Siby Thomas vs M/S Somany Ceramics Ltd

Reportable

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

Criminal Appeal No. of 2023 (@Special Leave Petition (Crl.) No.12 of 2020)

Siby Thomas …Appellant Versus

M/s. Somany Ceramics Ltd. …Respondent

JUDGMENT

C.T. RAVIKUMAR, J.

1. Leave granted.

2. This Appeal by accused No.4 in the complaint filed

by the respondent herein under Section 138 read with

Section 141 of the Negotiable Instruments Act, 1881 (for

short ‘the NI Act’) is directed against the order dated

Signature Not Verified 06.12.2019 in CRM-M No.52299 of 2019 passed by the Digitally signed by Vijay Kumar

High Court of Punjab and Haryana at Chandigarh. As per Date: 2023.10.10 12:14:53 IST Reason:

SLP (Crl.) 12 of 2020 Page 1 of 21

the impugned order the High Court declined to quash

the complaint qua the appellant in exercise of the power

under Section 482 of the Code of Criminal Procedure (for

short ‘Cr.PC’).

3. Heard the learned counsel appearing for the

petitioner and learned counsel appearing for the

respondent.

4. Virtually, the appellant set up twin grounds to seek

quashment of the complaint against him; firstly, that he

had resigned from the partnership firm on 28.05.2013

whereas the cheque in question was issued on

21.08.2015 and secondly, that the complaint is devoid of

mandatory averments required to be made in terms of

sub-Section 1 of Section 141 of the NI Act, as relates him.

The High Court found that the contention in regard to the

maintainability of the complaint against the appellant,

owing to his retirement from the partnership firm prior

to the issuance of the cheque in question, is a matter of

SLP (Crl.) 12 of 2020 Page 2 of 21 evidence and ultimately, the appellant would have to

lead evidence and prove that fact. Consequently, it was

held that the complaint could not be rejected qua the

appellant at the initial stage in exercise of the powers

under Section 482 Cr.PC.

5. The learned counsel appearing for the petitioner

contended that even if it is taken that the factum of his

retirement from the partnership firm on 28.5.2013 was

prior to the cheque in question on 21.8.2015 is a matter

of evidence, the complaint as against the appellant is

liable to be quashed owing to the absence of mandatory

averments required to be made in terms of Section 141

(1) of the NI Act, in the complaint. In other words, it is

submitted that though the respondent had specified or

elaborated the role of some of the accused in the

complaint as relates the appellant averments

elaborating/specifying his role in the day-to-day affairs

of the partnership firm much-less mandatorily required

SLP (Crl.) 12 of 2020 Page 3 of 21 averments for his prosecution are conspicuously absent

in the complaint. To drive home the contentions that the

learned counsel for the appellant drew our attention to

paragraphs 3 to 6 of the complaint. Learned counsel for

the appellant relied on the decisions of this Court in

Anita Malhotra v. Apparel Export Promotion Council &

Anr.1 and a decision of Two-Judge Bench of this Court in

Criminal Appeal No. 879 of 2023 titled Ashok

Shewakramani & Ors. v. State of Andhra Pradesh &

Anr.2 and connected cases dated 03.08.2023 to buttress

the said contentions.

6. Per Contra, learned counsel appearing for the

respondent would submit that paragraphs 3 and 4 of the

complaint would reveal that the averments thereunder

are sufficient to satisfy the mandatory requirement in

terms of Section 141 of the NI Act, qua the appellant as

1 (2012) 1 SCC 520 2 2023 INSC 692

SLP (Crl.) 12 of 2020 Page 4 of 21 well. In order to support his contention the learned

counsel relied on the decision of a two-Judge Bench of

this Court in S.P. Mani and Mohan Dairy v. Dr.

Snehalatha Elangovan3.

7. In view of the rival contentions as above it is

apposite to refer to the averments in paragraph 3 and 4

of the complaint, which is annexed to the SLP. They read

thus:

“3. That the accused No.1 is a partnership-firm with the name and style of M/s Tile Store, having its office at 5-654/B, Jyothis Complex, By-pass Road, Eranhipalam, Calicut-673006 (Kerala), while accused No.2 to 6 are the partners of the accused No.1. The accused No.2 to 6 being the partners are responsible for the day to day conduct and business of the accused No. 1.

