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

[2022] 9 S.C.R.

S. P. MANI AND MOHAN DAIRY

DR.SNEHALATHA ELANGOVAN

(Criminal Appeal No. 1586 of 2022)

BSEPTEMBER 16, 2022

[SURYA KANT AND J. B. PARDIWALA, JJ.]

Negotiable Instruments Act, 1881 – ss.138 and 141 –Partnership firm – Cheque dishonour case – Vicarious liability ofthe partners – Held: Burden is on Board of Directors or officers inCcharge of the affairs of the company /partners of firm to showthat they were not liable to be convicted – Existence of any specialcircumstance that makes them not liable is something that ispeculiarly within their knowledge and it is for them to establish atthe trial to show that at the relevant time they were not in charge ofDthe affairs of the company or the firm – Criminal liability is attractedonly on those, who at the time of commission of the offence, were incharge of and were responsible for the conduct of the business ofthe firm – But vicarious criminal liability can be inferred againstthe partners of firm when it is specifically averred in the complaintabout the status of the partners ‘qua’ the firm – This would makeEthem liable to face the prosecution but it does not lead to automaticconviction – Hence, they are not adversely prejudiced if they areeventually found to be not guilty, as necessary consequencethereof would be acquittal.Code of Criminal Procedure, 1973 – s.482 – NegotiableFInstruments Act, 1881 – s.138 and 141 – Partnership firm – Chequedishonour case against Director / partner of the firm – Interferenceby High Court u/s.482 CrPC – Scope – Held: High Court shouldnot interfere u/s.482 CrPC at the instance of an accused unless itcomes across some unimpeachable and incontrovertible evidenceGto indicate that the Director/partner of firm could not have beenconcerned with the issuance of cheques – In given case despitethe presence of basic averments, the High Court may conclude thatno case is made out against the particular Director/partner providedthe Director/partner is able to adduce some unimpeachable andincontrovertible evidence beyond suspicion and doubt – If anyH

S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHAELANGOVAN

Director wants the process to be quashed by filing petitionu/s.482 CrPC on the ground that only bald averment is made inthe complaint and that he/she is really not concerned with theissuance of the cheque, he/she must in order to persuade the HighCourt to quash the process either furnish some sterlingincontrovertible material or acceptable circumstances to substantiatehis/her contention – He/she must make out case that making him/her stand the trial would be an abuse of process of Court – Abuseof Court.

Notice – Statutory Notice – Negotiable Instruments Act, 1881– s.138 and 141 – Partnership firm – Cheque dishonour case againsta partner of the firm – No reply given by respondent-accused tostatutory notice served upon her by appellant-complainant – Effect– Held: It is essential for the person to whom statutory notice isissued u/s.138 to give an appropriate reply – The person concernedis expected to clarify his or her stance – If the person concernedhas some unimpeachable and incontrovertible material to establishthat he or she has no role to play in the affairs of the company/firm,then such material should be highlighted in the reply to the noticeas foundation – Once the necessary averments are made in thestatutory notice issued by the complainant in regard to the vicariousliability of the partners and upon receipt of such notice, if the partnerkeeps quiet and does not say anything in reply to the same, then thecomplainant has all the reasons to believe that what he has statedin the notice has been accepted by the noticee.

Negotiable Instruments Act, 1881 – s.141 – Differencebetween sub-section (1) and (2) of s.141 – Discussed.

Allowing the appeal, the Court

HELD:1. The primary responsibility of the complainant isto make specific averments in the complaint so as to make theaccused vicariously liable. For fastening the criminal liability,there is no legal requirement for the complainant to show thatthe accused partner of the firm was aware about each and everytransaction. On the other hand, the first proviso to sub-section(1) of Section 141 of the Negotiable Instruments Act, 1881 clearlylays down that if the accused is able to prove to the satisfaction ofthe Court that the offence was committed without his/her

Aknowledge or he/she had exercised due diligence to prevent thecommission of such offence, he/she will not be liable of punishment.[Para 47][666-C-E]

2. The complainant is supposed to know only generally asto who were in charge of the affairs of the company or firm, as theBcase may be. The other administrative matters would be withinthe special knowledge of the company or the firm and those whoare in charge of it. In such circumstances, the complainant isexpected to allege that the persons named in the complaint arein charge of the affairs of the company/firm. It is only the Directorsof the company or the partners of the firm, as the case may be,Cwho have the special knowledge about the role they had playedin the company or the partners in firm to show before the courtthat at the relevant point of time they were not in charge of theaffairs of the company. Advertence to Sections 138 and Section141 respectively of the NI Act shows that on the other elementsDof an offence under Section 138 being satisfied, the burden is onthe Board of Directors or the officers in charge of the affairs ofthe company/partners of firm to show that they were not liableto be convicted. The existence of any special circumstance thatmakes them not liable is something that is peculiarly within theirknowledge and it is for them to establish at the trial to show thatEat the relevant time they were not in charge of the affairs of thecompany or the firm. [Para 47][666-E-H; 667-A-B]

3. Criminal liability is attracted only on those, who at thetime of commission of the offence, were in charge of and wereresponsible for the conduct of the business of the firm. ButFvicarious criminal liability can be inferred against the partners ofa firm when it is specifically averred in the complaint about thestatus of the partners ‘qua’ the firm. This would make them liableto face the prosecution but it does not lead to automaticconviction. Hence, they are not adversely prejudiced if they areGeventually found to be not guilty, as necessary consequencethereof would be acquittal. [Para 47][667-C-D]

4. If any Director wants the process to be quashed by filinga petition under Section 482 of the Code on the ground that only

bald averment is made in the complaint and that he/she is reallynot concerned with the issuance of the cheque, he/she must inorder to persuade the High Court to quash the process eitherfurnish some sterling incontrovertible material or acceptablecircumstances to substantiate his/her contention. He/she mustmake out case that making him/her stand the trial would be anabuse of process of Court. [Para 47][667-E-F]

N Rangachari v. Bharati Sanchar Nigam Limited AIR(2007) SC 1682 : [2007] 5 SCR 329; Anil Hada v.Indian Acrylic Ltd. (2000) 1 SCC 1 : [1999] 5 Suppl.SCR 6; Monaben Ketanbhai Shah v. State of Gujarat(2004) 7 SCC 15 : [2004] 3 Suppl. SCR 411; K.K.Ahuja v. V.K. Vora (2009) 10 SCC 48 : [2009] 9 SCR1144; Sunita Palita v. M/s Panchami Stone Quarry(2022) SC Online SC 945; Ashutosh AshokParasrampuria v. Gharrkul Industries Pvt. Ltd. (2021)SCC Online SC 915; Gunmala Sales Pvt. Ltd. v. AnuMehta & Ors. (2015) 1 SCC103 : [2014] 10 SCR 1117;Rallis India Ltd v. Poduru Vidya Bhusan & Ors. (2011)13 SCC 88 : [2011] 5 SCR 289 – relied on.SMS Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC89 : [2005] 3 Suppl. SCR 371; National Small IndustriesCorporation v. Harmeet Singh Paintal & Anr. (2010) 3SCC 330 : [2010] 2 SCR 805; Sunita Palita & Othersv. M/s Panchami Stone Quarry (2022) SC Online SC945; Municipal Corporation of Delhi v. Ram KishanRohtagi (1983) 1 SCC 1 : [1983] 1 SCR 884; U.P.Pollution Control Board v. Modi Distillery (1987) 3 SCC684 : [1987] 3 SCR 798; P. Rajarathinam v. State ofMaharashtra (2000)10 SCC 529; K. Bhaskaran v.Sankaran Vaidhyan Balan (1999) 7 SCC 510 : [1999]3 Suppl. SCR 271; Assistant Commissioner, Assessment-II Bangalore and Ors. v.Velliappa Textiles Ltd. and Ors.AIR (2004) SC 86 : [2003] 3 Suppl. SCR 763; SabhithaRamamurthy v. RBS Channabasavaradhya AIR (2006)SC 3086 : [2006] 6 Suppl. SCR 126; S. K. Alagh v.State of Uttar Pradesh (2008) 5 SCC 662 : [2008] 2

ASCR 1088; Maharashtra State Electricity DistributionCo. Ltd. v. Datar Switchgear Ltd. (2010) 10 SCC 479 :[2010] 12 SCR 551; GHCL Employees Stock OptionTrust v. India Infoline Limited (2013) 4 SCC 505 : [2013]5 SCR 27 – referred to.

