Supreme Court of India
G. RAMESHversusKANIKE HARISH KUMAR UJWAL & ANR.
- Citation
- 2019 INSC 468
- Decided
- 5 April 2019
- Disposal
- Appeal(s) allowed
- Bench
- D Y CHANDRACHUD
Holding
The complaint adequately averred the partnership’s nature and each partner’s involvement, satisfying Section 141(1), so the High Court’s quashing of the complaint was erroneous.
Summary
The appellant filed a complaint under Section 138 of the Negotiable Instruments Act alleging that a partnership firm, Vainqueur Corporate Services, and its partners issued several cheques that were dishonoured for insufficient funds after the appellant had performed data‑entry work. The complaint detailed the partnership’s business, the caution deposit, the issuance and return of the cheques, and the partners' assurances to re‑present the cheques, which were again dishonoured. The High Court, invoking Section 482 of the CrPC, quashed the complaint on the ground that the averments did not sufficiently implicate the first respondent, a partner, under Section 141(1) of the NI Act. On appeal, the Supreme Court examined whether the complaint contained adequate particulars to deem the partners liable as "persons in charge" of the firm, as defined by the explanation to Section 141. The Court held that the complaint sufficiently described the nature of the partnership, the business, and each accused’s role, thereby meeting the requirements of Section 141(1). Consequently, the High Court’s order was set aside and the appeal was allowed.
Issues considered
- Whether the complaint under Section 138 of the Negotiable Instruments Act contains sufficient averments to satisfy the requirements of Section 141(1) for deeming partners of a partnership firm liable.
- Whether the High Court erred in exercising its power under Section 482 of the CrPC to quash the criminal complaint.
Legislation cited
- Code of Criminal Procedure, 1972s. 482
- Negotiable Instruments Act, 1881s. 138, s. 141
Subjects
Negotiable Instruments ActSection 138Section 141Partnership firmCompany definitionQuashing of complaintSection 482 CrPCCheque dishonourCriminal liability of partners
Judgment
[2019] 5 S.C.R. 751 751
G. RAMESH A
v.
KANIKE HARISH KUMAR UJWAL & ANR.
(Criminal Appeal No. 603 of 2019)
APRIL 05, 2019 B
[DR. DHANANJAYA Y CHANDRACHUD AND
HEMANT GUPTA, JJ.]
Code of Criminal Procedure, 1973: s.482 – Quashing of
complaint filed under s.138 NI Act – Case of the appellant- C
complainant was that the partnership firm of which the first
respondent was a partner had obtained contracts for data entry,
which were sub-contracted to the complainant on deposit of caution
amount for assigning the job of data entry to him – After the job of
data entry was completed, the accused issued two cheques which
D
on presentation were dishonoured on the ground of insufficiency
of funds – Thereafter, two more cheques were issued by the managing
partner which were again returned unpaid – Complaint filed under
s.138 NI Act – High Court quashed the complaint – Appeal by
complainant – Question for consideration in the appeal was whether
there were sufficient averments in the complaint to meet the E
requirement of s.141(1) NI Act – Held: In terms of the explanation
to s.141, the expression “company” is defined to mean any body
corporate and include a firm or other association of individuals –
Sub-section (1) of s.141 postulates that where an offence is
committed under s.138 by a company, the company as well as every
F
person who, at the time when the offence was committed, was in-
charge of and was responsible to the company for the conduct of
the business shall be deemed to be guilty of the offence – In the
instant case, the complaint contained sufficient description of the
nature of the partnership, the business which was being carried on
and the role of each of the accused in the conduct of the business G
and, specifically, in relation to the transactions which took place
with the complainant – At every place in the averments, the accused
were referred to in the plural sense – Besides this, the specific role
of each of them in relation to the transactions arising out of the
contract in question, which ultimately led to the dishonour of the
H
751
752 SUPREME COURT REPORTS [2019] 5 S.C.R.
A cheques, was elucidated – The averments were sufficient to meet
the requirement of s.141(1) – The fact that the first accused was a
partnership firm of which the remaining two accused were partners
was missed by the High Court – Thus, High Court was in error in
quashing the complaint against the first respondent – Negotiable
Instruments Act, 1881 – ss.138 and 141.
