2017 (10) TMI 142 - HC - Indian Laws

Court dismisses writ petitions, allows case under Sections 138 & 141 of N.I. Act. Defense to be examined at trial.

Arvind Satpaul Gupta Partner of M/s. Shree Tirupati Greenfield Versus The State of Maharashtra & Another

The court dismissed the writ petitions, finding that the complaint contained sufficient averments to proceed against the petitioner for the offence under ... Commission of offence punishable under Section 138 read with Section 141 of NI Act - Whether criminal liability under Section 141 of the N.I.Act cannot be fastened against the Partner or a Director, who at the time of commission of offence was a sleeping Partner or ladies as well as others, who may not be knowing anything about the business of the Firm? - Held that:- It is well settled that there needs to be averment in the complaint that Partner of Firm or Director of the Company was in-charge of and was responsible to the Firm or the Company, as the case may be for conduct of the business of the Firm/Company, as the case may be. The basic requirement under Section 141 of the N.I.Act is to make specific averment in the complaint that accused Partner or Director who was neither signatory to the cheque nor the Managing Director or Managing Partner, as the case may be, at the time of commission of offence was incharge of and responsible to the Firm or Company for conduct of business. It is categorically averred by respondent No.2/original complainant in paragraph Nos.2 and 5 of the compliant that petitioner/accused No.4 was incharge of and was responsible for the affairs of the Partnership Firm in its day to day conduct of business. It is further averred that even cheques were issued with the knowledge and consent of all accused persons, who had taken active part in the transaction. These averments are certainly sufficient to put the writ petitioner/accused for trial. He may, on his part, establish that the offence was committed without his knowledge or that he had exercised due diligence to prevent the commission of offence, but that will be the subject matter of the defence in the trial and such defence may be established by cross-examining the complainant or by adducing defence evidence. He may point out at the trial that he is just a sleeping partner of the firm. At this stage, what is required to be considered is whether there is sufficient ground for prosecuting the writ petitioner/accused No.4 and that ground is established by averments made in the complaint. Mere averments in the petition that the writ petitioner/accused No.4 was a sleeping partner having no knowledge of the transaction in question is not sufficient to quash process issued against him. This defence will have to be established during the trial. Writ petitions are devoid of merit and the same are dismissed Issues Involved:1. Quashing of the order of issuance of process under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.2. The requirement of specific averments in complaints under Section 138 read with Section 141 of the Negotiable Instruments Act.3. The role and liability of a sleeping partner in a partnership firm concerning offences under the Negotiable Instruments Act.4. The necessity of conducting an inquiry under Section 202 of the Code of Criminal Procedure.5. Applicability of precedents and doctrines from higher courts in determining the liability of partners/directors.Detailed Analysis:1. Quashing of the Order of Issuance of Process:The petitioner, accused No.4, sought to quash the order of issuance of process against him in multiple criminal cases alleging offences under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The petitioner argued that the allegations were general and lacked specific acts attributable to him, including the absence of mens rea. The court, however, found that the complaint contained sufficient averments that accused No.4 was in charge of and responsible for the conduct of the business of the partnership firm at the relevant time. The court emphasized that such averments were enough to issue process and that the veracity of these claims could only be judged during the trial.2. Requirement of Specific Averments:The petitioner contended that the complaint did not contain detailed averments about his role in the alleged offence. The court referred to precedents, including the case of Gunmala Sales Private Ltd. v. Anu Mehta & Ors., which stated that basic averments that a director or partner was in charge of and responsible for the conduct of the business at the relevant time are sufficient for issuing process. The court concluded that the complaint met this requirement by stating that accused No.4 was responsible for the day-to-day conduct of the firm's business and that the cheques were issued with the knowledge and consent of all accused persons.3. Role and Liability of a Sleeping Partner:The petitioner claimed to be a sleeping partner with no involvement in the firm's transactions. The court noted that Section 141 of the N.I. Act creates vicarious liability for partners who are in charge of and responsible for the conduct of the business. The court cited multiple judgments, including Monaben Ketanbhai Shah & Anr. v. State of Gujarat & Ors., which clarified that criminal liability under Section 141 cannot be fastened on a partner who had no knowledge of the transaction. However, the court found that the complaint's averments were sufficient to establish a prima facie case, and the petitioner's claim of being a sleeping partner could be examined during the trial.4. Necessity of Conducting Inquiry under Section 202 CrPC:The petitioner argued that the trial court erred by not conducting an inquiry under Section 202 of the Code of Criminal Procedure. The court did not find merit in this argument, as the primary issue was whether the complaint contained sufficient averments to issue process, which it did. The necessity of conducting an inquiry under Section 202 was not deemed crucial to the decision to issue process.5. Applicability of Precedents and Doctrines:The petitioner relied on various judgments, including Standard Chartered Bank v. State of Maharashtra & Ors., to argue that liability arises only when it is established that the accused was in charge of and responsible for the conduct of the business at the time of the offence. The court acknowledged these precedents but found that the complaint's averments met the necessary criteria. The court reiterated that the High Court could quash a complaint only if there was unimpeachable evidence showing that the accused could not have been concerned with the issuance of the cheques, which was not the case here.Conclusion:The court dismissed the writ petitions, finding that the complaint contained sufficient averments to proceed against the petitioner for the offence under Section 138 read with Section 141 of the N.I. Act. The petitioner's claims of being a sleeping partner and having no knowledge of the transaction were deemed matters to be examined during the trial. The court emphasized that the averments in the complaint met the legal requirements to issue process, and the petitioner's defense could be established in the course of the trial.