Final Judgment and Order would depend on the Evidence Adduced: Supreme Court
The Supreme Court ruled that the final judgment and order would depend on the evidence adduced.
Background
The appellant is engaged in the business of milk and milk products. The respondent is one of the partners of a Partnership Firm running in the name of Sira Marketing Services. The firm used to purchase milk and milk products from the appellant/complainant on credit basis.
The appellant has to recover an amount of Rs. Ten Lakh Seventy One Thousand Four Hundred Thirty Four and Sixty paise from the partnership firm. The firm issued a cheque duly signed by the original accused partner/authorised signatory in favour of the appellant for the amount of Rs. Ten Lakh. The cheque came to be dishonoured as there was no sufficient balance in the account maintained by the firm.
No sooner, the bank intimated the appellant that the cheque could not be cleared due to insufficient funds than the appellant issued a statutory notice to the firm and the two partners of the firm.
Despite service of notice to the firm as well as the two partners (accused persons) the amount was not paid to the appellant and therefore, the appellant was left with no other option but to file the complaint in the Judicial Magistrate Fast Track Court.
Arguments
Advocate E.R. Kumar, appearing for the appellant, submitted that the High Court committed a serious error in passing the impugned Order quashing the proceedings against the respondent.
He contended that in the statutory notice issued to the respondent as well as in the body of the complaint, there are specific averments that the accused, being the partners of the partnership firms, are incharge and responsible for the day-to -day affairs of the firm.
Advocate Hari Priya Padmanabhan, appearing for the respondent, submitted that no error, not to speak of any error of law, could be said to have been committed by the High Court in passing the impugned order.
She contended that mere bald averments in the complaint are not sufficient to fasten the vicarious liability on the partner of the firm as envisaged under Section 141 of the NI Act.
Decision
A division bench of Justice Surya Kant and Justice J. B. Pardiwala noted that the proceedings came to be quashed essentially on the ground that there was nothing to indicate that in what manner the respondent was incharge and responsible for the day to day 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 court said that the gist of Section 138 is that the drawer of the cheque shall be deemed to have committed an offence when the cheque drawn by him is returned unpaid on the prescribed grounds.
It was stated by the court that the principles discernible from the decision of the Court in the case of Ashutosh Ashok Parasrampuriya is that the 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.
The bench found clear and specific averments not only in the complaint but also in the statutory notice issued to the respondent.
“To make good her case, the respondent 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 added.
It was observed by the court that 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.
The court held that the primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable.
The court further held that the 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.
It was reiterated that “the world of commercial transactions contains numerous unique intricacies, many of which are yet to be statutorily regulated. More particularly, the principle laid down in Section 141 of the NI Act (which is pari materia with identical sections in other Acts like the Food Safety and Standards Act, 2006; the erstwhile Prevention of Food Adulteration Act, 1954; etc.) is susceptible to abuse by unscrupulous companies to the detriment of unsuspecting third parties.”
Case title: S.P. Mani and Mohan Dairy v/s Dr. Snehalatha Elangovan
Citation: CRIMINAL APPEAL NO.1586 OF 2022
