138 NI Act cannot be dismissed on the ground that partnership firm on whose behalf cheque was issued was not arrayed as a party.- The Law Literates
🏛️ SUPREME COURT OF INDIA
Section 138 of the NI ACT Act is maintainable, even in the absence of a partnership firm being named as an accused. It also stated that if the partners of the partnership firm are proceeded against, they are jointly and severally liable, along with the partnership firm, as well as inter se, the partners of the firm Court allowed an appeal filed by Dhanasingh Prabhu against the Madras High Court’s judgment of February 26, 2024, which quashed a complaint filed against respondents Chandrasekar and another under Section 138 of the NI Act with regard to dishonour of a cheque issued to repay a debt of Rs 21 lakh
9.1 Section 138 of the Act creates an offence for dishonour of a cheque for, inter alia, insufficiency of funds in the account by a deeming fiction. The complainant who is a victim of the dishonour of cheque issued by an accused has the right to file a private complaint in terms of Section 200 of the CrPC, (equivalent to Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (for short, “BNSS”)). When the said offence is proved against an individual/natural person, he is 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. But when such an offence is committed by a company, which is an artificial juristic entity,
Section 141 of the Act applies. The said Section states that if the person committing an offence under Section 138 of the Act 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. Since an artificial juristic entity such as a company cannot be punished with imprisonment, by a deeming fiction certain persons associated with such an artificial juristic entity are deemed to be guilty of the offence and made liable to be proceeded against and punished
accordingly. This is an instance of vicarious liability on 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. This is for the reason that a company is a separate entity vis-Ă -vis its shareholders or those who are in charge of the conduct of its business since a company is an artificial juristic entity. Thus, the liability would be on the company as well as on the category of persons mentioned above. Such a person must be both in charge of, as well as responsible to, the company for the conduct of the business of the company. However, the aforesaid category of person who is deemed to be guilty of the offence along with the company, can escape punishment (i) if he can prove that the offence was committed without his knowledge; or (ii) that he had exercised all due diligence to prevent the commission of such an offence. Hence, by way of a proviso to sub-section (1) to Section 141 of the Act, two defences are provided for the category of persons named in sub-section (1) of Section 141.
Consequently, the impugned order of the High Court is set aside. The complaint bearing STC No.1106/2022 is restored on the file of the Court of the learned Judicial Magistrate No. II, Pollachi. The trial court is directed to dispose of the complaint in accordance with law.
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