Justice JB Pardiwala delivered judgment for the bench comprising of him and Justice Surya Kant held that the High Court can quash a case only if there are unimpeachable and incontrovertible pieces of evidence available indicating that the Director/ Partner of the firm was not concerned with the issuance of the Cheque. 

In para 33 of the Court held in the judgement as under:-

"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 incharge 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;

(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 in favour of the complainant, the ingredients of the offence are altogether lacking."

The bench also held in para 45 that "Once the necessary averments are made in the statutory notice   issued   by   the   complainant   in   regard   to   the   vicarious liability of the partners and upon receipt of such notice, if the partner keeps quiet and does not say anything in reply to the same, then the complainant has all the reasons to believe that  what   he   has   stated   in   the   notice   has   been   accepted   by   the notice."

The Court further held in 46 that "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."

While ruling on the issue, the Supreme Court gave its verdict in Para 47 as under:-

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 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 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 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.

https://main.sci.gov.in/supremecourt/2021/29771/29771_2021_14_1501_38257_Judgement_16-Sep-2022.pdf

Case Details:-

CRIMINAL APPEAL NO.1586  OF 2022
S.P. MANI AND MOHAN DAIRY ……APPELLANT
VERSUS
DR. SNEHALATHA ELANGOVAN           ......RESPONDENT