[Cites 16, Cited by 0]
Madras High Court
R.Kalaivani vs Deputy Commissioner Of Income Tax on 19 January, 2026
Crl.R.C.Nos.872 & 956 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 06.01.2026
PRONOUNCED ON : 19.01.2026
CORAM
THE HONOURABLE MR.JUSTICE SUNDER MOHAN
Crl.R.C.Nos.872 & 956 of 2023
and
Crl.MP.Nos.7771 & 6805 of 2023
Crl.RC No.872 of 2023
R.Kalaivani ... Petitioner/A3
Vs.
Deputy Commissioner of Income Tax,
(Benami Prohibition),
Initiating Officer, Chennai. … Respondent/Complainant
Crl.R.C.No.956 of 2023
1. M/s.V.P.C. & Co.,
No.3/11, Natesan Colony,
Dadubaikuttai, Salem-636 015,
Rep. by its Partners
-R.Ramesh & R.Kalaivani ... Petitioner/A1
2.R.Ramesh ... Petitioner/A2
Vs.
Page No.1 of 16
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
Deputy Commissioner of Income Tax,
(Benami Prohibition),
Initiating Officer, Chennai – 600 034 … Respondent/Complainant
COMMON PRAYER: Criminal Revision Petitions filed under Section 397
r/w Section 401 of the Code of Criminal Procedure, 1973, to call for the
records in Crl.MP.No.5042/2022 in C.C.No.20/2021 on the file of the
learned IX Additional Special Judge, for CBI Cases, Chennai and set aside
the Order dated 20.03.2023 passed by the learned IX Additional Special
Judge, for CBI Cases, Chennai in Crl.MP.No.5042/2022 in C.C.No.20/2021
and consequently discharge the petitioners from the above case in
C.C.No.20 of 2021.
For Petitioner : Mr.R.John Sathyan, Sr. Counsel
in Crl.RC.No.872 of 2023 for Mr.S.Manuraj
For Petitioner
in Crl.RC.No.956 of 2023 : Mr.S.Manuraj
For Respondent : Ms.M.Sheela
in both cases Spl. Public Prosecutor (Income Tax)
COMMON ORDER
These two Criminal Revision Cases have been filed by the accused
facing prosecution in C.C.No.20 of 2021 filed under Section 53 of the
Prohibition of Benami Property Transactions Act, 1988 (as amended by Act
43 of 2016) [hereinafter referred to as 'the PBPT Act']. Crl.R.C.No.872 of
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
2023 has been filed by Accused No.3 and Crl.R.C.No.956 of 2023 has been
filed by Accused Nos.1 and 2. For the sake of convenience, the parties are
referred to as per their ranking before the trial Court.
2. (i) It is the case of the respondent that post-demonetisation in the
year 2017 there were cash deposits to the tune of Rs.68.71 Crores made into
the bank of the Partnership Firm viz., first accused, in which the second
accused and the third accused are the Partners; that the accused did not have
the requisite sources to make such a huge deposits; that the accused could
not produce the source of making such huge deposits; that the income
declared during the previous years was very less; that the sudden increase in
profits declared by the first accused is improbable and does not
commensurate with the business and financial standing of first accused and
hence, first accused along with second accused, who is its Managing Partner
and third accused, who is the Director, are jointly liable for the aforesaid
offence.
(ii) The petitioners sought for discharge on various grounds before the
trial Court. The learned Judge dismissed the discharge petitions on the
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
ground that the Court at the stage of charge framing cannot shift and weigh
the evidence and that the respondent has made out a prima facie case to
proceed further against the petitioners. Being aggrieved, the petitioners are
before this Court.