B
Allowing the appeal, the Court
HELD : The complaint contains a recital of the fact that the
first set of cheques were returned for insufficiency of funds. The
complaint also contains an averment that after the second set of
C cheques were dishonoured, the accused assured the complainant
that they will be honoured on re-presentation in the month of
July 2011. The averments are sufficient to meet the requirement
of Section 141(1). The High Court proceeded on the basis that
the first accused was a company in which the other two accused
were directors. Section 141 undoubtedly uses the expression
D “company” so as to include a firm or association of persons. The
fact that the first accused, in the present case, is a partnership
firm of which the remaining two accused are partners has been
missed by the High Court. [Paras 16, 17, 18]
Gunmala Sales Private Limited v. Anu Mehta and Others
E (2015) 1 SCC 103 : [2014] 10 SCR 1117 – relied on
Case Law Reference
[2014] 10 SCR 1117 relied on Para 7
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
F No. 603 of 2019.
From the Judgment and Order dated 13.06.2018 of the High Court
of Judicature at Hyderabad for the State of Telangana and the State of
Andhra Pradesh in Criminal Petition No. 5301 of 2014.
Ms. Bhabhna Das, Krishna Dev Jagarlamudi, Advocates for the
G Appellant.
Abhimanyu Bhandari, Ms. Akriti Chaubey, Ms. Roohina Dua,
Kunwar Aditya Singh, Ejaz Maqbool, S. Udaya Kumar Sagar, Mrityunjai
Singh, Advs. for the Respondents.
H
G. RAMESH v. KANIKE HARISH KUMAR UJWAL & ANR. 753
The Judgment of the Court was delivered by A
DR. DHANANJAYA Y CHANDRACHUD, J.
1. Leave granted.
2. This appeal arises from a judgment dated 13 June 2018 of a
learned Single Judge of the High Court of Judicature at Hyderabad. 1 B
While allowing a petition under Section 482 of the Code of Criminal
Procedure, 19732 instituted by the first respondent, the High Court
quashed the proceedings3 on the file of the Special Judicial Magistrate
of First Class arising out of a complaint under Section 138 of the
Negotiable Instruments Act, 1881.4
C
3. The appellant is the complainant. The first accused is a
partnership firm by the name of Vainqueur Corporate Services.
4. The third accused is the managing partner. The first respondent,
who is arrayed as the second accused, is a partner of the firm. The
complaint alleges that the partnership firm was dealing in data entry D
work. After obtaining contracts for data entry, sub-contracts were
entered into by the firm for the completion of the assignments. Paragraphs
1 to 7 of the complaint are material to the controversy in the present
case and are extracted below:
“1. That the accused No. 3 is the Managing Director and
E
Accused No. 2 is one of the partners of M/s. Va i n q u e u r
Corporate Services situated at Hyderabad and dealing in
data entry work. They used to take contracts of data
entry and give sub contracts to others to complete said
assignment.
F
2. The accused persons have given sub contract of data entry
to the complainant in the month of August 2010 by
taking a caution deposit of Rs 1,00,000 which has paid
through two cheques which were credited into their account
No. 304011014832 at ING Vysya Bank on 30.08.2010.
Thereafter, they have assigned the job of data entry to the G
complainant from the month of September 2010 to December
2010.
1
“Criminal Petition No. 5301 Of 2014"
2
“CrPC”
3
“Criminal M.P. No. 295 of 2014 in C.C. No. 751 of 2012"
4
“The Act” H
754 SUPREME COURT REPORTS [2019] 5 S.C.R.
A 3. The complainant did the data entry work for said four months
worth of Rs 8,50,000 as per rates of understanding. They
have issued cheque bearing No. 929605 dated 01.11.2010
drawn on Axis Bank, Hyderabad for Rs 2,00,000 towards
work of September 2010 andcheque bearing No. 929620
dated 18.12.2010 drawn on Axis Bank, Hyderabad for
B
Rs 2,50,000 towards work of October 2010.
4. The complainant presented said two cheques for collection
through his bank i.e., HDFC, Mahabubnagar but said
cheques were returned unpaid due toinsufficient balance in
their bank account. The said fact of return of cheques was
C informed to the accused with a request to pay the dishonoured
cheque amount along with subsequent months i.e., for the
month of November and December 2010 amounts.
5. On that accused No. 2 transferred Rs. 1,00,000 from his
account No. 10141560000576 to the account No.
D 10141070007111 of complainant at HDFC Bank,
Mahabubnagar on 08.02.2011 and 10.02.2011. They a l s o
assured the complainant to pay the balance amount within
short time. As the accused no. 2 is son of brother in law of
complainant, he believed them and kept quite for some time.
E As they have committed default in payment of amounts, the
complainant could not continue said work from the month of
January 2011, as he had no money to pay the salaries of his
employees.
