Instruments Act.
7. In the present case, the respondent has merely
repeated   the   words   used   under   Section   141   of   the
Negotiable Instruments Act and there is absolutely no
allegation as to how and in what manner the petitioner is
in­charge   and   responsible   for   the   conduct   of   the
business.   In   the   absence   of   such   an   allegation,   the
complaint is not maintainable as against the petitioner.
The law on this issue is well settled. 
8. In the result, the proceedings in STC No. 583 of
2017, on the file of the Judicial Magistrate Fast Track
Court   No.II,   Erode,   is   hereby   quashed   insofar   as   the
petitioner is concerned. The Court below is directed to
complete the proceedings in STC No.583 of 2017, against
the   other   accused   persons   within   a   period   of   three
months from the date of receipt of a copy of this order. 
9. This criminal original petition is allowed with the
above directions. Consequently, connected miscellaneous
petitions are closed.”
22. Thus, the plain reading of the impugned order passed by
the High Court as aforesaid would indicate that the proceedings
came to be quashed essentially on the ground that there was
nothing to indicate that in what manner the respondent herein
was in­charge and responsible for the day­to­day affairs of the
firm so as to make her vicariously liable for the alleged offence
with the aid of Section 141 of the NI Act. To put it in other words,
the High Court proceeded on the footing that mere averments in
17
the complaint as regards the role of the respondent as a partner
in the firm is not sufficient.
Analysing   Section   141   of   the   Negotiable   Instrument   Act,
1881
23. The provisions of Section 138 and Section 141 resply of the
NI Act read as under:­
“Section  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 be extended 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
18
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.”
“Section 141. Offences by companies.—
(1) If the person committing an offence under Section 138
is   a   company,   every   person   who,   at   the   time   the
offence was committed, was in charge of, and was
responsible   to   the   company   for   the   conduct   of   the
business of the company, as well as the company,
shall be deemed to be guilty of the offence and shall
be   liable   to   be   proceeded   against   and   punished
accordingly.”
Provided that nothing contained in this sub­section
shall   render   any   person   liable   to   punishment   if   he
proves   that   the   offence   was   committed   without   his
knowledge, or that he had exercised all due diligence to
prevent the commission of such offence.
Provided further that where a person is nominated
as a Director of a company by virtue of his holding any
office or employment in the Central Government or State
Government   or   a   financial   corporation   owned   or
controlled   by   the   Central   Government   or   the   State
Government, as the case may be, he shall not be liable
for prosecution under this Chapter.
(2)   Notwithstanding   anything   contained   in   sub­section
(1),   where   any   offence   under   this   Act   has   been
committed by a company and it is proved that the
offence   has   been   committed   with   the   consent   or
connivance of, or is attributable to, any neglect on the
19
part   of,   any   director,   manager,   secretary   or   other
officer   of   the   company,   such   director,   manager,
secretary or other officer shall also be deemed to be
guilty   of   that   offence   and   shall   be   liable   to   be
proceeded against and punished accordingly.
Explanation — For the purposes of this Section—
(a) “company” means any body corporate and includes a
firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the
firm.”
24. Evidently, the gist of Section 138 is that the drawer of the
cheque shall be deemed to have committed an offence when the
cheque   drawn   by   him   is   returned   unpaid   on   the   prescribed
grounds.   The   conditions   precedent   and   the   conditions
subsequent to constitute the offence are drawing of a cheque on
the   account   maintained   by   the   drawer   with   a   banker,
presentation of the cheque within the prescribed period, making
of a demand by the payee by giving a notice in writing within the
prescribed period and failure of the drawer to pay within the
prescribed   period.  Upon  fulfilment   of  these   requirements,   the
commission of the offence which may be called the offence of
‘dishonour of cheque’ is complete. If the drawer is a company, the
offence is primarily committed by the company. By virtue of the
provisions of sub­section (1) of Section 141, the guilt for the
offence and the liability to be prosecuted and punished shall be
20
extended   to   every   person   who,   at   the   time   the   offence   was
committed, was in charge of and was responsible to the company
for   the   conduct   of   its   business;   irrespective   of   whether  such
person is a director, manager, secretary or other officer of the
company. It would be for such responsible person, in order to be
exonerated in terms of the first proviso, to prove that the offence
was   committed   without   his   knowledge   or   despite   his   due
diligence.
25. Under   the   separate   provision   of   sub­section   (2),   if   it   is
proved   that   the   offence   was   committed   with   the   consent   or
connivance of or was attributable to the neglect on the part of
any director, manager, secretary or other officer of the company,
such person would also be deemed to be guilty for that offence.
