SIBY THOMASversusM/S. SOMANY CERAMICS LTD

                 [2023] 13 S.C.R. 821 : 2023 INSC 890



                           CASE DETAILS

                            SIBY THOMAS
                                    v.
                  M/S. SOMANY CERAMICS LTD.
                  (Criminal Appeal No. 3139 of 2023)
                          OCTOBER 10, 2023
        [C. T. RAVIKUMAR AND SANJAY KUMAR, JJ.]
                             HEADNOTES
      Issue for consideration: In the impugned order, the High Court
declined to quash the complaint u/s.138 r/w. s.141 of the Negotiable
Instruments Act, 1881 qua the appellant-accused no.4 in exercise of the
power u/s. 482 of the Cr.P.C.
     Negotiable Instruments Act, 1881 – s. 138 r/w. s.141 – Respondent
filed complaint u/s. 138 r/w. s.141 of the NI Act – Appellant set up twin
grounds to seek quashment of the complaint against him; firstly, that
he had resigned from the partnership firm on 28.05.2013 whereas the
cheque in question was issued on 21.08.2015 and secondly, that the
complaint is devoid of mandatory averments required to be made in
terms of sub-Section 1 of s.141 of the NI Act, as relates him:
      Held: It is not averred anywhere in the complaint that the appellant-
accused no.4 was in charge of the conduct of the business of the company
at the relevant time when the offence was committed – What is stated in
the complaint is only that the accused Nos. 2 to 6 being the partners are
responsible for the day-to-day conduct and business of the company – It
is also relevant to note that an overall reading of the complaint would not
disclose any clear and specific role of the appellant-accused no.4 – In the
complaint, it was alleged that accused No.1 through accused No.2 had
purchased the goods from the complainant on credit basis through proper
sales invoices and, in paragraph 6 it was alleged that for liquidation of
legal liability outstanding accused Nos. 2 and 3 issued cheque in favour of
the complainant from the account of accused No.1 – The averments in the
complaint filed by the respondent are not sufficient to satisfy the mandatory
                                     821
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requirements u/s. 141(1) of the NI Act – Since the averments in the complaint
are insufficient to attract the provisions u/s. 141(1) of the NI Act, to create
vicarious liability upon the appellant, he is entitled to succeed in this appeal.
[Paras 12, 13, 17]
      Negotiable Instruments Act, 1881 – Ingredients of s.141 – Vicarious
liability:
      Held: A vicarious liability would be attracted only when the ingredients
of s.141(1) of the NI Act, are satisfied – It would also reveal that merely
because somebody is managing the affairs of the company, per se, he would
not become in charge of the conduct of the business of the company or the
person responsible to the company for the conduct of the business of the
company – A bare perusal of s.141(1) of the NI Act, would reveal that only
that person who, at the time the offence was committed, was in charge of
and was responsible to the company for the conduct of the business of the
company, as well as the company alone shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished. [Para 16]
    Negotiable Instruments Act, 1881 – Specific averments in the
complaint to make the accused vicariously liable:
       Held: In the decision in S.P. Mani’s case in paragraph 47 (a) it was held
that the primary responsibility of the complainant is to make specific averments
in the complaint so as to make the accused vicariously liable. [Para 11]

       LIST OF CITATIONS AND OTHER REFERENCES

      S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan 2022 SCC
OnLine SC 1238; Gunmala Sales Private Limited v. Anu Mehta (2015) 1 SCC
103 : [2014] 10 SCR 1117; Ashok Shewakramani & Ors. v. State of Andhra
Pradesh & Anr. 2023 INSC 692 – relied on.
    Anita Malhotra v. Apparel Export Promotion Council & Anr. (2012) 1
SCC 520 : 2011 [13] SCR 76 – referred to.
       OTHER CASE DETAILS INCLUDING IMPUGNED
              ORDER AND APPEARANCES

     CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
3139 of 2023
        SIBY THOMAS v. M/S. SOMANY CERAMICS LTD.                           823


     From the Judgment and Order dated 06.12.2019 of the High Court of
Punjab & Haryana at Chandigarh in CRM-M No. 52299 of 2019.
     Appearances:
    Wills Mathews, Karthik S. D., Paul John Edison, Dhanesh M. Nair,
Manu Prakash Upadhyay, Ms. Shweta Garg, Advs. for the Appellant.
     Vipin Kumar Jai, Adv. for the Respondent.