6. After repeated demands for the payment of balance amount
F of Rs. 7,50,000 towards completed work and Rs.1,00,000
given towards caution deposit, the accused No. 3 issued two
more cheques bearing No. 929675 and 929676 dated
30.05.2011 and 19.07.2011 respectively each for Rs. 2,00,000
drawn on Axis Bank Ltd., Hyderabad towards part payment
of due amount and assured to pay the balance amount within
G short time.
7. The complainant presented said cheque bearing No. 929675
but the same was returned unpaid due to insufficient funds
in their bank account on 30.05.2011. The complainant
H
G. RAMESH v. KANIKE HARISH KUMAR UJWAL & ANR. 755
[DR. DHANANJAYA Y CHANDRACHUD, J.]
informed the accused about the return of cheque and they A
assured to honour both cheques on re-presentation in the
month of July 2011. As per their request, the complainant
presented cheques bearing No. 929675 and 929676 int h e
month of July 2011 but both cheques again returned unpaid
on 14.07.2011 and 20.07.2011 respectively for insufficient
B
funds in their bank account. Since then the complainant is
tried to contact the accused to inform and for the payment
of cheques amount along with entire due amount but t h e y
have avoided the complainant.”
In paragraph 8 of the complaint, there is an averment that a notice
of demand was issued within 30 days of the dishonour of the cheque on C
1 August 2011 in spite of which payment was not made.
5. The complaint was instituted on 19 September 2011 before the
Special Judicial Magistrate First Class, Mahabubnagar. Non-bailable
warrants were issued against the first respondent as he failed to appear
in the proceedings. The warrants were recalled. The first respondent D
instituted proceedings under Section 482 of the CrPC. The High Court
quashed the proceedings by its impugned judgment and order.
6. The High Court held that the averments contained in paragraph
5 of the complaint were not sufficient to implicate criminal liability upon
the first respondent for an offence punishable under Section 138. It is E
this view of the High Court which falls for consideration in the present
appeal.
7. Ms. Bhabhna Das, learned counsel appearing on behalf of the
appellant submits that the High Court was manifestly in error in quashing
the complaint. Besides relying on the decision of this Court in Gunmala F
Sales Private Limited v. Anu Mehta and Others5 , learned counsel
submitted that the averments contained in the complaint are sufficient to
meet the requirement of Section 141.
8. On the other hand, Mr. Abhimanyu Bhandari learned counsel
appearing on behalf of the first respondent submits that under Section G
141(1), where the person committing an offence 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
5
(2015) 1 SCC 103 (at paragraph 30 and 31) H
756 SUPREME COURT REPORTS [2019] 5 S.C.R.
A the company as well as the company shall be deemed to be guilty of the
offence. The submission is that there was no averment in the complaint
that the first respondent was incharge of and was responsible to the
“company” for the conduct of the business. The defence of the first
respondent is that, he resides in Kuwait where he is employed with the
National Bank of Kuwait. Hence, he has no day to day connection with
B
the affairs of the partnership firm. In these circumstances, learned
counsel submitted that the High Court having quashed the complaint,
this Court ought not to exercise its jurisdiction under Article 136 to
interfere with the judgment and order of the High Court.
9. Section 141(1) provides as follows:-
C
“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
D 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:
E
[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
F 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
G 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.”
H
G. RAMESH v. KANIKE HARISH KUMAR UJWAL & ANR. 757
[DR. DHANANJAYA Y CHANDRACHUD, J.]
The explanation to the Section is in the following terms:- A
“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.” B
10. In terms of the explanation to Section 141, the expression
“company” has been defined to mean any body corporate and to include
a firm or other association of individuals. Sub-section (1) of Section 141
postulates that where an offence is committed under Section 138 by a
company, the company as well as every person who, at the time when C
the offence was committed, was in charge of and was responsible to the
company for the conduct of the business shall be deemed to be guilty of
the offence.
11. In determining as to whether the requirements of the above
provision have been fulfilled, it is necessary to bear in mind the principle D
of law that a partnership is a compendious expression to denote the
partners who comprise of the firm. By the deeming fiction in Explanation
(a) the expression company is defined to include a firm.
12. The issue is whether there are sufficient averments in the
complaint to meet the requirement of Section 141(1). This is a matter
E
which has to be determined on a holistic reading of the complaint. From
the averments in the complaint, the case of the complainant is that the
partnership firm of which the first respondent is a partner had obtained
contracts for data entry, which were being sub-contracted to the
complainant. The accused are alleged to have obtained a caution deposit
of Rs 1,00,000 and to have assigned the job of data entry to the F
complainant. After completing the job of data entry, the accused issued
two cheques dated 1 November 2010 and 18 December 2010 for the
amount of Rs 2,00,000 and Rs 2,50,000 respectively. On presentation,
the cheques were returned due to insufficiency of funds. It was thereafter
that the first respondent is alleged to have transferred an amount of Rs
G
1,00,000 from his account on 8 February 2011 and 10 February 2011.
