# S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA ELANGOVAN

- **Citation:** [2022] 9 S.C.R. 634
- **Court:** Supreme Court of India
- **Decided:** 2022-09-16
- **Case number:** Criminal Appeal No. 1586 of 2022
- **Bench:** Surya Kant, J. B. Pardiwala
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/s-p-mani-and-mohan-dairy-v-dr-snehalatha-elangovan-36622
- **Pages:** 35

## Headnote

Negotiable Instruments Act, 1881 - ss.138 and 141 -
Partnership firm - Cheque dishonour case - Vicarious liability of
the partners - Held: Burden is on Board of Directors or officers in
charge of the affairs of the company /partners of a firm to show
that they were not liable to be convicted - Existence of any special
circumstance that makes them not liable is something that is
peculiarly within their knowledge and it is for them to establish at
the trial to show that at the relevant time they were not in charge of
the affairs of the company or the firm - 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 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 acquittal.
Code of Criminal Procedure, 1973 - s.482 - Negotiable
Instruments Act, 1881 - s.138 and 141 - Partnership firm - Cheque
dishonour case against Director / partner of the firm - Interference
by High Court u/s.482 CrPC - Scope - Held: High Court should
not interfere u/s.482 CrPC at the instance of an accused unless it
comes across some unimpeachable and incontrovertible evidence
to indicate that the Director/partner of a firm could not have been
concerned with the issuance of cheques - In a given case despite
the presence of basic averments, the High Court may conclude that
no case is made out against the particular Director/partner provided
the Director/partner is able to adduce some unimpeachable and
incontrovertible evidence beyond suspicion and doubt - If any
[2022] 9 S.C.R. 634
634
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Director wants the process to be quashed by filing a petition
u/s.482 CrPC on the ground that only a bald averment is made in
the complaint and that he/she is really not concerned with the
issuance of the cheque, he/she must in order to persuade the High
Court to quash the process either furnish some sterling
incontrovertible material or acceptable circumstances to substantiate
his/her contention - He/she must make out a case that making him/
her stand the trial would be an abuse of process of Court - Abuse
of Court.
Notice - Statutory Notice - Negotiable Instruments Act, 1881
- s.138 and 141 - Partnership firm - Cheque dishonour case against
a partner of the firm - No reply given by respondent-accused to
statutory notice served upon her by appellant-complainant - Effect
- Held: It is essential for the person to whom statutory notice is
issued u/s.138 to give an appropriate reply - The person concerned
is expected to clarify his or her stance - If the person concerned
has some unimpeachable and incontrovertible material to establish
that he or she has no role to play in the affairs of the company/firm,
then such material should be highlighted in the reply to the notice
as a foundation - Once the necessary averments are made in the
statutory notice issued by the complainant in regard to the vicarious
liability of the partners and upon receipt of such notice, if the partner
keeps quiet and does not say anything in reply to the same, then the
complainant has all the reasons to believe that what he has stated
in the notice has been accepted by the noticee.
Negotiable Instruments Act, 1881 - s.141 - Difference
between sub-section (1) and (2) of s.141 - Discussed.
Allowing the appeal, the Court
HELD:1. The primary responsibility of the complainant is
to 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

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SUPREME COURT REPORTS
[2022] 9 S.C.R.
S. P. MANI AND MOHAN DAIRY
v.
DR.SNEHALATHA ELANGOVAN
(Criminal Appeal No. 1586 of 2022)
SEPTEMBER 16, 2022
[SURYA KANT AND J. B. PARDIWALA, JJ.]
Negotiable Instruments Act, 1881 - ss.138 and 141 -
Partnership firm - Cheque dishonour case - Vicarious liability of
the partners - Held: Burden is on Board of Directors or officers in
charge of the affairs of the company /partners of a firm to show
that they were not liable to be convicted - Existence of any special
circumstance that makes them not liable is something that is
peculiarly within their knowledge and it is for them to establish at
the trial to show that at the relevant time they were not in charge of
the affairs of the company or the firm - 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 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 acquittal.