Obviously,   the   burden   of   alleging   and   proving   consent,
connivance or neglect on the part of any director, etc. would rest
upon the complainant. The non obstante clause with which the
sub­section   (2)   opens   indicate   that   the   deeming   provision   is
distinct and different from the deeming provision in sub­section
(1) in which the office or designation of the person in charge of
and responsible to the company for the conduct of its business is
immaterial.
21
26. While the essential element for implicating a person under
sub­section (1) is his or her being in charge of and responsible to
the   company   in   the   conduct   of   its   business   at   the   time   of
commission of the offence, the emphasis in sub­section (2) is
upon   the   holding   of   an   office   and   consent,   connivance   or
negligence of such officer irrespective of his or her being or not
being actually in charge of and responsible to the company in the
conduct of its business. Thus, the important and distinguishing
feature in sub­section (1) is the control of a responsible person
over the affairs of the company rather than his holding of an
office or his designation, while the liability under sub­section (2)
arises   out   of   holding   an   office   and   consent,   connivance   or
neglect. While all the persons covered by sub­section (1) and subsection (2) are liable to be proceeded against and also punished
upon the proof of their being either in charge of and responsible
to the company in the conduct of its business or of their holding
of the office and having been guilty of consent, connivance or
neglect   in   the   matter   of   commission   of   the   offence   by   the
company, the person covered by sub­section (1) may, by virtue of
the first proviso, escape only punishment if he proves that the
22
offence was committed without his knowledge or despite his due
diligence.
27. As   for   the   requisite   evidence,   the   burden   upon   the
prosecution would be discharged under sub­section (1) when a
person   is   proved   to   be   in   charge   of   and   responsible   to   the
company in the conduct of its business and would shift upon the
accused to prove that he was ignorant or diligent, if that be his
defence; whereas under sub­section (2) the prosecution would be
required to allege and prove the consent, connivance or neglect
and holding of the office by the accused. There is nothing to
suggest   that   the   same   person   cannot   be   made   to   face   the
prosecution either under sub­section (1) or sub­section (2) or
both. A director or manager can be arraigned and proved to be
guilty as the person in charge of and responsible to the company
as well as the director of the company who, as such, might have
consented to, connived at or been negligent in respect of the
offence   of   dishonour   of   cheque,   be   logically   deduced   that   a
person can be arraigned in a complaint as the accused along with
the company if it prima facie appears that he was in charge of
and responsible to the company for the conduct of its business,
although he may or may not be or may not have continued to be
23
a director or other officer of the company, as mentioned in subsection (2). It would be sufficient if the complaint indicates that
such person has been arraigned on the basis of averments which
disclose him or her to be the person in charge of and responsible
to the company in the conduct of its business at the time the
offence was committed. Evidently, a person who signs the cheque
or who has the authority to sign the cheque for and on behalf of
the company, regardless of his office or capacity, can, prima facie,
be assumed to be in charge of and responsible to the company in
the   conduct   of   its   business.   And,   where   such   person   is
prosecuted,   then,   if   it   be   his   defence   that   the   offence   was
committed without his or her knowledge or that he or she has
exercised all due diligence to prevent the commission of such
offence, the burden to prove that would be on him or her and can
only be discharged at the stage of evidence.
28. While   dealing   with   a   reference   to   resolve   the   apparent
conflict between the judgments of this Court in the Municipal
Corporation of Delhi v. Ram Kishan Rohtagi, (1983) 1 SCC 1,
and the U.P. Pollution Control Board v. Modi Distillery, (1987)
3   SCC   684,   in   the   context   of   vicarious   liability   under   the
24
provisions   of   Section   141   of   the   NI   Act,   this   Court   in P.
Rajarathinam v. State   of  Maharashtra, (2000) 10 SCC 529,
pertinently observed as under:
“4. A bare reading of the provision mandates that some
facts must come on the record in order to figure as to who
should   answer   the   charge   ultimately.   Necessarily,   precharge evidence assumes importance.  The complainant will
have to put his side of the case as given out in the complaint
and the persons summoned would have to put on the record
all what is material to extricate themselves out. In any case,
the crucial time would be when framing charge whereat a
decision in that respect would be required to be made by the
court. Presently, it appears to us premature to be resolving
the conflict and the ratio deduced thereby, may turn out to
be obiter. Therefore, we think that we need not resolve such
conflict at present and leave it to the court concerned to
pass appropriate orders at the time of framing of charge. In
this manner, we dispose of these appeals.”
