Vicarious liability in benami prosecutions requires specific pleadings showing a partner was in charge of business, not mere status.

In prosecutions under the Prohibition of Benami Property Transactions Act, allegations of large post-demonetisation cash deposits, sharp turnover disparity, and fabricated sales materials were treated as sufficient to continue proceedings at the charge stage against the first and second accused, and the defence of genuineness could not be examined on merits. The Court also noted that non-identification of the beneficial owner did not warrant discharge where the statutory definition covers consideration allegedly provided by a fictitious or untraceable person. By contrast, a dormant partner could not be proceeded against without specific pleadings showing she was in charge of and responsible for the firm's business; in the absence of such averments and supporting material, proceedings against the third accused were set aside.

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Issues: (i) Whether the accused, other than the partner against whom no specific role was pleaded, were entitled to discharge in the prosecution under the Prohibition of Benami Property Transactions Act, 1988. (ii) Whether the complaint contained the requisite averments to fasten vicarious liability on the third accused, a dormant partner, under the Act.

Issue (i): Whether the accused, other than the partner against whom no specific role was pleaded, were entitled to discharge in the prosecution under the Prohibition of Benami Property Transactions Act, 1988.

Analysis: The allegations concerned large cash deposits made after demonetisation, an unusually sharp disparity with the firm's earlier turnover, and the claim that the cash sales and supporting bills were fabricated. At the stage of charge, the defence that the deposits were genuine and backed by sufficient income could not be examined on merits. The Court also treated the plea that the beneficial owner had not been identified as irrelevant for discharge in view of the statutory definition of benami transactions covering situations where the person providing consideration is fictitious or not traceable.

Conclusion: The challenge to the prosecution as against the first and second accused was rejected and discharge was refused.

Issue (ii): Whether the complaint contained the requisite averments to fasten vicarious liability on the third accused, a dormant partner, under the Act.

Analysis: Vicarious liability for a partner in a firm is not presumed and must be founded on specific pleadings showing that the person was in charge of and responsible for the conduct of the business. The complaint and sanction material did not set out the third accused's exact role or disclose how she satisfied the statutory requirements for vicarious liability. In the absence of those averments, and in the absence of material showing her active role, the prosecution could not be sustained against her merely because she was a partner.

Conclusion: The order refusing discharge was set aside insofar as the third accused was concerned and she was entitled to relief.

Final Conclusion: The prosecution continued against the first and second accused, but the third accused was taken out of the proceedings for want of the necessary foundational averments to invoke vicarious liability.

Ratio Decidendi: In a prosecution against partners of a firm, criminal vicarious liability can be fastened only when the complaint specifically pleads and the record prima facie shows that the person was in charge of and responsible for the conduct of the business; absent such averments, a partner cannot be proceeded against merely by reason of status.

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