2022 (3) TMI 924 - HC - Indian Laws

Dishonor of Cheque - vicarious liability or not - justifiable grounds to invoke the power granted under Section 482 of Code of Criminal Procedure or not - only contention of the petitioners is that as they have not issued the alleged cheques, they cannot be held liable vicariously - Section 141 of the N.I. Act - HELD THAT - Every person responsible for the conduct of business of the company as well as the company shall be deemed to be guilty of the offence punishable under Section 138 of N.I.Act, unless it is proved that the offence was committed without the knowledge of the said person or that he had exercised all due diligence for preventing the commission of such offence. In the case on hand, petitioners are not disputing their association with the firm. Whether they were performing duties and were managing the affairs of the firm during the relevant time cannot be discussed and decided by this Court. Furthermore, the power granted under Section 482 Cr.P.C., to quash the proceedings is very limited i.e., to say that the said power cannot be exercised except to make necessary order to give effect to an order under the Code of Criminal Procedure or to prevent abuse of the process of any Court or otherwise to secure the ends of justice - The petitioners in the case on hand have not made out such circumstances to exercise the said special power, which should be sparingly and cautiously exercised. The Criminal Petition is dismissed.

Summary

Issues:
Petition seeking quashing of criminal proceedings under Section 138 of Negotiable Instruments Act, 1881 - Vicarious liability of partners in a firm - Invocation of power under Section 482 of Code of Criminal Procedure (Cr.P.C.).

Analysis:

1. Quashing of Criminal Proceedings:
The petitioners sought to quash the proceedings in C.C.No.118 of 2014 pending before the Court of Judicial Magistrate of First Class at Huzurnagar, Nalgonda District. The main contention was that the petitioners, as Accused Nos.1 & 3, were wrongly implicated in the case under Section 138 of the N.I. Act. The petitioners argued that they had no involvement in the transactions or issuance of cheques leading to the alleged offence. However, the 2nd respondent contended that the petitioners, being partners in the firm, were collectively responsible and were rightly accused. The Court had to determine whether there were justifiable grounds to quash the proceedings under Section 482 of Cr.P.C.

2. Vicarious Liability of Partners:
The 2nd respondent alleged that the petitioners, as partners in the firm, were collectively responsible for the business transactions with the complainant. The complaint stated that the petitioners, along with Accused No.2, obtained supplies from the complainant and issued cheques that were dishonored, leading to the offence under Section 138 of N.I. Act. The petitioners argued that they were not directly involved in these transactions and should not be held vicariously liable. The legal position on vicarious liability under Section 141 of the N.I. Act was discussed, emphasizing that specific averments were required to establish such liability.

3. Application of Section 141 of N.I. Act:
Section 141 of the N.I. Act deals with offences by companies and the liability of individuals in charge of the company's business conduct. It stipulates that individuals responsible for the company's affairs shall be deemed guilty of the offence unless they prove lack of knowledge or due diligence to prevent the offence. In this case, the petitioners did not dispute their association with the firm but contested their direct involvement in the alleged offence. The Court noted that the power to quash proceedings under Section 482 Cr.P.C. is limited and should be sparingly exercised.

4. Decision and Dismissal of Petition:
After considering the arguments and legal principles, the Court dismissed the criminal petition. It was observed that the petitioners failed to demonstrate circumstances warranting the exercise of the special power under Section 482 Cr.P.C. The Court emphasized that this power should be cautiously used to prevent abuse of the legal process or secure justice. Consequently, the petition for quashing the proceedings was rejected, and any interim stay granted earlier was vacated.

In conclusion, the High Court of Telangana dismissed the petition seeking to quash the criminal proceedings under Section 138 of the N.I. Act against the petitioners, emphasizing the limited scope of invoking Section 482 of Cr.P.C. and the principles of vicarious liability under the law.