4.That the accused No.1 through its partners i.e. accused No.2 to 6, on the basis of the authority vested in them approached to the complainant for purchasing the ceramic tiles, sanitary wares

3 2022 SCC OnLine SC 1238

SLP (Crl.) 12 of 2020 Page 5 of 21 and bath fitting from the complainant on credit basis. The request of the accused No.1 was accepted by the complainant and the accused agreed to pay the amount of the goods purchased by them to the complainant within one month and it was also agreed that if the accused failed to make the payment within one month in that case they shall also be liable to pay interest @ 24% per annum on the balance sale consideration till its full realization.” (Underline supplied)

8. As noticed hereinbefore, the parties are at issue

over the question as to whether the averments in the

complaint satisfy the requirements under Section 141 (1)

of the N.I. Act. True that in paragraph 3 it is stated that

accused No.1 is a partnership firm and accused Nos.2 to

6 are the partners of accused No.1 and they, being the

partners, are responsible for the day-to-day contact and

business of accused No.1. In paragraph 4 what is stated

is that accused No.1 through its partners i.e., accused

Nos. 2 to 6, on the basis of the authority vested in them

SLP (Crl.) 12 of 2020 Page 6 of 21 approached the complainant for purchasing the ceramic

tiles, sanitary-wares and bath fittings from the

complainant on credit basis. Indubitably, besides the

aforesaid averments no other averments are made in the

complaint in regard to the appellant’s role. Therefore,

the question is whether the averments referred to

hereinbefore are sufficient to prosecute the appellant

under Section 138 of the NI Act, on the afore-extracted

averments. We are not oblivious of the fact that the

appellant has also got a contention that he retired from

the partnership firm much prior to the issuance of the

cheque in question. It is only proper and profitable to

refer to sub-section (1) of Section 141 of the N.I. Act in

view of the rival contentions. It reads thus:-

“(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct

SLP (Crl.) 12 of 2020 Page 7 of 21 of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: 22 [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]”

9. Bearing in mind the averments made in the

complaint in relation to the role of the appellant and sub-

section (1) of Section 141, we will have to appreciate the

SLP (Crl.) 12 of 2020 Page 8 of 21 rival contentions. Going by the decision relied on by the

respondent in S.P. Mani’s case (supra) it is the primary

responsibility of the complainant to make specific

averments in the complaint, so as to make the accused

vicariously liable. Relying on paragraph 47(b) of the

said decision learned counsel appearing for the

respondent would also submit that 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

maybe and he relied on mainly the following recitals

thereunder:

“47…… a.) …… 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

SLP (Crl.) 12 of 2020 Page 9 of 21 allege that the persons named in the complaint are in charge of the affairs of the company/firm.”

10. We are of the considered view that the respondent

has misread the said decision. Under the sub-caption

‘Specific Averments in the complaint’, in paragraph 41

and sub-paragraphs (a) and (d) as also in paragraph 42

thereof, it was held in the decision in S.P. Mani’s case

(supra) thus:-

“41. In Gunmala Sales Private Limited (supra), this Court after an exhaustive review of its earlier decisions on Section 141 of the NI Act, summarized its conclusion as under:-

“(a) Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director;

(b) ……

(c) ……

SLP (Crl.) 12 of 2020 Page 10 of 21

(d) No restriction can be placed on the High Court’s powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director.”

42. The principles of law and the dictum as laid in Gunmala Sales Private Limited (supra), in our opinion, still holds the field and reflects the correct position of law.”

