/2022 INSC 0814/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1586  OF 2022
(ARISING OUT OF SPECIAL LEAVE APPEAL (CRIMINAL) NO. 9811 OF 2021)
S.P. MANI AND MOHAN DAIRY ……APPELLANT(S)  
VERSUS
DR. SNEHALATHA ELANGOVAN           ......RESPONDENT(S)
J U D G M E N T
J.B. PARDIWALA, J.    
1. Leave granted.
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2. This appeal is at the instance of the original complainant of
a   complaint   filed   under   Section   138   of   the   Negotiable
Instruments   Act,   1881   (for   short,   “the   NI   Act”)   and   is   directed
against   the   order   passed   by   the   High   Court   of   Madras   dated
16.02.2021   in   the   Criminal   Original   Petition   No.   1063   of   2021
filed by the respondent herein (accused no.03) under Section 482
of the Code of Criminal Procedure (for short, “the Code”), whereby
the High Court allowed the application and quashed the criminal
proceedings   initiated   against   the   respondent   herein   in   the   court
of the Judicial Magistrate Fast Track Court No.­II, Erode.
3. There are some legal issues with a never­ending debate. The
debate   on   such   legal   issues   goes   on   and   on   despite   there   being
plethora of case law on the subject. The NI Act by now is almost
three decades old. Section 141 of the NI Act is on the statute past
more   than   three   decades.   There   are   various   decisions   of   this
Court and High Courts explaining the true purport of Section 141
of the NI Act. However, the debate on Section 141 of the NI Act is
never ending. The present litigation is also one in which we have
been called upon to look into Section 141 of the NI Act.
FACTUAL MATRIX
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4. The   facts   of   this   case   are   plain   and   simple.   The   appellant
herein   (original   complainant)   is   engaged   in   the   business   of   milk
and milk products. The respondent herein is one of the partners
of   a   Partnership   Firm   running   in   the   name   of   Sira   Marketing
Services. The firm used to purchase milk and milk products from
the   appellant/complainant   on  credit   basis.   The   appellant   has   to
recover  an amount of Rs. 10,71,434.60/­ (Rs. Ten Lakh Seventy
One   Thousand   Four   Hundred   Thirty   Four   and   Sixty   paise)   from
the partnership firm. The firm issued a cheque duly signed by the
original   accused   No.   02   (partner/authorised   signatory)   in  favour
of the appellant for the amount of Rs. 10,00,000/­ (Rs. Ten Lakh
only)   dated   05.05.2017.   The   cheque   came   to   be   dishonoured   as
there was no sufficient balance in the account maintained by the
firm. No sooner, the bank intimated the appellant herein that the
cheque   could   not   be   cleared   due   to   insufficient   funds   than   the
appellant   herein   issued   a   statutory   notice   dated   14­08­2017   to
the   firm   and   the   two   partners   of   the   firm.   Despite   service   of
notice   to   the   firm   as   well   as   the   two   partners   (accused   persons)
the   amount   was   not   paid   to   the   appellant   and   therefore,   the
appellant was left with no other option but to file the complaint in
the   Judicial   Magistrate   Fast   Track   Court   No.   II,   Erode   for   the
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offence   punishable   under   Section   138   r/w   141   of   the   NI   Act
which came to registered as the STC No. 583 of 2017.
5. The   respondent   herein   (original   accused   No.   03/partner)
preferred an application under 482 of the Code in the High Court
and   prayed   that   the   criminal   proceedings   instituted   against   her
may   be   quashed   as   she   has   no   liability   under   the   law.   The
principal   argument   of   the   respondent   herein   before   the   High
Court   was   that   much   before   the   cheque   came   to   be   issued,   the
firm   had   been   dissolved.   The   accounts   of   the   firm   were   also
settled on                  13­02­2017 following  the  dissolution. The High
Court   quashed   the   proceedings   against   the   respondent   herein
mainly   on   the   ground   that   there   was   nothing   to   indicate   as   to
how and in what manner the respondent at the relevant point of
time   was   in­charge   and   responsible   for   the   conduct   of   the
business   of   the   firm.   The   High   Court   took   the   view   that   the
complaint   can   be   prosecuted   as   against   the   respondent   herein
only   if   the   allegations   made   in   the   complaint   fulfils   the
requirements   of   Section   141   of   the   NI   Act.   The   High   Court   took
the   view   that   merely   by   reciting   the   words   used   under   Section
141   of   the   NI   Act   in   the   complaint   no   vicarious   liability   can   be
fastened on the partner of the firm.
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6. In   such   circumstances   above,   the   High   Court   allowed   the
application   filed   by   respondent   herein   and   terminated   the
proceedings as far as the respondent is concerned.
7. In view of the aforesaid, the appellant (original complainant)
is here before this Court with the present appeal.
Submissions on behalf of the Appellant  
8. The   learned   counsel,   Mr.   E.R.   Kumar   appearing   for   the
appellant vehemently submitted that the High Court committed a
serious   error   in   passing   the   impugned   Order   quashing   the
proceedings against the respondent herein. He would submit that
the   entire   premise   on   which   the   High   Court   proceeded   could   be
termed   as   erroneous   in   law.   The   learned   counsel   would   submit
that in the statutory notice issued to the respondent as well as in
the   body   of   the   complaint,   there   are   specific   averments   that   the
accused   Nos.   02   and   03   respectively,   being   the   partners   of   the
partnership   firms,   are   in­charge   and   responsible   for   the   day­to­
day   affairs   of   the   firm.   He   pointed   out   there   are   specific
averments made in the complaint that the partners which include
the   respondent   herein   are   regularly   looking   after   and   actively
taking   part   in   the   day­to­day   business   of   the   firm.   He   further
pointed   out   that   there   is   a   specific   averment   that   in   order   to
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discharge the liability, the original accused No. 02 had issued the
cheque   within   the   knowledge   and   consent   of   the   respondent
herein. It is argued that if the substance of the allegation made in
the complaint fulfil the requirements of Section 141 of the NI Act,
the  complaint  is to proceed and is required to be tried with. The
learned   counsel   vociferously   argued   that   while   construing   a
complaint the Court should not adopt a hyper­technical approach
and quash the same.
9. The   learned   counsel   further   pointed   out   that   three
individual   notices   were   issued   under   Section   138   of   the   NI   Act
before   the   filing   of   the   complaint.   He   would   submit   that   the
statutory   notice   was   duly   served   upon   the   respondent   herein.
However,  the  respondent  thought  fit  not   to  give  any  reply  to  the
notice. It is argued that if the respondent had anything to say as
regards her role in the firm, she could have given an appropriate
reply that she is a sleeping partner and not involved into the day­
to­day   affairs   of   the   firm.   It   is   argued   that   respondent   herein
could   also   have   clarified   in   her   reply   that   the   firm   had   already
been   dissolved   much   before   the   cheque   was   issued   and   in  such
circumstances,   no   liability   could   be   fastened   on   her.   In   the
absence of any reply to the statutory notice, the respondent could
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not have argued before the High Court for the first time about her
involvement in the affairs of the firm. The learned counsel would
submit   that   the   High   Court   committed   a   serious   error   in
accepting   such   submission   canvassed   on   behalf   of   the
respondent at the preliminary stage.
10. The   learned   counsel   further   submitted   that   once   the
necessary   averments   are   made   in   the   complaint,   the   onus
thereafter   would   shift   on   the   accused   to   establish   by   producing
some   unimpeachable   and   incontrovertible   evidence   which   may
clearly indicate that the respondent herein as one of the partners
of  the   firm,  could  not  have  been  concerned  with  the  issuance  of
the cheque in question.
11. In   such   circumstances   referred   above,   the   learned   counsel
appearing   for   the   appellant   prays   that   there   being   merit   in   his
appeal, the same may be allowed and the impugned order passed
by the High Court may be quashed.
Submissions on behalf of the Respondent:
12. Ms.   Hari   Priya   Padmanabhan,   the   learned   counsel
appearing   for   the   respondent   (accused)   on   the   other   hand   has
vehemently opposed the present appeal submitting that no error,
not   to   speak   of   any   error   of   law,   could   be   said   to   have   been
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committed by the High Court in passing the impugned order. She
would submit that mere bald averments in the complaint are not
sufficient to fasten the vicarious lability on the partner of the firm
as   envisaged   under   Section   141   of   the   NI   Act.   The   learned
counsel would submit that the case on hand is squarely covered
by   the   decision   of   this   Court   in   the   case   of   SMS
Pharmaceuticals   Ltd.   v.   Neeta   Bhalla ,   (2005)   8   SCC   89.
Relying   on   the   said   decision   of   this   Court,   the   learned   counsel
would   submit   that   the   deeming   fiction   creating   criminal   lability
and vicarious lability are a departure from the usual principles of
criminal   law   and   that   a   clear   case   should   be   spelt   out   and   the
accused person should be made aware of the case alleged against
him   or   her.   The   learned   counsel   would   submit   that   this   would
therefore   necessarily   require   averments   in   addition   to   the
statement   that   the   accused   is   in­charge   of   and   responsible   for
the affairs of the company/firm. 
13. The   learned   counsel   appearing   for   the   respondent   in
support   of   her   aforesaid   submissions   has   placed  strong   reliance
on the following decisions:
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(i) Gunmala   Sales   Pvt.   Ltd.   v.   Anu   Mehta   &   Ors ,
reported in (2015) 1 SCC 103;
(ii) National  Small  Industries   Corporation  v.  Harmeet
Singh Paintal & Anr ., reported in (2010) 3 SCC 330;
(iii) Sunita   Palita   &   Others   v.   M/s   Panchami   Stone
Quarry , reported in (2022) SC Online SC 945.
14. In   such   circumstances   referred   above,   the   learned   counsel
appearing   for   the  respondent  prays   that   there   being   no   merit   in
this appeal, the same may be dismissed. 
Analysis 
15. Having  heard the learned counsel appearing  for  the parties
and   having   gone   through   the   materials   on   record   the   only
question   that   falls   for   our   consideration   is   whether   the   High
Court committed any error in passing the impugned order?
16. Since   the   arguments   of   both   the   sides   have   proceeded
mainly   on   the   averments   made   in   the   complaint   and   to   analyze
the   case   before   us   in   proper   perspective,   it   is   necessary   to
scrutinize   the   statutory   notice   as   well   as   the   complaint.   The
statutory notice dated 14.08.2017 reads thus:­
“To,
 