Code of Criminal Procedure, 1973 - s.482 - Negotiable
Instruments Act, 1881 - s.138 and 141 - Partnership firm - Cheque
dishonour case against Director / partner of the firm - Interference
by High Court u/s.482 CrPC - Scope - Held: High Court should
not interfere u/s.482 CrPC at the instance of an accused unless it
comes across some unimpeachable and incontrovertible evidence
to indicate that the Director/partner of a firm could not have been
concerned with the issuance of cheques - In a given case despite
the presence of basic averments, the High Court may conclude that
no case is made out against the particular Director/partner provided
the Director/partner is able to adduce some unimpeachable and
incontrovertible evidence beyond suspicion and doubt - If any
[2022] 9 S.C.R. 634
634
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Director wants the process to be quashed by filing a petition
u/s.482 CrPC on the ground that only a bald averment is made in
the complaint and that he/she is really not concerned with the
issuance of the cheque, he/she must in order to persuade the High
Court to quash the process either furnish some sterling
incontrovertible material or acceptable circumstances to substantiate
his/her contention - He/she must make out a case that making him/
her stand the trial would be an abuse of process of Court - Abuse
of Court.
Notice - Statutory Notice - Negotiable Instruments Act, 1881
- s.138 and 141 - Partnership firm - Cheque dishonour case against
a partner of the firm - No reply given by respondent-accused to
statutory notice served upon her by appellant-complainant - Effect
- Held: It is essential for the person to whom statutory notice is
issued u/s.138 to give an appropriate reply - The person concerned
is expected to clarify his or her stance - If the person concerned
has some unimpeachable and incontrovertible material to establish
that he or she has no role to play in the affairs of the company/firm,
then such material should be highlighted in the reply to the notice
as a foundation - Once the necessary averments are made in the
statutory notice issued by the complainant in regard to the vicarious
liability of the partners and upon receipt of such notice, if the partner
keeps quiet and does not say anything in reply to the same, then the
complainant has all the reasons to believe that what he has stated
in the notice has been accepted by the noticee.
Negotiable Instruments Act, 1881 - s.141 - Difference
between sub-section (1) and (2) of s.141 - Discussed.
Allowing the appeal, the Court
HELD:1. The primary responsibility of the complainant is
to 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, the first proviso to sub-section
(1) of Section 141 of the Negotiable Instruments Act, 1881 clearly
lays down that if the accused is able to prove to the satisfaction of
the Court that the offence was committed without his/her
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
ELANGOVAN
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knowledge or he/she had exercised due diligence to prevent the
commission of such offence, he/she will not be liable of punishment.
[Para 47][666-C-E]
2. 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 allege that the persons named in the complaint are
in charge of the affairs of the company/firm. It is only the Directors
of the company or the partners of the firm, as the case may be,
who have the special knowledge about the role they had played
in the company or the partners in a firm to show before the court
that at the relevant point of time they were not in charge of the
affairs of the company. Advertence to Sections 138 and Section
141 respectively of the NI Act shows that on the other elements
of an offence under Section 138 being satisfied, the burden is on
the Board of Directors or the officers in charge of the affairs of
the company/partners of a firm to show that they were not liable
to be convicted. The existence of any special circumstance that
makes them not liable is something that is peculiarly within their
knowledge and it is for them to establish at the trial to show that
at the relevant time they were not in charge of the affairs of the
company or the firm. [Para 47][666-E-H; 667-A-B]
3. 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 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 acquittal. [Para 47][667-C-D]
4. If any Director wants the process to be quashed by filing
a petition under Section 482 of the Code on the ground that only
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a bald averment is made in the complaint and that he/she is really
not concerned with the issuance of the cheque, he/she must in
order to persuade the High Court to quash the process either
furnish some sterling incontrovertible material or acceptable
circumstances to substantiate his/her contention. He/she must
make out a case that making him/her stand the trial would be an
abuse of process of Court. [Para 47][667-E-F]
N Rangachari v. Bharati Sanchar Nigam Limited AIR
(2007) SC 1682 : [2007] 5 SCR 329; Anil Hada v.
Indian Acrylic Ltd. (2000) 1 SCC 1 : [1999] 5 Suppl.
SCR 6; Monaben Ketanbhai Shah v. State of Gujarat
(2004) 7 SCC 15 : [2004] 3 Suppl. SCR 411; K.K.
Ahuja v. V.K. Vora (2009) 10 SCC 48 : [2009] 9 SCR
1144; Sunita Palita v. M/s Panchami Stone Quarry
(2022) SC Online SC 945; Ashutosh Ashok
Parasrampuria v. Gharrkul Industries Pvt. Ltd. (2021)
SCC Online SC 915; Gunmala Sales Pvt. Ltd. v. Anu
Mehta & Ors. (2015) 1 SCC103 : [2014] 10 SCR 1117;
Rallis India Ltd v. Poduru Vidya Bhusan & Ors. (2011)
13 SCC 88 : [2011] 5 SCR 289 - relied on.
SMS Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC
89 : [2005] 3 Suppl. SCR 371; National Small Industries
Corporation v. Harmeet Singh Paintal & Anr. (2010) 3
SCC 330 : [2010] 2 SCR 805; Sunita Palita & Others
v. M/s Panchami Stone Quarry (2022) SC Online SC
945; Municipal Corporation of Delhi v. Ram Kishan
Rohtagi (1983) 1 SCC 1 : [1983] 1 SCR 884; U.P.