                                                           [Emphasis supplied]
29. The seminal issue raised and requires to be settled in the
present case is one relating to a person  liable to be proceeded
against under the provisions of sub­section (1) of Section 141 for
being in­charge of and responsible to the company “at the time
the offence was committed.” It would, therefore, be important to
find out the “time” when the offence under Section 138 can be
said to have been committed by the company. It is common place
that an offence means an aggregate of facts or omissions which
are   punishable   by   law   and,   therefore,   can   consist   of   several
25
parts, each part being committed at different time and place
involving different persons. The provisions of Section 138 would
require a series of acts of commission and omission to happen
before the offence of, what may be loosely called “dishonour of
cheque” can be constituted for the purpose of prosecution and
punishment.   It   is   held   by   the   Supreme   Court   in K.
Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC 510,
that:­
“14.  The  offence   under Section  138  of  the  Act   can   be
completed   only   with   the   concatenation   of   a   number   of
acts. The following are the acts which are components of
the   said   offence:   (1)   drawing   of   the   cheque,   (2)
presentation of the cheque to the bank, (3) returning the
cheque unpaid by the drawee bank, (4) giving notice in
writing to the drawer of the cheque demanding payment
of the cheque amount, (5) failure of the drawer to make
payment within 15 days of the receipt of the notice.”
30. Different persons can be in­charge of the company when
each of the series of acts of commission and omission essential to
complete the commission of offence by the company were being
committed. To take an example, in the case of a company, “A”
might be in charge of the company at the time of drawing the
cheque, “B” might be in charge of the company at the time of
dishonour of cheque and “C” might be in charge of the company
26
at the time of failure to pay within 15 days of the receipt of the
demand notice. In such a case, the permissibility of prosecution
of A, B and C resply or any of them would advance the purpose of
the provision and, if none can be prosecuted or punished, it
would frustrate the purpose of the provisions of Section 138 as
well as Section 141. The key to this interpretation lies in the use
of the phrase: “every person shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished
accordingly” as it occurs in sub­section (1) of Section 141 and the
use of the phrase “provided that nothing contained in this subsection   shall   render any person   liable   to   punishment   if   he
proves…” that occurs in the first proviso. Every person who was
in charge of and was responsible to the company for the conduct
of its business at the time any of the components necessary for
the   commission   of   the   offence   occurred   may   be   “proceeded
against”, but may not be “punished” if he succeeds in proving
that   the   offence   was   committed   without   his   knowledge   and
despite his due diligence; the burden of proving that remaining
on   him.   Therefore,   it   also   has   to   be   held   that   the   time   of
commission of the offence of dishonour of cheque cannot be on
the stroke of a clock or during 15 days after the demand notice
27
has   to   be   construed   as   the   time   when   each   of   the   acts   of
commission and omission essential to constitute the offence was
committed. The word “every” points to the possibility of plurality
of responsible persons at the same point of time as also to the
possibility   of   a   series   of   persons   being   in   charge   when   the
sequence of events culminating into the commission of offence by
the company were taking place. As to what this ‘relevant time’ is,
was a question that this Court was called to answer, inter alia, in
N Rangachari v. Bharati Sanchar Nigam Limited, AIR (2007)
SC 1682. In this case, Data Access, a company had issued two
cheques   to   the   BSNL,   which   were   duly   presented,   but   were
dishonoured   for   insufficiency   of   funds.   A   complaint   under
Section 138 of the NI Act was filed. While the BSNL held the
directors   liable,   the   appellant,   a   chairman   in   the   company
contended that he being a nominated chairman and holding an
Honorary post in the Company, was never assigned with any of
the company’s financial or other business activities. He was the
Chairman for name sake and was never entrusted with any job or
business or constituted a signing authority. Resolving the issue
of when the liability could be fastened, this Court said:­
28
“In the case on hand, reading the complaint as a whole, it
is clear that the allegations in the complaint are that at the
time at which the two dishonoured cheques were issued
by   the   company,   the   appellant   and   another   were   the
Directors of the company and were in charge of the affairs
of the company. It is not proper to split hairs in reading
the   complaint   so   as   to   come   to   a   conclusion   that   the
allegations as a whole are not sufficient to show that at
the relevant point of time the appellant and the other are
not alleged to be persons in­charge of the affairs of the
company. Obviously, the complaint refers to the point of
time   when   the   two   cheques   were   issued,   their
presentment,   dishonour   and   failure   to   pay   in   spite   of
notice of dishonour.”