Case Law Reference

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.G1586 of 2022.

From the Judgment and Orders dated 16.02.2021 of the HighCourt of Judicature at Madras, in Crl. O.P. No. 1063 of 2021.

E. R. Kumar, Ms. Raghav Bansal for M/s Parekh & Co., Advs.Hfor the Appellant.

S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHAELANGOVAN

Ms. Hari Priya Padmanabhan, T. Mahendhran, RaghunathaSethupathy B., Ms. Jhanvi Dhubay, K. Paari Vendhan, Advs. for theRespondent.

The Judgment of the Court was delivered by

J. B. PARDIWALA, J.

1. Leave granted.

2. This appeal is at the instance of the original complainant of acomplaint filed under Section 138 of the Negotiable Instruments Act,1881 (for short, “the NI Act”) and is directed against the order passedby the High Court of Madras dated 16.02.2021 in the Criminal OriginalPetition No. 1063 of 2021 filed by the respondent herein (accused no.03)under Section 482 of the Code of Criminal Procedure (for short, “theCode”), whereby the High Court allowed the application and quashedthe criminal proceedings initiated against the respondent herein in thecourt of the Judicial Magistrate Fast Track Court No.-II, Erode.

3. There are some legal issues with never-ending debate. Thedebate on such legal issues goes on and on despite there being plethoraof case law on the subject. The NI Act by now is almost three decadesold. Section 141 of the NI Act is on the statute past more than threedecades. There are various decisions of this Court and High Courtsexplaining the true purport of Section 141 of the NI Act. However, thedebate on Section 141 of the NI Act is never ending. The presentlitigation is also one in which we have been called upon to look intoSection 141 of the NI Act.

FACTUALMATRIX

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 Partnership Firm runningin the name of Sira Marketing Services. The firm used to purchase milkand milk products from the appellant/complainant on credit basis. Theappellant has to recover an amount of Rs. 10,71,434.60/- (Rs. Ten LakhSeventy One Thousand Four Hundred Thirty Four and Sixty paise) fromthe partnership firm. The firm issued cheque duly signed by the originalaccused No. 02 (partner/authorised signatory) in favour of the appellantfor 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

Ain the account maintained by the firm. No sooner, the bank intimated theappellant herein that the cheque could not be cleared due to insufficientfunds than the appellant herein issued statutory notice dated 14-08-2017to the firm and the two partners of the firm. Despite service of notice tothe firm as well as the two partners (accused persons) the amount wasnot paid to the appellant and therefore, the appellant was left with noBother option but to file the complaint in the Judicial Magistrate Fast TrackCourt No. II, Erode for the offence punishable under Section 138 r/w141 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 andCprayed that the criminal proceedings instituted against her may be quashedas she has no liability under the law. The principal argument of therespondent herein before the High Court was that much before the chequecame to be issued, the firm had been dissolved. The accounts of the firmwere also settled on 13-02-2017 following the dissolution. The High CourtDquashed the proceedings against the respondent herein mainly on theground that there was nothing to indicate as to how and in what mannerthe respondent at the relevant point of time was in-charge and responsiblefor the conduct of the business of the firm. The High Court took theview that the complaint can be prosecuted as against the respondentherein only if the allegations made in the complaint fulfils the requirementsEof Section 141 of the NI Act. The High Court took the view that merelyby reciting the words used under Section 141 of the NI Act in the complaintno vicarious liability can be fastened on the partner of the firm.

6. In such circumstances above, the High Court allowed theapplication filed by respondent herein and terminated the proceedings asFfar as the respondent is concerned.

7. In view of the aforesaid, the appellant (original complainant) ishere before this Court with the present appeal.

Submissions on behalf of the AppellantG

G8. The learned counsel, Mr. E.R. Kumar appearing for the appellantvehemently submitted that the High Court committed serious error inpassing the impugned Order quashing the proceedings against therespondent herein. He would submit that the entire premise on whichthe High Court proceeded could be termed as erroneous in law. Thelearned counsel would submit that in the statutory notice issued to theH

respondent as well as in the body of the complaint, there are specificaverments that the accused Nos. 02 and 03 respectively, being thepartners of the partnership firms, are in-charge and responsible for theday-to- day affairs of the firm. He pointed out there are specific avermentsmade in the complaint that the partners which include the respondentherein are regularly looking after and actively taking part in the day-to-daybusiness of the firm. He further pointed out that there is specific avermentthat in order to discharge the liability, the original accused No. 02 hadissued the cheque within the knowledge and consent of the respondentherein. It is argued that if the substance of the allegation made in thecomplaint fulfil the requirements of Section 141 of the NI Act, the complaintis to proceed and is required to be tried with. The learned counselvociferously argued that while construing complaint the Court shouldnot adopt hyper-technical approach and quash the same.9. The learned counsel further pointed out that three individualnotices were issued under Section 138 of the NI Act before the filing ofthe complaint. He would submit that the statutory notice was duly servedupon the respondent herein. However, the respondent thought fit not togive any reply to the notice. It is argued that if the respondent had anythingto say as regards her role in the firm, she could have given an appropriatereply that she is sleeping partner and not involved into the day- to-dayaffairs of the firm. It is argued that respondent herein could also haveclarified in her reply that the firm had already been dissolved much beforethe cheque was issued and in such circumstances, no liability could befastened on her. In the absence of any reply to the statutory notice, therespondent could not have argued before the High Court for the firsttime about her involvement in the affairs of the firm. The learned counselwould submit that the High Court committed serious error in acceptingsuch submission canvassed on behalf of the respondent at the preliminarystage.

10. The learned counsel further submitted that once the necessaryaverments are made in the complaint, the onus thereafter would shift onthe accused to establish by producing some unimpeachable andincontrovertible evidence which may clearly indicate that the respondentherein as one of the partners of the firm, could not have been concernedwith the issuance of the cheque in question.

11. In such circumstances referred above, the learned counselappearing for the appellant prays that there being merit in his appeal, the

[2022] 9 S.C.R.

Asame may be allowed and the impugned order passed by the High Courtmay be quashed.