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1. Sira Marketing Service,
Represented by it's Partner/ Authorized Signatory, 
Rajesh, Old No.60, New No.30, 
28th Cross St, Indhira Nagar,
Adyar, Chennai­20. 
2. Rajesh,
Partner/ Authorized Signatory, 
Sira Marketing Service, 
Old No.60, New No. 30, 
28th Cross St, Indhira Nagar,
Adyar, Chennai­20. 
3. Dr. Mrs. Snehalatha Elangovan,
W/o. Elangovan, 
Partner / Authorized Signatory, 
Sira Marketing Service, 
Old No.60, New No.30, 
28th Cross St, Indhira Nagar, 
Adyar, Chennai­20. 
Sir,
Please   take   notice   that   we   are   instructed   by   our   client
S.P.   Mani   and   Mohan   Dairy,   Represented   by   its
Managing   Partner:   R.Mohanasundaram,   No.34   &   84,
Jeevanantham Street, Kollampalayam, Erode­638 002 to
issue this notice to you. 
You   No.1   is   a   Partnership   Firm,   You   No.2   and   3   are
Partners and incharge and responsible for the day­to­day
affairs of You No. 1, you No.2 and 3 are regularly looking
after and actively taking part in the day­to­day business
of You No.1.
Our   client   is   doing   business   in   Milk   and   Milk   Products:
You   used   to   purchase   Milk   and   Milk   Products   from   our
client  on  credit   basis.  Our  client   is  maintaining  true  and
correct   accounts.   As   per   accounts   maintained   by   our
client  you  have   to   pay  a balance   of   Rs.  10,71,434.60  to
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our   client .   In   order   to   discharge   the   part   of   the   said
balance   amount   and   liability   you   No.2   on   behalf   of   you
No.1   and   with   the   knowledge   and   consent   of   you   No.3
issued the following cheque which is drawn on TamilNad
Mercantile   Bank   Ltd .,   Thiruvanmiyur   Branch,   Chennai­
41.
 S.No.  Cheque Date  Cheque No.  Cheque Amount
   1.   05.05.2017       411618  Rs. 10,00,000/­ 
On   your   request   our   client   presented   the   above   said
cheque for collection on 13.06.2017 through HDFC Bank
Ltd.,   Sathy   Road   Branch,   Erode   and   the   same   was
returned as "Funds Insufficient" on 14.06.2017. Again on
your request  our client  presented  the  above  said  cheque
for   collection   on   20.07.2017   through   HDFC   Bank   Ltd.,
Sathy   Road   Branch,   Erode   and   the   same   was   returned
as "Funds Insufficient" on 21.07.2017. Without sufficient
funds   in   your   account,   you   have   issued   the   above   said
cheque. 
You  issued   the   above   said   cheque  assuring  payment  on
presentation of the same. At the time of issuing the said
cheque, you represented that you are having an account
in which you will have sufficient amount in your account.
But   you   purposely   allowed   the   same   to   be   dishonoured
with   an   intention   to   cheat   and   defraud   our   client.
Therefore,   you   have   committed   an   offence   punishable
U/S 138 of the Negotiable Instruments Act. 
You   are   hereby   called   upon   to   pay   the   above   said
amount   of   Rs.10,00,000/­due   under   the   above   said
cheque dated 05.05.2017 within is days from the date of
receipt   of   this   notice.   Please   note   that   on   your   failure   to
make   the   payment   within   the   above­mentioned   time,
legal action will be taken against you under section 138
of   the   Negotiable   Instruments   Act   1881   and   thereupon
you will be held liable for all the costs and consequences
arising thereof.”             [Emphasis
supplied]
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17. At   the   cost   of   repetition,   we   may   state   that   there   is   no
dispute   that   the   aforesaid   notice   issued   to   the   respondent   was
duly   acknowledged   by   her,   however,   the   respondent   thought   fit
not   to   give   any   reply   to   the   same.   The   acknowledgement   receipt
has   also   been   placed   on   record.   The   learned   counsel   appearing
for the respondent fairly submitted that her client was in receipt
of the notice however, no reply has been given to the same.
18.  The   complaint   filed   under   Section   138   of   the   NI   Act   reads
thus:­
“The complainant is a Partnership Firm registered under
the   Partnership   act   and   carrying   on   business   in   the
above   said   address.   The   Partners   of   the   said   firm
resolved   that   D.   Gokulnath,   S/o.   M.   Dhanapal   the
Manager of the said  complainant  who knows personally
about each and  every transaction of this  case to be  and
he is authorized to represent the firm in this case. A copy
of power of attorney is produced herewith. 
The   accused   No.1   is   a   Partnership   Firm,   the   accused
No.2   and   3   are   Partners   and   in­charge   and   responsible
for   the   day­to­day   affairs   of   the   accused   No.1,   the
accused   No.2   and   3   are   regularly   looking   after   and
actively   taking   part   in   the   day­to­day   business   of   the
accused No.1 .
The   complainant   is   doing   business   in   Milk   and   Milk
Products.   The   accused   used   to   purchase   Milk   and   Milk
Products   from   the   complainant   on   credit   basis.   The
complainant is maintaining true and correct accounts. As
per   accounts   maintained   by   the   complainant,   the
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accused have to pay a balance of Rs.10,71,434.60 to the
complainant.   In   order   to   discharge   the   part   of   the   said
balance amount and liability the accused No.2 on behalf
of   the   accused   No.   1   and   with   the   knowledge   and
consent of the accused No.3 issued the following cheque
which   is   drawn   on   TamilNad   Mercantile   Bank   Ltd.,
Thiruvanmiyur Branch, Chennai­41 .
 S.No.    Cheque Date   Cheque No.   Cheque Amount 
 1.    05.05.2017 411618      Rs. 10,00,000/­
On the request of the accused the complainant presented
the   above   said   cheque   for   collection   on   13.06.2017
through HDFC Bank Ltd., Sathy Road Branch, Erode and
the   same   was   returned   as   "Funds   Insufficient"   on
14.06.2017.   Again,   on   the   request   of   the   accused   the
complainant   presented   the   above   said   cheque   for
collection on 20.07.2017 through HDFC Bank Ltd., Sathy
Road   Branch,   Erode   and   the   same   was   returned   as
"Funds   Insufficient"   on   21.07.2017.   Without   sufficient
funds   in   their   account   accused   have   issued   the   above
said cheque.
The   accused   issued   the   above   said   cheque   assuring
payment   on   presentation   of   the   same.   At   the   time   of
issuing   the   said   cheque,   the   accused   represented   that
they   are   having   an   account   in   which   they   will   have
sufficient   amount   in   their   account.   But   the   accused
purposely   allowed   the   same   to   be   dishonoured   with   an
intention   to   cheat   and   defraud   the   complainant.
Therefore,   the   accused   have   committed   an   offence
punishable u/s 138 of the Negotiable Instruments Act. 
Thereupon   the   complainant   issued   a   lawyer   notice   on
14.08.2017 to  the  accused  calling upon them  to  pay the
above   said   sum   of   Rs.10,00,000/­   due   under   the   said
cheque   dated   05.05.2017   within   15   days   from   the   date
of   receipt   of   this   notice.   The   accused   received   the   above
said   notice   on   16.08.2017.   But   they   failed   to   pay   the
above   said   cheque   amount   within   15   days.   Hence   the
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accused   has   committed   an   offence   punishable   u/s   138
r/w.   142   of   Negotiable   Instruments   Act   1881   as
amended by Act 55 of2002. 
The   complainant   submits   that   he   had   produced   the
relevant documents relating to this offence. 
He further submits that he has filed this complaint within
one month from the date of expiry of 15 days grace time
given   in   the   notice   for   the   payment   of   above   said
cheque's amount. The above said cheque was presented
for   collection   through   HDFC   Bank   Ltd.,   Sathy   Road
Branch,   Erode   which   is   situated   in   Erode
Karungalpalayam Police Station limit. Hence this Hon'ble
court is having jurisdiction to cognizance the offence.
A court fee of Rs.5,000/­ is paid under Tamilnadu Court
Fee Act. 
It   is   therefore,   prayed   that   this   Hon'ble   Court   may   be
pleased   to   take   this   case   on   file,   issue   summon   to   the
accused,   enquire   the   matter,   punish   the   accused   with
maximum   sentence   and   direct   the   accused   to   pay
compensation   to   the   complainant   u/s   357   CPC   and
render justice.”             [Emphasis
supplied]
19. Thus,   from   the   aforesaid   the   following   averments   in   the
complaint are evident:­
(a) Accused No.1 is a Partnership Firm, the accused Nos. 2 and
3 resply  are the partners and in charge and responsible for
the day­to­day affairs of the firm, the accused Nos. 2 and 3
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are   regularly   looking   after   and   actively   taking   part   in   the
day­to­day business of the firm;
(b) In order to discharge the part liability, the accused No. 2 on
behalf of the firm and with the consent and knowledge of the
accused   No.   3   issued   the   cheque   drawn   on   the   Tamilnad
Mercantile Bank Ltd., Thiruvanmiyur Branch, Chennai­41.
20. The aforesaid averments are not only found to be read in the
complaint but in the notice too.
21. We   shall   now   proceed   to   look   into   the   impugned   order
passed by the High Court. The same order reads thus:­
  “This   criminal   original   petition   has   been   filed   to   quash
the proceedings in STC No. 583 of 2017, pending on the
file   of   the   Judicial   Magistrate   Fast   Track   Court   No.II
Erode. 
2. The   respondent   has   filed   a   complaint   under
Section   138   of   the   Negotiable   Instruments   Act.   The
petitioner   has   been   arrayed   as   A~   3   in   the   complaint.
This   quash   petition   has   been   filed   primarily   on   two
grounds.   The   first   ground   is   that   the   Partnership   Firm
was   dissolved   during   February   2017   and   the   subject
cheque   is   said   to   have   been   issued   by   A~2   on
05.05.2017, after the dissolution of the Partnership Firm.
The   2nd   ground   that   has   been   raised   is   that   the
allegations   made   in   the   complaint   does   not   satisfy   the
requirements   of   Section   141   of   the   Negotiable
Instruments Act. 
3. Heard   Mr.   K.   Kannan,   learned   counsel   for   the
petitioner   and   Mr.   M.   Guruprasad,   learned   counsel   for
the respondent. 
15

