Holding

When a complaint specifically averts that the accused were partners and were in charge of the firm's affairs, the burden of proving they were not partners at the relevant time lies on the accused, and the High Court erred in quashing the proceedings under Section 482.

Summary

Rallis India Ltd. filed criminal complaints under Sections 138 and 141 of the Negotiable Instruments Act alleging that a partnership firm and its partners had issued dishonoured cheques. The complaint specifically stated that the respondents were partners who managed the day‑to‑day affairs of the firm, making their liability joint and several. The respondents sought discharge of the proceedings under Section 482 of the CrPC, claiming they had ceased to be partners before the cheques were issued. The Supreme Court held that the specific averments in the complaint shift the burden of proving non‑partnership at the relevant time onto the respondents, and that such factual disputes must be decided at trial, not by a pre‑emptive quash order. Consequently, the High Court’s order quashing the complaints was set aside and the appeal was allowed.

Issues considered

Whether specific averments in a complaint can attract vicarious criminal liability of partners under Section 141 of the Negotiable Instruments Act.
Who bears the burden of proof to show that the accused were not partners at the relevant time.
Whether a High Court may quash criminal proceedings under Section 482 of the CrPC when factual issues regarding partnership status remain unresolved.
The proper exercise of the power under Section 482 in offences committed by companies or partnership firms.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Negotiable Instruments Act, 1881s. 138, s. 141

Subjects

Negotiable Instruments ActSection 138Section 141vicarious liabilitypartnership firmcriminal procedureSection 482quash of criminal proceedingsburden of proofspecific averment

Judgment

[2011] 5 S.C.R. 289

RALLIS INDIA LTD. A
v.
PODURU VIDYA BHUSAN & ORS.
(Criminal Appeal No. 924 of 2011) ·
APRIL 13, 2011
. tt • B
[DALVEER,BHANDARI AND DEEPAK VERMA, JJ.]

Negotiable Instruments Act, 1881: s. 141 - Offence by
companies/firms· - Dishonour of cheque issued by
partnership firm - Complaint u/s. 138 against firm and partners C
including respondents - Averment in the complaint that all
partners were looking .after day to day affairs of the accused
firm and their liability was joint as we// as several - Quashing
of complaint sought by respondents on the ground that they
had severed their connections with the firm much prior to the D
issuance of dishonoured cheques - High Court discharged
the respondents ..:. On appeal, held: Specific averments were
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 - Burden of proof that E
at the relevant point of time they were not partners, lay
specifically on them - The question as to whether or not tliey
were partners in the firm during the relevant period is one of
fact, which has to be established in trial - High Court should
not have interfered with the cognizance of the complaints F
having been taken by the trial court a.nd discharged the
respondents of the said liability at the threshold - Code of
Criminal Procedure, 1973 - s.482.

Code of Criminal Procedure, 1973: s.482 - Manner in
which High Courts ought to exercise their power to quash G
criminal proceeding when such proceeding is related to
offences committed by companies - Discussed.

The appellant filed criminal complaints under
289 H ,
,____
I
290 SUPREME COURT REPORTS [2011) 5 S.C.R.

A Sections 138 and 141 of the Negotiable Instruments Act,
1881 against the accused. In the complaint, the plea was
raised by the appellant that the accused No. 1 was a
partnership firm and accused No. 2 to 7 were partners
thereof and accused No. 3 was signatory of the
B impugned cheques and all partners were looking after
day to day affairs of the accused firm and thus the liability
as raised by them was joint as well as several.

The respondents arrayed as accused nos.4, 6 and 7
C in the said complaints filed applications in the High Court
under Section 482, Cr.P.C. for their discharge on the
ground that they had severed their connections with the
accused-firm much prior to the issuance of the
dishonoured cheques. The High Court discharged the
0 respondents. Aggrieved, the appellant filed the instant
appeal.

Allowing the appeal, the Court

HELD: 1. Sufficient avermentS were made against the
E 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. These averments were
specifically mentioned by the appellant in the complaint
even though denied by the respondents but the burden
F of proof that at the relevant point of time they were not
the partners, lay specifically on them. This onus was
required to be discharged by them by leading evidence
and unless it was so proved, in accordance with law, they
could be discharged of their liability. Consequently, High
G Court committed an error in discharging them. Also, by
virtue of their own submissions before the High Court,
the respondents had admitted the fact that the appellant
had referred to them in their capacity as partners who
were in-charge of the affairs of the firm in the initial
H
RALLIS INDIA LTD. v. PODURU VIDYA BHUSAN & 291
ORS .
. complaintS. The question as to whether or not they were A
partners in the firm as on 31.03.2004, is one of fact, which
was to be established in trial. Thus, the primary
responsibility of .the complainant is to make specific
avermentS in the' complaint so as to"make the accused
'vicarioushi liable~ For fastening the criminal liabilify, there B
is no legal requirement for the complainant to show that
, • ~ •' • : .• I , • , ' 'r f
1