      [Emphasis supplied]
31. As held by this Court in Anil Hada v. Indian Acrylic Ltd.,
(2000) 1 SCC 1, the phrase “as well as” used in sub­section (1) of
Section 141 of the NI Act would embroil the persons mentioned
therein   within   the   tentacles   of   the   offence   on   par   with   the
offending company. Therefore, when the company or firm is the
drawee of the cheque, such company or firm is the principal
offender and  the  fiction  created by the  legislature. When  the
offence is attributed to a juristic person or a body made up of
several   individuals   and   the   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
the individuals intended to be embroiled may not escape the
29
liability by mere fact of having not been in charge at the time
when one of the other of the events essential to complete the
offence   by   the   company   happened.   Borrowing   again   from K.
Bhaskaran (supra), the court should not adopt an interpretation
which helps a dishonest evader and clips an honest payee as that
would defeat the very legislative measure.
32. In the aforesaid context, we may straight away proceed to
look into the following observations made by this Court in the
case   of  Monaben   Ketanbhai   Shah   v.   State   of   Gujarat  in
Criminal Appeal No. 850 of 2004 decided on 10.08.2004 reported
in (2004) 7 SCC 15:­
“Section 138 of the Act makes dishonour of the cheque an
offence   punishable   with   imprisonment   or   fine   or
both. Section   141 relates   to   offences   by   the   company.   It
provides   that   if   the   person   committing   an   offence
under Section 138 is a company, every person who, at the
time the offence was committed, was in charge of, and was
responsible to, the company for the conduct of the business
of the company, as well as the company, shall be deemed
to   be   guilty   of   the   offence   and   shall   be   liable   to   be
proceeded   against   and   punished   accordingly.   Thus,
vicarious liability has been fastened on those who are incharge of and responsible to the company for the conduct of
its business. For the purpose of Section 141, a firm comes
within   the   ambit   of   a   company.  It   is   not   necessary   to
    reproduce   the   language   of     Section   141 verbatim   in   the
complaint since the complaint is required to be read as a
whole.   If   the   substance   of   the   allegations   made   in   the
    complaint   fulfill   the   requirements   of     Section   141,   the
30
complaint has to proceed and is required to be tried with. It
is also true that in construing a complaint a hyper­technical
approach should not be adopted so as to quash the same.
The laudable object of preventing bouncing of cheques and
sustaining   the   credibility   of   commercial   transactions
    resulting in enactment of     Sections 138     and     141 has to be
borne   in   mind.   These   provisions   create   a   statutory
presumption of dishonesty exposing a person to criminal
liability if payment is not made within statutory period even
after   issue   of   notice.   It   is   also   true   that   the   power   of
quashing is required to be exercised very sparingly and
where, read as a whole, factual foundation for the offence
has been laid in the complaint, it should not be quashed. All
the same, it is also to be remembered that it is the duty of
the   Court   to   discharge   the   accused   if   taking   everything
stated   in   the   complaint   as   correct   and   construing   the
allegations   made   therein   liberally   in   favour   of   the
complainant, the ingredients of the offence are altogether
lacking.”

[Emphasis supplied]
33. Thus,   the   legal   principles   discernible   from   the   aforesaid
decision of this Court may be summarised as under:­
(a) Vicarious liability can be fastened on those who are incharge of and responsible to the company or firm for the
conduct of its business. For the purpose of Section 141, the
firm comes within the ambit of a company;
(b) It is not necessary to reproduce the language of Section 141
verbatim in the complaint since the complaint is required to
be read as a whole;
31
(c) If the substance of the allegations made in the complaint
fulfil the requirements of Section 141, the complaint has to
proceed in regards the law.
(d) In   construing   a   complaint   a   hyper­technical   approach
should not be adopted so as to quash the same.
(e) The laudable object of preventing bouncing of cheques and
sustaining   the   credibility   of   commercial   transactions
resulting   in   the   enactment   of   Sections   138   and   141
respectively should be kept in mind by the Court concerned.
(f) These   provisions   create   a   statutory   presumption   of
dishonesty exposing a person to criminal liability if payment
is not made within the statutory period even after the issue
of notice.
(g) The power of quashing should be exercised very sparingly
and where, read as a whole, the factual foundation for the
offence has been laid in the complaint, it should not be
quashed.
(h) The Court concerned would owe a duty to discharge the
accused   if   taking   everything   stated   in   the   complaint   is
correct and construing the allegations made therein liberally
32
in favour of the complainant, the ingredients of the offence
are altogether lacking.