4.  Insofar   as   the   first   issue   that   is   raised   by   the
petitioner,   the   same   cannot   be   gone   into   by   this   Court
and it is a factual issue which can be decided only in the
course of trial. 
5. Insofar as the second issue is concerned, it will be
beneficial   to   extract   the   relevant   portion   from   the
complaint filed by the respondent hereunder: 
"The   accused   No.   1   is   a   Partnership   Firm,   the
accused No.2 and 3 are Partners and in­charge and
responsible for the day­to­day affairs of the accused
No. 1, the accused No.2 and 3 are regularly looking
after   and   actively   taking   part   in   the   day­to­day
business of the accused No. 1. 
The complainant is doing business in Milk and Milk
Products.   The   accused   used   to   purchase   Milk   and
Milk Products from the  complainant  on credit basis.
The   complainant   is   maintaining   true   and   correct
accounts.   As   per   accounts   maintained   by   the
complainant,   the   accused   have   to   pay   a  balance   of
Rs.   10,71,434.   60/­   to   the   complainant.   In   order   to
discharge   the   part   of   the   said   balance   amount   and
liability   the   accused   No.2   on   behalf   of   the   accused
No.1   and   with   the   knowledge   and   consent   of   the
accused No. 3 issued the following cheque which is
drawn   on   Tamil   Nadu   Mercantile   Bank   Ltd.,
Thiruvanmiyur Branch, Chennai­41.” 
S.No.   Cheque Date    Cheuqe No.    Cheque Amount
1.    05.05.2017     411618         Rs. 10,00,000/­
6. In   the   present   case,   A~   1   is   the   Partnership   Firm
and   A~2   who   is   the   partner   is   the   signatory   of   the
cheque.   The   petitioner   A~   3   has   been   roped   in   as   an
accused   since   she   is   a   partner   of   A~   1   Firm.   The
complaint   can   be   prosecuted   as   against   the   petitioner
only if the allegations made in the complaint satisfies the
16

requirements   of   Section   141   of   the   Negotiable
Instruments Act.
7. In   the   present   case,   the   respondent   has   merely
repeated   the   words   used   under   Section   141   of   the
Negotiable   Instruments   Act   and   there   is   absolutely   no
allegation as to how and in what manner the petitioner is
in­charge   and   responsible   for   the   conduct   of   the
business.   In   the   absence   of   such   an   allegation,   the
complaint   is   not   maintainable   as   against   the   petitioner.
The law on this issue is well settled. 
8. In   the   result,   the   proceedings   in   STC   No.   583   of
2017,   on   the   file   of   the   Judicial   Magistrate   Fast   Track
Court   No.II,   Erode,   is   hereby   quashed   insofar   as   the
petitioner   is   concerned.   The   Court   below   is   directed   to
complete the proceedings in STC No.583 of 2017, against
the   other   accused   persons   within   a   period   of   three
months from the date of receipt of a copy of this order. 
9. This   criminal   original   petition   is   allowed   with   the
above directions. Consequently, connected miscellaneous
petitions are closed.”
22. Thus,   the   plain   reading   of   the   impugned   order   passed   by
the  High Court  as aforesaid would  indicate that  the proceedings
came   to   be   quashed   essentially   on   the   ground   that   there   was
nothing   to   indicate   that   in   what   manner   the   respondent   herein
was   in­charge   and   responsible   for   the   day­to­day   affairs   of   the
firm   so   as   to   make   her   vicariously   liable   for   the   alleged   offence
with the aid of Section 141 of the NI Act. To put it in other words,
the High Court proceeded on the footing  that mere averments in
17