Pollution Control Board v. Modi Distillery (1987) 3 SCC
684 : [1987] 3 SCR 798; P. Rajarathinam v. State of
Maharashtra (2000)10 SCC 529; K. Bhaskaran v.
Sankaran Vaidhyan Balan (1999) 7 SCC 510 : [1999]
3 Suppl. SCR 271; Assistant Commissioner, AssessmentII Bangalore and Ors. v.Velliappa Textiles Ltd. and Ors.
AIR (2004) SC 86 : [2003] 3 Suppl. SCR 763; Sabhitha
Ramamurthy v. RBS Channabasavaradhya AIR (2006)
SC 3086 : [2006] 6 Suppl. SCR 126; S. K. Alagh v.
State of Uttar Pradesh (2008) 5 SCC 662 : [2008] 2
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
ELANGOVAN
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SCR 1088; Maharashtra State Electricity Distribution
Co. Ltd. v. Datar Switchgear Ltd. (2010) 10 SCC 479 :
[2010] 12 SCR 551; GHCL Employees Stock Option
Trust v. India Infoline Limited (2013) 4 SCC 505 : [2013]
5 SCR 27 - referred to.
Case Law Reference
[2005] 3 Suppl. SCR 371
referred to
Para 12
[2014] 10 SCR 1117
relied on
Para 13
[2010] 2 SCR 805
referred to
Para 13
[1983] 1 SCR 884
referred to
Para 28
[1987] 3 SCR 798
referred to
Para 28
(2000) 10 SCC 529
referred to
Para 28
[1999] 3 Suppl. SCR 271
referred to
Para 29
[2007] 5 SCR 329
relied on
Para 30
[1999] 5 Suppl. SCR 6
relied on
Para 31
[2004] 3 Suppl. SCR 411
relied on
Para 32
[2005] 3 Suppl. SCR 371
referred to
Para 34
[2003] 3 Suppl. SCR 763
referred to
Para 35
[2006] 6 Suppl. SCR 126
referred to
Para 36
[2009] 9 SCR 1144
relied on
Para 36
[2008] 2 SCR 1088
referred to
Para 39
[2010] 12 SCR 551
referred to
Para 39
[2013] 5 SCR 27
referred to
Para 39
[2011] 5 SCR 289
relied on
Para 48
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1586 of 2022.
From the Judgment and Orders dated 16.02.2021 of the High
Court of Judicature at Madras, in Crl. O.P. No. 1063 of 2021.
E. R. Kumar, Ms. Raghav Bansal for M/s Parekh & Co., Advs.
for the Appellant.
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Ms. Hari Priya Padmanabhan, T. Mahendhran, Raghunatha
Sethupathy B., Ms. Jhanvi Dhubay, K. Paari Vendhan, Advs. for the
Respondent.
The Judgment of the Court was delivered by
J. B. PARDIWALA, J.
1. Leave granted.
2. This appeal is at the instance of the original complainant of a
complaint filed under Section 138 of the Negotiable Instruments Act,
1881 (for short, "the NI Act") and is directed against the order passed
by the High Court of Madras dated 16.02.2021 in the Criminal Original
Petition No. 1063 of 2021 filed by the respondent herein (accused no.03)
under Section 482 of the Code of Criminal Procedure (for short, "the
Code"), whereby the High Court allowed the application and quashed
the criminal proceedings initiated against the respondent herein in the
court of the Judicial Magistrate Fast Track Court No.-II, Erode.
3. There are some legal issues with a never-ending debate. The
debate on such legal issues goes on and on despite there being plethora
of case law on the subject. The NI Act by now is almost three decades
old. Section 141 of the NI Act is on the statute past more than three
decades. There are various decisions of this Court and High Courts
explaining the true purport of Section 141 of the NI Act. However, the
debate on Section 141 of the NI Act is never ending. The present
litigation is also one in which we have been called upon to look into
Section 141 of the NI Act.
FACTUAL MATRIX
4. The facts of this case are plain and simple. The appellant herein
(original complainant) is engaged in the business of milk and milk products.
