[2024 (1) T.N.L.R. 1 (SC)]
SUPREME COURT
BEFORE:
C.T. RAVIKUMAR AND SANJAY KUMAR, JJ.
SIBY THOMAS ….Appellant
Versus
M/S. SOMANY CERAMICS LTD. …Respondent
[Criminal Appeal No. ..... of 2023 (@ S.L.P. (Crl.) No. 12 of 2020), decided
on 10th October, 2023]
Negotiable Instruments Act, 1881—Sections 138 and 141—Dishonour
of cheque—Quashing of complaint—Scope—Vicarious liability—Specific
averments made in the complaint—Whether the averments made in
complaint are sufficient to prosecute the appellant under Section 138, N.I.
Act ?—A vicarious liability would be attracted only when ingredients of
Section 141 (1) are satisfied—Merely because somebody is managing the
affairs of the company, per se would not become incharge of the conduct of
business of company—Only that person who at the time the offence was
committed, was in charge of and was responsible to company for conduct
of business of company, as well as company alone shall be deemed to be
guilty of offence and shall be liable to be prosecuted and punished—
Averments made in the complaint filed by respondent found not sufficient
to satisfy mandatory requirement of Section 141 (1)—Provisions of Section
141 (1) not attracted—Vicarious liability not created upon appellant—
Complaint filed by the respondent therefore quashed—Appeal allowed.
(Paras 8 to 17)
Case Laws:—(2012) 1 SCC 520; 2022 SCC OnLine SC 1238; (2015) 1
SCC 103—referred.
JUDGMENT
C.T. RAVIKUMAR, J.—Leave granted.
2. This Appeal by accused No. 4 in the complaint filed by the respondent
herein under Section 138 read with Section 141 of the Negotiable Instruments Act,
1881 (for short 'the NI Act') is directed against the order dated 6.12.2019 in CRMM No. 52299 of 2019 passed by the High Court of Punjab and Haryana at Chandigarh.
As per the impugned order the High Court declined to quash the complaint qua the
appellant in exercise of the power under Section 482 of the Code of Criminal
Procedure (for short 'Cr.PC').
SIBY THOMAS Vs. M/S. SOMANY CERAMICS LTD. (SC)
2 TAMIL NADU LAW REPORTER [Vol. 1
3. Heard the learned Counsel appearing for the petitioner and learned Counsel
appearing for the respondent.
4. Virtually, the appellant set up twin grounds to seek quashment of the complaint
against him; firstly, that he had resigned from the partnership firm on 28.5.2013
whereas the cheque in question was issued on 21.8.2015 and secondly, that the
complaint is devoid of mandatory averments required to be made in terms of subsection (1) of Section 141 of the NI Act, as relates him. The High Court found that
the contention in regard to the maintainability of the complaint against the appellant,
owing to his retirement from the partnership firm prior to the issuance of the cheque
in question, is a matter of evidence and ultimately, the appellant would have to lead
evidence and prove that fact. Consequently, it was held that the complaint could not
be rejected qua the appellant at the initial stage in exercise of the powers under
Section 482 Cr.PC.
5. The learned Counsel appearing for the petitioner contended that even if it is
taken that the factum of his retirement from the partnership firm on 28.5.2013 was
prior to the cheque in question on 21.8.2015 is a matter of evidence, the complaint
as against the appellant is liable to be quashed owing to the absence of mandatory
averments required to be made in terms of Section 141 (1) of the NI Act, in the
complaint. In other words, it is submitted that though the respondent had specified
or elaborated the role of some of the accused in the complaint as relates the
appellant averments elaborating/specifying his role in the day-to-day affairs of
the partnership firm much-less mandatorily required averments for his prosecution
are conspicuously absent in the complaint. To drive home the contentions that the
learned Counsel for the appellant drew our attention to paragraphs 3 to 6 of the
complaint. Learned Counsel for the appellant relied on the decisions of this Court
in Anita Malhotra v. Apparel Export Promotion Council and another, (2012) 1
SCC 520 and a decision of Two-Judge Bench of this Court in Criminal Appeal
No. 879 of 2023 titled Ashok Shewakramani and others v. State of Andhra
Pradesh and another, 2023 INSC 692 and connected cases dated 3.8.2023 to
buttress the said contentions.
6. Per Contra, learned Counsel appearing for the respondent would submit
that paragraphs 3 and 4 of the complaint would reveal that the averments thereunder
are sufficient to satisfy the mandatory requirement in terms of Section 141 of the
NI Act, qua the appellant as well. In order to support his contention the learned
Counsel relied on the decision of a two-Judge Bench of this Court in S.P. Mani and
Mohan Dairy v. Dr. Snehalatha Elangovan, 2022 SCC OnLine SC 1238.