34. The inter­relationship between the Sections 138 and 141
respectively of the NI Act has been succinctly explained by this
Court in  SMS   Pharmaceuticals   v.   Neeta   Bhalla, AIR (2005)
3512, in the following words:­
“It will be seen from the above provisions that Section 138
casts criminal liability punishable with imprisonment or
fine   or   with   both   on   a   person   who   issues   a   cheque
towards discharge of a debt or liability as a whole or in
part   and   the   cheque   is   dishonoured   by   the   Bank   on
presentation. Section 141 extends such criminal liability in
case of a Company to every person who at the time of the
offence,   was   in­charge   of   and   was   responsible   for   the
conduct of the business of the Company. By a deeming
provision   contained   in   Section   141   of   the   Act,   such   a
person is vicariously liable to be held guilty for the offence
under Section 138 and punished accordingly.”
Who is liable? Vicarious liability:
35. This   Court   in  Assistant   Commissioner,   Assessment­II,
Bangalore and Ors.  v.  Velliappa Textiles Ltd.  and Ors.  AIR
(2004) SC 86, introduced the concept of ego and alter ego in
relation to the employee and the employer corporation. The Court
elucidated this principle in the following words:­
“In   order   to   trigger   corporate   criminal   liability   for   the
actions   of   the   employee   (who   must   generally   be   liable
33
himself), the actor­employee who physically committed the
offence   must   be   the   ego,   the   centre   of   the   corporate
personality, the vital organ of the body corporate, the alter
ego of the employer corporation or its directing mind. Since
the company/corporation has no mind of its own, its active
and   directing   will   must   consequently   be   sought   in   the
person of somebody who for some purposes may be called
an agent, but who is really the directing mind and will of
the corporation, the very ego and centre of the personality
of the corporation. To this extent there are no difficulties in
our law to fix criminal liability on a company. The common
law   tradition   of alter   ego or   identification   approach   is
applicable under our existing laws.”
36. Now, the logical question that would follow is who would
be   liable   through   the   company   for   this   offence?   Can   the
company itself be prosecuted for this offence? Answering this
question, the Section 141 says,  ‘every person who was in
charge   of’  and  ‘was   responsible   to   the   company   for   the
conduct of the business’  shall be deemed to be guilty of the
offence. This concept of vicarious liability has been explained
by   this   Court   in  Sabhitha   Ramamurthy   v.   RBS
Channabasavaradhya, AIR (2006) SC 3086, as:­
“Section 141 raises a legal fiction. By reason of the said
provision, a   person   although  is   not  personally  liable   for
commission of such an offence would be vicariously liable
therefor. Such vicarious liability can be inferred so far as a
company registered or incorporated under the Companies
Act,   1956   is   concerned   only   if   the   requisite   statements,
which are required to be averred in the complaint petition,
34
are made so as to make the accused therein vicariously
liable for the offence committed by the company. Before a
person can  be  made vicariously liable, strict compliance
with the statutory requirements would be insisted.”          
    [Emphasis supplied]
37. At this stage, we should look into the decision of this Court
in the case of  K.K.  Ahuja v.  V.K.  Vora, (2009) 10 SCC 48, in
K.K. Ahuja (supra), wherein this Court discussed the principles
of vicarious liability of the officers of a company in respect of
dishonour of a cheque and held­ 
“27.   The   position   under section   141 of   the   Act   can   be
summarized thus:
(i) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an
averment in the complaint that he is in charge of, and
is responsible to the company, for the conduct of the
business   of   the   company.   It   is   sufficient   if   an
averment is made that the accused was the Managing
Director  or Joint  Managing  Director  at  the   relevant
time. This is because the prefix “Managing” to the
word   “Director”   makes   it   clear   that they   were   incharge of and are responsible to the company, for the
conduct of the business of the company.
(ii)   In   the   case   of   a   director   or   an   officer   of   the
company   who   signed   the   cheque   on   behalf   of   the
company,   there   is   no   need   to   make   a   specific
averment   that   he   was   in   charge   of   and   was
responsible to the company, for the conduct of the
business   of   the   company   or   make   any   specific
allegation   about   consent,  connivance   or   negligence.
The very fact that the dishonoured cheque was signed
35
by him on behalf of the company, would give rise to
responsibility under sub­section (2) of Section 141.
(iii) In the case of a Director, Secretary or Manager (as
    defined in Section 2(24) of the     Companies Act) or a
    person referred to in clauses (e) and (f) of     section 5 of
Companies Act, an averment in the complaint that he
was   in   charge   of,   and   was   responsible   to   the
company,   for   the   conduct   of   the   business   of   the
    company is necessary to bring the case under section
    141(1)  of   the   Act.   No   further   averment   would   be
necessary in the complaint, though some particulars
will   be   desirable.   They   can   also   be   made   liable
    under     Section 141(2) by making necessary averments
relating to consent and connivance or negligence, in
the  complaint, to bring  the  matter under that  subsection.
