MONABEN KETANBHAI SHAH AND ANR.versusSTATE OF GUJARAT AND ORS.

            MONAB EN KET ANBHAI SHAH AND ANR.                             A
                                   v.
                  STATE OF GUJARAT AND ORS.

                          AUGUST 10, 2004

      [Y.K. SABHARWAL AND D.M. DHARMADHIKARI, JJ.]                        B

      Negotiable Instruments Act, 1881-Sections 138 and 141-Dishon-
our of cheque--{;omplaint against partners offirm-Absence of requisite
averments in the complaint that they took active interest in the business-
Fastening ofcriminal liability-Held: Under section f4 I' criminal liability C
is fastened on those who are in-charge of and responsible to the firm for
the conduct of its business-The substance of allegations made in the
complaint do not fulfil ingredients of Section-Hence accused discharged.

     Respondent No. 2 filed complaint under Section 138 of the D
Negotiable Instruments Act, 1881 against five accused-partners of a
firm alleging dishonour of a cheque. Out of five accused three were
ladies. They filed an application alleging that it was not specifically
mentioned in the complaint that all the accused were incharge of the
business, and as such the complaint did not fulfil the ingredients of
Section 141 of the Act. Magistrate discharged the accused' since there E
were no allegations in the complaint making out a case against them.
However, Sessions Judge set aside the order on the ground that non-
mentioning of specific words that 'all accused were in-charge of
business' does not mean that they were not incharge of the business
and it was for the accused to establish that they had no knowledge F
about the transaction or had exercised due diligence. High Court
upheld the order of Sessions Judge with regard to accused Nos. 3 and
4 but set aside the order with regard to accused No. 5. Hence the
present appeal.

     Allowing the appeal, the Court                                       G

     HELD : 1.1. Section 141 of the Negotiable Instrument Act, 1881
does not make all partners liable for the offence. The criminal liability
has been fastened on those who, at the time of the commission of the
offence, was in charge of and was responsible to the firm for the conduct H
                                   411
    412               SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A of the business of the firm. These may be sleeping partners who are not
    required to take any part in the business of the firm; they may be ladies
    and others who may not know anything about the business of the firm.
    The primary responsibility is on the complainant to make necessary
    averments in the compliant so as to make the accused vicariously liable.
B   For fastening the criminal liability, there is no presumption that every
    partner knows about the transaction. [415-G-H; 416-A-Bf

          1.2. In the instant case, it is evident that in the complaint there
    is total absence of requisite against the appellants that they have taken
    active interest in the business except stating in the title that they are
C   partners of the firm. The obligation of the appellants to prove that at
    the time the offence was committed they were not incharge of and were
    not responsible to the firm for the conduct of the business of the firm,
    would arise only when the complainant makes necessary averments in
    the complaint and establishes that fact. Therefore the order of High
D   Court is set aside and the order of the Magistrate discharging the
    appellants is upheld. [415-F; 416-B-C; 416-EI

         K.P.G. Nair v. Jindal Menthol India Ltd., [20011 IO SCC 218 and
    Smt. Kalla Sujatha v. Fertilizers and Chemicals Travancore Ltd. and Anr.,
E   120021 7 sec 655, referred to.

         CIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 850
    of 2004.

          From the Judgment and Order dated I 9. I 2.2003 of the Gujarat High
F Court in Crl. Misc. Application No. 1042 of 2002.
        Uday U. Lalit, Gautam Joshi, Rajesh Dave, Prashant Kumar, Abhijat
    P. Medh and Rohan Thavani for the Appellants

          R.P. Bhatt, C.M. Shroff, Girish M.S. and M.N. Shroff, for the
G Respondents No. 2.
          Mrs. Hemantika Wahi for the Respondent No. I.

          The Judgment of the Court was delivered by

H         Y.K. SABHARWAL, J. : Leave granted.
       M.K. SHAH v. STATE OF GUJARAT [SABHARWAL, J.]                   413

      The second respondent has filed a complaint against five accused A
under Section 138 of the Negotiable Instruments Act, 1881 (for short, "the
Act") alleging dishonour of a cheque, the accused having stopped payment
thereof. Out of five, three accused are ladies. On an application filed by
the said accused, inter alia, alleging that the complaint does not fulfill the
ingredients of Section 141 of the Act, the Magistrate directed their B
discharge holding that there are no allegations in the complaint, making
out an offence against them. The order of the Magistrate was, however,
set aside by the Sessions Judge. The learned Sessions Judge held that 'no
doubt, it is not specifically mentioned in the complaint that all the accused
were in-charge of the business but merely non-mentioning of specific C
words does not mean that they were not in-charge of the business' and in
this view came to the conclusion that it was for the accused to establish
that they had no knowledge about the transaction or had exercised due
diligence. The High Court, by the impugned judgment, has upheld the
order of the Sessions Judge insofar as it concerns the appellants. The order
of the Sessions Judge insofar as original accused No. 5 is concerned, has D
 been reversed by the High Court and that of the Magistrate restored since
the High Court came to the conclusion that accused No. 5 was a student
 up to 1998 studying at Ahmedabad, and thereafter she got married and
went to USA and in these circumstances her case stood on different footing.
 The remaining two sisters are in appeal on grant of special leave.            E

      Section 138 of the Act makes dishonour of the cheque an offence
punishable with imprisonment or fine or both. Section 141 relates to
offences by the company. It provides that if the person committing an
offence under Section 138 is a company, every person who, at the time F
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, shall be deemed to be guilty of the offence and shall be liable
to be proceeded against and punished accordingly. Thus, vicarious liability
has been fastened on those who are in-charge of and responsible to the
company for the conduct of its business. For the purpose of Section 141, G
a firm comes within the ambit of a company.