7. In view of the rival contentions as above it is apposite to refer to the averments
in paragraph 3 and 4 of the complaint, which is annexed to the SLP. They read thus:
2024] 3
"3. That the accused No. 1 is a partnership-firm with the name and style
of M/s Tile Store, having its office at 5-654/B, Jyothis Complex, Bypass Road, Eranhipalam, Calicut-673006 (Kerala), while accused No.
2 to 6 are the partners of the accused No. 1. The accused No. 2 to 6
being the partners are responsible for the day to day conduct and
business of the accused No. 1.
4. That the accused No. 1 through its partners i.e. accused No. 2 to 6,
on the basis of the authority vested in them approached to the
complainant for purchasing the ceramic tiles, sanitary wares and bath
fitting from the complainant on credit basis. The request of the accused
No. 1 was accepted by the complainant and the accused agreed to
pay the amount of the goods purchased by them to the complainant
within one month and it was also agreed that if the accused failed to
make the payment within one month in that case they shall also be
liable to pay interest @ 24% per annum on the balance sale
consideration till its full realization." (Underline supplied)
8. As noticed hereinbefore, the parties are at issue over the question as to
whether the averments in the complaint satisfy the requirements under Section 141
(1) of the N.I. Act. True that in paragraph 3 it is stated that accused No. 1 is a
partnership firm and accused Nos. 2 to 6 are the partners of accused No. 1 and
they, being the partners, are responsible for the day-to-day contact and business of
accused No. 1. In paragraph 4 what is stated is that accused No. 1 through its
partners i.e., accused Nos. 2 to 6, on the basis of the authority vested in them
approached the complainant for purchasing the ceramic tiles, sanitary-wares and
bath fittings from the complainant on credit basis. Indubitably, besides the aforesaid
averments no other averments are made in the complaint in regard to the appellant's
role. Therefore, the question is whether the averments referred to hereinbefore are
sufficient to prosecute the appellant under Section 138 of the NI Act, on the aforeextracted averments. We are not oblivious of the fact that the appellant has also got
a contention that he retired from the partnership firm much prior to the issuance of
the cheque in question. It is only proper and profitable to refer to sub-section (1) of
Section 141 of the N.I. Act in view of the rival contentions. It reads thus:-
"(1) If the person committing an offence under Section 138 is a company,
every person who, at the time the offence was committed, was in
charge of, and was responsible to the company for the conduct of the
business of the company, as well as the company, shall be deemed to
be guilty of the offence and shall be liable to be proceeded against
and punished accordingly: Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that
SIBY THOMAS Vs. M/S. SOMANY CERAMICS LTD. (SC)
4 TAMIL NADU LAW REPORTER [Vol. 1
the offence was committed without his knowledge, or that he had
exercised all due diligence to prevent the commission of such offence:
22 [Provided further that where a person is nominated as a Director
of a company by virtue of his holding any office or employment in the
Central Government or State Government or a financial corporation
owned or controlled by the Central Government or the State
Government, as the case may be, he shall not be liable for prosecution
under this Chapter.]"
9. Bearing in mind the averments made in the complaint in relation to the role
of the appellant and sub-section (1) of Section 141, we will have to appreciate the
rival contentions. Going by the decision relied on by the respondent in S.P. Mani's
case (supra) it is the primary responsibility of the complainant to make specific
averments in the complaint, so as to make the accused vicariously liable. Relying on
paragraph 47(b) of the said decision learned Counsel appearing for the respondent
would also submit that 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 maybe and he
relied on mainly the following recitals thereunder:
"47 ......
a) ......
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."
10. We are of the considered view that the respondent has misread the said
decision. Under the sub-caption 'Specific Averments in the complaint', in paragraph
41 and sub-paragraphs (a) and (d) as also in paragraph 42 thereof, it was held in the
decision in S.P. Mani's case (supra) thus:-
"41. In Gunmala Sales Private Limited (supra), this Court after an
exhaustive review of its earlier decisions on Section 141 of the NI
Act, summarized its conclusion as under:-
"(a) Once in a complaint filed under Section 138 read with Section 141
of the NI Act the basic averment is made that the Director was in
charge of and responsible for the conduct of the business of the
company at the relevant time when the offence was committed,
the Magistrate can issue process against such Director;
2024] 5
(b) ......
(c) ......