Submissions on behalf of the Respondent:

12. Ms. Hari Priya Padmanabhan, the learned counsel appearingfor the respondent (accused) on the other hand has vehemently opposedBthe present appeal submitting that no error, not to speak of any error oflaw, could be said to have been committed by the High Court in passingthe impugned order. She would submit that mere bald averments in thecomplaint are not sufficient to fasten the vicarious lability on the partnerof the firm as envisaged under Section 141 of the NI Act. The learnedCcounsel would submit that the case on hand is squarely covered by thedecision of this Court in the case of SMS Pharmaceuticals Ltd. v.Neeta Bhalla, (2005) 8 SCC 89. Relying on the said decision of thisCourt, the learned counsel would submit that the deeming fiction creatingcriminal lability and vicarious lability are departure from the usualprinciples of criminal law and that clear case should be spelt out andDthe accused person should be made aware of the case alleged againsthim or her. The learned counsel would submit that this would thereforenecessarily require averments in addition to the statement that the accusedis in-charge of and responsible for the affairs of the company/firm.

13. The learned counsel appearing for the respondent in supportEof her aforesaid submissions has placed strong reliance on the followingdecisions:

(i)Gunmala Sales Pvt. Ltd. v. Anu Mehta & Ors, reported in(2015) 1 SCC 103;

F(ii) National Small Industries Corporation v. Harmeet SinghPaintal & 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 counselGappearing for the respondent prays that there being no merit in thisappeal, the same may be dismissed.

Analysis

15. Having heard the learned counsel appearing for the partiesand having gone through the materials on record the only question thatH

falls for our consideration is whether the High Court committed anyerror in passing the impugned order?

16. Since the arguments of both the sides have proceeded mainlyon the averments made in the complaint and to analyze the case beforeus in proper perspective, it is necessary to scrutinize the statutory noticeas well as the complaint. The statutory notice dated 14.08.2017 readsthus:-

1. Sira Marketing Service,Represented by it’s Partner/ Authorized Signatory,Rajesh, Old No.60, New No.30,28th Cross St, Indhira Nagar,Adyar, Chennai-20.

2. Rajesh,Partner/ Authorized Signatory,Sira Marketing Service,Old No.60, New No. 30,28th Cross St, Indhira Nagar,Adyar, Chennai-20.3. 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, Chennai-20.

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, Erode-638 002 to issue this notice to you.

You No.1 is Partnership Firm, YouNo.2and3arePartnersand incharge and responsible for the day-to-day affairs ofYou No. 1, you No.2 and 3 are regularly looking after andactively taking part in the day-to-day business ofYouNo.1.

Our client is doing business in Milk and Milk Products: Youused to purchase Milk and Milk Products from our client oncredit basis. Our client is maintaining true and correctaccounts. As per accounts maintained by our client you haveto pay balance of Rs. 10,71,434.60 to our client.Inordertodischargethepartofthesaid balance amount and liabilityyou No.2 on behalf of you No.1 and with the knowledge andconsent of you No.3 issued the following cheque which isdrawn on TamilNad MercantileBankLtd., ThiruvanmiyurBranch, Chennai- 41.

S.No. Cheque DateCheque No. Cheque Amount1. 05.05.2017411618 Rs. 10,00,000/-

On your request our client presented the above said chequefor collection on 13.06.2017 through HDFC Bank Ltd., SathyRoad Branch, Erode and the same was returned as “FundsInsufficient” on 14.06.2017. Again on your request our clientpresented the above said cheque for collection on 20.07.2017through HDFC Bank Ltd., Sathy Road Branch, Erode and thesame was returned as “Funds Insufficient” on 21.07.2017.Without sufficient funds in your account, you have issued theabove said cheque.

You issued the above said cheque assuring payment onpresentation of the same. At the time of issuing the saidcheque, you represented that you are having an account inwhich you will have sufficient amount in your account. Butyou purposely allowed the same to be dishonoured with anintention to cheat and defraud our client. Therefore, you havecommitted an offence punishable U/S 138 of the NegotiableInstruments Act.

You are hereby called upon to pay the above said amount ofRs.10,00,000/-due under the above said cheque dated05.05.2017 within is days from the date of receipt of thisnotice. Please note that on your failure to make the paymentwithin the above-mentioned time, legal action will be takenagainst you under section 138 of the Negotiable InstrumentsAct 1881 and thereupon you will be held liable for all thecosts and consequences arising thereof.” [Emphasis supplied]

17. At the cost of repetition, we may state that there is no disputethat the aforesaid notice issued to the respondent was duly acknowledgedby her, however, the respondent thought fit not to give any reply to thesame. The acknowledgement receipt has also been placed on record.The learned counsel appearing for the respondent fairly submitted thather client was in receipt of the notice however, no reply has been givento the same.

18. The complaint filed under Section 138 of the NI Act reads

thus:-

“The complainant is Partnership Firm registered under thePartnership act and carrying on business in the above saidaddress. The Partners of the said firm resolved that D.Gokulnath, S/o. M. Dhanapal the Manager of the saidcomplainant who knows personally about each and everytransaction of this case to be and he is authorized to representthe firm in this case. copy of power of attorney is producedherewith.

TheaccusedNo.1isaPartnership Firm, the accused No.2and3arePartnersandin-chargeandresponsible fortheday-to-dayaffairsoftheaccusedNo.1,the accusedNo.2and3areregularlylookingafterand activelytakingpartintheday-to-daybusinessofthe accusedNo.1.

The complainant is doing business in Milk and Milk Products.The accused used to purchase Milk and Milk Products fromthe complainant on credit basis. The complainant ismaintaining true and correct accounts. As per accountsmaintained by the complainant, the accused have to pay abalance of Rs.10,71,434.60 to the complainant. In order todischarge the part of the said balance amount and liabilitythe accused No.2 on behalf oftheaccusedNo.1andwith theknowledge and consent of the accused No.3 issued thefollowing cheque whichisdrawnonTamilNadMercantileBankLtd.,ThiruvanmiyurBranch,Chennai-41.

S.No. Cheque DateCheque No. Cheque Amount1. 05.05.2017411618 Rs. 10,00,000/-

On the request of the accused the complainant presented theabove said cheque for collection on 13.06.2017 throughHDFC Bank Ltd., Sathy Road Branch, Erode and the samewas returned as “Funds Insufficient” on 14.06.2017. Again,on the request of the accused the complainant presented theabove said cheque for collection on 20.07.2017 throughHDFC Bank Ltd., Sathy Road Branch, Erode and the samewas returned as “Funds Insufficient” on 21.07.2017. Withoutsufficient funds in their account accused have issued theabove said cheque.

The accused issued the above said cheque assuring paymenton presentation of the same. At the time of issuing the saidcheque, the accused represented that they are having anaccount in which they will have sufficient amount in theiraccount. But the accused purposely allowed the same to bedishonoured with an intention to cheat and defraud thecomplainant. Therefore, the accused have committed anoffence punishable u/s 138 of the Negotiable Instruments Act.

Thereupon the complainant issued lawyer notice on14.08.2017 to the accused calling upon them to pay the abovesaid sum of Rs.10,00,000/- due under the said cheque dated05.05.2017 within 15 days from the date of receipt of thisnotice. The accused received the above said notice on16.08.2017. But they failed to pay the above said chequeamount within 15 days. Hence the accused has committed anoffence punishable u/s 138 r/w. 142 of Negotiable InstrumentsAct 1881 as amended by Act 55 of 2002.

The complainant submits that he had produced the relevantdocuments relating to this offence.

He further submits that he has filed this complaint within onemonth from the date of expiry of 15 days grace time given inthe notice for the payment of above said cheque’s amount.The above said cheque was presented for collection throughHDFC Bank Ltd., Sathy Road Branch, Erode which is situatedin Erode Karungalpalayam Police Station limit. Hence thisHon’ble court is having jurisdiction to cognizance the offence.

court fee of Rs.5,000/- is paid under Tamilnadu Court FeeAct.

