Supreme Court of India was dealing with the petition where the appellant was challenging his conviction under Section 1381 read with Section141 of the Negotiable Instruments Act, 1881.
Brief Facts:
Bank of Baroda, had granted term loans and cash credit facility to a partnership firm – M/s. Global Packaging. It is alleged that in part repayment of the loan, the Firm, through its authorised signatory, Simaiya Hariramani, had issued three cheques. However, the cheques were dishonoured on presentation due to insufficient funds. The Bank, through its Branch Manager, issued a demand notice to Simaiya Hariramani under Section 138 of the NI Act. The respondent Bank, through its Branch Manager, filed a complaint under Section 138 of the NI Act before the Court of Judicial Magistrate, Balodabazar, Chhattisgarh, against Simaiya Hariramani and the appellant. The Firm was not made an accused. The Firm had availed term loans and cash credit and gave three cheques, which were dishonoured due to ‘insufficient funds. Even after the demand notice, the accused had not deposited the amount. Thereby, a complaint under Section 138 of the NI Act was filed. The appellant and Simaiya Hariramani were convicted by the Judicial Magistrate First Class, Balodabazar, Chhattisgarh, under Section 138 of the NI Act and sentenced to imprisonment for six months. An appeal preferred by the appellant and Simaiya Hariramani challenging their conviction was dismissed by the Sessions Judge, Balodabazar, Chhattisgarh. The appellant and Simaiya Hariramani challenged the judgment before the High Court of Chhattisgarh, which has been dismissed by the impugned judgment dated 12th October 2020.
SC’s Observations:
The issue before the SC was whether a partner can be convicted and held to be vicariously liable when the partnership firm is not an accused tried for the primary/substantive offence?
SC looked into Sub-section (1) to Section 141 of the NI Act and stated that expression ‘every person’ is wide and comprehensive enough to include a director, partner or other officers or persons. At the same time, it follows that a person who does not bear out the requirements of ‘in charge of and responsible to the company for the conduct of its business’ is not vicariously liable under Section 141 of the NI Act. The burden is on the prosecution to show that the person prosecuted was in charge of and responsible to the company for conduct of its business.
SC stated that the appellant cannot be convicted merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. However, vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened because of the civil liability. Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day-to-day business of the company or firm.
SC stated that Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender.
SC Held:
After evaluating submissions made by both the parties the SC held that “we allow the present appeal and set aside the appellant's conviction under Section 138 read with Section 141 of the NI Act. The impugned judgment of the High Court confirming the conviction and order of sentence passed by the Sessions Court, and the order of conviction passed by the Judicial Magistrate First Class are set aside.”
Case Title: Dilip Hariramani v. Bank of Baroda
Bench: J. Ajay Rastogi and J. Sanjiv Khanna
Citation: CRIMINAL APPEAL NO. 767 OF 2022
Decided on: 9th May, 2022
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