(d) No restriction can be placed on the High Court's powers under
Section 482 of the Code. The High Court always uses and must
use this power sparingly and with great circumspection to prevent
inter alia the abuse of the process of the Court. There are no
fixed formulae to be followed by the High Court in this regard and
the exercise of this power depends upon the facts and
circumstances of each case. The High Court at that stage does
not conduct a mini trial or roving inquiry, but nothing prevents it
from taking unimpeachable evidence or totally acceptable
circumstances into account which may lead it to conclude that no
trial is necessary qua a particular Director."
42. The principles of law and the dictum as laid in Gunmala Sales Private
Limited (supra), in our opinion, still holds the field and reflects the
correct position of law."
11. In the light of the afore-extracted recitals from the decision in Gunmala
Sales Private Limited v. Anu Mehta, (2015) 1 SCC 103, quoted with agreement in
S.P. Mani's case (supra) and in view of sub-section (1) of Section 141 of the N.I.
Act it cannot be said that in a complaint filed under Section 138 read with Section
141 of the N.I. Act to constitute basic averment it is not required to aver that the
accused concerned is a person who was in charge of and responsible for the conduct
of the business of the company at the relevant time when the offence was committed.
In paragraph 43 of S.P. Mani's case (supra) it was held thus:
"43. In the case on hand, we find clear and specific averments not in the
complaint but also in the statutory notice issued to the respondent." It
is thereafter that in the decision in S.P. Mani's case (supra) in
paragraph 47 (a) it was held that the primary responsibility of the
complainant is to make specific averments in the complaint so as to
make the accused vicariously liable.
12. Bearing in mind the afore-extracted recitals from the decisions in Gunmala
Sales Private Limited's case (supra) and S.P. Mani's case (supra), we have carefully
gone through the complaint filed by the respondent. It is not averred anywhere in
the complaint that the appellant was in charge of the conduct of the business of the
company at the relevant time when the offence was committed. What is stated in
the complaint is only that the accused Nos. 2 to 6 being the partners are responsible
for the day-to-day conduct and business of the company. It is also relevant to note
that an overall reading of the complaint would not disclose any clear and specific
SIBY THOMAS Vs. M/S. SOMANY CERAMICS LTD. (SC)
6 TAMIL NADU LAW REPORTER [Vol. 1
role of the appellant. In the statutory notice dated 10.9.2015 (Annexure-P6) at
paragraph 3 it was averred thus:-
"3. That for liquidation of the aforesaid legal liability/outstanding, you
noticee No. 2 to 6 issued cheque number 005074 dated 21.8.2015,
amounting to Rs. 27,46,737/- drawn on Punjab National Bank,
Ernhipalam (Kozhikode) branch in favour of my client from the
account of noticee No. 1." In response to that in Annexure- P7 reply
the appellant herein stated thus:-
"In this regard, I would like to convey you that, I have retired from M/
s Tile store as partner way back on 28.5.2013 and I am not a partner
of M/s. Tile Store any more. (Copy of Retirement deed enclosed).
During the time of my retirement, there were no dues to M/s. Somany
Ceramics Ltd. from M/s. Tile Store as full payments were made for
the consignments taken from them. (Copy of accounts statements up
to 31.5.2013 enclosed)"
13. In the light of the aforesaid circumstances the averments of the respondent
in paragraphs 5 and 6 of the SLP (Crl.) 12 of 2020 Page 15 of 21 complaint are also
to be seen. In paragraph 5 of the complaint, it was alleged that accused No. 1
through accused No. 2 had purchased the goods from the complainant on credit
basis through proper sales invoices and, in paragraph 6 it was alleged that for liquidation
of legal liability outstanding accused Nos. 2 and 3 issued cheque Nos. 005074 dated
21.8.2015 amounting to Rs. 27,46,737/- drawn upon Punjab National Bank,
Ernhipalam (Kozhikode), in favour of the complainant from the account of accused
No. 1. The appellant is the accused No. 4 in the complaint.
14. In view of the factual position relating the averments revealed from the
complaint as aforesaid it is relevant to refer to the decisions relied on by the learned
Counsel appearing for the appellant. In the decision in Anita Malhotra's case (supra)
in paragraph 22 it was held thus:-
"22. This Court has repeatedly held that in case of a Director, the complaint
should specifically spell out how and in what manner the Director
was in charge of or was responsible to the accused company for
conduct of its business and mere bald statement that he or she was in
charge of and was responsible to the company for conduct of its
business is not sufficient. (Vide : National Small Industries Corpn.