It is therefore, prayed that this Hon’ble Court may be pleasedto take this case on file, issue summon to the accused, enquirethe matter, punish the accused with maximum sentence anddirect the accused to pay compensation to the complainantu/s 357 CPC and render justice.” [Emphasis supplied]

19. Thus, from the aforesaid the following averments in thecomplaint are evident:-

(a) Accused No.1 is Partnership Firm, the accused Nos. 2 and3 resply are the partners and in charge and responsible for theday-to-day affairs of the firm, the accused Nos. 2 and 3 areregularly looking after and actively taking part in the day-to-daybusiness of the firm;

(b) In order to discharge the part liability, the accused No. 2 onbehalf of the firm and with the consent and knowledge of theaccused No. 3 issued the cheque drawn on the TamilnadMercantile Bank Ltd., Thiruvanmiyur Branch, Chennai-41.

20. The aforesaid averments are not only found to be read in thecomplaint but in the notice too.

21. We shall now proceed to look into the impugned order passedby the High Court. The same order reads thus:-

“This criminal original petition has been filed to quash theproceedings in STC No. 583 of 2017, pending on the file ofthe Judicial Magistrate Fast Track Court No.II Erode.

2. The respondent has filed complaint under Section 138 ofthe Negotiable Instruments Act. The petitioner has been arrayedas A~ 3 in the complaint. This quash petition has been filedprimarily on two grounds. The first ground is that thePartnership Firm was dissolved during February 2017 andthe subject cheque is said to have been issued by A~2 on05.05.2017, after the dissolution of the Partnership Firm. The2nd ground that has been raised is that the allegations madein the complaint does not satisfy the requirements of Section141 of the Negotiable Instruments Act.

3. Heard Mr. K. Kannan, learned counsel for the petitionerand Mr. M. Guruprasad, learned counsel for the respondent.

4. Insofar as the first issue that is raised by the petitioner, thesame cannot be gone into by this Court and it is factualissue which can be decided only in the course of trial.

5. Insofar as the second issue is concerned, it will be beneficialto extract the relevant portion from the complaint filed by therespondent hereunder:

“The accused No. 1 is Partnership Firm, the accusedNo.2 and 3 are Partners and in-charge and responsiblefor the day-to-day affairs of the accused No. 1, the accusedNo.2 and 3 are regularly looking after and actively takingpart in the day-to-day business of the accused No. 1.

The complainant is doing business in Milk and MilkProducts. The accused used to purchase Milk and MilkProducts from the complainant on credit basis. Thecomplainant is maintaining true and correct accounts. Asper accounts maintained by the complainant, the accusedhave to pay balance of Rs. 10,71,434. 60/- to thecomplainant. In order to discharge the part of the saidbalance amount and liability the accused No.2 on behalfof the accused No.1 and with the knowledge and consentof the accused No. 3 issued the following cheque which isdrawn on Tamil Nadu Mercantile Bank Ltd., ThiruvanmiyurBranch, Chennai-41.”

S.No. Cheque Date Cheuqe No.Cheque Amount1. 05.05.2017 411618Rs. 10,00,000/-

6. In the present case, A~ 1 is the Partnership Firm and A~2who is the partner is the signatory of the cheque. The petitionerA~ 3 has been roped in as an accused since she is partnerof A~ 1 Firm. The complaint can be prosecuted as against thepetitioner only if the allegations made in the complaint satisfiesthe requirements of Section 141 of the Negotiable InstrumentsAct.

7. In the present case, the respondent has merely repeated thewords used under Section 141 of the Negotiable InstrumentsAct and there is absolutely no allegation as to how and inwhat manner the petitioner is in-charge and responsible for

the conduct of the business. In the absence of such anallegation, the complaint is not maintainable as against thepetitioner. The law on this issue is well settled.

8. In the result, the proceedings in STC No. 583 of 2017, onthe file of the Judicial Magistrate Fast Track Court No.II,Erode, is hereby quashed insofar as the petitioner isconcerned. The Court below is directed to complete theproceedings in STC No.583 of 2017, against the other accusedpersons within period of three months from the date of receiptof copy of this order.

9. This criminal original petition is allowed with the abovedirections. Consequently, connected miscellaneous petitionsare closed.”

22. Thus, the plain reading of the impugned order passed by theHigh Court as aforesaid would indicate that the proceedings came to bequashed essentially on the ground that there was nothing to indicate thatin what manner the respondent herein was in-charge and responsible forthe day-to-day affairs of the firm so as to make her vicariously liable forthe alleged offence with the aid of Section 141 of the NI Act. To put itin other words, the High Court proceeded on the footing that mereaverments in the complaint as regards the role of the respondent as apartner in the firm is not sufficient.

Analysing Section 141 of the Negotiable Instrument Act,

23. The provisions of Section 138 and Section 141 resply of theNI Act read as under:-

“Section 138. Dishonour of cheque for insufficiency, etc. of—funds in the account.

Where any cheque drawn by person on an accountmaintained by him with banker for payment of any amountof money to another person from out of that account for thedischarge, in whole or in part, of any debt or other liability,is returned by the bank unpaid, either because of the amountof money standing to the credit of that account is insufficientto honour the cheque or that it exceeds the amount arrangedto be paid from that account by an agreement made with that

Abank, such person shall be deemed to have committed anoffence and shall, without prejudice to any other provision ofthis Act, be punished with imprisonment for term which maybe extended to two years, or with fine which may extend totwice the amount of the cheque or with both:

BProvided that nothing contained in this Section shall applyunless—

(a) the cheque has been presented to the bank within periodof six months from the date on which it is drawn or withinthe period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, asthe case may be, makes demand for the payment of thesaid amount of money by giving notice in writing, tothe drawer of the cheque, within thirty days of the receiptof information by him from the bank regarding the returnDof the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment ofthe said amount of money to the payee or, as the casemay be, to the holder in due course of the cheque, withinfifteen days of the receipt of the said notice.

EExplanation: For the purposes of this Section, “debt or otherliability” means legally enforceable debt or other liability.”

“—Section 141. Offences by companies.

(1) If the person committing an offence under Section 138 isa company, every person who, at the time the offence wasFcommitted, was in charge of, and was responsible to thecompany for the conduct of the business of the company,as well as the company, shall be deemed to be guilty ofthe offence and shall be liable to be proceeded againstand punished accordingly.”

Provided that nothing contained in this sub-sectionshall render any person liable to punishment if he provesthat the offence was committed without his knowledge, orthat he had exercised all due diligence to prevent thecommission of such offence.

Provided further that where person is nominatedas Director of company by virtue of his holding anyoffice or employment in the Central Government or StateGovernment or financial corporation owned orcontrolled by the Central Government or the StateGovernment, as the case may be, he shall not be liablefor prosecution under this Chapter.

(2) Notwithstanding anything contained in sub-section (1),where any offence under this Act has been committed by acompany and it is proved that the offence has beencommitted with the consent or connivance of, or isattributable to, any neglect on the part of, any director,manager, secretary or other officer of the company, suchdirector, manager, secretary or other officer shall also bedeemed to be guilty of that offence and shall be liable tobe proceeded against and punished accordingly.

Explanation — For the purposes of this Section—

(a) “company” means any body corporate and includesa firm or other association of individuals; and

(b) “director”, in relation to firm, means partner inthe firm.”