      It is not necessary to reproduce the language of Section 141 verbatim
in the complaint since the complaint is required to be read as a whole. If
the substance of the allegations made in the complaint fulfil the require- H
    414                SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.

A ments of Section 141, the complaint has to proceed and is required to be
  tried with. It is also true that in construing a complaint a hyper-technical
  approach should not be adopted so as to quash the same. The laudable
  object of preventing bouncing of cheques and sustaining the credibility of
  commercial transactions resulting in enactment of Sections 138 and 141
B has to be borne in mind. These provisions create a statutory presumption
  of dishonesty exposing a person to criminal liability if payment is not made
 -.vithin statutory period even after isswe of notice. It is also true that the
  power of quashing is required to -be exercised very sparingly and where,
  read as a whole, factual foundation for the offence has been laid in the
  complaint, it should not be quashed. All the same, it is also to be
C remembered that it is the duty of the Court to discharge the accused if
  taking everything stated in the complaint as correct and construing the
  allegations made therein liberally in favour of the complainant, the
  ingredients of the offence are altogether lacking. The present case falls in
  this category as would be evident from the facts noticed hereinafter.
D
          The High Court in the impugned judgment has held that "on its
    perusal, it is clear that the respondent No. 2 original complainant has made
    specific allegations against the accused persons including the present
    petitioners in the complaint that the petitioners are partners of the
E   partnership firm and the petitioners have taken active interest in the
    business". The aforesaid finding is not supported by the complaint. There
    are no averments in the complaint t!Jat the appellants have taken active
    interest in the business. There are two material paragraphs in the complaint
    and rest of the complaint sets out the names of the witnesses to be examined
F   by the complainant besides the prayer clause. The two paragraphs read
    as under :

             "(I) The accused in this matter, for the development of their
                  business had taken amount of Rs. 60,000 through Agent on
                  8.J.t998 which was paid by us vide cheque No. 7432109
G                 drawn on Canara Bank for Rs.60,000 which are received by
                  the accused, therefore, the receipt was also issued on 8.1.1998.

             (2)   The saic! amount was for 2.5 months. Therefore, the accused
                   had issued us a cheque No. 3358762 dated 23.3.1998 drawn
H                  on State Bank of Saurashtra, Kalanala Branch, Bhavnagar
          M.K. SHAH v. STATE OF GUJARAT [SABHARWAL, J.]                415

                 for a sum of Rs. 62,250. On presentation of the said cheque A
                 in our account the accused had stopped payment on the said
                 cheque so it was returned. · The Canara Bank was given
                 intimation in this regard by letter dated 17.9.1998 S.B.S.
                 Kalanala, Bhavnagar. And, therefore, on 19.9.1998 the
                 Canara Bank informed us, so the notice through Advocate B
                 dated 28.9.1998 was issued to the accused. And although
                 all of them are served but no amount is paid."

        The material part of the title of the complaint reads thus :

            "Karta of Himanshu Jayantilal,                                     c
            H.U.F.
            Himmanshu Jayantilal Thakkar .......
                                                             ... Complainant

                                    Versus                                     D
            Partners of Sona Fibres
            (I) Shah Madhumati Harshadraj
            (2) Harshadrai V. Shah (H.U.F.)
            (3) Monaben Ketanbhai Shah
            (4) Sonaben R. Shah
                                                                               E
            (5) Rupaben Harshabhai Shah


                                                               ... Accused"

          From the above, it is evident that in the complaint there are no
                                                                               F
    averments against the appellants except stating in the title that they are
    partners of the firm. Learned counsel for the respondents/complainant



-
    contended that a copy of the partnership deed was also filed which would
    show that the appellants were active in the business. No such document
    was filed with the complaint or made part thereof. The filing of the G
    partnership deed later is of no consequence for determining the point in
    issue. Section 141 does not make all partners liable for the offence. The
    criminal liability has been fastened on those who, at the time of the
    commission of the offence, was in charge of. and was responsible to the
    firm for the conduct of the business of the firm. These may be sleeping H
    416                SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A partners who are not required to take any part in the business of the firm;
  they may be ladies and others who may not know anything about the
  business of the firm. The primary responsibility is on the complainant to
  make necessary averments in the complaint so as to make the accused
  vicariously liable. For fastening the criminal liability, there is no presump-
B ti on that every partner knows about the transaction. The obligation of the
  appellants to prove that at the time the offence was committed they were
  not in charge of and were not responsible to the firm for the conduct of
  the business of the firm, would arise only when first the complainant makes
  necessary averments in the complaint and establishes that fact. The present
C case is of total absence of requisite averments in the complaint.
          In K.P.G. Nair v. Jindal Menthol India Ltd., [2001] I0 SCC 218, this
    Court held that the substance of allegations read as a whole should answer
    and fulfil the requirements of the ingredients of Section 141. The criminal
    complaint was quashed in Katta Sujatha (Smt.) v. Fertilizers & Chemicals
D   Travancore Ltd. & Anr., [2002] 7 sec 655, since in the complaint it was
    not stated that the accused was in charge of the business and was
    responsible for the conduct of the business of the firm nor was their any
    other allegation that she had connived with any other partner in the matter
    of issue of cheque.
E        Under the aforesaid circumstances, we set aside the impugned
    judgment of the High Court and restore the order of the Magistrate
    discharging the appellants. The appeal is allowed accordingly.

    N.J.                                                      Appeal allowed.