The Honorable Supreme Court voids its order of May 09, 2022 in the matter of Dilip Hariramani v. Bank of Baroda1 observed that a person cannot be convicted of the offense of dishonoring a check under section 138 of the Negotiable Instruments (NI) Act 1881 merely because he was a partner in the firm which had contracted the loan or that it had acted as guarantor for such a loan. Further, vicarious liability under section 141 of the Negotiable Instruments Act 1881 cannot be imposed on a person simply because civil liability under the Partnerships Act rests with a partner.
The Magistrate’s Court convicted three defendants in a kidnapping and murder case and sentenced them to death for the offense punishable under Section 302 read with 120B of the Indian Penal Code, 1860 and sentenced to imprisonment for 10 years and a fine of Rs.5000/- each for the offense punishable under Section 364 of the Indian Penal Code 1860. Allowing the appeal by two defendants, the Punjab High Court and Haryana, rendered a judgment dated February 22, 2011, acquitted Anita @Arti (A1) and Ranjit Kumar Gupta (A3) and allowed in part the appeal filed by Ravinder Singh @ Kaku (A2) and all quashing the death sentence, the High Court of Punjab and Haryana sentenced him to rigorous imprisonment for 20 years under Section 302 of the Indian Penal Code, 1860. Challenging his conviction and sentence of 20 years old current Appellant Ravinder Kumar @ Kaku filed Criminal Appeal No. 1307 of 2019 @ SLP (Crl.) 9431 of 2011 of before the Honorable Supreme Court. One of the issues raised before the Honorable Supreme Court was whether the call records produced by the prosecution would be admissible under Sections 65A and 65B of the Indian Evidence Act 1872.
The case was brought before the Supreme Court on appeal by Mr. Dilip Hariramani, notably challenging his conviction.
Bank of Baroda (respondent hereto) had advanced term loans and extended cash credit facility to partner company namely M/s Global Packaging on 04 October 2012 for the sum of 6,73,80,000/- . In partial repayment of the loan, the partner company, namely M/s Global Packaging, through its authorized signatory and partner, Mrs. Simaiya Hariramani, had issued 3 checks for 25,000,000/-, dated 17, 25 and October 31, 2015, respectively. However, the 3 checks had been refused by the bank when they were presented, for lack of funds. On 04 November 2015, the branch manager of the respondent bank issued a legal notice to Ms. Hariramani, and subsequently filed a complaint under Section 138 of the NI Act in the Judicial Magistrate’s Court, Balodabazar, Chattisgarh against the two business partners, namely Mrs. Hariramani and the present appellant. The general partnership was not sued and the complaint asserted its vicarious liability only by stating that it had been accused of being partners in the debtor company, and as the disputed deeds had been issued under the signature of one partner in the name of the firm, this made the second partner also vicariously liable for the latter’s dishonor.
On February 19, 2019, Magistrate First Class, Balodabazar, Chattisgarh sentenced the two defendants to serve six months imprisonment and a heavy fine as compensation, or failing that, to serve an additional month imprisonment. The defendant challenged the order on appeal to the Magistrate Judge, Balodabazar, Chattisgarh, and was dismissed there, again before the Honorable High Court of Chattisgarh at Bilaspur, which again dismissed the appeal order vide 12 Oct 2020. The couple appealed to the Hon’ble Supreme Court against the said order from the Hon’ble High Court of Chattisgarh.
Judgment of the Honorable Supreme Court
The Honorable the Supreme Court has observed that the Partnerships Act 1932 creates civil liability. Further, the liability of the guarantor under the Indian Contract Act, 1872 is a civil liability. The appellant may have civil liability and may also be liable under the Banks and Financial Institutions Debt Recovery Act 1993 and the Securitization and Reconstruction of Financial Assets and Financial Institutions Act 2002. enforcement of securities. However, vicarious liability under criminal law under NI Act 141 cannot be attached due to civil liability. Vicarious liability under subsection (1) of section 141 of the Negotiable Instruments Act 1881 may arise where the person has overall control of the day-to-day operations of the company or business. Vicarious liability under subsection (2) of section 141 of the Negotiable Instruments Act 1881 may arise by reason of the personal conduct, functional or transactional role of the manager, manager, secretary or another officer, even if the person did not have general control of the day-to-day business of the business at the time the offense was committed. Vicarious liability under subsection (2) arises where the offense is committed with the consent, connivance or is attributable to the negligence 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 considering the fiction which presupposes and requires the commission of the offense by the company or business. Therefore, unless the company or enterprise committed the offense as the principal accused, the persons mentioned in paragraph (1) or (2) would not be liable and convicted as liable for others. Section 141 of the Negotiable Instruments Act 1881 extends vicarious criminal liability to officers associated with the company or business where one of the two requirements of section 141 of the 1881 Act on negotiable instruments has been satisfied, which person(s) then, considering the fiction, is vicariously liable and punished. However, such vicarious liability only arises when the business or company commits the offense as the primary offender.