(iv) Other Officers of a company cannot be made liable
under sub­section (1) of Section 141. Other officers of
a company can be made liable only under sub­section
(2) of Section 141, by averring in the complaint their
position and duties in the company and their role in
regard   to   the   issue   and   dishonour   of   the   cheque,
disclosing consent, connivance or negligence.”
   [Emphasis supplied]
38. In   a   very   recent   pronouncement   in   the   case   of  Sunita
Palita   v.  M/s   Panchami   Stone  Quarry  (2022) SC Online SC
945, this Court, after referring to K.K. Ahuja (supra) referred to
above, observed as under:
“When   the   accused   is   the   Managing   Director   or   a   Joint
Managing Director of a company, it is not necessary to make
an averment in the complaint that he is in charge of, and is
responsible to the company for the conduct of the business of
36
the company. This is because the prefix “Managing” to the
word   “Director”   makes   it   clear   that   the   Director   was   in
charge of and responsible to the company, for the conduct of
the business of the company. A Director or an Officer of the
company who signed the cheque renders himself liable in
case of dishonour. Other officers of a company can be made
liable only under sub­section (2) of Section 141 of the NI Act
by averring in the complaint, their position and duties, in the
company, and their role in regard to the issue and dishonour
of the cheque, disclosing consent, connivance or negligence.” 
39. In yet one another recent pronouncement in the case of
Ashutosh Ashok Parasrampuria v. Gharrkul Industries Pvt.
Ltd. reported in (2021) SCC Online SC 915, this Court after due
consideration   of   the   decisions   in   the   case   of  SMS
Pharmaceuticals  (supra);  S.K.   Alagh   v.   State   of   Uttar
Pradesh  (2008) 5 SCC 662;  Maharashtra   State   Electricity
Distribution Co. Ltd. v. Datar Switchgear Ltd., (2010) 10 SCC
479,   and  GHCL   Employees   Stock   Option   Trust   v.   India
Infoline Limited, (2013) 4 SCC 505, observed as under:­   
“In the light of the ratio in SMS Pharmaceuticals Ltd. (supra)
and later judgments of which a reference has been made
what is to be looked into is whether in the complaint, in
addition to asserting that the appellants are the Directors of
the Company and they are in­charge of and responsible to
the   Company   for   the   conduct   of   the   business   of   the
Company and if statutory compliance of Section 141 of the
NI Act has been made, it may not open for the High Court to
interfere under Section 482 CrPC unless it comes across
37
some   unimpeachable,   incontrovertible   evidence   which   is
beyond   suspicion   or   doubt   or   totally   acceptable
circumstances which may clearly indicate that the Director
could   not   have   been   concerned   with   the   issuance   of
cheques and asking him to stand the trial would be abused
of process of Court. Despite the presence of basic averment,
it   may   come   to   a   conclusion   that   no   case   is   made   out
against   the   particular   Director   for   which   there   could   be
various reasons.”
       [Emphasis supplied]
40. The principles discernible from the aforesaid decision of this
Court in the case of Ashutosh Ashok Parasrampuriya (supra)
is that the High Court should not interfere under Section 482 of
the Code at the instance of an accused unless it comes across
some unimpeachable and incontrovertible evidence to indicate
that   the   Director/partner   of   a   firm   could   not   have   been
concerned with the issuance of cheques. This Court clarified that
in a given case despite the presence of basic averments, the High
Court   may   conclude   that   no   case   is   made   out   against   the
particular Director/ partner provided the Director/partner is able
to   adduce   some  unimpeachable   and   incontrovertible   evidence
beyond suspicion and doubt.
Specific Averments in the complaint:
38
41. In  Gunmala   Sales   Private   Limited  (supra),   this   Court
after an exhaustive review of its earlier decisions on Section 141
of the NI Act, summarized its conclusion as under:­
“a) Once in a complaint filed under Section 138 read with
Section 141 of the NI Act the basic averment is made that
the Director was in charge of and responsible for the conduct
of the business of the company at the relevant time when the
offence was committed, the Magistrate can issue process
against such Director;
b) If a petition is filed under Section 482 of the Code for
quashing of such a complaint by the Director, the High Court
may, in the facts of a particular case, on an overall reading
of the complaint, refuse to quash the complaint because the
complaint contains the basic averment which is sufficient to
make out a case against the Director;
c) In the facts of a given case, on an overall reading of the
complaint, the High Court may, despite the presence of the
basic averment, quash the complaint because of the absence
of   more   particulars   about   role   of   the   Director   in   the
complaint.   It   may   do   so   having   come   across   some
unimpeachable, incontrovertible evidence which is beyond
suspicion or doubt or totally acceptable circumstances which
may clearly indicate that the Director could not have been
concerned with the issuance of cheques and asking him to
stand the trial would be abuse of the process of the court.
