By Nihit Nagpal and Anuj Jhawar
The Hon’ble Supreme Court vide its order dated May 09, 2022 in the matter of Dilip Hariramani v. Bank of Baroda1 has observed that a person cannot be convicted for the offence of dishonour of cheque under Section 138 of the Negotiable Instruments (NI) Act, 1881 merely because he was a partner of the firm which had taken the loan or that he had stood as a guarantor for such a loan. Further, vicarious liability under Section 141 of the Negotiable Instruments Act, 1881 cannot be fastened upon a person merely because the civil liability under the Partnership Act falls upon a partner.
The Trial Court convicted three accused in a kidnap cum murder case and sentenced them to death for the offence punishable under Section 302 read with 120B of the Indian Penal Code, 1860 and rigorous imprisonment for 10 years and fine of Rs.5000/- each for the offence punishable under Section 364 of the Indian Penal Code, 1860. Allowing the appeal filed by two accused, The High Court of Punjab and Haryana, vide judgment dated February 22, 2011, acquitted Anita @Arti (A1) and Ranjit Kumar Gupta (A3) and partly allowed the appeal filed by Ravinder Singh @ Kaku (A2) and while setting-aside the death penalty, the High Court of Punjab and Haryana sentenced him to undergo rigorous imprisonment for 20 years under Section 302 of the Indian Penal Code, 1860. Challenging his conviction and sentence of 20 years, the present appellant Ravinder Kumar @ Kaku filed Criminal Appeal No. 1307 of 2019 @ SLP (Crl.) 9431 of 2011 before the Hon’ble Supreme Court. One of the issues raised before the Hon’ble Supreme Court was whether the call records produced by the prosecution would be admissible under Section 65A and 65B of the Indian Evidence Act, 1872.
Matter has been brought before the Hon’ble Supreme Court in appeal by Mr. Dilip Hariramani, inter alia challenging his conviction.
Bank of Baroda (respondent herein) had advanced term loans and granted cash credit facility to a partnership firm, namely M/s Global Packaging, on October 04, 2012 for the sum of 6,73,80,000/-. In part repayment of the loan, the partnership firm, namely M/s Global Packaging, through its authorized signatory and partner, Mrs. Simaiya Hariramani, had issued 3 cheques of 25,00,000/-, dated October 17, 25 and 31, 2015, respectively. However, all 3 cheques had been dishonoured by the bank upon presentation, owing to insufficiency of funds. On November 04, 2015, the Branch Manager of the respondent bank had issued a legal notice to Mrs. Hariramani, and thereafter a complaint under Section 138 of the NI Act before the Court of the Judicial Magistrate, Balodabazar, Chattisgarh against both partners of the firm, namely Mrs. Hariramani as well as the present appellant. The partnership firm was not made an accused and the complaint asserted their vicarious liability only by stating that they have been accused on account of being the partners of the debtor firm, and as the impugned instruments had been issued under the signature of one partner in the name of the firm, this made the second partner equally vicariously liable for dishonor of the same.
On February 19, 2019, the Judicial Magistrate First Class, Balodabazar, Chattisgarh, convicted the two accused to serve six months imprisonment and a hefty fine as compensation, or in default, suffer an additional month’s imprisonment. The accused challenged the order in appeal before the Sessions Judge, Balodabazar, Chattisgarh, and being dismissed therein, again before the Hon’ble High Court of Chattisgarh at Bilaspur, who once again dismissed the appeal vide order of October 12, 2020. The couple has approached the Hon’ble Supreme Court in appeal against the said order of the Hon’ble High Court of Chattisgarh.
Judgement by the Hon’ble Supreme Court
The Hon’ble Supreme Court observed that the Partnership Act, 1932 creates civil liability. Further, the guarantor’s liability under the Indian Contract Act, 1872 is a civil liability. The appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened because of the civil liability. Vicarious liability under subsection (1) to Section 141 of the Negotiable Instruments Act, 1881 can be pinned when the person is in overall control of the day to-day business of the company or firm. Vicarious liability under subsection (2) to Section 141 of the Negotiable Instruments Act, 1881 can arise because of the director, manager, secretary, or other officer’s personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day-to-day business of the company when the offence was committed. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company.
The provisions of Section 141 of the Negotiable Instruments Act, 1881 impose vicarious liability by deeming fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-section (1) or (2) would not be liable and convicted as vicariously liable. Section 141 the Negotiable Instruments Act, 1881 extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 of the Negotiable Instruments Act, 1881 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender.
1Criminal Appeal No. 767 OF 2022 (Arising out of Special Leave Petition (Criminal) No. 641 of 2021)