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 liable to be proceeded against and punished.: Supreme Court of India
(Siby Thomas v. Somany Ceramics Ltd., Special Leave Petition (Crl.) No.12 of 2020, decided on 10.10.2023)
The Hon’ble Supreme Court held 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 the present case, an Appeal was preferred by the Accused against the order of the Hon’ble Punjab and Haryana High Court whereby it declined to quash the Complaint pending against him under Section 138 of NI Act.
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 whereas 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 Respondent relied on the decision of a two-Judge Bench of the Hon’ble Punjab and Haryana Court in “
S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan.”
The Hon’ble 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.
The Hon’ble Supreme Court noted that the only averment in the Complaint regarding the liability of the Appellant was that
“The accused No.2 to 6 being the partners are responsible for the day to day conduct and business of the accused No. 1.”
The Hon’ble Supreme Court held that:
“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.”
While relying on the decisions in “
Gunmala Sales Private Limited v. Anu Mehta” and “
S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan”, the Hon’ble Supreme Court further held that:
“We have carefully gone through the complaint filed 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.”
After having relied upon the decision of “
Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr”, the Hon’ble Supreme Court made an observation 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.”
The Hon’ble Supreme Court allowed an Appeal and held that:
“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.”
Read the full Judgment here 
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