In Criminal Appeal No. 3139 of 2023 -SC- Supreme Court quashes criminal complaint against partner in cheque bounce case, says complaint failed to establish vicarious liability
Justice C.T. Ravikumar & Justice Sanjay Kumar [10-10-2023]

Read Order: Siby Thomas v. M/s. Somany Ceramics Ltd

Chahat Varma

New Delhi, October 11, 2023: In a recent ruling, the Supreme Court has quashed a criminal complaint against a partner in a cheque bounce case, holding that the complaint failed to establish vicarious liability.

Factual background of the case was that the accused no. 4/appellant, had filed the present appeal, in a case related to a complaint under the Negotiable Instruments Act, 1881 (NI Act), specifically under Sections 138 and 141. The appeal was directed against the order passed by the Punjab and Haryana High Court, which had declined to quash the complaint against the appellant.

The appellant had presented two primary arguments to support his request for the dismissal of the complaint against him. First, he contended that he had resigned from the partnership firm on 28.05.2013, while the cheque in question was issued on 21.08.2015. Second, he argued that the complaint lacked the essential allegations mandated under sub-Section 1 of Section 141 of the NI Act, specifically concerning his role in the matter.

The division bench of Justice C.T. Ravikumar and Justice Sanjay Kumar observed that the complaint did not contain any assertion that the appellant was responsible for overseeing the company's business at the time when the offense was committed. The complaint only stated that accused Nos. 2 to 6, as partners, were accountable for the daily management and operations of the company. Furthermore, a comprehensive review of the complaint failed to reveal any distinct or specific role attributed to the appellant.

The bench cited the case of Anita Malhotra v. Apparel Export Promotion Council & Anr. [LQ/SC/2011/1442], in which it was noted that in the case of a director, the complaint must explicitly outline how and in what capacity the director was responsible for or in charge of the company's business. A mere generic statement claiming responsibility for the conduct of the company's business is deemed insufficient.

The bench also noted that vicarious liability comes into play when the conditions laid out in sub-section 1 of Section 141 are met. The bench determined that a plain reading of Section 141(1) of the NI Act clearly states that only the person who, at the time when the offense occurred, was responsible for and in charge of the company's business shall be deemed guilty of the offense. It is this person and the company alone who can be held liable, proceeded against, and subjected to punishment.

Consequently, the court concluded that, the allegations in the complaint lodged by the respondent failed to meet the mandatory criteria specified in Section 141(1) of the NI Act. Given the inadequacy of the allegations in the complaint to establish vicarious liability under Section 141(1) of the NI Act, the appellant was deemed successful in this appeal.

Thus, the court determined that the appellant had successfully demonstrated a valid reason to quash the criminal complaint against him, in exercise of the jurisdiction under Section 482 of Cr.P.C. As a result, the impugned order was set aside, and the criminal complaint lodged by the respondent was dismissed, solely in regards to the appellant.