       JUDGMENT / ORDER OF THE SUPREME COURT

                               JUDGMENT
     C.T. RAVIKUMAR, J.
     1. Leave granted.
      2. This Appeal by accused No.4 in the complaint filed by the
respondent herein under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 (for short ‘the NI Act’) is directed against the order
dated 06.12.2019 in CRM-M No.52299 of 2019 passed by the High Court
of Punjab and Haryana at Chandigarh. As per the impugned order the High
Court declined to quash the complaint qua the appellant in exercise of the
power under Section 482 of the Code of Criminal Procedure (for short ‘Cr.
PC’).
     3. Heard the learned counsel appearing for the petitioner and learned
counsel appearing for the respondent.
      4. Virtually, the appellant set up twin grounds to seek quashment of the
complaint against him; firstly, that he had resigned from the partnership firm
on 28.05.2013 whereas the cheque in question was issued on 21.08.2015 and
secondly, that the complaint is devoid of mandatory averments required to be
made in terms of sub-Section 1 of Section 141 of the NI Act, as relates him.
The High Court found that the contention in regard to the maintainability
of the complaint against the appellant, owing to his retirement from the
partnership firm prior to the issuance of the cheque in question, is a matter
of evidence and ultimately, the appellant would have to lead evidence and
prove that fact. Consequently, it was held that the complaint could not be
rejected qua the appellant at the initial stage in exercise of the powers under
Section 482 Cr.PC.
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      5. The learned counsel appearing for the petitioner contended that
even if it is taken that the factum of his retirement from the partnership firm
on 28.5.2013 was prior to the cheque in question on 21.8.2015 is a matter
of evidence, the complaint as against the appellant is liable to be quashed
owing to the absence of mandatory averments required to be made in terms
of Section 141 (1) of the NI Act, in the complaint. In other words, it is
submitted that though the respondent had specified or elaborated the role
of some of the accused in the complaint as relates the appellant averments
elaborating/specifying his role in the day-to-day affairs of the partnership
firm much-less mandatorily required averments for his prosecution are
conspicuously absent in the complaint. To drive home the contentions that
the learned counsel for the appellant drew our attention to paragraphs 3 to 6
of the complaint. Learned counsel for the appellant relied on the decisions
of this Court in Anita Malhotra v. Apparel Export Promotion Council &
Anr.1 and a decision of Two-Judge Bench of this Court in Criminal Appeal
No. 879 of 2023 titled Ashok Shewakramani & Ors. v. State of Andhra
Pradesh & Anr.2 and connected cases dated 03.08.2023 to buttress the said
contentions.
      6. Per Contra, learned counsel appearing for the respondent would
submit that paragraphs 3 and 4 of the complaint would reveal that the
averments thereunder are sufficient to satisfy the mandatory requirement
in terms of Section 141 of the NI Act, qua the appellant as well. In order to
support his contention the learned counsel relied on the decision of a two-
Judge Bench of this Court in S.P. Mani and Mohan Dairy v. Dr. Snehalatha
Elangovan3.
     7. In view of the rival contentions as above it is apposite to refer to
the averments in paragraph 3 and 4 of the complaint, which is annexed to
the SLP. They read thus:
      “3. That the accused No.1 is a partnership-firm with the name and
      style of M/s Tile Store, having its office at 5-654/B, Jyothis Complex,
      By-pass Road, Eranhipalam, Calicut-673006 (Kerala), while accused


1
      (2012) 1 SCC 520
2
      2023 INSC 692
3
      2022 SCC OnLine SC 1238
        SIBY THOMAS v. M/S. SOMANY CERAMICS LTD.                          825
                  [C.T. RAVIKUMAR, J.]

