2004 (8) TMI 385 - SC - Companies Law

Complaint against five accused under section 138 of the Negotiable Instruments Act, 1881 alleging dishonour of a cheque? Held that - Appeal allowed. As it is evident that in the complaint there are no averments against the appellants except stating in the title that they are partners of the firm. The respondents/complainant contended that a copy of the partnership deed was also filed which would show that the appellants were active in the business. No such document was filed with the complaint or made part thereof. The filing of the partnership deed later is of no consequence for determining the point in issue. Section 141 does not make all partners liable for the offence. The criminal liability has been fastened on those who, at the time of the commission of the offence, was in-charge of and was responsible to the firm for the conduct of the business of the firm. These may be sleeping partners who are not required to take any part in the business of the firm; they may be ladies and others who may not know anything about the business of the firm. The obligation of the appellants to prove that at the time the offence was committed they were not in-charge of and were not responsible to the firm for the conduct of the business of the firm, would arise only when first the complainant makes necessary averments in the complaint and establishes that fact. The present case is of total absence of requisite averments in the complaint.

Issues:
1. Interpretation of Section 138 and Section 141 of the Negotiable Instruments Act, 1881.
2. Vicarious liability of individuals in charge of a company's business under Section 141.
3. Requirement of specific averments in a complaint to establish vicarious liability.
4. Consideration of partnership deed in determining criminal liability of partners.
5. Precedents regarding the substance of allegations in complaints fulfilling legal requirements.

Interpretation of Section 138 and Section 141 of the Negotiable Instruments Act, 1881:
The judgment involves a complaint under Section 138 of the Negotiable Instruments Act, 1881, regarding the dishonor of a cheque. Section 141 deals with offenses by a company, holding individuals in charge of the company's business responsible. The court highlights that vicarious liability is imposed on those in control of the company's operations, including firms falling within the scope of a company.

Vicarious liability of individuals in charge of a company's business under Section 141:
The court emphasizes that for Section 141 to apply, it is essential that individuals in charge of a company's business are held accountable for offenses. The judgment clarifies that partners are not automatically liable for offenses committed by the firm unless they were actively responsible for the firm's conduct at the time of the offense. The complainant must make specific allegations in the complaint to establish vicarious liability.

Requirement of specific averments in a complaint to establish vicarious liability:
The court scrutinizes the complaint in detail, emphasizing the necessity of including precise averments to establish vicarious liability. It notes that the absence of essential allegations against the accused in the complaint can lead to the discharge of the accused. The judgment stresses that the complainant must provide necessary details in the complaint to hold individuals vicariously liable for the offense.

Consideration of partnership deed in determining criminal liability of partners:
The judgment dismisses the significance of filing a partnership deed after the complaint to determine the liability of partners. It clarifies that criminal liability is not automatically imposed on all partners but only on those actively responsible for the firm's operations at the time of the offense. The court underscores the importance of including relevant information in the complaint itself.

Precedents regarding the substance of allegations in complaints fulfilling legal requirements:
The court references previous cases to support its decision, highlighting that the substance of allegations in a complaint must meet the legal requirements. It cites cases where complaints were quashed due to insufficient details regarding the accused's role in the offense. By considering past judgments, the court reinforces the importance of ensuring that complaints contain necessary averments to establish criminal liability.

In conclusion, the Supreme Court's judgment emphasizes the importance of specific averments in complaints to establish vicarious liability under Section 141 of the Negotiable Instruments Act, 1881. The court's decision to set aside the High Court's judgment and restore the Magistrate's order discharging the accused underscores the critical role of detailed allegations in determining criminal liability in such cases.

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