3. Mr.R.John Sathyan, the learned senior counsel appearing for the
third accused, the petitioner in Crl.RC.No.872 of 2023 would submit that the
petitioner was only a dormant partner in the partnership firm/first accused;
that all the affairs was taken care of only by her husband/second accused;
that the petitioner had sent a reply to the show cause notice, although a
separate show cause notice was not sent to the petitioner; that in the reply,
the petitioner had stated that she is only a dormant partner; that even
thereafter, the respondent has not chosen to collect any evidence to establish
her role in the affairs of the firm; and that in any case, the respondent has
not even made the requisite averments in the complaint to invoke the
provisions of Section 62 of the PBPT Act, which provides for vicarious
liability of officers of the firm/company if the offence is committed by the
firm/company
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
4.(i) Mr.S.Manuraj, the learned counsel appearing for the first and
second accused/petitioners in Crl.RC.No.956 of 2023 would submit that the
1st petitioner/first accused viz., the firm had sufficient means to make the
deposit; that merely because in the previous years the profit shown is less,
the respondent cannot assume that the petitioners could not have earned the
money deposited in the bank account; that the sum of Rs.68.71 Crores is the
turn over of the first accused firm from cash sales and cash advances which
is accumulated for a period of seven months before the period of
demonetisation and was deposited after the commencement of the scheme of
demonetisation; that the alleged beneficial owner has not been traced by the
respondent and therefore, the learned Judge ought to have discharged the
petitioners.
(ii) As regards the role of the 2nd petitioner/second accused, the
learned counsel would submit that the respondent has not made any
averments in the impugned complaint stating that the Managing
Partner/second accused was in-charge of and responsible for the conduct of
the business of the first accused firm and in the absence of averments, the
impugned prosecution cannot be sustained.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
(iii) The learned counsel relied upon the judgments of the Hon'ble
Supreme Court in Sanjay Dutt & Ors. vs. The State of Haryana & Anr.,
[Crl.A.No.11 of 2025 @ SLP(Crl.) No.7464/2024 -decided on 02.01.2025],
reported in 2025 INSC 34 and that of this Court in Umanga Vohra vs. The
State of Tamil Nadu, reported in 2025-1-LW(Crl) 848.
5.(i) Ms.M.Sheela, learned Special Public Prosecutor (Income Tax
cases) per contra submitted that the turn over of the firm for the assessment
year 2015-16 was Rs.2,31,449/-; for the year 2016-17 was Rs.1,70,203/-;
and for the year 2017-18, it was raised to Rs.24,36,212/- and such being the
financial status of the firm in the previous years, the claim of the firm that
they had made a sale of Rs.68 Crores, is a concocted story; that the
documents filed by the respondent would show that the firm had an over
due of Rs.4,93,77,687.51 as on 05.11.2016 and it is therefore impossible to
believe that an amount of Rs.68.17 Crores was the turn over of the firm and
was deposited post-demonetisation; and that the petitioners are therefore
bound to explain as to why they had kept an outstanding balance of Rs.4.93
Crores, when they had cash of Rs.68 Crores.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
(ii) The learned Special Public Prosecutor also submitted that the
respondent had examined several witnesses to establish that the petitioners
had filed bogus bills and the registration numbers of the vehicles shown in
the bills are that of two-wheelers and not of lorries or trucks as stated by the
petitioners; and that in the light of such evidence, the learned Judge was
justified in dismissing the discharge petitions.
(iii) The learned Special Public Prosecutor further submitted that
admittedly the second accused is the Managing Partner and all the business
activities of the firm was only carried out by him and the third accused,
being his wife, actively assisted him in the business transactions; that her
claim that she was not in-charge and responsible for the conduct of the
business of the firm cannot be adjudicated in a discharge petition; and that
unlike the company where the Directors can claim ignorance, the first
accused in this case is a partnership firm with only two partners and
therefore prayed that the revisions may be dismissed. The respondent has
filed a common counter in both cases.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
6. As stated earlier, it is the case of the respondent that a sum of
Rs.68.71 Crores was credited to the account of the first accused firm post-
demonetisation. It is seen from the counter and the other records that the
income of the first accused firm was less in the previous Academic Years.
That apart the respondent has alleged that the petitioners have filed bogus
bills and sales bills to falsely claim the sale of the products that they were
dealing with. In such circumstances, this Court is of the view that the
petitioners' defence that they had enough income and the deposits made by
them were genuine cannot be adjudicated at this stage. In fact, under
Section 2(9)(D) of the PBPT Act, 'Benami Transactions' include the
transaction in respect of the property where the person providing the
consideration is not traceable or is fictitious. Therefore, the fact that the
beneficial owner has not been identified would not be a ground for
discharge.