The respondent herein is one of the partners of a Partnership Firm running
in the name of Sira Marketing Services. The firm used to purchase milk
and milk products from the appellant/complainant on credit basis. The
appellant has to recover an amount of Rs. 10,71,434.60/- (Rs. Ten Lakh
Seventy One Thousand Four Hundred Thirty Four and Sixty paise) from
the partnership firm. The firm issued a cheque duly signed by the original
accused No. 02 (partner/authorised signatory) in favour of the appellant
for the amount of Rs. 10,00,000/- (Rs. Ten Lakh only) dated 05.05.2017.
The cheque came to be dishonoured as there was no sufficient balance
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
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in the account maintained by the firm. No sooner, the bank intimated the
appellant herein that the cheque could not be cleared due to insufficient
funds than the appellant herein issued a statutory notice dated 14-08-2017
to the firm and the two partners of the firm. Despite service of notice to
the firm as well as the two partners (accused persons) the amount was
not paid to the appellant and therefore, the appellant was left with no
other option but to file the complaint in the Judicial Magistrate Fast Track
Court No. II, Erode for the offence punishable under Section 138 r/w
141 of the NI Act which came to registered as the STC No. 583 of 2017.
5. The respondent herein (original accused No. 03/partner)
preferred an application under 482 of the Code in the High Court and
prayed that the criminal proceedings instituted against her may be quashed
as she has no liability under the law. The principal argument of the
respondent herein before the High Court was that much before the cheque
came to be issued, the firm had been dissolved. The accounts of the firm
were also settled on 13-02-2017 following the dissolution. The High Court
quashed the proceedings against the respondent herein mainly on the
ground that there was nothing to indicate as to how and in what manner
the respondent at the relevant point of time was in-charge and responsible
for the conduct of the business of the firm. The High Court took the
view that the complaint can be prosecuted as against the respondent
herein only if the allegations made in the complaint fulfils the requirements
of Section 141 of the NI Act. The High Court took the view that merely
by reciting the words used under Section 141 of the NI Act in the complaint
no vicarious liability can be fastened on the partner of the firm.
6. In such circumstances above, the High Court allowed the
application filed by respondent herein and terminated the proceedings as
far as the respondent is concerned.
7. In view of the aforesaid, the appellant (original complainant) is
here before this Court with the present appeal.
Submissions on behalf of the Appellant
8. The learned counsel, Mr. E.R. Kumar appearing for the appellant
vehemently submitted that the High Court committed a serious error in
passing the impugned Order quashing the proceedings against the
respondent herein. He would submit that the entire premise on which
the High Court proceeded could be termed as erroneous in law. The
learned counsel would submit that in the statutory notice issued to the
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respondent as well as in the body of the complaint, there are specific
averments that the accused Nos. 02 and 03 respectively, being the
partners of the partnership firms, are in-charge and responsible for the
day-to- day affairs of the firm. He pointed out there are specific averments
made in the complaint that the partners which include the respondent
herein are regularly looking after and actively taking part in the day-to-day
business of the firm. He further pointed out that there is a specific averment
that in order to discharge the liability, the original accused No. 02 had
issued the cheque within the knowledge and consent of the respondent
herein. It is argued that if the substance of the allegation made in the
complaint fulfil the requirements of Section 141 of the NI Act, the complaint
is to proceed and is required to be tried with. The learned counsel
vociferously argued that while construing a complaint the Court should
not adopt a hyper-technical approach and quash the same.
9. The learned counsel further pointed out that three individual
notices were issued under Section 138 of the NI Act before the filing of
the complaint. He would submit that the statutory notice was duly served
upon the respondent herein. However, the respondent thought fit not to
give any reply to the notice. It is argued that if the respondent had anything
to say as regards her role in the firm, she could have given an appropriate
reply that she is a sleeping partner and not involved into the day- to-day
affairs of the firm. It is argued that respondent herein could also have
clarified in her reply that the firm had already been dissolved much before
the cheque was issued and in such circumstances, no liability could be
fastened on her. In the absence of any reply to the statutory notice, the
respondent could not have argued before the High Court for the first
time about her involvement in the affairs of the firm. The learned counsel
would submit that the High Court committed a serious error in accepting
such submission canvassed on behalf of the respondent at the preliminary
stage.
10. The learned counsel further submitted that once the necessary
averments are made in the complaint, the onus thereafter would shift on
the accused to establish by producing some unimpeachable and
incontrovertible evidence which may clearly indicate that the respondent
herein as one of the partners of the firm, could not have been concerned
with the issuance of the cheque in question.
