Cheque Case Against Director/Partner Of Firm Can Be Quashed Only If There Is Unimpeachable & Incontrovertible Evidence That They Were Not Concerned With Issuance Of Cheque: Supreme Court

The Supreme Court observed that a High Court can quash a cheque case only if 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."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.", the bench comprising Justices Surya Kant and JB Pardiwala observed.In this case, the High Court quashed a cheque case against the accused (partner of a firm) on the ground that there was nothing to indicate that in what manner the accused herein was incharge and responsible for the daytoday affairs of the firm so as to make her vicariously liable for the alleged offence with the aid of Section 141 of the NI Act. The High Court held that merely by reciting the words used under Section 141 of the NI Act in the complaint no vicarious liability can be fastened on the partner of the firm.In appeal, Advocate E.R. Kumar for the complainant-appellant, contended that there are averments made in the complaint that the partners which include the accused are regularly looking after and actively taking part in the daytoday business of the firm. Advocate Hari Priya Padmanabhan, who appeared for the respondent, contended that mere bald averments in the complaint are not sufficient to fasten the vicarious lability on the partner of the firm as envisaged under Section 141 of the NI Act.The bench, analysing the scope of Section 141 of the Negotiable Instrument Act, 1881, summarized the legal position as follows:(a) Vicarious liability can be fastened on those who are incharge of and responsible to the company or firm for the conduct of its business. For the purpose of Section 141, the firm comes within the ambit of a company;(b) It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole;(c) If the substance of the allegations made in the complaint fulfil the requirements of Section 141, the complaint has to proceed in regards the law.(d) In construing a complaint a hypertechnical approach should not be adopted so as to quash the same.(e) The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in the enactment of Sections 138 and 141 respectively should be kept in mind by the Court concerned.(f) These provisions create a statutory presumption of dishonesty exposing a person to criminal liability if payment is not made within the statutory period even after the issue of notice.(g) The power of quashing should be exercised very sparingly and where, read as a whole, the factual foundation for the offence has been laid in the complaint, it should not be quashed.(h) The Court concerned would owe a duty to discharge the accused if taking everything stated in the complaint is correct and construing the allegations made therein liberally in favour of the complainant, the ingredients of the offence are altogether lacking.The court noted that in the instant case, there are clear and specific averments not only in the complaint but also in the statutory notice issued to the accused and that the cheque was issued with the consent of the accused and within her knowledge. While allowing the appeal, the bench observed:"In our view, this was sufficient to put the respondent herein to trial for the alleged offence. We are saying so because the case of the respondent that at the time of issuance of the cheque or at the time of the commission of the offence, she was in no manner concerned with the firm or she was not incharge or responsible for daytoday affairs of the firm cannot be on the basis of mere bald assertion in this regard. The same is not sufficient. To make good her case, the respondent herein is expected to lead unimpeachable and incontrovertible evidence. Nothing of the sort was adduced by the respondent before the High Court to get the proceedings quashed. The High Court had practically no legal basis to say that the averments made in the complaint are not sufficient to fasten the vicarious liability upon the respondent by virtue of Section 141 of the NI Act."The court also summarized principles in this regard as follows: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 subsection (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the...

Cheque Case Against Director/Partner Of Firm Can Be Quashed Only If There Is Unimpeachable & Incontrovertible Evidence That They Were Not Concerned With Issuance Of Cheque: Supreme Court

Ashok KM

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