2019 (4) TMI 1994 - SC - Indian Laws

Dishonor of Cheque - sufficient averments in the complaint to meet the requirement of Section 141(1) or not - submission is that there was no averment in the complaint that the first Respondent was incharge of and was responsible to the company for the conduct of the business - HELD THAT - In the present case, it is evident from the relevant paragraphs of the complaint which have been extracted above that the complaint contains a sufficient description of (i) the nature of the partnership; (ii) the business which was being carried on; (iii) the role of each of the Accused in the conduct of the business and, specifically, in relation to the transactions which took place with the complainant. At every place in the averments, the Accused have been referred to in the plural sense. Besides this, the specific role of each of them in relation to the transactions arising out of the contract in question, which ultimately led to the dishonour of the cheques, has been elucidated. The High Court proceeded on the basis that the first Accused was a company in which the other two Accused were directors. Section 141 undoubtedly uses the expression company so as to include a firm or association of persons. The fact that the first accused, in the present case, is a partnership firm of which the remaining two Accused are partners has been missed by the High Court. The High Court was in error in quashing the criminal case against the first Respondent - Appeal allowed.

Summary

Issues Involved:
1. Quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881.
2. Applicability of Section 141 of the Negotiable Instruments Act, 1881 to partners of a firm.
3. Sufficiency of averments in the complaint to implicate criminal liability.
4. Jurisdiction of the Supreme Court under Article 136 to interfere with the High Court's judgment.

Detailed Analysis:

1. Quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881:
The High Court quashed the proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881, against the first Respondent. The proceedings were initially instituted due to the dishonour of cheques issued by a partnership firm for insufficient funds. The Supreme Court scrutinized whether the High Court's decision to quash the proceedings was legally justified.

2. Applicability of Section 141 of the Negotiable Instruments Act, 1881 to partners of a firm:
Section 141(1) of the Act states that if an offence under Section 138 is committed by a company, every person responsible for the conduct of the business of the company at the time of the offence shall be deemed guilty. The term "company" includes a firm, and "director" includes a partner in the firm. The Supreme Court emphasized that the High Court erred in treating the first accused as a company and not as a partnership firm, thereby misapplying the law.

3. Sufficiency of averments in the complaint to implicate criminal liability:
The Supreme Court examined the complaint's averments to determine if they met the requirements of Section 141(1). The complaint detailed the nature of the partnership, the business activities, and the roles of the accused. Specific allegations included the issuance and dishonour of cheques, the transfer of funds by the first Respondent, and assurances given to the complainant. The Court concluded that these averments were sufficient to implicate the accused under Section 141(1).

4. Jurisdiction of the Supreme Court under Article 136 to interfere with the High Court's judgment:
The Supreme Court exercised its jurisdiction under Article 136 to review the High Court's decision. The Court found that the High Court had erred in quashing the complaint based on an incorrect interpretation of the law and insufficient examination of the complaint's averments. Therefore, the Supreme Court set aside the High Court's judgment and reinstated the criminal proceedings.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment dated 13 June 2018. The Court held that the averments in the complaint were sufficient to implicate the accused under Section 141(1) of the Negotiable Instruments Act, 1881. The case was remanded for trial, with the first Respondent given the liberty to seek exemption from personal appearance before the Trial Court.