[SC] NIA S. 138, 141 – Dishonour of cheque – Quashing – Parameters – Notice – Reply – Not given – Admisison of facts – Director/ partner provided the Director/partner is able to adduce some unimpeachable and incontrovertible evidence beyond suspicion and doubt. [PLRonline 477602]

2023 SCeJ 266 , [PLRonline 477602]

SUPREME COURT OF INDIA

Before:- Surya Kant and J.B. Pardiwala, JJ.

S.P. Mani And Mohan Dairy – Appellants

Versus

Dr. Snehalatha Elangovan – Respondents

Criminal Appeal No. 1586 of 2022 (Arising Out Of Special Leave Appeal (Criminal) No. 9811 of 2021).

16.9.2022.

Negotiable Instruments Act, 1881, Sections 138 and 141 – Criminal Procedure Code, 1973, Section 482 – Dishonour of cheque – Quashing.

Held,

a.) The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.

b.) The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.

c.) Needless to say, the final judgement and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners `qua? the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal.

d.) If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a 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 quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court.

Order : Order passed by High Court , Quashing the proceedings under Section 138 NIA, set aside. [Para 47]

Negotiable Instruments Act, 1881, Sections 138 and 141 – Criminal Procedure Code, 1973, Section 482 – Quashing – High Court should not interfere under Section 482 of the Code at the instance of an accused unless it comes across some unimpeachable and incontrovertible evidence to indicate that the Director/partner of a firm could not have been concerned with the issuance of cheques – In a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/ partner provided the Director/partner is able to adduce some unimpeachable and incontrovertible evidence beyond suspicion and doubt.  [Para 40]

Negotiable Instruments Act, 1881, Section 138 – Notice – Reply – It is essential for the person to whom statutory notice is issued under section 138 of the NI Act to give an appropriate reply – The person concerned is expected to clarify his or her stance – If the person concerned has some unimpeachable and incontrovertible material to establish that 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 notice as a foundation – If any such foundation is laid, the picture would be more clear before the eyes of the complainant – The complainant would come to know as to why the person to whom he has issued notice says that he is not responsible for the dishonour of the cheque – The object of notice before the filing of the complaint is not just to give a chance to the drawer of the cheque to rectify his omission to make his stance clear so far as his liability under section 138 of the NI Act is concerned. [Para 44, 45]

Negotiable Instruments Act, 1881, Section 138 – Notice – Reply – Not given – Once the necessary averments are made in the statutory notice issued by the complainant in regard to the vicarious liability of the partners and upon receipt of such notice, if the partner keeps quiet and does not say anything in reply to the same, then the complainant has all the reasons to believe that what he has stated in the notice has been accepted by the notice –  In such circumstances what more is expected of the complainant to say in the complaint. [Para 44, 45]

Negotiable Instruments Act, 1881, Section 141(1) –  If any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention – He must make out a case that making him stand the trial would be an abuse of process of court – He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial – Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking – For quashing of a complaint, it must be shown that no offence is made out at all against the Director or Partner. [Para 46]

Negotiable Instruments Act, 1881, Section 138 – Dishonour of cheque – Non reply to Notice – Once necessary averments are made in statutory notice issued by complainant in regard to vicarious liability of partners and upon receipt of such notice, if partner keeps quiet and does not say anything in reply to same, then complainant has all reasons to believe that what he has stated in notice accepted by noticee. [Para 44]

Cases Referred :

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3. Assistant Commissioner, Assessment-II, Bangalore v. Velliappa Textiles Ltd. AIR (2004) SC 86.
4. GHCL Employees Stock Option Trust v. India Infoline Limited, (2013) 4 SCC 505.
5. Gunmala Sales Pvt. Ltd. v. Anu Mehta , (2015) 1 SCC 103.
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8. Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2010) 10 SCC 479.
9. Monaben Ketanbhai Shah v. State of Gujarat in Criminal Appeal No. 850 of 2004 decided on 10.08.2004 : (2004) 7 SCC 15.
10. Municipal Corporation of Delhi v. Ram Kishan Rohtagi, (1983) 1 SCC 1.
11. N Rangachari v. Bharati Sanchar Nigam Limited, AIR (2007) SC 1682.
12. National Small Industries Corporation v. Harmeet Singh Paintal (2010) 3 SCC 330.
13. P. Rajarathinam v. State of Maharashtra, (2000) 10 SCC 529.
14. Rallis India Ltd v. Poduru Vidya Bhusan , (2011) 13 SCC 88.
15. S.K. Alagh v. State of Uttar Pradesh (2008) 5 SCC 662.
16. Sabhitha Ramamurthy v. RBS Channabasavaradhya, AIR (2006) SC 3086.
17. SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 : AIR (2005) 3512.
18. Sunita Palita v. M/s Panchami Stone Quarry (2022) SC Online SC 945.
19. U.P. Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684.