CASE 3: Rajeshbhai Murjibhai Varsani vs Nitaben Vishrama Bhuva

CITATION :IST 2016 R/CR.MA/11618/2015 ORDER

SUBJECT: VICARIOUS LIABILITY UNDER CRIMINAL LAW

CHAPTER: VICARIOUS LIABILITY UNDER STATUTORY OFFENCES ( THE NEGTIABLE INSTRUMNTS

ACT, 1885.

LEGAL PROVISION:

Section 141 of the Negotiable Instruments Act deals with the Offences by companies. Under the
section , 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 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.

BRIEF CASE FACTS

The applicant herein in his capacity as one of the partners of a partnership firm, namely, M/s.
Varshani Construction Company, issued a cheque in favaour of the complainant for an
amount of Rs.4,00,000/ drawn on the Corporation Bank, Bhuj Branch, Bhuj, which came
to be dishonoured. The complainant accordingly lodged a complaint for the offence
punishable under Section 138 of the Negotiable Instruments Act in the Court of the learned
Chief Judicial Magistrate at Bhuj - Kutch. .

ISSUES RAISED

1. whether the complaint is maintainable are not , as the partnership firm as a legal entity has
not been arraigned as an accused.

2. whether , without the legal entity being prosecuted, the applicant as a partner can be
prosecuted on the principle of vicarious liability as explained under Section 141 of the
Negotiable Instruments Act ,or not.

CASES REFERED

C.V. Parekh, (AIR 1971 SC 447)

Sheoratan Agarwal and another, (AIR 1984 SC 1824)

U.P. Pollution Control Board v. M/s. Modi Distillery (AIR 1988 SC 1128)

M/s. Ashok Transport Agency v. Awadhesh Kumar and another (1998 5 SCC 5671 )

Aneeta Hada v. M/s. Godfather Travels and Tours Pvt. Ltd., 2012(5) SCC 661.
JUDGEMENT AND ORDER

The honourable high court of Gujarat held that, in the absence of the partnership firm being a
juristic person or a legal entity, the applicant, in his capacity as one of the partners, cannot be
proceeded for the offence alleged, by virtue of Section 141 of the Negotiable Instruments Act."
Therefore, this application was allowed. The proceedings of the Criminal Case No.3 of 2015
pending in the Court of the learned Chief Judicial Magistrate at Bhuj - Kutch were ordered to be
quashed. Rule was made absolute to the aforesaid extent.

RATIO DESCIDENDI

The honourable bench has applied the doctrine of strict construction, and opined that
commission of offence by the company is an express condition precedent to attract the
vicarious liability of others. Thus, the words as well as the company appearing in the Section
make it absolutely unmistakably clear that when the company can be prosecuted, then
only the persons mentioned in the other categories could be vicariously liable for the offence
subject to the averments in the petition and proof thereof. One cannot be oblivious
of the fact that the company is a juristic person and it has its own respectability. If a finding is
recorded against it, it would create a concavity in its reputation. There can be situations when
the corporate reputation is affected when a director is indicted.In this view ,it was further stated
that 'we arrive at the irresistible conclusion that for maintaining the prosecution under Section
141 of the Act, arraigning of a company as an accused is imperative. The other categories
of offenders can only be brought in the dragnet on the touchstone of vicarious
liability as the same has been stipulated in the provision itself.' This ratio is based on the same
of