REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 924 of 2011
[Arising out of SLP(Crl.) No. 1874 of 2008]
Rallis India Ltd. .............Appellant
Versus
Poduru Vidya Bhusan & Ors. .............Respondents
W I T H
Criminal Appeal No.925 of 2011
[Arising out of S.L.P. (Crl.) No. 3064 of 2008];
and
Criminal Appeal No.926 of 2011
[Arising out of SLP (Crl.) No. 3339 of 2008]
J U D G M E N T
Deepak Verma, J.
1. Leave granted.
2. This and the connected matters arise out of the order dated 27.07.2007 in exercise of
the jurisdiction conferred under Section 482 of the Code of Criminal Procedure [for
short, ‘Cr.P.C.’], passed by learned Single Judge of the High Court of Judicature of
Andhra Pradesh at Hyderabad in Criminal Petitions No. 3085 of 2007, 3082 of 2007
and 3084 of 2007 all titled Poduru Vidya Bhushan and Others Vs. Rallis India
Ltd. and Another,
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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whereby and whereunder Accused No. 4, 6 and 7 (arraigned as Respondents Nos. 1, 2 and
3 herein) have been discharged of the offences contained under Sections 138 and 141 of
the Negotiable Instruments Act, 1881 (hereinafter shall be referred to as ‘Act’).
3. For the sake of convenience, facts mentioned in SLP (Crl.) No. 1874 of 2008 are taken
into consideration.
4. Appellant as Complainant filed a criminal complaint before the Chief Judicial
Magistrate, Gautam Budh Nagar, Noida (U.P.) on 23.7.2004, under Sections 138 and
141 of the Act. It was alleged in the said complaint that cheques bearing nos.382874
and 382875 dated 31.03.2004 for Rs.15,00,000/- each drawn on Union Bank of India,
Vijaywada Main Branch were issued by the accused persons. The said cheques, when
presented to their banker, were returned as unpaid vide Cheques Return Advices dated
29.05.2004, with the remarks, ‘Payment stopped by Drawer’. In the said complaint, the
following specific plea is raised by the Appellant:
“That the Accused No. 1 is a partnership firm and Accused No. 2 to
7 are partners thereof and Accused No. 3 is signatory of the impugned
cheques and all partners are looking after day to day affairs of the accused
firm and thus the liability as raised by them is joint and several.”
5. It may be pertinent to mention here that the Appellant herein had filed substantially
similar complaints before the Criminal Courts of competent Jurisdiction at Chandigarh,
Vijayawada and Jammu & Kashmir as well. The partnership firm M/s Sri Lakshmi
Agency was therefore, constrained to file T.P. (Crl.) Nos. 161-171 of 2005, which
came to be
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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disposed of by this Court on 03.03.2006 and all criminal cases (excluding those pending in
the State of Jammu & Kashmir) filed by Appellant against Respondents were directed to be
tried by Competent Criminal Court at Hyderabad as a series of composite criminal
complaints. Consequently all the complaints are now pending before XIV Additional Chief
Metropolitan Magistrate, Nampally, Hyderabad, for disposal in accordance with law. The
Respondents herein arrayed as Accused Nos. 4, 6 and 7 in the said complaints thereafter
filed applications in the High Court of Judicature of Andhra Pradesh at Hyderabad under
Section 482 of the Cr.P.C. for their discharge.
6. It was, inter alia, contended by the Respondents before the High Court as under :
“That the aforesaid complaint depicted the applicants as the partners
of M/s Sri Lakshmi Agencies.
That the aforesaid averments is a false one. Particularly when the
complainant M/s Rallis India Ltd. was fully aware that the applicants had
severed their connections with M/s Lakshmi agencies much prior to the
execution of the Memorandum of Understanding dated 31.03.2004 and also
the issuance of the dishonoured cheques on 31.03.2004.”
The learned Single Judge of the High Court after perusal of the record and hearing the
parties found it fit and proper to discharge the Respondents. Hence this Appeal.
7. We have, accordingly, heard learned counsel, Mr. Ajay Dahiya for Appellant and Mr.
G.V.R. Choudary, for Respondents at length and perused the record.
8. At the outset, learned counsel appearing for Appellant contended that in the light of the
aforesaid averments having been made categorically in the original complaints, no case
was made out for discharge of the Respondents. It was also contended that
Respondents
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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have denied their vicarious liability for the offences under Section 138/141 of the Act, on
the ground that they had retired from the partnership firm in 2001/2002, i.e., much prior to
the issuance of the cheques in question in 2004. It is further contended by the learned
counsel for the Appellant that the said denial cannot be accepted as it would be a matter of
evidence to be considered by the Trial Court. Even the question whether or not they would
be responsible for the impugned liabilities would be required to be answered only after the
parties go to trial as it is disputed question as to when the Respondents had actually retired
from the partnership firm, before the issuance of dishonoured cheques.