11. In such circumstances referred above, the learned counsel
appearing for the appellant prays that there being merit in his appeal, the
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
ELANGOVAN [J. B. PARDIWALA, J.]
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same may be allowed and the impugned order passed by the High Court
may be quashed.
Submissions on behalf of the Respondent:
12. Ms. Hari Priya Padmanabhan, the learned counsel appearing
for the respondent (accused) on the other hand has vehemently opposed
the present appeal submitting that no error, not to speak of any error of
law, could be said to have been committed by the High Court in passing
the impugned order. She would submit that mere bald averments in the
complaint are not sufficient to fasten the vicarious lability on the partner
of the firm as envisaged under Section 141 of the NI Act. The learned
counsel would submit that the case on hand is squarely covered by the
decision of this Court in the case of SMS Pharmaceuticals Ltd. v.
Neeta Bhalla, (2005) 8 SCC 89. Relying on the said decision of this
Court, the learned counsel would submit that the deeming fiction creating
criminal lability and vicarious lability are a departure from the usual
principles of criminal law and that a clear case should be spelt out and
the accused person should be made aware of the case alleged against
him or her. The learned counsel would submit that this would therefore
necessarily require averments in addition to the statement that the accused
is in-charge of and responsible for the affairs of the company/firm.
13. The learned counsel appearing for the respondent in support
of her aforesaid submissions has placed strong reliance on the following
decisions:
(i)
Gunmala Sales Pvt. Ltd. v. Anu Mehta & Ors, reported in
(2015) 1 SCC 103;
(ii) National Small Industries Corporation v. Harmeet Singh
Paintal & Anr., reported in (2010) 3 SCC 330;
(iii) Sunita Palita & Others v. M/s Panchami Stone Quarry,
reported in (2022) SC Online SC 945.
14. In such circumstances referred above, the learned counsel
appearing for the respondent prays that there being no merit in this
appeal, the same may be dismissed.
Analysis
15. Having heard the learned counsel appearing for the parties
and having gone through the materials on record the only question that
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falls for our consideration is whether the High Court committed any
error in passing the impugned order?
16. Since the arguments of both the sides have proceeded mainly
on the averments made in the complaint and to analyze the case before
us in proper perspective, it is necessary to scrutinize the statutory notice
as well as the complaint. The statutory notice dated 14.08.2017 reads
thus:-
"To,
1. Sira Marketing Service,
Represented by it's Partner/ Authorized Signatory,
Rajesh, Old No.60, New No.30,
28th Cross St, Indhira Nagar,
Adyar, Chennai-20.
2. Rajesh,
Partner/ Authorized Signatory,
Sira Marketing Service,
Old No.60, New No. 30,
28th Cross St, Indhira Nagar,
Adyar, Chennai-20.
3. Dr. Mrs. Snehalatha Elangovan,
W/o. Elangovan,
Partner / Authorized Signatory,
Sira Marketing Service,
Old No.60, New No.30,
28th Cross St, Indhira Nagar,
Adyar, Chennai-20.
Sir,
Please take notice that we are instructed by our client S.P.
Mani and Mohan Dairy, Represented by its Managing Partner:
R.Mohanasundaram, No.34 & 84, Jeevanantham Street,
Kollampalayam, Erode-638 002 to issue this notice to you.
You No.1 is a Partnership Firm, You No.2 and 3 are Partners
and incharge and responsible for the day-to-day affairs of
You No. 1, you No.2 and 3 are regularly looking after and
actively taking part in the day-to-day business of You No.1.
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
ELANGOVAN [J. B. PARDIWALA, J.]
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Our client is doing business in Milk and Milk Products: You
used to purchase Milk and Milk Products from our client on
credit basis. Our client is maintaining true and correct
accounts. As per accounts maintained by our client you have
to pay a balance of Rs. 10,71,434.60 to our client. In order
to discharge the part of the said balance amount and liability
you No.2 on behalf of you No.1 and with the knowledge and
consent of you No.3 issued the following cheque which is
drawn on TamilNad Mercantile Bank Ltd., Thiruvanmiyur
Branch, Chennai- 41.
