Telangana High Court
Tabrez Alam vs The State Of Telangana on 6 June, 2024
THE HONOURABLE SMT. JUSTICE K. SUJANA
CRIMINAL PETITION No.6845 OF 2023
ORDER:
This Criminal Petition is filed under Section 482 of Code of Criminal Procedure, 1973 (for short 'Cr.P.C.') to quash the proceedings against the petitioners/accused Nos.3 and 4 in STC.NI.No.121 of 2023 on the file of the learned IX Metropolitan Magistrate, Cyberabad, Kukatpally, registered for the offences punishable under Section 138 read with 141 and 142 of the Negotiable Instruments Act, 1881 (for short 'the NI Act').
2. Brief facts of the case are that respondent No.2/de facto complainant lodged a private complaint against the petitioners and other accused stating that it is a company i.e., TFL Quinn India Private Limited, engaged in the leather chemical business and manufactures and sells a wide variety of specialty chemicals, organic, dyestuffs, etc. It is further stated that respondent No.2 and accused No.1 entered into the Distributorship Agreement on 17.12.2021, wherein accused No.1-company as its distributor to distribute the products within the territory of Kanpur as agreed between the parties. Accused No.1 is represented through accused Nos.2 2 SKS,J Crl.P.No.6845 of 2023 to 4. It is further stated that the said agreement came into effect from 01.01.2022. As per the terms of the said agreement, accused No.1 has to issue purchase orders in favour of respondent No.2 which inturn, would supply the goods and raise invoices. Respondent No.2 supplied the products as per the purchase orders. Accused No.1 accepted the products and made part payment from time to time. From May, 2022, accused No.1 started delaying the payments without any reason. Despite reminding several times, the accused gave baseless grounds for not making the payment.
3. It is further stated that on 14.02.2023, the total outstanding amount was Rs.93,59,396/-, including interest. Later, accused No.1 has given five blank cheques to respondent No.2 and the same were dishonored with an endorsement 'payment stopped by drawer'. Thereafter, respondent No.2 issued legal notice to accused No.1. Instead of paying the cheque amount, the accused has sent an evasive reply. Basing on the said complaint, the learned IX Metropolitan Magistrate, Cyberabad, Kukatpally has taken cognizance of the same and numbered as STC.NI.No.121 of 2023.
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4. Heard Sri E. Sudhanshu Rao, learned counsel appearing on behalf of the petitioners as well as Sri S. Ganesh, learned counsel appearing on behalf of respondent No.1-State and Sri A.Sanjay Kishore, learned counsel appearing on behalf of respondent No.2.
5. Learned counsel for the petitioners submitted that petitioners/accused Nos.3 and 4 are only the partners, but not the signatories of accused No.1-company. When they are only partners, the mandatory requirement under Section 141 of NI Act is not applicable. It is further submitted that except stating the names of the petitioners in the complaint, there are no specific allegations against them in the alleged transactions. Therefore, he prayed the Court to quash the proceedings against the petitioners.
6. In support of his submissions, learned counsel for the petitioners relied on the judgment of the Hon'ble Supreme Court in Siby Thomas vs. Somany Ceramics Limited 1 , wherein in paragraph No.18 it is held as follows:
"18. Thus, in the light of the dictum laid down in Ashok Shewakramani case, it is evident that a vicarious liability would be attracted only when the 1 (2024) 1 Supreme Court Cases 348 4 SKS,J Crl.P.No.6845 of 2023 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."
7. Learned counsel for the petitioners further relied on the judgment of the Hon'ble Supreme Court in Sunita Palita and others vs. Panchami Stone Quarry 2, wherein it is observed that a non-executive Director, who is not involved in the day to day affairs of the company or in the running of its business, is no way responsible for the day to day running of the accused company.
8. On the other hand, learned counsel for respondent No.2 submitted that the petitioners are parties in the said agreement as partners of accused No.1-company and that they are not resigned, as such, they are responsible for the 2 (2022) 10 Supreme Court Cases 152 5 SKS,J Crl.P.No.6845 of 2023 day to day affairs of the accused No.1-company and therefore, prayed the Court to dismiss the petition.