24. Evidently, the gist of Section 138 is that the drawer of thecheque shall be deemed to have committed an offence when the chequedrawn by him is returned unpaid on the prescribed grounds. The conditionsprecedent and the conditions subsequent to constitute the offence aredrawing of cheque on the account maintained by the drawer with abanker, presentation of the cheque within the prescribed period, makingof demand by the payee by giving notice in writing within theprescribed period and failure of the drawer to pay within the prescribedperiod. Upon fulfilment of these requirements, the commission of theoffence which may be called the offence of ‘dishonour of cheque’ iscomplete. If the drawer is company, the offence is primarily committedby the company. By virtue of the provisions of sub-section (1) of Section141, the guilt for the offence and the liability to be prosecuted and punishedshall be extended to every person who, at the time the offence wascommitted, was in charge of and was responsible to the company forthe conduct of its business; irrespective of whether such person is

Adirector, manager, secretary or other officer of the company. It would befor such responsible person, in order to be exonerated in terms of thefirst proviso, to prove that the offence was committed without hisknowledge or despite his due diligence.

25. Under the separate provision of sub-section (2), if it is provedBthat the offence was committed with the consent or connivance of orwas attributable to the neglect on the part of any director, manager,secretary or other officer of the company, such person would also bedeemed to be guilty for that offence. Obviously, the burden of allegingand proving consent, connivance or neglect on the part of any director,etc. would rest upon the complainant. The non obstante clause withCwhich the sub-section (2) opens indicate that the deeming provision isdistinct and different from the deeming provision in sub-section (1) inwhich the office or designation of the person in charge of and responsibleto the company for the conduct of its business is immaterial.

26. While the essential element for implicating person underDsub-section (1) is his or her being in charge of and responsible to thecompany in the conduct of its business at the time of commission of theoffence, the emphasis in sub-section (2) is upon the holding of an officeand consent, connivance or negligence of such officer irrespective of hisor her being or not being actually in charge of and responsible to theEcompany in the conduct of its business. Thus, the important anddistinguishing feature in sub-section (1) is the control of responsibleperson over the affairs of the company rather than his holding of anoffice or his designation, while the liability under sub-section (2) arisesout of holding an office and consent, connivance or neglect. While all thepersons covered by sub-section (1) and sub- section (2) are liable to beFproceeded against and also punished upon the proof of their being eitherin charge of and responsible to the company in the conduct of its businessor of their holding of the office and having been guilty of consent,connivance or neglect in the matter of commission of the offence by thecompany, the person covered by sub-section (1) may, by virtue of theGfirst proviso, escape only punishment if he proves that the offence wascommitted without his knowledge or despite his due diligence.

27. As for the requisite evidence, the burden upon the prosecutionwould be discharged under sub-section (1) when person is proved tobe in charge of and responsible to the company in the conduct of itsHbusiness and would shift upon the accused to prove that he was ignorant

or diligent, if that be his defence; whereas under sub-section (2) theprosecution would be required to allege and prove the consent, connivanceor neglect and holding of the office by the accused. There is nothing tosuggest that the same person cannot be made to face the prosecutioneither under sub-section (1) or sub-section (2) or both. director ormanager can be arraigned and proved to be guilty as the person in chargeof and responsible to the company as well as the director of the companywho, as such, might have consented to, connived at or been negligent inrespect of the offence of dishonour of cheque, be logically deduced thata person can be arraigned in complaint as the accused along with thecompany if it prima facie appears that he was in charge of andresponsible to the company for the conduct of its business, although hemay or may not be or may not have continued to be director or otherofficer of the company, as mentioned in sub- section (2). It would besufficient if the complaint indicates that such person has been arraignedon the basis of averments which disclose him or her to be the person incharge of and responsible to the company in the conduct of its businessat the time the offence was committed. Evidently, person who signsthe cheque or who has the authority to sign the cheque for and onbehalf of the company, regardless of his office or capacity, can, primafacie, be assumed to be in charge of and responsible to the company inthe conduct of its business. And, where such person is prosecuted, then,if it be his defence that the offence was committed without his or herknowledge or that he or she has exercised all due diligence to preventthe commission of such offence, the burden to prove that would be onhim or her and can only be discharged at the stage of evidence.

28. While dealing with reference to resolve the apparent conflictbetween the judgments of this Court in the Municipal Corporation ofDelhi v. Ram Kishan Rohtagi, (1983) 1 SCC 1, and the U.P. PollutionControl Board v. Modi Distillery, (1987) 3 SCC 684, in the context ofvicarious liability under the provisions of Section 141 of the NI Act, thisCourt in P. Rajarathinam v. State of Maharashtra, (2000) 10 SCC529, pertinently observed as under:

“4. bare reading of the provision mandates that some factsmust come on the record in order to figure as to who shouldanswer the charge ultimately. Necessarily, pre-charge evidenceassumes importance. The complainant willhave to put hisside of the case as given out in the complaint and the persons

Asummoned would have to put on the record all what is materialto extricate themselves out. In any case, the crucial time wouldbe when framing charge whereat decision in that respectwould be required to be made by the court. Presently, it appearsto us premature to be resolving the conflict and the ratiodeduced thereby, may turn out to be obiter. Therefore, we thinkBthat we need not resolve such conflictatpresentandleaveittothecourtconcernedtopass appropriate orders at the timeof framing of charge. In thismanner,wedisposeofthese”appeals.

[Emphasis supplied]

29. The seminal issue raised and requires to be settled in the presentcase is one relating to person liable to be proceeded against under theprovisions of sub-section (1) of Section 141 for being in-charge of andresponsible to the company “at the time the offence was committed.” Itwould, therefore, be important to find out the “time” when the offenceDunder Section 138 can be said to have been committed by the company.It is common place that an offence means an aggregate of facts oromissions which are punishable by law and, therefore, can consist ofseveral parts, each part being committed at different time and placeinvolving different persons. The provisions of Section 138 would requireEa series of acts of commission and omission to happen before the offenceof, what may be loosely called “dishonour of cheque” can be constitutedfor the purpose of prosecution and punishment. It is held by the SupremeCourt in K. Bhaskaran v. Sankaran Vaidhyan Balan, (1999) 7 SCC510, that:-

F“14. The offence under Section 138 of the Act can be completedonly with the concatenation of number of acts. The followingare the acts which are components of the said offence: (1)drawing of the cheque, (2) presentation of the cheque to thebank, (3) returning the cheque unpaid by the drawee bank,(4) giving notice in writing to the drawer of the chequeGdemanding payment of the cheque amount, (5) failure of thedrawer to make payment within 15 days of the receipt of thenotice.”