     No.2 to 6 are the partners of the accused No.1. The accused No.2 to
     6 being the partners are responsible for the day to day conduct and
     business of the accused No. 1.
     4.That the accused No.1 through its partners i.e. accused No.2 to 6, on
     the basis of the authority vested in them approached to the complainant
     for purchasing the ceramic tiles, sanitary wares and bath fitting from
     the complainant on credit basis. The request of the accused No.1
     was accepted by the complainant and the accused agreed to pay the
     amount of the goods purchased by them to the complainant within
     one month and it was also agreed that if the accused failed to make
     the payment within one month in that case they shall also be liable to
     pay interest @ 24% per annum on the balance sale consideration till
     its full realization.”
                                                      (Underline supplied)
       8. As noticed hereinbefore, the parties are at issue over the question
as to whether the averments in the complaint satisfy the requirements
under Section 141 (1) of the N.I. Act. True that in paragraph 3 it is stated
that accused No.1 is a partnership firm and accused Nos.2 to 6 are the
partners of accused No.1 and they, being the partners, are responsible for
the day-to-day contact and business of accused No.1. In paragraph 4 what
is stated is that accused No.1 through its partners i.e., accused Nos. 2 to 6,
on the basis of the authority vested in them approached the complainant
for purchasing the ceramic tiles, sanitary-wares and bath fittings from the
complainant on credit basis. Indubitably, besides the aforesaid averments no
other averments are made in the complaint in regard to the appellant’s role.
Therefore, the question is whether the averments referred to hereinbefore
are sufficient to prosecute the appellant under Section 138 of the NI Act,
on the afore-extracted averments. We are not oblivious of the fact that the
appellant has also got a contention that he retired from the partnership firm
much prior to the issuance of the cheque in question. It is only proper and
profitable to refer to sub-section (1) of Section 141 of the N.I. Act in view
of the rival contentions. It reads thus:-
     “(1) If the person committing an offence under section 138 is a
     company, every person who, at the time the offence was committed,
     was in charge of, and was responsible to the company for the conduct
826          SUPREME COURT REPORTS                       [2023] 13 S.C.R.


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

      9. Bearing in mind the averments made in the complaint in relation
to the role of the appellant and sub-section (1) of Section 141, we will
have to appreciate the rival contentions. Going by the decision relied on by
the respondent in S.P. Mani’s case (supra) it is the primary responsibility
of the complainant to make specific averments in the complaint, so as to
make the accused vicariously liable. Relying on paragraph 47(b) of the said
decision learned counsel appearing for the respondent would also submit
that the complainant is supposed to know only generally as to who were
in charge of the affairs of the company or firm, as the case maybe and he
relied on mainly the following recitals thereunder:
      “47……
      a.) ……
      b.) The complainant is supposed to know only generally as to who
      were in charge of the affairs of the company or firm, as the case may
      be. The other administrative matters would be within the special
      knowledge of the company or the firm and those who are in charge
      of it. In such circumstances, the complainant is expected to allege
      that the persons named in the complaint are in charge of the affairs
      of the company/firm.”
      10. We are of the considered view that the respondent has misread the
said decision. Under the sub-caption ‘Specific Averments in the complaint’,
        SIBY THOMAS v. M/S. SOMANY CERAMICS LTD.                       827
                  [C.T. RAVIKUMAR, J.]

in paragraph 41 and sub-paragraphs (a) and (d) as also in paragraph 42
thereof, it was held in the decision in S.P. Mani’s case (supra) thus:-
     “41. In Gunmala Sales Private Limited (supra), this Court after an
          exhaustive review of its earlier decisions on Section 141 of the
          NI Act, summarized its conclusion as under:-
          “(a) Once in a complaint filed under Section 138 read with
          Section 141 of the NI Act the basic averment is made that the
          Director was in charge of and responsible for the conduct of the
          business of the company at the relevant time when the offence
          was committed, the Magistrate can issue process against such
          Director;
          (b) ……
          (c) ……
          (d) No restriction can be placed on the High Court’s powers
          under Section 482 of the Code. The High Court always uses and
          must use this power sparingly and with great circumspection to
          prevent inter alia the abuse of the process of the Court. There
          are no fixed formulae to be followed by the High Court in this
          regard and the exercise of this power depends upon the facts and
          circumstances of each case. The High Court at that stage does
          not conduct a mini trial or roving inquiry, but nothing prevents
          it from taking unimpeachable evidence or totally acceptable
          circumstances into account which may lead it to conclude that
          no trial is necessary qua a particular Director.”
     42. The principles of law and the dictum as laid in Gunmala Sales
          Private Limited (supra), in our opinion, still holds the field and
          reflects the correct position of law.”
     11. In the light of the afore-extracted recitals from the decision in
Gunmala Sales Private Limited v. Anu Mehta4, quoted with agreement in
S.P. Mani’s case (supra) and in view of sub-section (1) of Section 141 of
the N.I. Act it cannot be said that in a complaint filed under Section 138


