2019 (2) TMI 544 - HC - Indian Laws

Dishonor of Cheque - section 138 read with section 141 of the Act - vicarious liability on director/partner - Held that - It is well settled, and reference to the catena of decisions enunciating the position of law is not really necessary, that a director or a partner can not be fastened with vicarious liability unless he was in charge of, and was responsible to the firm for the conduct of the business of the firm. A director or a partner can not be deemed to be liable, and that the director and partners is vicariously liable for the offence committed by the company or firm must be pleaded and proved like any other fact. In the absence of the necessary averment in the complaint, which averments may not necessarily confirm to or mechanically reproduce the language of section 141 of the Act, it would impermissible for the Court to take cognizance of the complaint. The very sine qua non for issuance of process is that the complaint, holistically read and understood, must aver that the directors or partners who are arrayed as accused were responsible to the company or firm for the conduct of the business. It is obvious that the purchase orders would be placed by either the company or firm or on its behalf by a director or officer or other employee. The fact that the invoices placed on record do not refer to the applicants accused does not take the case of the applicants accused any further. The challenge to the order of issuance of process must fail - the personal presence of the applicants accused is exempted unless the trial Court, for reasons to be recorded, finds that the personal presence of the applicants accused is absolutely necessary - Application rejected.

Summary

Issues Involved:
1. Quashing of the order of issuance of process under Section 138 of the Negotiable Instruments Act, 1981.
2. Sufficiency of averments in the complaint.
3. Vicarious liability of partners under Section 141 of the Negotiable Instruments Act.
4. Examination of unimpeachable and incontrovertible material on record.

Detailed Analysis:

1. Quashing of the order of issuance of process under Section 138 of the Negotiable Instruments Act, 1981:
The applicants, accused 3 and 4 in Criminal Complaint 1224 of 2015, sought the quashing of the order dated 8.4.2015, which issued process for an offence punishable under Section 138 of the Negotiable Instruments Act, 1981. The application was heard under Section 482 of the Criminal Procedure Code, 1973, which allows the High Court to prevent abuse of process of law.

2. Sufficiency of averments in the complaint:
The applicants argued that the complaint lacked the basic averments necessary for the Magistrate to take cognizance under Section 138. They contended that mere assertions that the applicants were partners and in charge of the firm's affairs were insufficient without specific details of their roles in the transaction. The respondent countered that the complaint, when read holistically, satisfied the requirements of Section 138 read with Section 141, asserting that it was unnecessary to detail the specific roles of the partners.

3. Vicarious liability of partners under Section 141 of the Negotiable Instruments Act:
The court examined Section 141, which deals with offences by companies and holds that every person responsible for the company's business at the time of the offence is deemed guilty. The court referenced the Supreme Court's decision in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, which clarified that specific averments are necessary to show that the accused was in charge of and responsible for the conduct of the business. The court noted that a director or partner cannot be held vicariously liable without such averments.

4. Examination of unimpeachable and incontrovertible material on record:
The applicants presented tax invoices and an additional affidavit to demonstrate that they were not involved in the transactions or the issuance of the dishonoured cheques. The court, however, found that these materials did not conclusively exclude the applicants' involvement. The invoices did not mention the applicants, but this did not prove their non-involvement in the firm's affairs.

Conclusion:
The court concluded that the complaint contained the necessary averments to take cognizance under Section 138. The presence of basic averments was sufficient to issue process, and the High Court could not quash the complaint solely based on these averments. The court emphasized that it would only interfere in exceptional cases where unimpeachable evidence ruled out the accused's role. Consequently, the application to quash the order of issuance of process was rejected. However, the court exempted the personal presence of the applicants unless deemed absolutely necessary by the trial court.