30. Different persons can be in-charge of the company wheneach of the series of acts of commission and omission essential to completeH

the commission of offence by the company were being committed. Totake an example, in the case of company, “A” might be in charge ofthe company at the time of drawing the cheque, “B” might be in chargeof the company at the time of dishonour of cheque and “C” might be incharge of the company at the time of failure to pay within 15 days of thereceipt of the demand notice. In such case, the permissibility ofprosecution of A, and resply or any of them would advance thepurpose of the provision and, if none can be prosecuted or punished, itwould frustrate the purpose of the provisions of Section 138 as well asSection 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 shallbe liable to be proceeded against and punished accordingly” as itoccurs in sub-section (1) of Section 141 and the use of the phrase“provided that nothing contained in this sub- section shall renderany person liable to punishment if he proves…” that occurs in thefirst proviso. Every person who was in charge of and was responsibleto the company for the conduct of its business at the time any of thecomponents necessary for the commission of the offence occurred maybe “proceeded against”, but may not be “punished” if he succeeds inproving that the offence was committed without his knowledge and despitehis 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 ofdishonour of cheque cannot be on the stroke of clock or during 15days after the demand notice has to be construed as the time when eachof the acts of commission and omission essential to constitute the offencewas committed. The word “every” points to the possibility of plurality ofresponsible persons at the same point of time as also to the possibility ofa series of persons being in charge when the sequence of eventsculminating into the commission of offence by the company were takingplace. As to what this ‘relevant time’ is, was question that this Courtwas called to answer, inter alia, in N Rangachari v. Bharati SancharNigam Limited, AIR (2007) SC 1682. In this case, Data Access, acompany had issued two cheques to the BSNL, which were dulypresented, but were dishonoured for insufficiency of funds. complaintunder Section 138 of the NI Act was filed. While the BSNL held thedirectors liable, the appellant, chairman in the company contended thathe being nominated chairman and holding an Honorary post in theCompany, was never assigned with any of the company’s financial orother business activities. He was the Chairman for name sake and was

Anever entrusted with any job or business or constituted signing authority.Resolving the issue of when the liability could be fastened, this Courtsaid:-

“Inthecaseonhand,readingthecomplaintasawhole,itisclearthattheallegationsinthecomplaintarethatatthe timeBatwhich thetwodishonoured cheques were issuedbythecompany,theappellantandanotherwerethe Directors of thecompany and were in charge of the affairs ofthecompany.Itisnotpropertosplithairsinreadingthecomplaintsoastocometoaconclusionthattheallegationsasawholearenotsufficienttoshowthatatthe relevant point of time theC-appellant and the other are not alleged to be persons inchargeof the affairs of the company. Obviously, the complaint refersto the point of timewhenthetwochequeswereissued,theirpresentment,dishonourandfailuretopayinspite of noticeofdishonour.”

[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 sub-section (1) ofSection 141 of the NI Act would embroil the persons mentioned thereinwithin the tentacles of the offence on par with the offending company.ETherefore, when the company or firm is the drawee of the cheque, suchcompany or firm is the principal offender and the fiction created by thelegislature. When the offence is attributed to juristic person or bodymade up of several individuals and the liability to be prosecuted andpunished is extended to embroil by legal fiction certain human beings,Fthat legal fiction has to be so interpreted and applied that the individualsintended to be embroiled may not escape the liability by mere fact ofhaving not been in charge at the time when one of the other of the eventsessential to complete the offence by the company happened. Borrowingagain from K. Bhaskaran (supra), the court should not adopt aninterpretation which helps dishonest evader and clips an honest payeeGas that would defeat the very legislative measure.

32. In the aforesaid context, we may straight away proceed tolook into the following observations made by this Court in the case ofMonaben Ketanbhai Shah v. State of Gujarat in Criminal Appeal No.850 of 2004 decided on 10.08.2004 reported in (2004) 7 SCC 15:-H

“Section 138of the Act makes dishonour of the cheque anoffence punishable with imprisonment or fine or both. Section141relates to offences by the company. It provides that if theperson committing an offence under Section 138 is company,every person who, at the time the offence was committed, wasin charge of, and was responsible to, the company for theconduct of the business of the company, as well as thecompany, shall be deemed to be guilty of the offence andshall be liable to be proceeded against and punishedaccordingly. Thus, vicarious liability has been fastened onthose who are in- charge of and responsible to the companyfor the conduct of its business. For the purpose of Section141, firm comes within the ambit of company. Itisnotnecessaryto reproducethelanguageof Section141 verbatiminthe complaint since the complaint is required to be read asa whole.IfthesubstanceoftheallegationsmadeinthecomplaintfulfilltherequirementsofSection141,thecomplainthasto proceed and is required to be tried with. It isalso true that in construing complaint hyper-technicalapproachshouldnotbeadoptedso as to quash the same. Thelaudableobjectofpreventingbouncingofchequesandsustainingthecredibilityofcommercialtransactions resultinginenactmentof Sections138 and 141 has to be borneinmind.Theseprovisionscreateastatutorypresumptionofdishonestyexposingapersontocriminal liability if payment is not madewithin statutory period even afterissueofnotice.Itisalsotruethatthepowerof quashingisrequiredtobeexercisedvery sparingly andwhere,readasawhole, factual foundationfor the offencehasbeenlaidinthecomplaint,itshouldnotbequashed.All thesame,itisalsotoberememberedthatitisthedutyof theCourttodischarge the accused if takingeverything statedinthecomplaintascorrectandconstruingthe allegationsmadethereinliberallyinfavourofthecomplainant,theingredientsoftheoffencearealtogether”lacking.

[Emphasis supplied]

33. Thus, the legal principles discernible from the aforesaid decisionof this Court may be summarised as under:-

A(a)Vicarious liability can be fastened on those who are in-charge of and responsible to the company or firm for theconduct of its business. For the purpose of Section 141,the firm comes within the ambit of company;

(b)It is not necessary to reproduce the language of SectionB141 verbatim in the complaint since the complaint is requiredto be read as whole;

(c)If the substance of the allegations made in the complaintfulfil the requirements of Section 141, the complaint has toproceed in regards the law.

(d)In construing complaint hyper-technical approachshould not be adopted so as to quash the same.

(e)The laudable object of preventing bouncing of cheques andsustaining the credibility of commercial transactionsresulting in the enactment of Sections 138 and 141Drespectively should be kept in mind by the Courtconcerned.

(f)These provisions create statutory presumption ofdishonesty exposing person to criminal liability if paymentis not made within the statutory period even after the issueEof notice.

(g)The power of quashing should be exercised very sparinglyand where, read as whole, the factual foundation for theoffence has been laid in the complaint, it should not bequashed.F

(h)The Court concerned would owe duty to discharge theaccused if taking everything stated in the complaint iscorrect and construing the allegations made therein liberallyin favour of the complainant, the ingredients of the offenceare altogether lacking.G34. The inter-relationship between the Sections 138 and 141respectively of the NI Act has been succinctly explained by this Court inSMS Pharmaceuticals v. Neeta Bhalla, AIR (2005) 3512, in thefollowing words:-

“It will be seen from the above provisions that Section 138casts criminal liability punishable with imprisonment or fineor with both on person who issues cheque towardsdischarge of debt or liability as whole or in part and thecheque is dishonoured by the Bank on presentation. Section141 extends such criminal liability in case of Company toevery person who at the time of the offence, was in-charge ofand was responsible for the conduct of the business of theCompany. By deeming provision contained in Section 141of the Act, such person is vicariously liable to be held guiltyfor the offence under Section 138 and punished accordingly.”