S.No. Cheque Date
Cheque No. Cheque Amount
1. 05.05.2017
411618 Rs. 10,00,000/-
On your request our client presented the above said cheque
for collection on 13.06.2017 through HDFC Bank Ltd., Sathy
Road Branch, Erode and the same was returned as "Funds
Insufficient" on 14.06.2017. Again on your request our client
presented the above said cheque for collection on 20.07.2017
through HDFC Bank Ltd., Sathy Road Branch, Erode and the
same was returned as "Funds Insufficient" on 21.07.2017.
Without sufficient funds in your account, you have issued the
above said cheque.
You issued the above said cheque assuring payment on
presentation of the same. At the time of issuing the said
cheque, you represented that you are having an account in
which you will have sufficient amount in your account. But
you purposely allowed the same to be dishonoured with an
intention to cheat and defraud our client. Therefore, you have
committed an offence punishable U/S 138 of the Negotiable
Instruments Act.
You are hereby called upon to pay the above said amount of
Rs.10,00,000/-due under the above said cheque dated
05.05.2017 within is days from the date of receipt of this
notice. Please note that on your failure to make the payment
within the above-mentioned time, legal action will be taken
against you under section 138 of the Negotiable Instruments
Act 1881 and thereupon you will be held liable for all the
costs and consequences arising thereof." [Emphasis supplied]
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17. At the cost of repetition, we may state that there is no dispute
that the aforesaid notice issued to the respondent was duly acknowledged
by her, however, the respondent thought fit not to give any reply to the
same. The acknowledgement receipt has also been placed on record.
The learned counsel appearing for the respondent fairly submitted that
her client was in receipt of the notice however, no reply has been given
to the same.
18. The complaint filed under Section 138 of the NI Act reads
thus:-
"The complainant is a Partnership Firm registered under the
Partnership act and carrying on business in the above said
address. The Partners of the said firm resolved that D.
Gokulnath, S/o. M. Dhanapal the Manager of the said
complainant who knows personally about each and every
transaction of this case to be and he is authorized to represent
the firm in this case. A copy of power of attorney is produced
herewith.
The accused No.1 is a Partnership Firm, the accused No.2
and 3 are Partners and in-charge and responsible for the
day-to-day affairs of the accused No.1, the accused No.2 and
3 are regularly looking after and actively taking part in the
day-to-day business of the accused No.1.
The complainant is doing business in Milk and Milk Products.
The accused used to purchase Milk and Milk Products from
the complainant on credit basis. The complainant is
maintaining true and correct accounts. As per accounts
maintained by the complainant, the accused have to pay a
balance of Rs.10,71,434.60 to the complainant. In order to
discharge the part of the said balance amount and liability
the accused No.2 on behalf of the accused No. 1 and with the
knowledge and consent of the accused No.3 issued the
following cheque which is drawn on TamilNad Mercantile
Bank Ltd., Thiruvanmiyur Branch, Chennai-41.
S.No. Cheque Date
Cheque No. Cheque Amount
1. 05.05.2017
411618 Rs. 10,00,000/-
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
ELANGOVAN [J. B. PARDIWALA, J.]
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On the request of the accused the complainant presented the
above said cheque for collection on 13.06.2017 through
HDFC Bank Ltd., Sathy Road Branch, Erode and the same
was returned as "Funds Insufficient" on 14.06.2017. Again,
on the request of the accused the complainant presented the
above said cheque for collection on 20.07.2017 through
HDFC Bank Ltd., Sathy Road Branch, Erode and the same
was returned as "Funds Insufficient" on 21.07.2017. Without
sufficient funds in their account accused have issued the
above said cheque.
The accused issued the above said cheque assuring payment
on presentation of the same. At the time of issuing the said
cheque, the accused represented that they are having an
account in which they will have sufficient amount in their
account. But the accused purposely allowed the same to be
dishonoured with an intention to cheat and defraud the
complainant. Therefore, the accused have committed an
offence punishable u/s 138 of the Negotiable Instruments Act.
Thereupon the complainant issued a lawyer notice on
14.08.2017 to the accused calling upon them to pay the above
said sum of Rs.10,00,000/- due under the said cheque dated
05.05.2017 within 15 days from the date of receipt of this
notice. The accused received the above said notice on
16.08.2017. But they failed to pay the above said cheque
amount within 15 days. Hence the accused has committed an
offence punishable u/s 138 r/w. 142 of Negotiable Instruments
Act 1881 as amended by Act 55 of 2002.
The complainant submits that he had produced the relevant
documents relating to this offence.
He further submits that he has filed this complaint within one
month from the date of expiry of 15 days grace time given in
the notice for the payment of above said cheque's amount.
