Recently, the Allahabad High Court examined a challenge to criminal proceedings initiated under Section 138 of the Negotiable Instruments Act, wherein the applicants sought quashing of cheque-dishonour complaints filed against them. The matter concerned allegations against two sleeping partners of a partnership firm who contended that they were neither involved in day-to-day management nor signatories to the cheques. The Court noted an important principle that vicarious liability under Section 141 NI Act cannot be fastened without specific averments showing responsibility for the conduct of business.
Brief Facts:
The dispute arose from two cheque-dishonour complaints filed by the complainant against a partnership firm, M/s K.D. Overseas, and its partners. The applicants, both women, were sleeping partners who had entrusted all business operations to Mr. Sahil Verma through a registered power of attorney. He alone handled all transactions, including issuance of the cheques that were later dishonoured. Despite this, the complainant arrayed the applicants as accused persons without detailing any role attributed to them in running the affairs of the firm.
Contentions of the Applicants:
The applicants argued that they had no involvement in the firm’s daily operations and were not signatories to the dishonoured cheques. Their counsel submitted that all transactions, including banking operations, were conducted solely by Mr. Sahil Verma, to whom they had delegated all authority through a registered power of attorney.
It was further argued that the complaints lacked the mandatory specific averments under Section 141 NI Act showing that the applicants were “in charge of and responsible for” the conduct of business at the relevant time. The counsel relied on several Supreme Court precedents, including SMS Pharmaceuticals v. Neeta Bhalla, Sunita Palita v. Panchami Stone Quarry, NSIC v. Harmeet Singh Paintal, Ashok Shewakramani, and others, emphasizing that mere designation as a partner is insufficient to attract vicarious liability without specific allegations explaining their role.
Contentions of the Respondents:
The respondents argued that in partnerships, liability is joint and several, and partners cannot claim immunity merely by calling themselves “sleeping partners.” Unlike a company, a partnership has no independent juristic identity without its partners; therefore, partners must face proceedings. Reliance was placed on Dhanasingh Prabhu v. Chandrasekar to assert that partners stand on a different footing than directors and cannot escape liability unless the complaint is fundamentally flawed. The State supported the respondents, arguing that the Magistrate had applied his mind while issuing summons based on the complainant’s evidence.
Observations of the Court:
The Court undertook a detailed examination of Apex Court jurisprudence on vicarious liability under Section 141 NI Act. It reiterated the settled principle that criminal liability cannot be imposed merely on the basis of one’s status as a partner.
Quoting SMS Pharmaceuticals, the Court highlighted that, “It is necessary to specifically aver that at the time the offence was committed, the person accused was in charge of, and responsible for, the conduct of business of the company. Without this averment, the requirement of Section 141 cannot be said to be satisfied.”
The Court further referred to Ashok Shewakramani, noting that merely alleging that all persons were “aware of the issuance of cheques” does not fulfil the statutory requirement. Similarly, in Sunita Palita, the Apex Court clarified that liability depends on the role played in the affairs of the business, not on mere designation or status. The Court reiterated that specificity of allegations is essential, particularly when the accused is not a signatory to the cheque. The Court also referred to Pepsi Foods Ltd., reiterating that summoning an accused is a serious matter, and the Magistrate must reflect application of mind to the allegations and evidence.
The decision of the Court:
After considering the submissions and precedents, the Court held that the complaints failed to contain specific and necessary averments showing that the applicants were responsible for the conduct of the firm’s business at the relevant time. In the absence of such foundational allegations—and given that they were not signatories and had delegated all authority to the attorney holder, the continuation of proceedings amounted to an abuse of process. Accordingly, the Court quashed the proceedings and the summoning orders against the applicants in both connected complaint cases.
Case Title: Sonali Verma And Another Vs. State Of U.P. Thru. Its Addl. Chief Secy. Deptt. Of Home Lko. And Others
Case No.: Application U/S 482 No. - 8942 of 2025
Coram: Justice Brij Raj Singh
Advocate for Petitioner: Adv. Abhineet Jaiswal
Advocate for Respondent: Adv. G.A., Abhinav Kumar Mathur, Avdhesh Kumar Pandey, Ram Kumar Verma
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