the complaint as regards the role of the respondent as a partner
in the firm is not sufficient.
Analysing   Section   141   of   the   Negotiable   Instrument   Act,
1881
23. The provisions of Section 138 and Section 141 resply of the
NI Act read as under:­
“ Section   138.   Dishonour   of   cheque   for   insufficiency,
etc. of funds in the account. —
Where   any   cheque   drawn   by   a   person   on   an   account
maintained   by   him   with   a   banker   for   payment   of   any
amount of money to another person from out of that account
for   the   discharge,   in   whole   or   in   part,   of   any   debt   or   other
liability,   is  returned  by  the  bank  unpaid,  either  because   of
the amount of money standing to the credit of that account
is   insufficient   to   honour   the   cheque   or   that   it   exceeds   the
amount   arranged   to   be   paid   from   that   account   by   an
agreement   made   with   that   bank,   such   person   shall   be
deemed   to   have   committed   an   offence   and   shall,   without
prejudice   to   any   other   provision   of   this   Act,   be   punished
with   imprisonment   for   a   term   which   may   be   extended   to
two   years,   or   with   fine   which   may   extend   to   twice   the
amount of the cheque or with both:
    Provided   that   nothing   contained   in   this   Section   shall
apply unless—
(a) the cheque has been presented to the bank within a
period   of   six   months   from   the   date   on   which   it   is
drawn or within the period of its validity, whichever
is earlier;
(b) the payee or the holder in due course of the cheque,
as   the   case   may   be,   makes   a   demand   for   the
payment   of   the   said   amount   of   money   by   giving   a
18

notice in writing, to the drawer of the cheque, within
thirty days of the receipt of information by him from
the   bank   regarding   the   return   of   the   cheque   as
unpaid; and
(c)   the   drawer   of   such   cheque   fails   to   make   the
payment  of the  said  amount  of  money to  the  payee
or, as the  case may be, to the holder in due course
of   the   cheque,   within   fifteen   days   of   the   receipt   of
the said notice.
Explanation:   For the purposes of this Section, “debt or other
liability” means a legally enforceable debt or other liability.”
“ Section 141. Offences by companies. —
(1) If the person committing an offence under Section 138
is   a   company,   every   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,
shall   be   deemed   to   be   guilty   of   the   offence   and   shall
be   liable   to   be   proceeded   against   and   punished
accordingly.”
  Provided   that   nothing   contained   in   this   sub­section
shall   render   any   person   liable   to   punishment   if   he
proves   that   the   offence   was   committed   without   his
knowledge, or that he had exercised all due diligence to
prevent the commission of such offence.
  Provided  further  that   where   a  person  is   nominated
as a Director of a company by virtue of his holding any
office or employment in the Central Government or State
Government   or   a   financial   corporation   owned   or
controlled   by   the   Central   Government   or   the   State
Government, as the case may be, he shall not be liable
for prosecution under this Chapter.
(2)   Notwithstanding   anything   contained   in   sub­section
(1),   where   any   offence   under   this   Act   has   been
committed   by   a   company   and   it   is   proved   that   the
offence   has   been   committed   with   the   consent   or
connivance of, or is attributable to, any neglect on the
19

part   of,   any   director,   manager,   secretary   or   other
officer   of   the   company,   such   director,   manager,
secretary   or   other   officer   shall   also   be   deemed   to   be
guilty   of   that   offence   and   shall   be   liable   to   be
proceeded against and punished accordingly.
Explanation   — For the purposes of this Section—
(a) “company” means any body corporate and includes a
firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the
firm.”
24. Evidently,   the   gist   of   Section   138   is   that   the   drawer   of   the
cheque  shall   be  deemed  to  have  committed an  offence  when  the
cheque   drawn   by   him   is   returned   unpaid   on   the   prescribed
grounds.   The   conditions   precedent   and   the   conditions
subsequent to constitute the offence are drawing of a cheque on
the   account   maintained   by   the   drawer   with   a   banker,
presentation  of the cheque within the  prescribed period, making
of a demand by the payee by giving a notice in writing within the
prescribed   period   and   failure   of   the   drawer   to   pay   within   the
prescribed   period.   Upon   fulfilment   of   these   requirements,   the
commission   of   the   offence   which   may   be   called   the   offence   of
‘dishonour of cheque’ is complete. If the drawer is a company, the
offence   is   primarily  committed  by   the   company.   By   virtue  of   the
provisions   of   sub­section   (1)   of   Section   141,   the   guilt   for   the
offence   and  the   liability   to   be   prosecuted   and   punished   shall   be
20

extended   to   every   person   who,   at   the   time   the   offence   was
committed, was in charge of and was responsible to the company
for   the   conduct   of   its   business;   irrespective   of   whether   such
person   is   a   director,   manager,   secretary   or   other   officer   of   the
company. It would be for such responsible person, in order to be
exonerated in terms of the first proviso, to prove that the offence
was   committed   without   his   knowledge   or   despite   his   due
diligence.
25. Under   the   separate   provision   of   sub­section   (2),   if   it   is
proved   that   the   offence   was   committed   with   the   consent   or
connivance   of   or   was   attributable   to   the   neglect   on   the   part   of
any director, manager, secretary or other officer of the company,
such   person   would   also   be   deemed   to   be   guilty   for   that   offence.
Obviously,   the   burden   of   alleging   and   proving   consent,
connivance or neglect on the part of any director, etc. would rest
upon   the   complainant.   The   non   obstante   clause   with   which   the
sub­section   (2)   opens   indicate   that   the   deeming   provision   is
distinct   and   different   from   the   deeming   provision   in   sub­section
(1)   in   which   the   office   or   designation   of   the   person   in   charge   of
and responsible to the company for the conduct of its business is
immaterial.
21

26. While   the   essential   element   for   implicating   a   person   under
sub­section (1) is his or her being in charge of and responsible to
the   company   in   the   conduct   of   its   business   at   the   time   of
commission   of   the   offence,   the   emphasis   in   sub­section   (2)   is
upon   the   holding   of   an   office   and   consent,   connivance   or
negligence   of   such   officer   irrespective   of   his   or   her   being   or   not
being actually in charge of and responsible to the company in the
conduct   of   its   business.   Thus,   the   important  and   distinguishing
feature   in   sub­section   (1)   is   the   control   of   a   responsible   person
over   the   affairs   of   the   company   rather   than   his   holding   of   an
office or his designation, while the liability under sub­section (2)
arises   out   of   holding   an   office   and   consent,   connivance   or
neglect. While all the persons covered by sub­section (1) and sub­
section   (2)   are   liable   to   be   proceeded   against   and   also   punished
upon the proof of their being either in charge of and responsible
to the company in the conduct of its business or of their holding
of   the   office   and   having   been   guilty   of   consent,   connivance   or
neglect   in   the   matter   of   commission   of   the   offence   by   the
company, the person covered by sub­section (1) may, by virtue of
the   first   proviso,   escape   only   punishment   if   he   proves   that   the
22

offence was committed without his knowledge or despite his due
diligence.
27. As   for   the   requisite   evidence,   the   burden   upon   the
prosecution   would   be   discharged   under   sub­section   (1)   when   a
person   is   proved   to   be   in   charge   of   and   responsible   to   the
company in the conduct of its business and would shift upon the
accused   to   prove   that   he   was   ignorant   or   diligent,   if   that   be   his
defence; whereas under sub­section (2) the prosecution would be
required   to   allege   and   prove   the   consent,   connivance   or   neglect
and   holding   of   the   office   by   the   accused.   There   is   nothing   to
suggest   that   the   same   person   cannot   be   made   to   face   the
prosecution   either   under   sub­section   (1)   or   sub­section   (2)   or
both.   A   director   or   manager   can   be   arraigned   and   proved   to   be
guilty as the person in charge of and responsible to the company
as well as the director of the company who, as such, might have
consented   to,   connived   at   or   been   negligent   in   respect   of   the
offence   of   dishonour   of   cheque,   be   logically   deduced   that   a
person can be arraigned in a complaint as the accused along with
the   company   if   it   prima   facie   appears   that   he   was   in   charge   of
and   responsible  to  the  company  for   the  conduct   of  its business,
although he may or may not be or may not have continued to be
23

