No vicarious liability of persons u/s 141 of Negotiable Instruments Act: SC

Case Details: Dilip Hariramani v. Bank of Baroda - [2022] 138 taxmann.com 186 (SC)

Judiciary and Counsel Details

• • Ajay Rastogi & Sanjiv Khanna, JJ.

Facts of the Case

In the instant case, the respondent – Bank of Baroda, had granted term loans and cash credit facility to a partnership firm – M/s. Global Packaging. It was alleged that in part repayment of the loan, the Firm, through its authorised signatory, Simaiya Hariramani, had issued three cheques of Rs. 25,00,000/- each.

However, the cheques were dishonoured on presentation due to insufficient funds. The Bank, through its Branch Manager, issued a demand notice to Simaiya Hariramani under Section 138 of the NI Act and thereafter , filed a complaint under Section 138 of the NI Act, against Simaiya Hariramani and the appellant, a partner of firm.

The Firm was not made an accused. The appellant and Simaiya Hariramani were convicted by the Judicial Magistrate First Class, Balodabazar, Chhattisgarh, under Section 138 of the NI Act. The High Court dismissed appeal of the appellant.

On appeal, the Apex Court held that the provisions of Section 141 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.

Supreme Court Held

The Court stated that the Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 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.

In view of the above, the Apex Court set aside the impugned judgment of the High Court which confirmed the conviction and order of sentence passed by the Sessions Court, and the order of conviction passed by the Judicial Magistrate First Class.