11. In the light of the afore-extracted recitals from the

decision in Gunmala Sales Private Limited v. Anu

SLP (Crl.) 12 of 2020 Page 11 of 21 Mehta4, quoted with agreement in S.P. Mani’s case

(supra) and in view of sub-section (1) of Section 141 of

the N.I. Act it cannot be said that in a complaint filed

under Section 138 read with Section 141 of the N.I. Act to

constitute basic averment it is not required to aver that

the accused concerned is a person who was in charge of

and responsible for the conduct of the business of the

company at the relevant time when the offence was

committed. In paragraph 43 of S.P. Mani’s case (supra)

it was held thus:

“43. In the case on hand, we find clear and specific averments not in the complaint but also in the statutory notice issued to the respondent.”

It is thereafter that in the decision in S.P. Mani’s

case (supra) in paragraph 47 (a) it was held that the

primary responsibility of the complainant is to make

4 (2015) 1 SCC 103,

SLP (Crl.) 12 of 2020 Page 12 of 21 specific averments in the complaint so as to make the

accused vicariously liable.

12. Bearing in mind the afore-extracted recitals from

the decisions in Gunmala Sales Private Limited’s case

(supra) and S.P. Mani’s case (supra), we have carefully

gone through the complaint filed by the respondent. It

is not averred anywhere in the complaint that the

appellant was in charge of the conduct of the business of

the company at the relevant time when the offence was

committed. What is stated in the complaint is only that

the accused Nos. 2 to 6 being the partners are

responsible for the day-to-day conduct and business of

the company. It is also relevant to note that an overall

reading of the complaint would not disclose any clear

and specific role of the appellant. In the statutory notice

dated 10.09.2015 (Annexure-P6) at paragraph 3 it was

averred thus:-

SLP (Crl.) 12 of 2020 Page 13 of 21

“3. That for liquidation of the aforesaid legal liability/outstanding, you noticee No. 2 to 6 issued cheque number 005074 dated 21.08.2015, amounting to Rs. 27,46,737/- drawn on Punjab National Bank, Ernhipalam (Kozhikode) branch in favour of my client from the account of noticee No. 1.”

In response to that in Annexure- P7 reply the

appellant herein stated thus:-

“In this regard, I would like to convey you that, I have retired from M/s Tile store as partner way back on 28-5-2013 and I am not a partner of M/s. Tile Store any more. (Copy of Retirement deed enclosed). During the time of my retirement, there were no dues to M/s. Somany Ceramics Ltd. from M/s. Tile Store as full payments were made for the consignments taken from them. (Copy of accounts statements up to 31-05-2013 enclosed)”

13. In the light of the aforesaid circumstances the

averments of the respondent in paragraphs 5 and 6 of the

SLP (Crl.) 12 of 2020 Page 14 of 21 complaint are also to be seen. In paragraph 5 of the

complaint, it was alleged that accused No.1 through

accused No.2 had purchased the goods from the

complainant on credit basis through proper sales

invoices and, in paragraph 6 it was alleged that for

liquidation of legal liability outstanding accused Nos. 2

and 3 issued cheque Nos. 005074 dated 21.8.2015

amounting to Rs.27,46,737/- drawn upon Punjab National

Bank, Ernhipalam (Kozhikode), in favour of the

complainant from the account of accused No.1. The

appellant is the accused No. 4 in the complaint.

14. In view of the factual position relating the

averments revealed from the complaint as aforesaid it

is relevant to refer to the decisions relied on by the

learned counsel appearing for the appellant. In the

decision in Anita Malhotra’s case (supra) in paragraph

22 it was held thus:-

SLP (Crl.) 12 of 2020 Page 15 of 21

“22. This Court has repeatedly held that in case of a Director, the complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. (Vide National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal). In the case on hand, particularly, in Para 4 of the complaint, except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day-to-day affairs of the Company. We have verified the averments as regards to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day-to-day affairs of the Company. On this ground also, the appellant is entitled to succeed.”