a  director  or  other  officer   of  the  company, as  mentioned  in  sub­
section   (2).   It   would   be   sufficient   if   the   complaint   indicates   that
such person has been arraigned on the basis of averments which
disclose him or her to be the person in charge of and responsible
to   the   company   in   the   conduct   of   its   business   at   the   time   the
offence was committed. Evidently, a person who signs the cheque
or who has the authority to sign the cheque for and on behalf of
the company, regardless of his office or capacity, can,   prima facie ,
be assumed to be in charge of and responsible to the company in
the   conduct   of   its   business.   And,   where   such   person   is
prosecuted,   then,   if   it   be   his   defence   that   the   offence   was
committed   without   his   or   her   knowledge   or   that   he   or   she   has
exercised   all   due   diligence   to   prevent   the   commission   of   such
offence, the burden to prove that would be on him or her and can
only be discharged at the stage of evidence.
28. While   dealing   with   a   reference   to   resolve   the   apparent
conflict   between   the   judgments   of   this   Court   in   the   Municipal
Corporation of Delhi   v.   Ram Kishan Rohtagi , (1983) 1 SCC 1,
and the   U.P. Pollution Control Board   v.   Modi Distillery , (1987)
3   SCC   684,   in   the   context   of   vicarious   liability   under   the
24

provisions   of   Section   141   of   the   NI   Act,   this   Court   in   P.
Rajarathinam   v.   State   of   Maharashtra ,   (2000)   10   SCC   529,
pertinently observed as under:
“4.   A   bare   reading   of   the   provision   mandates   that   some
facts   must   come   on   the   record   in   order   to   figure   as   to   who
should   answer   the   charge   ultimately.   Necessarily,   pre­
charge evidence assumes importance.   The complainant will
have to put his side of the case as given out in the complaint
and the persons summoned would have to put on the record
all what is material to extricate themselves out. In any case,
the   crucial   time   would   be   when   framing   charge   whereat   a
decision in that respect would be required to be made by the
court.   Presently,   it   appears   to   us   premature   to   be   resolving
the  conflict   and   the   ratio   deduced   thereby,  may  turn  out   to
be obiter. Therefore, we think that we need not resolve such
conflict   at   present   and   leave   it   to   the   court   concerned   to
pass appropriate orders at the time of framing of charge. In
this manner, we dispose of these appeals .”  
                                                           [Emphasis supplied]
29. The   seminal   issue   raised   and   requires   to   be   settled   in   the
present   case   is   one   relating   to   a   person   liable   to   be   proceeded
against under the provisions of sub­section (1) of Section 141 for
being   in­charge   of   and   responsible   to   the   company   “ at   the   time
the   offence   was   committed .”   It   would,   therefore,   be   important   to
find   out   the   “time”   when   the   offence   under   Section   138   can   be
said to have been committed by the company. It is common place
that   an   offence   means   an   aggregate   of   facts   or   omissions   which
are   punishable   by   law   and,   therefore,   can   consist   of   several
25

parts,   each   part   being   committed   at   different   time   and   place
involving   different   persons.   The   provisions   of   Section   138   would
require   a   series   of   acts   of   commission   and   omission   to   happen
before   the   offence   of,   what   may   be   loosely   called   “dishonour   of
cheque”   can   be   constituted   for   the   purpose   of   prosecution   and
punishment.   It   is   held   by   the   Supreme   Court   in   K.
Bhaskaran   v.   Sankaran   Vaidhyan   Balan ,   (1999)   7   SCC   510,
that:­
“14.   The   offence   under   Section   138   of   the   Act   can   be
completed   only   with   the   concatenation   of   a   number   of
acts. The  following  are  the   acts   which are  components   of
the   said   offence:   (1)   drawing   of   the   cheque,   (2)
presentation   of   the   cheque   to   the   bank,   (3)   returning   the
cheque   unpaid   by   the   drawee   bank,   (4)   giving   notice   in
writing   to   the   drawer   of   the   cheque   demanding   payment
of   the   cheque   amount,   (5)   failure   of   the   drawer   to   make
payment within 15 days of the receipt of the notice.”
30. Different   persons   can   be   in­charge   of   the   company   when
each of the series of acts of commission and omission essential to
complete   the   commission   of   offence   by   the   company   were   being
committed.   To   take   an   example,   in   the   case   of   a   company,   “A”
might   be   in   charge   of   the   company   at   the   time   of   drawing   the
cheque,   “B”   might   be   in   charge   of   the   company   at   the   time   of
dishonour of cheque and “C” might be in charge of the company
26

at  the   time   of   failure   to   pay  within  15   days   of   the   receipt  of   the
demand notice. In such  a  case, the  permissibility   of prosecution
of A, B and C resply or any of them would advance the purpose of
the   provision   and,   if   none   can   be   prosecuted   or   punished,   it
would   frustrate   the   purpose   of   the   provisions   of   Section   138   as
well as Section 141. The key to this interpretation lies in the use
of   the   phrase:   “ every   person   shall   be   deemed   to   be   guilty   of   the
offence and shall be liable to be proceeded against and punished
accordingly ” as it occurs in sub­section (1) of Section 141 and the
use   of   the   phrase   “ provided   that   nothing   contained   in   this   sub­
section   shall   render   any   person   liable   to   punishment   if   he
proves… ” that occurs in the first proviso. Every  person who was
in charge of and was responsible to the company for the conduct
of   its   business   at   the   time   any   of   the   components   necessary   for
the   commission   of   the   offence   occurred   may   be   “proceeded
against”,   but   may   not   be   “punished”   if   he   succeeds   in   proving
that   the   offence   was   committed   without   his   knowledge   and
despite   his   due   diligence;   the   burden   of   proving   that   remaining
on   him.   Therefore,   it   also   has   to   be   held   that   the   time   of
commission   of   the   offence   of   dishonour   of   cheque   cannot   be   on
the   stroke   of   a   clock   or   during   15   days   after   the   demand   notice
27

has   to   be   construed   as   the   time   when   each   of   the   acts   of
commission and omission essential to constitute the offence was
committed. The word “every” points to the possibility of plurality
of   responsible   persons   at   the   same   point   of   time   as   also   to   the
possibility   of   a   series   of   persons   being   in   charge   when   the
sequence of events culminating into the commission of offence by
the company were taking place. As to what this ‘relevant time’ is,
was a question that this Court was called to answer,  inter alia , in
N Rangachari v. Bharati Sanchar Nigam Limited , AIR (2007)
SC   1682.   In   this   case,   Data   Access,   a   company   had   issued   two
cheques   to   the   BSNL,   which   were   duly   presented,   but   were
dishonoured   for   insufficiency   of   funds.   A   complaint   under
Section   138   of   the   NI   Act   was   filed.   While   the   BSNL   held   the
directors   liable,   the   appellant,   a   chairman   in   the   company
contended   that   he   being   a   nominated   chairman   and   holding   an
Honorary   post   in   the   Company,   was   never   assigned   with   any   of
the   company’s   financial   or   other   business   activities.   He   was   the
Chairman for name sake and was never entrusted with any job or
business   or   constituted   a   signing   authority.   Resolving   the   issue
of when the liability could be fastened, this Court said:­
28