Whoisliable?Vicariousliability:

35. This Court in Assistant Commissioner, Assessment-II,Bangalore and Ors. v. Velliappa Textiles Ltd. and Ors. AIR (2004)SC 86, introduced the concept of ego and alter ego in relation to theemployee and the employer corporation. The Court elucidated thisprinciple in the following words:-

“In order to trigger corporate criminal liability for the actionsof the employee (who must generally be liable himself), theactor-employee who physically committed the offence mustbe the ego, the centre of the corporate personality, the vitalorgan of the body corporate, the alter ego of the employercorporation or its directing mind. Since the company/corporation has no mind of its own, its active and directingwill must consequently be sought in the person of somebodywho for some purposes may be called an agent, but who isreally the directing mind and will of the corporation, the veryego and centre of the personality of the corporation. To thisextent there are no difficulties in our law to fix criminal liabilityon company. The common law tradition of alter ego oridentification approach is applicable under our existing laws.”36. Now, the logical question that would follow is who would beliable through the company for this offence? Can the company itself beprosecuted for this offence? Answering this question, the Section 141says, ‘every person who was in charge of’ and ‘was responsible to thecompany for the conduct of the business’shall be deemed to be guilty ofthe offence. This concept of vicarious liability has been explained by this

ACourt in Sabhitha Ramamurthy v. RBS Channabasavaradhya, AIR(2006) SC 3086, as:-

“Section 141 raises legal fiction. By reason of the saidprovision, person although is not personally liable forcommission of such an offence would be vicariously liableBtherefor. Such vicarious liability can be inferred so far as acompany registered or incorporated under the Companies Act,1956isconcernedonlyiftherequisite statements, whicharerequiredtobeaverredinthecomplaintpetition, aremadesoastomaketheaccusedthereinvicariously liable for theoffence committed by the company. Before person can beCmade vicariously liable, strict compliance with the statutoryrequirements would be insisted.”

[Emphasis supplied]

37. At this stage, we should look into the decision of this Court inDthe 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 ofthe officers of company in respect of dishonour of cheque and held-

“27. The position under section 141 of the Act can besummarized thus:

E(i) If the accused is the Managing Director or JointManaging Director, it is not necessary to make an avermentin the complaint that he is in charge of, and is responsibleto the company, for the conduct of the business of thecompany. It is sufficient if an averment is made that theFaccused was the Managing Director or Joint ManagingDirector at the relevant time. This is because the prefix“Managing” to the word “Director” makes it clear thatthey were in- charge of and are responsible to the company,for the conduct of the business of the company.

(ii) In the case of director or an officer of the companyGwho signed the cheque on behalf of the company, there isno need to make specific averment that he was in chargeof and was responsible to the company, for the conduct ofthe business of the company or make any specific allegationabout consent, connivance or negligence. The very factHthat the dishonoured cheque was signed by him on behalf

of the company, would give rise to responsibility undersub-section (2) of Section 141.

(iii) In the case of Director, Secretary or Manager (asdefinedinSection2(24)ofthe CompaniesAct)orapersonreferred to in clauses (e) and (f) of section 5 of CompaniesAct,anavermentinthecomplaintthathe wasinchargeof,andwasresponsibletothecompany,fortheconductofthebusinessofthe companyisnecessarytobringthecaseunder section141(1)oftheAct.Nofurtheravermentwouldbe necessaryinthecomplaint, though someparticularswillbedesirable.Theycanalsobe made liableunder Section141(2) bymakingnecessaryavermentsrelatingtoconsentand connivance or negligence, in thecomplaint,tobringthematterunderthatsub-section.

(iv) Other Officers of company cannot be made liableunder sub-section (1) of Section 141. Other officers of acompany can be made liable only under sub-section (2) ofSection 141, by averring in the complaint their positionand duties in the company and their role in regard to theissue and dishonour of the cheque, disclosing consent,connivance or negligence.”

[Emphasis supplied]

38. In very recent pronouncement in the case of Sunita Palitav. M/s Panchami Stone Quarry (2022) SC Online SC 945, this Court,after referring to K.K. Ahuja (supra) referred to above, observed asunder:

“When the accused is the Managing Director or JointManaging Director of company, it is not necessary to makean averment in the complaint that he is in charge of, and isresponsible to the company for the conduct of the business ofthe company. This is because the prefix “Managing” to theword “Director” makes it clear that the Director was in chargeof and responsible to the company, for the conduct of thebusiness of the company. Director or an Officer of thecompany who signed the cheque renders himself liable in caseof dishonour. Other officers of company can be made liableonly under sub-section (2) of Section 141 of the NI Act by

Aaverring in the complaint, their position and duties, in thecompany, and their role in regard to the issue and dishonourof the cheque, disclosing consent, connivance or negligence.”

39. In yet one another recent pronouncement in the case ofAshutosh Ashok Parasrampuria v. Gharrkul Industries Pvt. Ltd.Breported in (2021) SCC Online SC 915, this Court after due considerationof the decisions in the case of SMS Pharmaceuticals (supra); S.K.Alagh v. State of Uttar Pradesh (2008) 5 SCC 662; Maharashtra StateElectricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2010) 10SCC 479, and GHCL Employees Stock Option Trust v. India InfolineLimited, (2013) 4 SCC 505, observed as under:-C

“InthelightoftheratioinSMSPharmaceuticalsLtd.(supra)and later judgments of which reference has been madewhatis to be looked into is whether in the complaint, in addition toasserting that the appellants are the Directors of the Companyand they are in-charge of and responsible to theCompanyDfortheconductofthebusinessofthe Company and if statutorycompliance of Section 141 of the NI Act has been made, itmay not open for the High Court to interfereunderSection482CrPCunlessitcomesacross someunimpeachable,incontrovertibleevidencewhichisbeyondsuspicionordoubtEortotallyacceptable circumstances which may clearly indicatethat the Director couldnothavebeenconcernedwiththeissuanceofcheques and asking him to stand the trial wouldbe abused of process of Court. Despite the presence of basicaverment, itmaycometoaconclusionthatnocaseismadeout againsttheparticularDirectorforwhichtherecouldbeF”variousreasons.

[Emphasis supplied]

40. The principles discernible from the aforesaid decision of thisCourt in the case of Ashutosh Ashok Parasrampuriya (supra) is thatGthe High Court should not interfere under Section 482 of the Code atthe instance of an accused unless it comes across some unimpeachableand incontrovertible evidence to indicate that the Director/partner of afirm could not have been concerned with the issuance of cheques. ThisCourt clarified that in given case despite the presence of basicaverments, the High Court may conclude that no case is made out againstH

the particular Director/ partner provided the Director/partner is able toadduce some unimpeachable and incontrovertible evidence beyondsuspicionanddoubt.

SpecificAvermentsinthecomplaint:

41. In Gunmala Sales Private Limited (supra), this Court afteran exhaustive review of its earlier decisions on Section 141 of the NIAct, summarized its conclusion as under:-

“a) Once in complaint filed under Section 138 read withSection 141 of the NI Act the basic averment is made that theDirector was in charge of and responsible for the conductof the business of the company at the relevant time when theoffence was committed, the Magistrate can issue processagainst such Director;

b) If petition is filed under Section 482 of the Code forquashing of such complaint by the Director, the High Courtmay, in the facts of particular case, on an overall readingof the complaint, refuse to quash the complaint because thecomplaint contains the basic averment which is sufficient tomake out case against the Director;

c) In the facts of given case, on an overall reading of thecomplaint, the High Court may, despite the presence of thebasic averment, quash the complaint because of the absenceof 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 doubtor totally acceptable circumstances which may clearly indicatethat the Director could not have been concerned with theissuance of cheques and asking him to stand the trial wouldbe abuse of the process of the court. Despite the presence ofbasic averment, it may come to conclusion that no case ismade out against the Director. Take for instance case of aDirector suffering from terminal illness who was bedriddenat the relevant time or Director who had resigned long beforeissuance of cheques. In such cases, if the High Court isconvinced that prosecuting such Director is merely anarm-twisting tactics, the High Court may quash theproceedings. It bears repetition to state that to establish such

Acase unimpeachable, incontrovertible evidence which isbeyond suspicion or doubt or some totally acceptablecircumstances will have to be brought to the notice of the HighCourt. Such cases may be few and far between but thepossibility of such case being there cannot be ruled out. Inthe absence of such evidence or circumstances, complaintBcannot be quashed;

d) No restriction can be placed on the High Court’s powersunder Section 482 of the Code. The High Court always usesand must use this power sparingly and with greatcircumspection to prevent inter alia the abuse of the processCof the Court. There are no fixed formulae to be followed bythe High Court in this regard and the exercise of this powerdepends upon the facts and circumstances of each case. TheHigh Court at that stage does not conduct mini trial or rovinginquiry, but nothing prevents it from taking unimpeachableDevidence or totally acceptable circumstances into accountwhich may lead it to conclude that no trial is necessary qua aparticular Director.”