The complaint contains the statement that the parties are related.
Thereafter, two further cheques were issued by the managing partner
on 30 May 2011 and 19 July 2011 each in the amount of Rs 2,00,000.
H
758 SUPREME COURT REPORTS [2019] 5 S.C.R.
A After the cheques were returned unpaid due to insufficiency of funds,
the complainant is alleged to have informed the accused who are stated
to have assured him that both the cheques would be honoured on re-
presentation in the month of July 2011.
13. The submission is that the above averments are adequate to
B meet the requirements of Section 141 having regard to the fact that the
first accused is a partnership firm.
14. While laying down the general principles which must apply to
this body of law, a two-Judge Bench of this Court in Gunmala Sales
Private Limited (supra) held:
C “30. When a petition is filed for quashing the process, in a given
case, on an overall reading of the complaint, the High Court may
find that the basic averment is sufficient, that it makes out a case
against the Director; that there is nothing to suggest that the
substratum of the allegation against the Director is destroyed
D rendering the basic averment insufficient and that since offence
is made out against him, his further role can be brought out in the
trial. In another case, the High Court may quash the complaint
despite the basic averment. It may come across some
unimpeachable evidence or acceptable circumstances which may
in its opinion lead to a conclusion that the Director could never
E have been in charge of and responsible for the conduct of the
business of the company at the relevant time and therefore making
him stand the trial would be an abuse of process of court as no
offence is made out against him.”
31. When in view of the basic averment process is issued the
F complaint must proceed against the Directors. But, if any Director
wants the process to be quashed by filing a petition under Section
482 of the Code on the ground that only a bald averment is made
in the complaint and that he is really not concerned with the
issuance of the cheque, he must in order to persuade the High
G Court to quash the process either furnish some sterling
incontrovertible material or acceptable circumstances to
substantiate his contention. He must make out a case that making
him stand the trial would be an abuse of process of court. He
cannot get the complaint quashed merely on the ground that apart
H
G. RAMESH v. KANIKE HARISH KUMAR UJWAL & ANR. 759
[DR. DHANANJAYA Y CHANDRACHUD, J.]
from the basic averment no particulars are given in the complaint A
about his role, because ordinarily the basic averment would be
sufficient to send him to trial and it could be argued that his further
role could be brought out in the trial. Quashing of a complaint is a
serious matter. Complaint cannot be quashed for the asking. For
quashing of a complaint it must be shown that no offence is made
B
out at all against the Director.”
15. In the present case, it is evident from the relevant paragraphs
of the complaint which have been extracted above that the complaint
contains a sufficient description of (i) the nature of the partnership; (ii)
the business which was being carried on; (iii) the role of each of the
accused in the conduct of the business and, specifically, in relation to the C
transactions which took place with the complainant. At every place in
the averments, the accused have been referred to in the plural sense.
Besides this, the specific role of each of them in relation to the
transactions arising out of the contract in question, which ultimately led
to the dishonour of the cheques, has been elucidated. D
16. The complaint contains a recital of the fact that the first set of
cheques were returned for insufficiency of funds. It is alleged that the
first respondent transferred an amount of Rs 1,00,000 on 8 February
2011 and 10 February 2011. The complaint also contains an averment
that after the second set of cheques were dishonoured, the accused E
assured the complainant that they will be honoured on re-presentation in
the month of July 2011. The averments are sufficient to meet the
requirement of Section 141(1).
17. The High Court proceeded on the basis that the first accused
was a company in which the other two accused were directors. Section F
141 undoubtedly uses the expression “company” so as to include a firm
or association of persons. The fact that the first accused, in the present
case, is a partnership firm of which the remaining two accused are
partners has been missed by the High Court.
18. Be that as it may, for the reasons adduced above, we have G
come to the conclusion that the High Court was in error in quashing the
criminal case against the first respondent.
19. We accordingly allow the appeal and set aside the impugned
judgment and order of the High Court dated 13 June 2018.
H
760 SUPREME COURT REPORTS [2019] 5 S.C.R.
A 20. At this stage, Mr. Abhimanyu Bhandari, learned counsel has
submitted that the first respondent may be granted an exemption from
appearing before the Trial Court. We leave it open to the first respondent
to move an application in that regard before the learned Trial Judge
which would be considered in accordance with law.
B
Devika Gujral Appeal allowed.
C
D
E
F
G
H
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