“ In the case on hand, reading the complaint as a whole, it
is clear that the allegations in the complaint are that at the
time   at   which   the   two   dishonoured   cheques   were   issued
by   the   company,   the   appellant   and   another   were   the
Directors of the company and were in charge of the affairs
of   the   company.   It   is   not   proper   to   split   hairs   in   reading
the   complaint   so   as   to   come   to   a   conclusion   that   the
allegations   as   a   whole   are   not   sufficient   to   show   that   at
the  relevant  point  of time  the  appellant  and  the  other are
not   alleged   to   be   persons   in­charge   of   the   affairs   of   the
company.   Obviously,   the   complaint   refers   to   the   point   of
time   when   the   two   cheques   were   issued,   their
presentment,   dishonour   and   failure   to   pay   in   spite   of
notice of dishonour. ”
        [Emphasis supplied]
31. As held by this Court in   Anil Hada   v.   Indian Acrylic Ltd. ,
(2000) 1 SCC 1, the phrase “as well as” used in sub­section (1) of
Section   141   of   the   NI   Act   would   embroil   the   persons   mentioned
therein   within   the   tentacles   of   the   offence   on   par   with   the
offending   company.   Therefore,   when   the   company   or   firm   is   the
drawee   of   the   cheque,   such   company   or   firm   is   the   principal
offender   and   the   fiction   created   by   the   legislature.   When   the
offence   is   attributed   to   a   juristic   person   or   a   body   made   up   of
several   individuals   and   the   liability   to   be   prosecuted   and
punished   is   extended   to   embroil   by   legal   fiction   certain   human
beings, that legal fiction has to be so interpreted and applied that
the   individuals   intended   to   be   embroiled   may   not   escape   the
29

liability   by   mere   fact   of   having   not   been   in   charge   at   the   time
when   one   of   the   other   of   the   events   essential   to   complete   the
offence   by   the   company   happened.   Borrowing   again   from   K.
Bhaskaran   (supra), the court should not adopt an interpretation
which helps a dishonest evader and clips an honest payee as that
would defeat the very legislative measure.
32. In   the   aforesaid   context,   we   may   straight   away   proceed   to
look   into   the   following   observations   made   by   this   Court   in   the
case   of   Monaben   Ketanbhai   Shah   v.   State   of   Gujarat   in
Criminal Appeal No. 850 of 2004 decided on 10.08.2004 reported
in (2004) 7 SCC 15:­“
Section   138   of   the   Act   makes   dishonour   of   the   cheque   an
offence   punishable   with   imprisonment   or   fine   or
both.   Section   141   relates   to   offences   by   the   company.   It
provides   that   if   the   person   committing   an   offence
under   Section   138   is   a  company,   every  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, shall  be  deemed
to   be   guilty   of   the   offence   and   shall   be   liable   to   be
proceeded   against   and   punished   accordingly.   Thus,
vicarious   liability   has   been   fastened   on   those   who   are   in­
charge of and responsible to the company for the conduct of
its   business.   For   the   purpose   of   Section   141 ,   a   firm   comes
within   the   ambit   of   a   company.   It   is   not   necessary   to
reproduce   the   language   of        Section   141        verbatim   in   the
complaint   since   the   complaint   is   required   to   be   read   as   a
whole.   If   the   substance   of   the   allegations   made   in   the
complaint   fulfill   the   requirements   of        Section   141    ,   the
30

complaint has to proceed and is required to be tried with. It
is also true that in construing a complaint a hyper­technical
approach should  not  be  adopted  so  as  to  quash the  same.
The laudable object of preventing bouncing of cheques and
sustaining   the   credibility   of   commercial   transactions
resulting   in   enactment   of        Sections   138        and        141        has   to   be
borne   in   mind.   These   provisions   create   a   statutory
presumption   of   dishonesty   exposing   a   person   to   criminal
liability if payment is not made within statutory period even
after   issue   of   notice.   It   is   also   true   that   the   power   of
quashing   is   required   to   be   exercised   very   sparingly   and
where,  read   as   a  whole,  factual   foundation  for  the   offence
has been laid in the complaint, it should not be quashed. All
the same, it is also to be remembered that it is the duty of
the   Court   to   discharge   the   accused   if   taking   everything
stated   in   the   complaint   as   correct   and   construing   the
allegations   made   therein   liberally   in   favour   of   the
complainant,   the   ingredients   of   the   offence   are   altogether
lacking .”
                                                                             
[Emphasis supplied]
 
33. Thus,   the   legal   principles   discernible   from   the   aforesaid
decision of this Court may be summarised as under:­
(a) Vicarious   liability   can   be   fastened   on   those   who   are   in­
charge   of   and   responsible   to   the   company   or   firm   for   the
conduct of its business. For the purpose of Section 141, the
firm comes within the ambit of a company;
(b) It is not necessary to reproduce the language of Section 141
verbatim in the complaint since the complaint is required to
be read as a whole;
31

(c) If   the   substance   of   the   allegations   made   in   the   complaint
fulfil the requirements of Section 141, the complaint has to
proceed in regards the law.
(d) In   construing   a   complaint   a   hyper­technical   approach
should not be adopted so as to quash the same.
(e) The  laudable  object  of  preventing  bouncing  of  cheques  and
sustaining   the   credibility   of   commercial   transactions
resulting   in   the   enactment   of   Sections   138   and   141
respectively should be kept in mind by the Court concerned.
(f) These   provisions   create   a   statutory   presumption   of
dishonesty exposing a person to criminal liability if payment
is not made within the statutory period even after the issue
of notice.
(g) The   power   of   quashing   should   be   exercised   very   sparingly
and   where,   read   as   a   whole,   the   factual   foundation   for   the
offence   has   been   laid   in   the   complaint,   it   should   not   be
quashed.
(h) The   Court   concerned   would   owe   a   duty   to   discharge   the
accused   if   taking   everything   stated   in   the   complaint   is
correct and construing the allegations made therein liberally
32

in   favour  of  the  complainant,  the   ingredients  of  the  offence
are altogether lacking.
34. The   inter­relationship   between   the   Sections   138   and   141
respectively   of   the   NI   Act   has   been   succinctly   explained   by   this
Court   in   SMS   Pharmaceuticals   v.   Neeta   Bhalla ,   AIR   (2005)
3512, in the following words:­
“It will be seen from the above provisions that Section 138
casts   criminal   liability   punishable   with   imprisonment   or
fine   or   with   both   on   a   person   who   issues   a   cheque
towards   discharge   of   a   debt   or   liability   as   a   whole   or   in
part   and   the   cheque   is   dishonoured   by   the   Bank   on
presentation. Section 141 extends such criminal liability in
case of a Company to every person who at the time of the
offence,   was   in­charge   of   and   was   responsible   for   the
conduct   of   the   business   of   the   Company.   By   a   deeming
provision   contained   in   Section   141   of   the   Act,   such   a
person is vicariously liable to be held guilty for the offence
under Section 138 and punished accordingly.”
Who is liable? Vicarious liability:
35. This   Court   in   Assistant   Commissioner,   Assessment­II,
Bangalore   and   Ors.   v.   Velliappa   Textiles   Ltd.   and   Ors.   AIR
(2004)   SC   86,   introduced   the   concept   of   ego   and   alter   ego   in
relation to the employee and the employer corporation. The Court
elucidated this principle in the following words:­
“In   order   to   trigger   corporate   criminal   liability   for   the
actions   of   the   employee   (who   must   generally   be   liable
33

himself), the actor­employee who physically committed the
offence   must   be   the   ego,   the   centre   of   the   corporate
personality, the vital organ of the body corporate, the   alter
ego   of the employer corporation or its directing mind. Since
the company/corporation has no mind of its own, its active
and   directing   will   must   consequently   be   sought   in   the
person of somebody who for some purposes may be called
an agent, but  who is  really the  directing mind  and will of
the corporation, the very ego and centre of the personality
of the corporation. To this extent there are no difficulties in
our law to fix criminal liability on a company. The common
law   tradition   of   alter   ego   or   identification   approach   is
applicable under our existing laws.”
36. Now, the logical question that would follow is who would
be   liable   through   the   company   for   this   offence?   Can   the
company itself be prosecuted for this offence? Answering this
question,   the   Section   141   says,   ‘every   person   who   was   in
charge   of’   and   ‘was   responsible   to   the   company   for   the
conduct of the business’    shall be deemed to be guilty of the
offence. This concept of vicarious liability has been explained
by   this   Court   in   Sabhitha   Ramamurthy   v.   RBS
Channabasavaradhya , AIR (2006) SC 3086, as:­
“Section   141   raises   a   legal   fiction.   By   reason   of   the   said
provision,   a   person   although   is   not   personally   liable   for
commission   of   such   an   offence   would   be   vicariously   liable
therefor.   Such vicarious liability can be inferred so far as a
company   registered   or   incorporated   under   the   Companies
Act,   1956   is   concerned   only   if   the   requisite   statements,
which   are   required   to   be   averred   in   the   complaint   petition,
34