Despite the presence of basic averment, it may come to a
conclusion that no case is made out against the Director.
Take   for   instance   a   case   of   a   Director   suffering   from   a
terminal illness who was bedridden at the relevant time or a
Director who had resigned long before issuance of cheques.
In such cases, if the High Court is convinced that prosecuting
such a Director is merely an arm­twisting tactics, the High
Court may quash the proceedings. It bears repetition to state
that to establish such case unimpeachable, incontrovertible
evidence which is beyond suspicion or doubt or some totally
39
acceptable   circumstances   will   have   to   be   brought   to   the
notice of the High Court. Such cases may be few and far
between but the possibility of such a case being there cannot
be   ruled   out.   In   the   absence   of   such   evidence   or
circumstances, complaint cannot be quashed;
d) No restriction can be placed on the High Court's powers
under Section 482 of the Code. The High Court always uses
and   must   use   this   power   sparingly   and   with   great
circumspection to prevent inter alia the abuse of the process
of the Court. There are no fixed formulae to be followed by
the High Court in this regard and the exercise of this power
depends upon the facts and circumstances of each case. The
High Court at that stage does not conduct a mini trial or
roving   inquiry,   but   nothing   prevents   it   from   taking
unimpeachable evidence or totally acceptable circumstances
into account which may lead it to conclude that no trial is
necessary qua a particular Director.”
42. The principles of law and the dictum as laid in  Gunmala
Sales  Private  Limited  (supra), in our opinion, still holds the
field and reflects the correct position of law.
43. In the case on hand, we find clear and specific averments
not only in the complaint but also in the statutory notice issued
to the respondent. There are specific averments that the cheque
was issued with the consent of the respondent herein and within
her   knowledge.   In   our   view,   this   was   sufficient   to   put   the
respondent herein to trial for the alleged offence. We are saying
so   because   the   case   of   the   respondent   that   at   the   time   of
40
issuance of the cheque or at the time of the commission of the
offence, she was in no manner concerned with the firm or she
was not in­charge or responsible for day­to­day affairs of the firm
cannot be on the basis of mere bald assertion in this regard. The
same is not sufficient. To make good her case, the respondent
herein is expected to lead unimpeachable and incontrovertible
evidence. Nothing of the sort was adduced by the respondent
before the High Court to get the proceedings quashed. The High
Court had practically no legal basis to say that the averments
made in the complaint are not sufficient to fasten the vicarious
liability upon the respondent by virtue of Section 141 of the NI
Act.
44. We may also examine this appeal from a different angle. It is
not in dispute, as noted above, that no reply was given by the
respondent   to   the   statutory   notice   served   upon   her   by   the
appellant. In the proceedings of the present type, it is essential
for the person to whom statutory notice is issued under Section
138   of   the   NI   Act   to   give   an   appropriate   reply.   The   person
concerned is expected to clarify his or her stance. If the person
concerned   has   some   unimpeachable   and   incontrovertible
material to establish that he or she has no role to play in the
41
affairs   of   the   company/firm,   then   such   material   should   be
highlighted in the reply to the notice as a foundation. If any such
foundation is laid, the picture would be more clear before the
eyes of the complainant. The complainant would come to know as
to why the person to whom he has issued notice says that he is
not   responsible   for   the   dishonour   of   the   cheque.   Had   the
respondent herein given appropriate reply highlighting whatever
she   has   sought   to   highlight   before   us   then   probably   the
complainant would have undertaken further enquiry and would
have tried to find out what was the legal status of the firm on the
date of the commission of the offence and what was the status of
the respondent in the firm. The object of notice before the filing of
the complaint is not just to give a chance to the drawer of the
cheque to rectify his omission to make his stance clear so far as
his liability under Section 138 of the NI Act is concerned.
45. Once the necessary averments are made in the statutory
notice   issued   by   the   complainant   in   regard   to   the   vicarious
liability of the partners and upon receipt of such notice, if the
partner keeps quiet and does not say anything in reply to the
same, then the complainant has all the reasons to believe that
what   he   has   stated   in   the   notice   has   been   accepted   by   the
42
noticee. In such circumstances what more is expected of the
complainant to say in the complaint. 