15. Paragraph 19 of the Ashok Shewakramani’s case

(supra) is also relevant for the purpose of the case and it,

in so far as relevant, reads thus:

SLP (Crl.) 12 of 2020 Page 16 of 21 “19. Section 141 is an exception to the normal rule that there cannot be any vicarious liability when it comes to a penal provision. The vicarious liability is attracted when the ingredients of sub- section 1 of Section 141 are satisfied. The Section provides that every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of business of the company, as well as the company shall be deemed to be guilty of the offence under Section 138 of the NI Act. In the light of sub-section 1 of Section 141, we have perused the averments made in the complaints subject matter of these three appeals. The allegation in paragraph 1 of the complaints is that the appellants are managing the company and are busy with day to day affairs of the company. It is further averred that they are also in charge of the company and are jointly and severally liable for the acts of the accused No.1 company. The requirement of sub-section 1 of Section 141 of the NI Act is something different and higher. Every person who is sought to be roped in by virtue of sub-section 1 of Section 141 NI Act must be a person who at the time the offence was committed was in charge of and was

SLP (Crl.) 12 of 2020 Page 17 of 21 responsible to the company for the conduct of the business of the company. Merely because somebody is managing the affairs of the company, per se, he does not become in charge of the conduct of the business of the company or the person responsible for the company for the conduct of the business of the company. For example, in a given case, a manager of a company may be managing the business of the company. Only on the ground that he is managing the business of the company, he cannot be roped in based on sub-section 1 of Section 141 of the NI Act. The second allegation in the complaint is that the appellants are busy with the day-to-day affairs of the company. This is hardly relevant in the context of subsection 1 of Section 141 of the NI Act. The allegation that they are in charge of the company is neither here nor there and by no stretch of the imagination, on the basis of such averment, one cannot conclude that the allegation of the second respondent is that the appellants were also responsible to the company for the conduct of the business. Only by saying that a person was in charge of the company at the time when the

SLP (Crl.) 12 of 2020 Page 18 of 21 offence was committed is not sufficient to attract sub-section 1 of Section 141 of the NI Act.”

16. Thus, in the light of the dictum laid down in Ashok

Shewakramani’s case (supra), it is evident that a

vicarious liability would be attracted only when the

ingredients of Section 141(1) of the NI Act, are satisfied.

It would also reveal that merely because somebody is

managing the affairs of the company, per se, he would

not become in charge of the conduct of the business of

the company or the person responsible to the company

for the conduct of the business of the company. A bare

perusal of Section 141(1) of the NI Act, would reveal that

only that person who, at the time the offence was

committed, was in charge of and was responsible to the

company for the conduct of the business of the company,

as well as the company alone shall be deemed to be

guilty of the offence and shall be liable to be proceeded

against and punished. In such circumstances, paragraph

SLP (Crl.) 12 of 2020 Page 19 of 21 20 in Ashok Shewakramani’s case (supra) is also

relevant. After referring to the Section 141(1) of NI Act,

in paragraph 20 it was further held thus:

“20 On a plain reading, it is apparent that the words "was in charge of" and "was responsible to the company for the conduct of the business of the company" cannot be read disjunctively and the same ought be read conjunctively in view of use of the word "and" in between.”

17. The upshot of the aforesaid discussion is that the

averments in the complaint filed by the respondent are

not sufficient to satisfy the mandatory requirements

under Section 141(1) of the NI Act. Since the averments

in the complaint are insufficient to attract the provisions

under Section 141(1) of the NI Act, to create vicarious

liability upon the appellant, he is entitled to succeed in

this appeal. We are satisfied that the appellant has made

out a case for quashing the criminal complaint in relation

to him, in exercise of the jurisdiction under Section 482

SLP (Crl.) 12 of 2020 Page 20 of 21 of Cr.PC. In the result the impugned order is set aside

and the subject Criminal Complaint filed by the

respondent and pending before Ld. CJ (JD) JMIC,

Bahadurgarh, in the matter titled as M/s. Somany

Ceramics v. M/s. Tile Store etc. vide COMA- 321-2015

(CNRNO: HRJRA1004637-2015), stand quashed only in

so far as the appellant, who is accused No. 4, is

concerned. Appeal stands allowed as above. There will

be no order as to costs.

……………………, J.

(C.T. Ravikumar)

……………………, J.

(Sanjay Kumar) New Delhi;

October 10, 2023.

SLP (Crl.) 12 of 2020 Page 21 of 21