7. As regards the submission with regard to the second accused that
there is no averment in the impugned complaint stating that the 2 nd accused
was in-charge of and responsible to the firm for the conduct of its business,
it is seen that admittedly, the 2 nd accused is the Managing Partner of the
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
Firm. The learned counsel has relied upon the judgement of the Hon'ble
Supreme Court in Sanjay Dutt's case [cited supra]. In that case, the
Managing Director was prosecuted for the offence under the Punjab Land
Preservation Act, 1900. The allegation in the said case was that the
company destroyed a few trees belonging to the Forest Department using a
JCB machine. In the facts of that case, the Hon'ble Supreme Court had held
that there is no evidence to suggest that the Managing Director was aware of
the acts committed by its employees. In fact, the company in that case was
not made an accused. In such circumstances, the Hon'ble Supreme Court
held that the Managing Director cannot be made liable for acts committed
by its employees vicariously, especially since the company itself was not
made an accused. Therefore, the said judgment relied upon by the learned
counsel for the second accused would be of no avail to him.
8. Similarly, the judgment of this Court in Umanga Vohra's case
[cited supra], relied upon by the learned counsel for the petitioners/Accused
1 and 2, also would not be applicable to this case, as that was a prosecution
under the Drugs and Cosmetics Act wherein the officer had been
specifically named in the licence and instead of prosecuting the said person,
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
the Managing Director was sought to be prosecuted in the absence of any
allegation that he was aware that the drugs so manufactured were not of
standard quality. Therefore, that case also would not be applicable to the
facts and circumstances of this case.
9. In this case, the first accused is the partnership firm and the second
accused is its Managing Partner without whose consent the said cash
deposits would not have been made. Even according to the third accused,
the second accused was taking care of the affairs of the firm. He had also
signed the Balance Sheet and other relevant documents, which indicates his
knowledge and consent prima facie. Therefore, this Court is of the view that
the order of the learned Magistrate in refusing to discharge the second
accused also cannot be faulted.
10. As regards the third accused [petitioner in Crl.R.C.No.872 of
2023] who happens to be the wife of the second accused, it is the case of the
respondent that she was a partner and hence, liable. The petitioner/third
accused though not issued a separate show cause notice had replied stating
that she was only a dormant partner and that the affairs of the partnership
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
firm were taken care of by her husband/second accused. In the Sanction
Order relied upon by the respondent dated 21.10.2019, a reference is made
to the reply sent by the petitioner. However, there is no reference to the
exact role played by the petitioner and as to how she was in-charge and
responsible to the firm for the conduct of its business.
11. In the impugned complaint, the respondent have not made the
requisite averments to hold her vicariously liable for the offences committed
by the firm. The petitioner cannot be equated with her husband, who was
the Managing Partner. Therefore, the respondent should have specifically
averred that the petitioner was in-charge and responsible to the firm for the
conduct of its business.
12. In Dilip Hariramani vs. Bank of Baroda, reported in 2024 (15)
SCC 443 the Hon'ble Supreme Court had reiterated the legal position in a
case arising out of a complaint under Section 138 of the Negotiable
Instruments Act, which has a similar provision as regards vicarious liability.
The relevant portion from the judgment reads as follows:
“12. We would also refer to the summarisation of law on Section
141 by this Court in National Small Industries Corporation Limited v.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
Harmeet Singh Paintal and Another [10 (2010) 3 SCC 330] to the
following effect:
“39. From the above discussion, the following
principles emerge:
(i) The primary responsibility is on the complainant
to make specific averments as are required under the law in
the complaint so as to make the accused vicariously liable.
For fastening the criminal liability, there is no presumption
that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors
liable for the offence. The criminal liability can be fastened
only on those who, at the time of the commission of the
offence, were in charge of and were responsible for the
conduct of the business of the company.