46.  When in view of the basic averment process is issued the
complaint must proceed against the Directors or partners as the
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. He
must make out a case that making him stand the trial would be
an   abuse   of   process   of   court.   He   cannot   get   the   complaint
quashed   merely   on   the   ground   that   apart   from   the   basic
averment no particulars are given in the complaint about his
role, because ordinarily the basic averment would be sufficient to
send him to trial and it could be argued that his further role
could be brought out in the trial. Quashing of a complaint is a
serious matter. Complaint cannot be quashed for the asking. For
quashing of a complaint, it must be shown that no offence is
made out at all against the Director or Partner.
43
47. Our final conclusions may be summarised as under:­
a.) The primary responsibility of the complainant is to
make specific averments in the complaint so as to
make the accused vicariously liable. For fastening
the criminal liability, there is no legal requirement
for   the   complainant   to   show   that   the   accused
partner of the firm was aware about each and every
transaction. On  the  other hand,  the  first proviso
to sub­section (1) of  Section 141 of the Act clearly
lays down that if the accused is able to prove to the
satisfaction   of   the   Court   that   the   offence   was
committed   without   his/her   knowledge   or   he/she
had   exercised   due   diligence   to   prevent   the
commission   of   such   offence,   he/she   will   not   be
liable of punishment.
b.)   The complainant is supposed to know only generally
as   to   who   were   in   charge   of   the   affairs   of   the
company or firm, as the case may be.   The other
administrative matters would be within the special
44
knowledge of the company or the firm and those
who are in charge of it. In such circumstances, the
complainant is expected to allege that the persons
named in the complaint are in charge of the affairs
of the company/firm. It is only the Directors of the
company or the partners of the firm, as the case
may be, who have the special knowledge about the
role they had played in the company or the partners
in   a   firm   to   show   before   the   court   that   at   the
relevant point of time they were not in charge of the
affairs of the company. Advertence to Sections 138
and Section 141 respectively of the NI Act shows
that   on   the   other   elements   of   an   offence   under
Section 138 being satisfied, the burden is on the
Board of Directors or the officers in charge of the
affairs of the company/partners of a firm to show
that   they   were   not   liable   to   be   convicted.   The
existence of any special circumstance that makes
them   not   liable   is   something   that   is   peculiarly
within   their   knowledge   and   it   is   for   them   to
establish at the trial to show that at the relevant
45
time they were not in charge of the affairs of the
company or the firm.
c.) Needless to say, the final judgement and order would
depend on the evidence adduced. Criminal liability is
attracted   only   on   those,   who   at   the   time   of
commission  of the  offence, were  in  charge of  and
were responsible for the conduct of the business of
the   firm.   But   vicarious   criminal   liability   can   be
inferred against the partners of a firm when it is
specifically averred in the complaint about the status
of the partners ‘qua’ the firm. This would make them
liable to face the prosecution but it does not lead to
automatic conviction. Hence, they are not adversely
prejudiced   if   they   are   eventually   found   to   be   not
guilty, as a necessary consequence thereof would be
acquittal.
d.) If any Director 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/she is really not concerned
with  the  issuance  of  the  cheque,  he/she  must  in
46
order   to   persuade   the   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 the trial would be an
abuse of process of Court.
48. We reiterate the observations made by this Court almost a
decade back in the case of  Rallis  India  Ltd v. Poduru Vidya
Bhusan  &  Ors., (2011) 13 SCC 88, as to how the High Court
should exercise its power to quash the criminal proceeding when
such   proceeding   is   related   to   offences   committed   by   the
companies.  “The   world   of   commercial   transactions   contains
numerous   unique   intricacies,   many   of   which   are   yet   to   be
statutorily regulated. More  particularly, the  principle  laid down
in Section 141 of the NI Act (which is pari materia with identical
sections in other Acts like the Food Safety and Standards Act,
2006; the erstwhile Prevention of Food Adulteration Act, 1954; etc.)
is   susceptible   to   abuse   by   unscrupulous   companies   to   the
detriment of unsuspecting third parties.”
47
49. In the result, this appeal succeeds and is hereby allowed
with no order as to costs. The impugned order passed by the
High Court is hereby set aside.
50. Pending application, if any, also stands disposed of.
…….…………………………J.
(SURYA KANT)
……..………………………J.
(J.B. PARDIWALA)
New Delhi;
September 16, 2022
48

Comments

Popular posts from this blog

100 Questions on Indian Constitution for UPSC 2020 Pre Exam

संविधान की प्रमुख विशेषताओं का उल्लेख | Characteristics of the Constitution of India

भारतीय संविधान से संबंधित 100 महत्वपूर्ण प्रश्न उतर