are   made   so   as   to   make   the   accused   therein   vicariously
liable   for   the   offence   committed   by   the   company .   Before   a
person   can   be   made   vicariously   liable,   strict   compliance
with the statutory requirements would be insisted.”                   
    [Emphasis supplied]
37. At this stage, we should look into the decision of this Court
in   the   case   of   K.K.   Ahuja   v.   V.K.   Vora ,   (2009)   10   SCC   48,   in
K.K.   Ahuja   (supra), wherein this Court discussed  the  principles
of   vicarious   liability   of   the   officers   of   a   company   in   respect   of
dishonour of a cheque and held­ 
“27.   The   position   under   section   141   of   the   Act   can   be
summarized thus:
(i)   If   the   accused   is   the   Managing   Director   or   a   Joint
Managing   Director,   it   is   not   necessary   to   make   an
averment in the complaint that he is in charge of, and
is   responsible   to   the   company,   for   the   conduct   of   the
business   of   the   company.   It   is   sufficient   if   an
averment is made that the accused was the Managing
Director   or   Joint   Managing   Director   at   the   relevant
time.   This   is   because   the   prefix   “Managing”   to   the
word   “Director”   makes   it   clear   that   they   were   in­
charge of and are responsible to the company, for the
conduct of the business of the company.
(ii)   In   the   case   of   a   director   or   an   officer   of   the
company   who   signed   the   cheque   on   behalf   of   the
company,   there   is   no   need   to   make   a   specific
averment   that   he   was   in   charge   of   and   was
responsible   to   the   company,   for   the   conduct   of   the
business   of   the   company   or   make   any   specific
allegation   about   consent,   connivance   or   negligence.
The very fact that the dishonoured cheque was signed
35

by   him   on   behalf   of   the   company,   would   give   rise   to
responsibility under sub­section (2) of   Section 141 .
(iii) In the case of a Director, Secretary or Manager (as
defined   in   Section   2(24)   of   the        Companies   Act    )   or   a
person referred to in clauses (e) and (f) of        section 5        of
Companies Act, an averment in the complaint that he
was   in   charge   of,   and   was   responsible   to   the
company,   for   the   conduct   of   the   business   of   the
company is necessary to bring the case under        section
141(1)      of   the   Act.   No   further   averment   would   be
necessary   in   the   complaint,   though   some   particulars
will   be   desirable.   They   can   also   be   made   liable
under        Section 141(2)        by making necessary averments
relating   to   consent   and   connivance   or   negligence,   in
the   complaint,   to   bring   the   matter   under   that   sub­
section .
(iv) Other Officers of a company cannot be made liable
under sub­section (1)  of   Section 141 . Other officers   of
a company can be made liable only under sub­section
(2)   of   Section   141 ,   by   averring   in   the   complaint   their
position   and   duties   in   the   company   and   their   role   in
regard   to   the   issue   and   dishonour   of   the   cheque,
disclosing consent, connivance or negligence.”
     [Emphasis supplied]
38. In   a   very   recent   pronouncement   in   the   case   of   Sunita
Palita   v.   M/s   Panchami   Stone   Quarry   (2022)   SC   Online   SC
945, this Court, after referring to   K.K. Ahuja   (supra) referred to
above, observed as under:
“When   the   accused   is   the   Managing   Director   or   a   Joint
Managing Director of a company, it is not necessary to make
an averment in the complaint that he is in charge of, and is
responsible to the company for the conduct of the business of
36

the   company.   This   is   because   the   prefix   “Managing”   to   the
word   “Director”   makes   it   clear   that   the   Director   was   in
charge of and responsible to the company, for the conduct of
the  business  of the company. A Director or an Officer of the
company   who   signed   the   cheque   renders   himself   liable   in
case of dishonour. Other officers of a company can be made
liable only under sub­section (2) of Section 141 of the NI Act
by averring in the complaint, their position and duties, in the
company, and their role in regard to the issue and dishonour
of the cheque, disclosing consent, connivance or negligence.” 
39. In   yet   one   another   recent   pronouncement   in   the   case   of
Ashutosh   Ashok   Parasrampuria   v.   Gharrkul   Industries   Pvt.
Ltd.   reported in (2021) SCC Online SC 915, this Court after due
consideration   of   the   decisions   in   the   case   of   SMS
Pharmaceuticals   (supra);   S.K.   Alagh   v.   State   of   Uttar
Pradesh   (2008)   5   SCC   662;   Maharashtra   State   Electricity
Distribution Co. Ltd. v. Datar Switchgear Ltd. , (2010) 10 SCC
479,   and   GHCL   Employees   Stock   Option   Trust   v.   India
Infoline Limited , (2013) 4 SCC 505, observed as under:­   
“In the light of the ratio in SMS Pharmaceuticals Ltd. (supra)
and   later   judgments   of   which   a   reference   has   been   made
what   is   to   be   looked   into   is   whether   in   the   complaint,   in
addition to asserting that the appellants are the Directors of
the  Company and they are  in­charge  of  and responsible  to
the   Company   for   the   conduct   of   the   business   of   the
Company and if statutory compliance of Section 141 of the
NI Act has been made, it may not open for the High Court to
interfere   under   Section   482   CrPC   unless   it   comes   across
37

some   unimpeachable,   incontrovertible   evidence   which   is
beyond   suspicion   or   doubt   or   totally   acceptable
circumstances  which may clearly indicate  that  the  Director
could   not   have   been   concerned   with   the   issuance   of
cheques and asking him to stand the trial would be abused
of process of Court. Despite the presence of basic averment,
it   may   come   to   a   conclusion   that   no   case   is   made   out
against   the   particular   Director   for   which   there   could   be
various reasons.”
         [Emphasis supplied]
40. The principles discernible from the aforesaid decision of this
Court   in   the   case   of   Ashutosh   Ashok   Parasrampuriya   (supra)
is that the High Court should not interfere under Section 482 of
the   Code   at   the   instance   of   an   accused   unless   it   comes   across
some   unimpeachable   and   incontrovertible   evidence   to   indicate
that   the   Director/partner   of   a   firm   could   not   have   been
concerned with the issuance of cheques. This Court clarified that
in a given case despite the presence of basic averments, the High
Court   may   conclude   that   no   case   is   made   out   against   the
particular Director/ partner provided the Director/partner is able
to   adduce   some   unimpeachable   and   incontrovertible   evidence
beyond suspicion and doubt .
Specific Averments in the complaint:
38