9. On the other hand, learned Counsel appearing for Respondents strenuously contended
that the Appellant had failed to impute criminal liability upon the Respondents
specifically, which is a matter of record and therefore, at the very threshold, High Court
was justified in discharging them rather than directing them to face the Criminal
prosecution unnecessarily. According to them, in this view of the matter, no
interference is called for against the impugned order and Appeals deserve to be
dismissed.
10. To analyze the case before us in proper perspective, it is necessary to scrutinize all the
Criminal Complaints one by one. On perusal of the complaints, we observe that the
specific averment of vicarious criminal liability as mandated by the three Judge Bench of
this Court in the case of S.M.S. Pharmaceuticals Limited Vs. Neeta Bhalla and
Another, reported in 2005 (8) SCC 89, is contained in them in the form mentioned in
Para 4 hereinabove.
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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11. Thus, in the light of the aforesaid averments as found by us in the Criminal Complaint,
we are of the considered opinion that sufficient averments have been made against the
Respondents that they were the partners of the firm, at the relevant point of time and
were looking after day to day affairs of the partnership firm. This averment has been
specifically mentioned by the Appellant in the complaint even though denied by the
Respondents but the burden of proof that at the relevant point of time they were not
the partners, lies specifically on them. This onus is required to be discharged by them
by leading evidence and unless it is so proved, in accordance with law, in our opinion,
they cannot be discharged of their liability. Consequently, High Court committed an
error in discharging them. Also, at the cost of repetition, by virtue of their own
submissions before the High Court (reproduced in Para 6 above), the Respondents have
admitted the fact that the Appellant had referred to them in their capacity as partners
who were incharge of the affairs of the firm in the initial complaints. The question as to
whether or not they were partners in the firm as on 31.03.2004, is one of fact, which has
to be established in trial. The initial burden by way of averment in the complaint has
been made by the Appellant.
12. 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,
proviso to Section 141 of the Act clearly lays down that if the accused is able to prove
to the satisfaction of the
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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Court that the offence was committed without his knowledge or he had exercised due
diligence to prevent the commission of such offence, he will not be liable of punishment.
Needless to say, final judgment 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 acquitted.
13. At the threshold, the High Court should not have interfered with the cognizance of the
complaints having been taken by the trial court. The High Court could not have
discharged the respondents of the said liability at the threshold. Unless parties are given
opportunity to lead evidence, it is not possible to come to definite conclusion as to what
was the date when the earlier partnership was dissolved and since what date the
Respondents ceased to be the partners of the firm.
14. Before concluding the present discussion, we also take this opportunity to strike a
cautionary note with regard to the manner in which High Courts ought to exercise their
power to quash criminal proceedings when such proceeding is related to offences
committed by companies. The world of commercial transactions contains
numerous
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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unique intricacies, many of which are yet to be statutorily regulated. More particularly, the
principle laid down in Section 141 of the Act (which is pari materia with identical sections in
other Acts like the Food Safety and Standards Act, the erstwhile Prevention of Food
Adulteration Act etc. etc.) is susceptible to abuse by unscrupulous companies to the
detriment of unsuspecting third parties. In the present case, there are several disputed facts
involved – for instance, the date when the partnership came into being, who were the initial
partners, if and when the Respondents had actually retired from the partnership firm etc.
15. Strictly speaking, the ratio of the SMS Pharmaceuticals (supra) can be followed only,
after the factum that accused were the Directors or Partners of a Company or Firm
respectively at the relevant point of time, stands fully established. However, in cases like the
present, where there are allegations and counter-allegations between the parties regarding
the very composition of the firm, the above rule of `specific averment’ must be broadly
construed. Indeed, it would be nothing short of a travesty of justice if the Directors of a
Company of Partners of a Firm, who, having duped a third-party by producing false
documents (like a fake partnership deed) or making false statements (that some others were
in charge of the Company/Firm), at a subsequent stage, seek protection from prosecution
on the ground that they were not directly indicted in the complaint – such a proposition
strikes against one of the very basic tenets of the law of natural justice, which is, that none
shall be allowed to take advantage of his own default. Of course, the above observation is
of a general nature, and has no bearing on the present case, but nonetheless, the power to
Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)
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quash a criminal proceeding with respect to an offence under Section 141 of the Act, must
be exercised keeping this advisory note and caveat in mind.
16. On account of foregoing discussion, we are of the considered opinion that the
impugned judgment and order passed by learned Single Judge exercising the jurisdiction
conferred on him under Section 482 of the Cr.P.C. cannot be sustained in law. The same
are hereby set aside and quashed. The trial court is directed to dispose of the Criminal
complaints filed by Appellant at an early date, after giving opportunity of hearing to both
sides, in accordance with law. However, the Trial Court would not be influenced by any of
the observations made hereinabove and would decide the matters in accordance with law.
The appeals are allowed. Parties to bear their respective costs.
……………………………J.
[Dalveer Bhandari]
……………………………J.
[Deepak Verma]
New Delhi
April 13, 2011.