42. The principles of law and the dictum as laid in Gunmala SalesPrivate Limited (supra), in our opinion, still holds the field and reflectsEthe correct position of law.

43. In the case on hand, we find clear and specific averments notonly in the complaint but also in the statutory notice issued to therespondent. There are specific averments that the cheque was issuedwith the consent of the respondent herein and within her knowledge. InFour view, this was sufficient to put the respondent herein to trial for thealleged offence. We are saying so because the case of the respondentthat at the time of issuance of the cheque or at the time of the commissionof the offence, she was in no manner concerned with the firm or shewas not in-charge or responsible for day-to-day affairs of the firm cannotbe on the basis of mere bald assertion in this regard. The same is notGsufficient. To make good her case, the respondent herein is expected tolead unimpeachable and incontrovertible evidence. Nothing of the sortwas adduced by the respondent before the High Court to get theproceedings quashed. The High Court had practically no legal basis tosay that the averments made in the complaint are not sufficient to fasten

the vicarious liability upon the respondent by virtue of Section 141 of theNI Act.

44. We may also examine this appeal from different angle. It isnot in dispute, as noted above, that no reply was given by the respondentto the statutory notice served upon her by the appellant. In the proceedingsof the present type, it is essential for the person to whom statutorynotice is issued under Section 138 of the NI Act to give an appropriatereply. The person concerned is expected to clarify his or her stance. Ifthe person concerned has some unimpeachable and incontrovertiblematerial to establish that he or she has no role to play in the affairs of thecompany/firm, then such material should be highlighted in the reply tothe notice as foundation. If any such foundation is laid, the picturewould be more clear before the eyes of the complainant. The complainantwould come to know as to why the person to whom he has issued noticesays that he is not responsible for the dishonour of the cheque. Had therespondent herein given appropriate reply highlighting whatever she hassought to highlight before us then probably the complainant would haveundertaken further enquiry and would have tried to find out what wasthe legal status of the firm on the date of the commission of the offenceand what was the status of the respondent in the firm. The object ofnotice before the filing of the complaint is not just to give chance to thedrawer of the cheque to rectify his omission to make his stance clearso far as his liability under Section 138 of the NI Act is concerned.

45. Once the necessary averments are made in the statutory noticeissued by the complainant in regard to the vicarious liability of the partnersand upon receipt of such notice, if the partner keeps quiet and does notsay anything in reply to the same, then the complainant has all the reasonsto believe that what he has stated in the notice has been accepted bythe noticee. In such circumstances what more is expected of thecomplainant to say in the complaint.

46. When in view of the basic averment process is issued thecomplaint must proceed against the Directors or partners as the casemay be. But, if any Director or Partner wants the process to be quashedby filing petition under Section 482 of the Code on the ground thatonly bald averment is made in the complaint and that he is really notconcerned with the issuance of the cheque, he must in order to persuadethe High Court to quash the process either furnish some sterlingincontrovertible material or acceptable circumstances to substantiate his

Acontention. He must make out case that making him stand the trialwould be an abuse of process of court. He cannot get the complaintquashed merely on the ground that apart from the basic averment noparticulars are given in the complaint about his role, because ordinarilythe basic averment would be sufficient to send him to trial and it couldbe argued that his further role could be brought out in the trial. QuashingBof complaint is serious matter. Complaint cannot be quashed for theasking. For quashing of complaint, it must be shown that no offence ismade out at all against the Director or Partner.

47. Our final conclusions may be summarised as under:-

Ca.)The primary responsibility of the complainant is to makespecific averments in the complaint so as to make theaccused vicariously liable. For fastening the criminal liability,there is no legal requirement for the complainant to showthat the accused partner of the firm was aware about eachand every transaction. On the other hand, the first provisoDto sub-section (1) of Section 141 of the Act clearly laysdown that if the accused is able to prove to the satisfactionof the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence toprevent the commission of such offence, he/she will not beEliable of punishment.

b.)The complainant is supposed to know only generally as towho were in charge of the affairs of the company or firm,as the case may be. The other administrative matters wouldbe within the special knowledge of the company or the firmFand those who are in charge of it. In such circumstances,the complainant is expected to allege that the persons namedin the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partnersof the firm, as the case may be, who have the specialknowledge about the role they had played in the companyGor the partners in firm to show before the court that at therelevant point of time they were not in charge of the affairsof the company. Advertence to Sections 138 and Section141 respectively of the NI Act shows that on the otherelements of an offence under Section 138 being satisfied,the burden is on the Board of Directors or the officers inH

charge of the affairs of the company/partners of firm toshow that they were not liable to be convicted. The existenceof any special circumstance that makes them not liable issomething that is peculiarly within their knowledge and it isfor them to establish at the trial to show that at the relevanttime they were not in charge of the affairs of the companyor the firm.

c.)Needless to say, the final judgement and order would dependon the evidence adduced. Criminal liability is attracted onlyon those, who at the time of commission of the offence,were in charge of and were responsible for the conduct ofthe business of the firm. But vicarious criminal liability canbe inferred against the partners of firm when it isspecifically averred in the complaint about the status of thepartners ‘qua’ the firm. This would make them liable toface the prosecution but it does not lead to automaticconviction. Hence, they are not adversely prejudiced if theyare eventually found to be not guilty, as necessaryconsequence thereof would be acquittal.

d.)If any Director wants the process to be quashed by filing apetition under Section 482 of the Code on the ground thatonly 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 order to persuade the High Court to quashthe process either furnish some sterling incontrovertiblematerial or acceptable circumstances to substantiate his/her contention. He/she must make out case that makinghim/her stand the trial would be an abuse of process ofCourt.48. We reiterate the observations made by this Court almost adecade 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 itspower to quash the criminal proceeding when such proceeding is relatedto offences committed by the companies. “The world of commercialtransactions contains numerous unique intricacies, many of whichare yet to be statutorily regulated. More particularly, the principlelaid down in Section 141 of the NI Act (which is pari materia withidentical sections in other Acts like the Food Safety and Standards

AAct, 2006; the erstwhile Prevention of Food Adulteration Act, 1954;etc.) is susceptible to abuse by unscrupulous companies to thedetriment of unsuspecting third parties.”

49. In the result, this appeal succeeds and is hereby allowed withno order as to costs. The impugned order passed by the High Court isBhereby set aside.

50. Pending application, if any, also stands disposed of.

Bibhuti Bhushan Bose(Assisted by : Neha Sharma, LCRA)

Appeal allowed.