the accused
1 •fl,· .•
partner
. .
of the firm·
.-
was aware' about each
' • •.
and· ~very '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 ·s·a'tisfaction of the Court C
that tne offence was 'committed without his 'knowledge' or
1
he ·ha Cl ·exercised due diligence to ·prevent the
commission "of such offence, he' will not 'be liable of'
pLhishment. Tne .final judgment and order would depend
on the 1f I
evidence adduced.( Criminal liability is attracted D
' .•• ', . '' ' · I - - . ' ' .
only on :· • ' '
those;
-
who at'
the', time 1•of co·mmission
~1 .
of the
o~ence, .were Jn charge of and were responsible for the
conducfof the business of the firm. But vicarious criminal
liabili~ ~an be infern!~ against the partners of a firm when
it i_s specifically av~rred in the complaint about the status E ·
of the partners "qua". the ;fir~ .. This would make them ..
liable to face the prosecution but it w.ould not lead to
automatic conviction. Hence, they are not adversely
prejudiceCI - if they are eventually found to be not guilty,
as a necessary consequence thereof would be acquitted. F
[P~uas 11, 12] [297-B-H; 298-A-C] ;
~- -2. At the threshold, the High Court should not have .
interfered with the cognizance of the complaints having ·
been taken 'by the trial· court and di~charged the- G ·
respondents of the said liability-. Unless parti~s are given_
opportunity to lead evidence, it is not possible to come'
to definite conclusion as to what was the date when the
earlier
. L
partnership
l.i.
was dissolved and'since what date the
l, • I I , . t ~ ' t

H
292 SUPREME COURT REPORTS [2011] 5 S.C.R.

A respondents ceased to be the partners of the firm. [Para
13) [298-D]
3. Manner in which High Courts ought to exercise
their power to quash criminal proceedings when such
B proceeding is related to offences committed by
companies. The world of commercial transactions
_ contains numerous 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
c 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 instant case, there were
o several disputed facts involved such as the date when
the partnership came into being, who were the initial
partners and if and when the respondents had actually
retired from the partnership firm etc. [Para 14) [298-E-H]

E 4. The ratio of the SMS Pharmaceuticals as regards
the specific averment of vicarious liability 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,
F in cases like the instant one, where there are allegations
and counter-allegations between the parties regarding the
very composition of the firm, the said rule of 'specific
averment' must be broadly construed. Indeed, it would be
nothing short of a travesty of justice if the Directors of a
G 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
H the ground that they were not directly indicted in the
RALLIS INDIA LTD. v. PODURU VIDYA BHUSAN & 293
ORS.
complaint - such a proposition strikes against one of the A
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, such observation is of a general
nature, and has no bearing on the instant case, but
nonetheless, the power to quash a criminal proceeding B
with respect to an offence under Section 141 of the Act,
must be exercised keeping this advisory note and caveat
in mind. The impugned judgment and order passed by
Single Judge exercising the jurisdiction conferred on him
under Section 482, Cr.P.C. cannot be sustained in law. C
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 D
of the observations made and would decide the matters
in accordance with law. [Paras 15 and 16] [299-A-G]
SMS Pharmaceuticals Limited v. Neeta Bhalla and Anr.
2005(8) SCC 89 - relied on. E
Case law reference:
2005(8) sec 89 relied on Paras 10, 15
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
No. 924 of 2011.
F

From the Judgment & Order dated 27.7.2007 of the High
Court of Judicature at AP. at Hyderabad in Criminal Appeal
No. 3085 of 2007.
G
WITH

Criminal Appeal No. 925 and 926 of 2011.

Ajay Dahiya (for Shibashish Misra) for the Appellant.
H
294 SUPREME COURT REPORTS (2011] 5 S.C.R.

A G.V.R. Choudhary, K. Shivraj Choudhuri, D. Bharathi
Reddy and Ramesh Allanki (for D. Mahesh Babu) for the
Respondents.

The Judgment of the Court was delivered by
B 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,
c '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, whereby and whereunder Accused No. 4, 6
0 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
E (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
F 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
G 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.
H 3 is signatory of the impugned cheques and all partners
RALLIS INDIA LTD. v. PODURU VIDYA BHUSAN & 295
ORS. [DEEPAK VERMA, J.]
are looking after day to day affairs of the accused firm and A
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,
8
Vijayawada and Jammu & Kashmir as well. The partnership
firm Mis Sri Lakshmi Agency was therefore, constrained to file
T.P. (Crl.) Nos. 161-171 of 2005, which came to be 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 C
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, D
6 and 7 iri 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 E
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. F
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 G
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.
,H
296 SUPREME COURT REPORTS [2011] 5 S.C.R.

A 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
8 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 have denied their vicarious liability
for the offences under Section 138/141 of the Act, on the ground
C 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 Jor the
D impugned liabilities would be required to be answered only after
the parties go to trial as it is disputed question as to when the
R~spondents had actually retired from the partnership firm,
before the issuance of dishonoured cheques.

E 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
F 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,
G it is necessary to sc•utinize 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,
H
RALLIS INDIA LTD. v. PODURU VIDYA BHUSAN & 297
ORS. [DEEPAK VERMA, J.]

reported in 2005 (8) SCC 89, is contained in them in the form A
mentioned in Para 4 hereinabove.

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
8
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. C
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 D
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 E
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 F
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 G
of the Act clearly lays down that if the accused is able to prove
to the satisfaction of the 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
H
298 SUPREME COURT REPORTS (2011] 5 S.C.R.

A 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
B 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
C 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.
D 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.

E 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
F transactions contains numerous 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
G 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.
H
RALLIS INDIA LTD. v. PODURU VIDYA BHUSAN & 299
ORS. [DEEPAK VERMA, J.]
15. Strictly speaking, the. ratio of the SMS A
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 a
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) c
or making false statements (that some other~ 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
0
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 quash a criminal proceeding with respect fo an
offence under Section 141 of the Act, must be exercised
keeping this advisory note and caveat in mind. E

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 F
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 G
made hereinabove and would decide the matters in accordance
with law. The appeals are allowed. Parties to bear their
respective costs.

D.G. Appeal allowed.
H