Ltd. v. Harmeet Singh Paintal). In the case on hand, particularly, in
Para 4 of the complaint, except the mere bald and cursory statement
with regard to the appellant, the complainant has not specified her
role in the day-to-day affairs of the Company. We have verified the
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averments as regards to the same and we agree with the contention
of Mr. Akhil Sibal that except reproduction of the statutory requirements
the complainant has not specified or elaborated the role of the appellant
in the day-to-day affairs of the Company. On this ground also, the
appellant is entitled to succeed."
15. Paragraph 19 of the Ashok Shewakramani's case (supra) is also relevant
for the purpose of the case and it, in so far as relevant, reads thus:
"19. Section 141 is an exception to the normal rule that there cannot be
any vicarious liability when it comes to a penal provision. The vicarious
liability is attracted when the ingredients of sub-section (1) of Section
141 are satisfied. The Section provides that every person who at the
time the offence was committed was in charge of, and was responsible
to the Company for the conduct of business of the company, as well
as the company shall be deemed to be guilty of the offence under
Section 138 of the NI Act. In the light of sub-section (1) of Section
141, we have perused the averments made in the complaints subject
matter of these three appeals. The allegation in paragraph 1 of the
complaints is that the appellants are managing the company and are
busy with day to day affairs of the company. It is further averred that
they are also in charge of the company and are jointly and severally
liable for the acts of the accused No. 1 company. The requirement of
sub-section (1) of Section 141 of the NI Act is something different
and higher. Every person who is sought to be roped in by virtue of
sub-section (1) of Section 141 NI Act must be a person who at the
time the offence was committed was in charge of and was responsible
to the company for the conduct of the business of the company. Merely
because somebody is managing the affairs of the company, per se, he
does not become in charge of the conduct of the business of the
company or the person responsible for the company for the conduct
of the business of the company. For example, in a given case, a
manager of a company may be managing the business of the company.
Only on the ground that he is managing the business of the company,
he cannot be roped in based on sub-section (1) of Section 141 of the
NI Act. The second allegation in the complaint is that the appellants
are busy with the day-to-day affairs of the company. This is hardly
relevant in the context of sub-section (1) of Section 141 of the NI
Act. The allegation that they are in charge of the company is neither
here nor there and by no stretch of the imagination, on the basis of
SIBY THOMAS Vs. M/S. SOMANY CERAMICS LTD. (SC)
8 TAMIL NADU LAW REPORTER [Vol. 1
such averment, one cannot conclude that the allegation of the second
respondent is that the appellants were also responsible to the company
for the conduct of the business. Only by saying that a person was in
charge of the company at the time when the offence was committed
is not sufficient to attract sub-section (1) of Section 141 of the NI
Act."
16. Thus, in the light of the dictum laid down in Ashok Shewakramani's case
(supra), it is evident that a vicarious liability would be attracted only when the
ingredients of Section 141(1) of the NI Act, are satisfied. It would also reveal that
merely because somebody is managing the affairs of the company, per se, he would
not become in charge of the conduct of the business of the company or the person
responsible to the company for the conduct of the business of the company. A bare
perusal of Section 141(1) of the NI Act, would reveal that only that person who, at
the time the offence was committed, was in charge of and was responsible to the
company for the conduct of the business of the company, as well as the company
alone shall be deemed to be guilty of the offence and shall be liable to be proceeded
against and punished. In such circumstances, paragraph 20 in Ashok
Shewakramani's case (supra) is also relevant. After referring to the Section 141(1)
of NI Act, in paragraph 20 it was further held thus:
"20 On a plain reading, it is apparent that the words "was in charge of"
and "was responsible to the company for the conduct of the business
of the company" cannot be read disjunctively and the same ought be
read conjunctively in view of use of the word "and" in between."
17. The upshot of the aforesaid discussion is that the averments in the complaint
filed by the respondent are not sufficient to satisfy the mandatory requirements
under Section 141(1) of the NI Act. Since the averments in the complaint are
insufficient to attract the provisions under Section 141(1) of the NI Act, to create
vicarious liability upon the appellant, he is entitled to succeed in this appeal. We are
satisfied that the appellant has made out a case for quashing the criminal complaint
in relation to him, in exercise of the jurisdiction under Section 482 of Cr.PC. In the
result the impugned order is set aside and the subject Criminal Complaint filed by
the respondent and pending before Ld. CJ (JD) JMIC, Bahadurgarh, in the matter
titled as M/s. Somany Ceramics v. M/s. Tile Store etc. vide COMA- 321-2015
(CNRNO: HRJRA1004637-2015), stand quashed only in so far as the appellant,
who is accused No. 4, is concerned. Appeal stands allowed as above. There will be
no order as to costs.
Appeal allowed.