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Supreme Court On Vicarious Liability Of Partner For Cheque Dishonour – Trials & Appeals & Compensation



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The Hon’ble Supreme Court vide its order dated May 09,
2022 in the matter of Dilip Hariramani v. Bank of
Baroda
1 has observed that a person cannot be
convicted for the offence of dishonour of cheque under Section 138
of the Negotiable Instruments (NI) Act, 1881 merely because he was
a partner of the firm which had taken the loan or that he had stood
as a guarantor for such a loan. Further, vicarious liability under
Section 141 of the Negotiable Instruments Act, 1881 cannot be
fastened upon a person merely because the civil liability under the
Partnership Act falls upon a partner.

Brief Facts

The Trial Court convicted three accused in a kidnap cum murder
case and sentenced them to death for the offence punishable under
Section 302 read with 120B of the Indian Penal Code, 1860 and
rigorous imprisonment for 10 years and fine of Rs.5000/- each for
the offence punishable under Section 364 of the Indian Penal Code,
1860. Allowing the appeal filed by two accused, The High Court of
Punjab and Haryana, vide judgment dated February 22, 2011,
acquitted Anita @Arti (A1) and Ranjit Kumar Gupta (A3) and partly
allowed the appeal filed by Ravinder Singh @ Kaku (A2) and while
setting-aside the death penalty, the High Court of Punjab and
Haryana sentenced him to undergo rigorous imprisonment for 20 years
under Section 302 of the Indian Penal Code, 1860. Challenging his
conviction and sentence of 20 years, the present appellant Ravinder
Kumar @ Kaku filed Criminal Appeal No. 1307 of 2019 @ SLP (Crl.)
9431 of 2011 before the Hon’ble Supreme Court. One of the
issues raised before the Hon’ble Supreme Court was whether
the call records produced by the prosecution would be admissible
under Section 65A and 65B of the Indian Evidence Act, 1872.

Matter has been brought before the Hon’ble Supreme Court
in appeal by Mr. Dilip Hariramani, inter alia challenging his
conviction.

Bank of Baroda (respondent herein) had advanced term loans and
granted cash credit facility to a partnership firm, namely M/s
Global Packaging, on October 04, 2012 for the sum of 6,73,80,000/-
. In part repayment of the loan, the partnership firm, namely M/s
Global Packaging, through its authorized signatory and partner,
Mrs. Simaiya Hariramani, had issued 3 cheques of 25,00,000/-, dated
October 17, 25 and 31, 2015, respectively. However, all 3 cheques
had been dishonoured by the bank upon presentation, owing to
insufficiency of funds. On November 04, 2015, the Branch Manager of
the respondent bank had issued a legal notice to Mrs. Hariramani,
and thereafter a complaint under Section 138 of the NI Act before
the Court of the Judicial Magistrate, Balodabazar, Chattisgarh
against both partners of the firm, namely Mrs. Hariramani as well
as the present appellant. The partnership firm was not made an
accused and the complaint asserted their vicarious liability only
by stating that they have been accused on account of being the
partners of the debtor firm, and as the impugned instruments had
been issued under the signature of one partner in the name of
the firm, this made the second partner equally vicariously liable
for dishonor of the same.

On February 19, 2019, the Judicial Magistrate First Class,
Balodabazar, Chattisgarh, convicted the two accused to serve six
months imprisonment and a hefty fine as compensation, or in
default, suffer an additional month’s imprisonment. The
accused challenged the order in appeal before the Sessions Judge,
Balodabazar, Chattisgarh, and being dismissed therein, again before
the Hon’ble High Court of Chattisgarh at Bilaspur, who once
again dismissed the appeal vide order of October 12, 2020. The
couple has approached the Hon’ble Supreme Court in appeal
against the said order of the Hon’ble High Court of
Chattisgarh.

Judgement by the Hon’ble Supreme Court

The Hon’ble Supreme Court observed that 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 subsection (1) to Section 141 of the Negotiable
Instruments Act, 1881 can be pinned when the person is in overall
control of the day to-day business of the company or firm.
Vicarious liability under subsection (2) to Section 141 of the
Negotiable Instruments Act, 1881 can arise 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.

Conclusion

The provisions of Section 141 of the Negotiable Instruments Act,
1881 impose vicarious liability by deeming fiction which
presupposes and requires the commission of the offence by the
company or firm. Therefore, unless the company or firm has
committed the offence as a principal accused, the persons mentioned
in sub-section (1) or (2) would not be liable and convicted as
vicariously liable. Section 141 the Negotiable Instruments Act,
1881 extends vicarious criminal liability to officers associated
with the company or firm when one of the twin requirements of
Section 141 of the Negotiable Instruments Act, 1881 has been
satisfied, which person(s) then, by deeming fiction, is made
vicariously liable and punished. However, such vicarious liability
arises only when the company or firm commits the offence as the
primary offender.

Footnote

1. Criminal Appeal No. 767 OF 2022 (Arising out of
Special Leave Petition (Criminal) No. 641 of 2021)

For further information please contact at S.S Rana &
Co. email: info@ssrana.in or
call at (+91- 11 4012 3000). Our website can be accessed at
www.ssrana.in

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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