4
    (2015) 1 SCC 103,
828          SUPREME COURT REPORTS                        [2023] 13 S.C.R.


read with Section 141 of the N.I. Act to constitute basic averment it is not
required to aver that the accused concerned is a person who was in charge
of and responsible for the conduct of the business of the company at the
relevant time when the offence was committed. In paragraph 43 of S.P.
Mani’s case (supra) it was held thus:
      “43. In the case on hand, we find clear and specific averments not
           in the complaint but also in the statutory notice issued to the
           respondent.”
     It is thereafter that in the decision in S.P. Mani’s case (supra)
in paragraph 47 (a) it was held that the primary responsibility of the
complainant is to make specific averments in the complaint so as to make
the accused vicariously liable.
      12. Bearing in mind the afore-extracted recitals from the decisions
in Gunmala Sales Private Limited’s case (supra) and S.P. Mani’s case
(supra), we have carefully gone through the complaint fi led by the
respondent. It is not averred anywhere in the complaint that the appellant
was in charge of the conduct of the business of the company at the relevant
time when the offence was committed. What is stated in the complaint is
only that the accused Nos. 2 to 6 being the partners are responsible for
the day-to-day conduct and business of the company. It is also relevant to
note that an overall reading of the complaint would not disclose any clear
and specific role of the appellant. In the statutory notice dated 10.09.2015
(Annexure-P6) at paragraph 3 it was averred thus:-
      “3. That for liquidation of the aforesaid legal liability/outstanding,
      you noticee No. 2 to 6 issued cheque number 005074 dated
      21.08.2015, amounting to Rs. 27,46,737/- drawn on Punjab National
      Bank, Ernhipalam (Kozhikode) branch in favour of my client from
      the account of noticee No. 1.”
      In response to that in Annexure- P7 reply the appellant herein stated
thus:-
      “In this regard, I would like to convey you that, I have retired from
      M/s Tile store as partner way back on 28-5-2013 and I am not a
      partner of M/s. Tile Store any more. (Copy of Retirement deed
      enclosed).
        SIBY THOMAS v. M/S. SOMANY CERAMICS LTD.                          829
                  [C.T. RAVIKUMAR, J.]

     During the time of my retirement, there were no dues to M/s. Somany
     Ceramics Ltd. from M/s. Tile Store as full payments were made for
     the consignments taken from them. (Copy of accounts statements up
     to 31-05-2013 enclosed)”
      13. In the light of the aforesaid circumstances the averments of the
respondent in paragraphs 5 and 6 of the complaint are also to be seen. In
paragraph 5 of the complaint, it was alleged that accused No.1 through
accused No.2 had purchased the goods from the complainant on credit
basis through proper sales invoices and, in paragraph 6 it was alleged that
for liquidation of legal liability outstanding accused Nos. 2 and 3 issued
cheque Nos. 005074 dated 21.8.2015 amounting to Rs.27,46,737/- drawn
upon Punjab National Bank, Ernhipalam (Kozhikode), in favour of the
complainant from the account of accused No.1. The appellant is the accused
No. 4 in the complaint.
     14. In view of the factual position relating the averments revealed from
the complaint as aforesaid it is relevant to refer to the decisions relied on
by the learned counsel appearing for the appellant. In the decision in Anita
Malhotra’s case (supra) in paragraph 22 it was held thus:-
     “22. This Court has repeatedly held that in case of a Director, the
     complaint should specifically spell out how and in what manner the
     Director was in charge of or was responsible to the accused company
     for conduct of its business and mere bald statement that he or she
     was in charge of and was responsible to the company for conduct of
     its business is not sufficient. (Vide National Small Industries Corpn.
     Ltd. v. Harmeet Singh Paintal). In the case on hand, particularly, in
     Para 4 of the complaint, except the mere bald and cursory statement
     with regard to the appellant, the complainant has not specified her
     role in the day-to-day affairs of the Company. We have verified the
     averments as regards to the same and we agree with the contention of
     Mr. Akhil Sibal that except reproduction of the statutory requirements
     the complainant has not specified or elaborated the role of the appellant
     in the day-to-day affairs of the Company. On this ground also, the
     appellant is entitled to succeed.”
     15. Paragraph 19 of the Ashok Shewakramani’s case (supra) is also
relevant for the purpose of the case and it, in so far as relevant, reads thus:
830           SUPREME COURT REPORTS                         [2023] 13 S.C.R.