The above said cheque was presented for collection through
HDFC Bank Ltd., Sathy Road Branch, Erode which is situated
in Erode Karungalpalayam Police Station limit. Hence this
Hon'ble court is having jurisdiction to cognizance the offence.
A court fee of Rs.5,000/- is paid under Tamilnadu Court Fee
Act.
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It is therefore, prayed that this Hon'ble Court may be pleased
to take this case on file, issue summon to the accused, enquire
the matter, punish the accused with maximum sentence and
direct the accused to pay compensation to the complainant
u/s 357 CPC and render justice." [Emphasis supplied]
19. Thus, from the aforesaid the following averments in the
complaint are evident:-
(a) Accused No.1 is a Partnership Firm, the accused Nos. 2 and
3 resply are the partners and in charge and responsible for the
day-to-day affairs of the firm, the accused Nos. 2 and 3 are
regularly looking after and actively taking part in the day-to-day
business of the firm;
(b) In order to discharge the part liability, the accused No. 2 on
behalf of the firm and with the consent and knowledge of the
accused No. 3 issued the cheque drawn on the Tamilnad
Mercantile Bank Ltd., Thiruvanmiyur Branch, Chennai-41.
20. The aforesaid averments are not only found to be read in the
complaint but in the notice too.
21. We shall now proceed to look into the impugned order passed
by the High Court. The same order reads thus:-
"This criminal original petition has been filed to quash the
proceedings in STC No. 583 of 2017, pending on the file of
the Judicial Magistrate Fast Track Court No.II Erode.
2. The respondent has filed a complaint under Section 138 of
the Negotiable Instruments Act. The petitioner has been arrayed
as A~ 3 in the complaint. This quash petition has been filed
primarily on two grounds. The first ground is that the
Partnership Firm was dissolved during February 2017 and
the subject cheque is said to have been issued by A~2 on
05.05.2017, after the dissolution of the Partnership Firm. The
2nd ground that has been raised is that the allegations made
in the complaint does not satisfy the requirements of Section
141 of the Negotiable Instruments Act.
3. Heard Mr. K. Kannan, learned counsel for the petitioner
and Mr. M. Guruprasad, learned counsel for the respondent.
S. P. MANI AND MOHAN DAIRY v. DR.SNEHALATHA
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4. Insofar as the first issue that is raised by the petitioner, the
same cannot be gone into by this Court and it is a factual
issue which can be decided only in the course of trial.
5. Insofar as the second issue is concerned, it will be beneficial
to extract the relevant portion from the complaint filed by the
respondent hereunder:
"The accused No. 1 is a Partnership Firm, the accused
No.2 and 3 are Partners and in-charge and responsible
for the day-to-day affairs of the accused No. 1, the accused
No.2 and 3 are regularly looking after and actively taking
part in the day-to-day business of the accused No. 1.
The complainant is doing business in Milk and Milk
Products. The accused used to purchase Milk and Milk
Products from the complainant on credit basis. The
complainant is maintaining true and correct accounts. As
per accounts maintained by the complainant, the accused
have to pay a balance of Rs. 10,71,434. 60/- to the
complainant. In order to discharge the part of the said
balance amount and liability the accused No.2 on behalf
of the accused No.1 and with the knowledge and consent
of the accused No. 3 issued the following cheque which is
drawn on Tamil Nadu Mercantile Bank Ltd., Thiruvanmiyur
Branch, Chennai-41."
S.No. Cheque Date Cheuqe No.
Cheque Amount
1. 05.05.2017
 411618
Rs. 10,00,000/-
6. In the present case, A~ 1 is the Partnership Firm and A~2
who is the partner is the signatory of the cheque. The petitioner
A~ 3 has been roped in as an accused since she is a partner
of A~ 1 Firm. The complaint can be prosecuted as against the
petitioner only if the allegations made in the complaint satisfies
the requirements of Section 141 of the Negotiable Instruments
Act.
7. In the present case, the respondent has merely repeated the
words used under Section 141 of the Negotiable Instruments
Act and there is absolutely no allegation as to how and in
what manner the petitioner is in-charge and responsible for
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the conduct of the business. In the absence of such an
allegation, the complaint is not maintainable as against the
petitioner. The law on this issue is well settled.
8. In the result, the proceedings in STC No. 583 of 2017, on
the file of the Judicial Magistrate Fast Track Court No.II,
Erode, is hereby quashed insofar as the petitioner is
concerned. The Court below is directed to complete the
proceedings in STC No.583 of 2017, against the other accused
persons within a period of three months from the date of receipt
of a copy of this order.
