Can Cheque Bounce Case Against Directors/Partners of Firm be Quashed? Explains Supreme Court.
The Supreme Court on Friday ruled that “the time of the commission of the offence of dishonour of cheque cannot be on the stroke of a clock or during 15 days after the demand notice has to be construed as the time when each of the acts of commission and omission essential to constitute the offence was committed.”The bench of Justices Surya Kant and J.B. Pardiwala was dealing with the appeal challenging the order passed by the Madras HC whereby the High Court allowed the application and quashed the criminal proceedings initiated against the respondent.In this case, The appellant is engaged in the business of milk and milk products. The firm used to purchase milk and milk products from the appellant on credit basis. The appellant has to recover an amount of Rs. 10,71,434.60 from the partnership firm.The firm issued a cheque duly signed by the original accused No. 02 in favour of the appellant. The cheque came to be dishonoured as here was no sufficient balance in the account maintained by the firm.The appellant filed the complaint in the Judicial Magistrate for the offence punishable under Section 138 r/w 141 of the NI Act.The respondent 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 High Court stated 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.The High Court allowed the application filed by the respondent and terminated the proceedings as far as the respondent is concerned.The issue for consideration before the bench was:Whether the High Court committed any error in passing the impugned order?Supreme Court stated that “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 has to be construed as the time when each of the acts of commission and omission essential to constitute the offence was committed.”The bench opined that 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 time they were not in charge of the affairs of the company or the firm.Supreme Court observed that criminal liability is attracted 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 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.The bench observed that“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.”In view of the above, the Supreme Court allowed the appeal.Case Title: S.P. Mani and Mohan Dairy v. Dr. Snehalatha ElangovanBench: Justices Surya Kant and J.B. PardiwalaCase No.: CRIMINAL APPEAL NO.1586 OF 2022(Courtesy Live Law)Dr. Ajay Kummar Pandey
( LLM, MBA, (UK), PhD, AIMA, AFAI, PHD Chamber, ICTC, PCI, FCC, DFC, PPL, MNP, BNI, ICJ (UK), WP, (UK), MLE, Harvard Square, London, CT, Blair Singer Institute, (USA), Dip. in International Crime, Leiden University, the Netherlands )Advocate & Consultant, Supreme Court of India & High Courts4C Supreme Law International, Delhi, NCR. Mumbai & DubaiTel: M- 91- 9818320572. Email: editor.kumar@gmail.comWebsite: www.ajaykr.com, www.4Csupremelawint.com
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