      “19. Section 141 is an exception to the normal rule that there cannot
      be any vicarious liability when it comes to a penal provision. The
      vicarious liability is attracted when the ingredients of sub-section 1
      of Section 141 are satisfied. The Section provides that every person
      who at the time the offence was committed was in charge of, and was
      responsible to the Company for the conduct of business of the company,
      as well as the company shall be deemed to be guilty of the offence
      under Section 138 of the NI Act. In the light of sub-section 1 of Section
      141, we have perused the averments made in the complaints subject
      matter of these three appeals. The allegation in paragraph 1 of the
      complaints is that the appellants are managing the company and are
      busy with day to day affairs of the company. It is further averred that
      they are also in charge of the company and are jointly and severally
      liable for the acts of the accused No.1 company. The requirement
      of sub-section 1 of Section 141 of the NI Act is something different
      and higher. Every person who is sought to be roped in by virtue of
      sub-section 1 of Section 141 NI Act must be a person who at the time
      the offence was committed was in charge of and was responsible to
      the company for the conduct of the business of the company. Merely
      because somebody is managing the affairs of the company, per se,
      he does not become in charge of the conduct of the business of the
      company or the person responsible for the company for the conduct of
      the business of the company. For example, in a given case, a manager
      of a company may be managing the business of the company. Only on
      the ground that he is managing the business of the company, he cannot
      be roped in based on sub-section 1 of Section 141 of the NI Act. The
      second allegation in the complaint is that the appellants are busy with
      the day-to-day affairs of the company. This is hardly relevant in the
      context of subsection 1 of Section 141 of the NI Act. The allegation
      that they are in charge of the company is neither here nor there and
      by no stretch of the imagination, on the basis of such averment, one
      cannot conclude that the allegation of the second respondent is that
      the appellants were also responsible to the company for the conduct
      of the business. Only by saying that a person was in charge of the
      company at the time when the offence was committed is not sufficient
      to attract sub-section 1 of Section 141 of the NI Act.”
         SIBY THOMAS v. M/S. SOMANY CERAMICS LTD.                          831
                   [C.T. RAVIKUMAR, J.]

      16. Thus, in the light of the dictum laid down in Ashok Shewakramani’s
case (supra), it is evident that a vicarious liability would be attracted only
when the ingredients of Section 141(1) of the NI Act, are satisfied. It would
also reveal that merely because somebody is managing the affairs of the
company, per se, he would not become in charge of the conduct of the
business of the company or the person responsible to the company for the
conduct of the business of the company. A bare perusal of Section 141(1) of
the NI Act, would reveal that only that person who, at the time the offence
was committed, was in charge of and was responsible to the company
for the conduct of the business of the company, as well as the company
alone shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished. In such circumstances, paragraph 20 in
Ashok Shewakramani’s case (supra) is also relevant. After referring to the
Section 141(1) of NI Act, in paragraph 20 it was further held thus:
      “20 On a plain reading, it is apparent that the words “was in charge of”
      and “was responsible to the company for the conduct of the business
      of the company” cannot be read disjunctively and the same ought
      be read conjunctively in view of use of the word “and” in between.”
       17. The upshot of the aforesaid discussion is that the averments in the
complaint filed by the respondent are not sufficient to satisfy the mandatory
requirements under Section 141(1) of the NI Act. Since the averments in
the complaint are insufficient to attract the provisions under Section 141(1)
of the NI Act, to create vicarious liability upon the appellant, he is entitled
to succeed in this appeal. We are satisfied that the appellant has made out a
case for quashing the criminal complaint in relation to him, in exercise of
the jurisdiction under Section 482 of Cr.PC. In the result the impugned order
is set aside and the subject Criminal Complaint filed by the respondent and
pending before Ld. CJ (JD) JMIC, Bahadurgarh, in the matter titled as M/s.
Somany Ceramics v. M/s. Tile Store etc. vide COMA- 321-2015 (CNRNO:
HRJRA1004637-2015), stand quashed only in so far as the appellant, who
is accused No. 4, is concerned. Appeal stands allowed as above. There will
be no order as to costs.


Headnotes prepared by:                                           Appeal allowed.
Ankit Gyan