41. In   Gunmala   Sales   Private   Limited   (supra),   this   Court
after an exhaustive review of its earlier decisions on Section 141
of the NI Act, summarized its conclusion as under:­
“a)   Once   in   a   complaint   filed   under   Section   138   read   with
Section   141   of   the   NI   Act   the   basic   averment   is   made   that
the Director was in charge of and responsible for the conduct
of the business of the company at the relevant time when the
offence   was   committed,   the   Magistrate   can   issue   process
against such Director;
b)   If   a   petition   is   filed   under   Section   482   of   the   Code   for
quashing of such a complaint by the Director, the High Court
may, in the facts of a particular case, on an overall reading
of the  complaint, refuse  to quash the complaint  because the
complaint contains the basic averment which is sufficient to
make out a case against the Director;
c)   In   the   facts   of   a   given   case,   on   an   overall   reading   of   the
complaint,   the   High   Court   may,   despite   the   presence   of   the
basic averment, quash the complaint because of the absence
of   more   particulars   about   role   of   the   Director   in   the
complaint.   It   may   do   so   having   come   across   some
unimpeachable,   incontrovertible   evidence   which   is   beyond
suspicion or doubt or totally acceptable circumstances which
may   clearly   indicate   that   the   Director   could   not   have   been
concerned   with   the   issuance   of   cheques   and   asking   him   to
stand   the   trial   would   be   abuse   of   the   process   of   the   court.
Despite   the   presence   of   basic   averment,   it   may   come   to   a
conclusion   that   no   case   is   made   out   against   the   Director.
Take   for   instance   a   case   of   a   Director   suffering   from   a
terminal illness who was bedridden at the relevant time or a
Director who  had  resigned  long  before  issuance  of  cheques.
In such cases, if the High Court is convinced that prosecuting
such   a   Director   is   merely   an   arm­twisting   tactics,   the   High
Court may quash the proceedings. It bears repetition to state
that   to   establish   such   case   unimpeachable,   incontrovertible
evidence which is beyond suspicion or doubt or some totally
39

acceptable   circumstances   will   have   to   be   brought   to   the
notice   of   the   High   Court.   Such   cases   may   be   few   and   far
between but the possibility of such a case being there cannot
be   ruled   out.   In   the   absence   of   such   evidence   or
circumstances, complaint cannot be quashed;
d)   No   restriction   can   be   placed   on   the   High   Court's   powers
under Section 482 of the Code. The High Court always uses
and   must   use   this   power   sparingly   and   with   great
circumspection to prevent inter alia the abuse of the process
of   the   Court.   There   are   no   fixed   formulae   to   be   followed   by
the High Court in this regard and the exercise of this power
depends upon the facts and circumstances of each case. The
High   Court   at   that   stage   does   not   conduct   a   mini   trial   or
roving   inquiry,   but   nothing   prevents   it   from   taking
unimpeachable evidence or totally acceptable circumstances
into   account   which   may   lead   it   to   conclude   that   no   trial   is
necessary qua a particular Director.”
42. The   principles   of   law   and   the   dictum   as   laid   in   Gunmala
Sales   Private   Limited   (supra),   in   our   opinion,   still   holds   the
field and reflects the correct position of law.
43. In   the   case   on   hand,   we   find   clear   and   specific   averments
not only  in the complaint but also in the statutory notice issued
to   the  respondent.  There  are  specific averments  that  the  cheque
was issued with the consent of the respondent herein and within
her   knowledge.   In   our   view,   this   was   sufficient   to   put   the
respondent   herein   to   trial   for   the   alleged   offence.   We   are   saying
so   because   the   case   of   the   respondent   that   at   the   time   of
40

issuance   of   the   cheque   or   at   the   time   of   the   commission   of   the
offence,   she   was   in   no   manner   concerned   with   the   firm   or   she
was not in­charge or responsible for day­to­day affairs of the firm
cannot be on the basis of mere bald assertion in this regard. The
same   is   not   sufficient.   To   make   good   her   case,   the   respondent
herein   is   expected   to   lead   unimpeachable   and   incontrovertible
evidence.   Nothing   of   the   sort   was   adduced   by   the   respondent
before the  High  Court to  get the  proceedings quashed.  The High
Court   had   practically   no   legal   basis   to   say   that   the   averments
made   in   the   complaint   are   not   sufficient   to   fasten   the   vicarious
liability   upon   the   respondent   by   virtue   of   Section   141   of   the   NI
Act.
44. We may also examine this appeal from a different angle. It is
not   in   dispute,   as   noted   above,   that   no   reply   was   given   by   the
respondent   to   the   statutory   notice   served   upon   her   by   the
appellant.   In   the   proceedings   of   the   present   type,   it   is   essential
for  the person to whom  statutory  notice  is issued under  Section
138   of   the   NI   Act   to   give   an   appropriate   reply.   The   person
concerned   is   expected   to   clarify   his   or   her   stance.   If   the   person
concerned   has   some   unimpeachable   and   incontrovertible
material   to   establish   that   he   or   she   has   no   role   to   play   in   the
41

affairs   of   the   company/firm,   then   such   material   should   be
highlighted in the reply to the notice as a foundation. If any such
foundation   is   laid,   the   picture   would   be   more   clear   before   the
eyes of the complainant. The complainant would come to know as
to why the person to whom he has issued notice says that he is
not   responsible   for   the   dishonour   of   the   cheque.   Had   the
respondent   herein   given   appropriate   reply   highlighting   whatever
she   has   sought   to   highlight   before   us   then   probably   the
complainant   would   have   undertaken   further   enquiry   and   would
have tried to find out what was the legal status of the firm on the
date of the commission of the offence and what was the status of
the respondent in the firm. The object of notice before the filing of
the   complaint   is   not   just   to   give   a   chance   to   the   drawer   of   the
cheque to rectify his omission to make his stance clear so far as
his liability under Section 138 of the NI Act is concerned.
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
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noticee.   In   such   circumstances   what   more   is   expected   of   the
complainant to say in the complaint. 
46.  When   in   view   of   the   basic   averment   process   is   issued   the
complaint must proceed against the Directors or partners as the
case may be. But, if any Director or Partner 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   is   really   not   concerned   with   the   issuance   of   the
cheque,   he   must   in   order   to   persuade   the   High   Court   to   quash
the process either furnish some sterling incontrovertible material
or   acceptable   circumstances   to   substantiate   his   contention.   He
must make out a case that making him stand the trial would be
an   abuse   of   process   of   court.   He   cannot   get   the   complaint
quashed   merely   on   the   ground   that   apart   from   the   basic
averment   no   particulars   are   given   in   the   complaint   about   his
role, because ordinarily the basic averment would be sufficient to
send   him   to   trial   and   it   could   be   argued   that   his   further   role
could   be   brought   out   in   the   trial.   Quashing   of   a   complaint   is   a
serious matter. Complaint cannot be quashed for the asking. For
quashing   of   a   complaint,   it   must   be   shown   that   no   offence   is
made out at all against the Director or Partner.
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47. Our final conclusions may be summarised 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   other   hand,   the   first   proviso
to   sub­section   (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   or   firm,   as   the   case   may   be.     The   other
administrative   matters   would   be   within   the   special
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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   the
role 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/partners   of   a   firm   to   show
that   they   were   not   liable   to   be   convicted.   The
existence   of   any   special   circumstance   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
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time   they   were   not   in   charge   of   the   affairs   of   the
company or the firm.
c.) Needless to say, the final judgement and order would
depend on the evidence adduced. Criminal liability is
attracted   only   on   those,   who   at   the   time   of
commission   of   the   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
automatic   conviction.   Hence,   they   are   not   adversely
prejudiced   if   they   are   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
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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   case
that   making   him/her   stand   the   trial   would   be   an
abuse of process of Court.
48. We   reiterate   the   observations   made   by   this   Court   almost   a
decade   back   in   the   case   of   Rallis   India   Ltd   v.   Poduru   Vidya
Bhusan   &   Ors. ,   (2011)   13   SCC   88,   as   to   how   the   High   Court
should exercise its power to quash the criminal proceeding when
such   proceeding   is   related   to   offences   committed   by   the
companies.   “The   world   of   commercial   transactions   contains
numerous   unique   intricacies,   many   of   which   are   yet   to   be
statutorily   regulated.   More   particularly,   the   principle   laid   down
in   Section   141   of   the   NI   Act   (which   is   pari   materia   with   identical
sections   in   other   Acts   like   the   Food   Safety   and   Standards   Act ,
2006; the erstwhile   Prevention of Food Adulteration Act , 1954;   etc.)
is   susceptible   to   abuse   by   unscrupulous   companies   to   the
detriment of unsuspecting third parties.”  
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49. In   the   result,   this   appeal   succeeds   and   is   hereby   allowed
with   no   order   as   to   costs.   The   impugned   order   passed   by   the
High Court is hereby set aside.
50. Pending application, if any, also stands disposed of.
  …….…………………………J.
  (SURYA   KANT)
 
……..………………………J.
(J.B.   PARDIWALA)
New Delhi;
September 16, 2022
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