9. This criminal original petition is allowed with the above
directions. Consequently, connected miscellaneous petitions
are closed."
22. Thus, the plain reading of the impugned order passed by the
High Court as aforesaid would indicate that the proceedings came to be
quashed essentially on the ground that there was nothing to indicate that
in what manner the respondent herein was in-charge and responsible for
the day-to-day affairs of the firm so as to make her vicariously liable for
the alleged offence with the aid of Section 141 of the NI Act. To put it
in other words, the High Court proceeded on the footing that mere
averments in the complaint as regards the role of the respondent as a
partner in the firm is not sufficient.
Analysing Section 141 of the Negotiable Instrument Act,
1881
23. The provisions of Section 138 and Section 141 resply of the
NI Act read as under:-
"Section 138. Dishonour of cheque for insufficiency, etc. of
funds in the account.-
Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any amount
of money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability,
is returned by the bank unpaid, either because of the amount
of money standing to the credit of that account is insufficient
to honour the cheque or that it exceeds the amount arranged
to be paid from that account by an agreement made with that
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bank, such person shall be deemed to have committed an
offence and shall, without prejudice to any other provision of
this Act, be punished with imprisonment for a term which may
be extended to two years, or with fine which may extend to
twice the amount of the cheque or with both:
Provided that nothing contained in this Section shall apply
unless-
(a) the cheque has been presented to the bank within a period
of six months from the date on which it is drawn or within
the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as
the case may be, makes a demand for the payment of the
said amount of money by giving a notice in writing, to
the drawer of the cheque, within thirty days of the receipt
of information by him from the bank regarding the return
of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of
the said amount of money to the payee or, as the case
may be, to the holder in due course of the cheque, within
fifteen days of the receipt of the said notice.
Explanation: For the purposes of this Section, "debt or other
liability" means a legally enforceable debt or other liability."
"Section 141. Offences by companies.-
(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 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.
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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.
(2) Notwithstanding anything contained in sub-section (1),
where any offence under this Act has been committed by a
company and it is proved that the offence has been
committed with the consent or connivance of, or is
attributable to, any neglect on the part of, any director,
manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to
be proceeded against and punished accordingly.
Explanation - For the purposes of this Section-
(a) "company" means any body corporate and includes
a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in
the firm."
24. Evidently, the gist of Section 138 is that the drawer of the
cheque shall be deemed to have committed an offence when the cheque
drawn by him is returned unpaid on the prescribed grounds. The conditions
precedent and the conditions subsequent to constitute the offence are
drawing of a cheque on the account maintained by the drawer with a
banker, presentation of the cheque within the prescribed period, making
of a demand by the payee by giving a notice in writing within the
prescribed period and failure of the drawer to pay within the prescribed
period. Upon fulfilment of these requirements, the commission of the
offence which may be called the offence of 'dishonour of cheque' is
complete. If the drawer is a company, the offence is primarily committed
by the company. By virtue of the provisions of sub-section (1) of Section
141, the guilt for the offence and the liability to be prosecuted and punished
shall be extended to every person who, at the time the offence was
committed, was in charge of and was responsible to the company for
the conduct of its business; irrespective of whether such person is a
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director, manager, secretary or other officer of the company. It would be
for such responsible person, in order to be exonerated in terms of the
first proviso, to prove that the offence was committed without his
knowledge or despite his due diligence.
25. Under the separate provision of sub-section (2), if it is proved
that the offence was committed with the consent or connivance of or
was attributable to the neglect on the part of any director, manager,
secretary or other officer of the company, such person would also be
deemed to be guilty for that offence. Obviously, the burden of alleging
and proving consent, connivance or neglect on the part of any director,
etc. would rest upon the complainant. The non obstante clause with
which the sub-section (2) opens indicate that the deeming provision is
distinct and different from the deeming provision in sub-section (1) in
which the office or designation of the person in charge of and responsible
to the company for the conduct of its business is immaterial.
26. While the essential element for implicating a person under
sub-section (1) is his or her being in charge of and responsible to the
company in the conduct of its business at the time of commission of the
offence, the emphasis in sub-section (2) is upon the holding of an office
and consent, connivance or negligence of such officer irrespective of his
or her being or not being actually in charge of and responsible to the
company in the conduct of its business. Thus, the important and
distinguishing feature in sub-section (1) is the control of a responsible
person over the affairs of the company rather than his holding of an
office or his designation, while the liability under sub-section (2) arises
out of holding an office and consent, connivance or neglect.