9. In support of his submissions, learned counsel for respondent No.2 relied on the judgment of the Hon'ble Supreme Court in S.P. Mani and Mohan Dairy vs. Dr. Snehalatha Elangovan 3, wherein in paragraph Nos. 45 and 47 it is held as follows:
"45. Once the necessary averments are made in the statutory notice issued by the complainant in regard to the vicarious liability of the partners and upon receipt of such notice, if the partner keeps quiet and does not say anything in reply to the same, then the complainant has all the reasons to believe that what he has stated in the notice has been accepted by the notice. In such circumstances what more is expected of the complainant to say in the complaint.
47. Our final conclusions may be summarized as under:-
a. 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 3 2022 SCC OnLine SC 1238 6 SKS,J Crl.P.No.6845 of 2023 other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.
b. The complainant is supposed to know only generally as to who were in charge of the affairs of the company orn firm, as the case may be. The other administrative matters would be within in 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. It is only the Directors of the Company or the partners of the firm, as the case may be, who have the special knowledge about therole they had played in the company or the partners in a firm to show before the Court that at the relevant point of time they were not in charge of the affairs of the company. 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/parterns of a firm to show that they were not liable to be convicted. The existence of 7 SKS,J Crl.P.No.6845 of 2023 any special circumstances that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.
c. Needless to say, the final judgment and order would depend on the evidence adduced. Criminal liability is attracted only onthose, who at the time of commission of offence, were in charge of and were responsible for the conduct of the business of the firm. But 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. This would make them liable to face the prosecution but it does not lead to eventually found to be not guilty, as a necessary consequence thereof would be acquittal.
d. If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a 8 SKS,J Crl.P.No.6845 of 2023 case that making him/her stand the trial would be an abuse of Court."
10. Having regard to the rival submissions made by both the learned counsel and having gone through the material available on record, the prime contention of the learned counsel for the petitioners is that they are not the signatories and they are only the partners in accused No.1-company. Therefore, the allegations leveled against them do not constitute any offence. As per the law laid down in the above judgments relied by the petitioners, whether a particular Director was in charge and responsible for conduct of business of the company and he is the signatory, if the partners of the company are not aware of the day to day affairs, each and every transactions, they are not liable for the punishment under Section 138 of the NI Act.
11. Learned counsel for respondent No.2 relied on the observation made by the Hon'ble Apex Court in S.P. Mani and Mohan Dairy (supra), wherein it is observed that if the partners are aware about the day to day affairs of the company, they are vicariously liable for the issuance of cheques also. Further, the complainant has to state the same in the legal notice, as well as, in the complaint. 9
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12. In the present case, a perusal of the legal notice shows that there is no reference about the vicarious liability, whereas the same is averred in complaint. Learned counsel for the petitioner contended that cheques were issued as security prior to the agreement i.e., on 13.07.2021. In support of this contention, a letter sent by the respondent acknowledging the receipt of the said cheques, wherein the date was mentioned as 13.07.2021, which is prior to the date of agreement i.e., 17.12.2021, and the same shows that the petitioners are not partners as on the date of issuance of the cheques. Therefore, the judgment relied on by respondent No.2 with regard to vicarious liability is not applicable to the present case. As the petitioners are not parties to the agreement on the date of issuance of cheques, they are not liable for the offence punishable under Section 138 of NI Act.
13. In the present case, petitioners are not signatories and they are only the partners of the said company. Therefore, the allegations leveled against the petitioners do not constitute any offence and the proceedings against them are liable to be quashed.
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14. Accordingly, the criminal petition is allowed and the proceedings against the petitioners/accused Nos.3 and 4 in STC.NI.No.121 of 2023 on the file of the learned IX Metropolitan Magistrate, Cyberabad, Kukatpally, are hereby quashed.
Miscellaneous petitions, if any pending, shall also stand closed.
___________ K. SUJANA Date: 06.06.2024 SAI