(iii) Vicarious liability can be inferred against a
company registered or incorporated under the Companies
Act, 1956 only if the requisite statements, which are
required to be averred in the complaint/petition, are made
so as to make the accused therein vicariously liable for
offence committed by the company along with averments
in the petition containing that the accused were in charge of
and responsible for the business of the company and by
virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must
be pleaded and proved and not inferred.
xx xx xx
(vii) The person sought to be made liable should be
in charge of and responsible for the conduct of the business
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
of the company at the relevant time. This has to be averred
as a fact as there is no deemed liability of a Director in such
cases.”
13. In the present case, we have reproduced the contents of the
complaint and the deposition of PW-1. It is an admitted case of the
respondent Bank that the appellant had not issued any of the three
cheques, which had been dishonoured, in his personal capacity or
otherwise as a partner. In the absence of any evidence led by the
prosecution to show and establish that the appellant was in charge of and
responsible for the conduct of the affairs of the firm, an expression
interpreted by this Court in Girdhari Lal Gupta v. D.H. Mehta and Another
[(1971) 3 SCC 189] to mean ‘a person in overall control of the day-to-day
business of the company or the firm’, the conviction of the appellant has to
be set aside. [State of Karnataka v. Pratap Chand and Others, (1981) 2
SCC 335.].
14. 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. The Partnership Act, 1932 creates civil liability. Further,
the guarantor's liability under the Indian Contract Act, 1872 is a civil
liability. The appellant may have civil liability and may also be liable
under the Recovery of Debts Due to Banks and Financial Institutions Act,
1993 and the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002. 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. Vicarious
liability under sub-section (2) to Section 141 of the NI Act can arise
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
because of the director, manager, secretary, or other officer's personal
conduct, functional or transactional role, notwithstanding that the person
was not in overall control of the day-to-day business of the company when
the offence was committed. Vicarious liability under sub-section (2) is
attracted when the offence is committed with the consent, connivance, or
is attributable to the neglect on the part of a director, manager, secretary,
or other officer of the company.
13. From the above observations, it would be clear that although a
firm is not a juristic person, a partner could not be liable unless one of the
twin requirements to make him/her vicariously liable is satisfied. In the
PBPT Act, the twin requirements are stipulated in Section 62.
14. Thus, in the light of the specific stand taken by the petitioner/third
accused in the reply to the show cause notice and in the absence of any
material to establish the role played by the petitioner/third accused, this
Court is of the view that the petitioner/third accused cannot be made
vicariously liable, especially since even the necessary averment to invoke
vicarious liability is absent in the complaint. Therefore, this Court is
inclined to set aside the impugned order insofar as the petitioner/third
accused is concerned.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
15. Accordingly, the impugned order dated 20.03.2023 passed by the
learned IX Additional Special Judge, for CBI Cases, Chennai in
Crl.MP.No.5042/2022 in C.C.No.20/2021 is set aside insofar as the
petitioner/third accused alone is concerned. However, it is made clear that if
the respondent is able to adduce any evidence to prove the role played by the
petitioner/third accused to make her vicariously liable, then the respondent
is at liberty to invoke Section 319 of the Cr.P.C., corresponding to 358
BNSS.
16. With the above observations, the Crl.RC No.872 of 2023 filed by
the third accused stands allowed and the Crl.RC.No.956 of 2023 filed by the
first and second accused stands dismissed. Consequently, the connected
Criminal Miscellaneous Petitions are closed.
19.01.2026
Index : Yes/No
Speaking Order/Non Speaking Order
Neutral Citation: Yes/No
ars
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
Crl.R.C.Nos.872 & 956 of 2023
SUNDER MOHAN, J.
ars
To
1. The IX Additional Special Judge for CBI Cases,
Chennai.
2. The Deputy Commissioner of Income Tax,
(Benami Prohibition)
Initiating Officer, Chennai.
3. The Public Prosecutor,
High Court, Madras.
Pre-delivery Common Order in
Crl.R.C.Nos.872 & 956 of 2023
19.01.2026
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 02:01:35 pm )
