REPORTABLE

  IN THE SUPREME COURT OF INDIA

    CRIMINAL APPELLATE JURISDICTION

   CRIMINAL APPEAL NO. 924 of 2011  [Arising out of SLP(Crl.) No. 1874 of 2008]

Rallis India Ltd.                   …....……Appellant

Versus

Poduru Vidya Bhusan & Ors.          ….……...Respondents

W I T H

Criminal Appeal No.925 of 2011 [Arising out of S.L.P. (Crl.) No. 3064 of 2008];

and

Criminal Appeal No.926 of 2011  [Arising out of SLP (Crl.) No. 3339 of 2008]

J U D G M E N T  

Deepak Verma, J.

1. Leave granted.

2. This and the connected matters arise out of the order dated 27.07.2007 in exercise of  

the jurisdiction conferred under Section 482 of the Code of Criminal Procedure [for  

short,  'Cr.P.C.'],  passed by learned Single Judge of the High Court  of Judicature  of  

Andhra Pradesh at Hyderabad in Criminal Petitions No.  3085 of 2007, 3082 of 2007

and 3084 of 2007  all  titled  Poduru  Vidya  Bhushan  and  Others  Vs.  Rallis  India  

Ltd. and Another,  

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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whereby and whereunder Accused No. 4, 6 and 7 (arraigned as Respondents Nos. 1, 2 and  

3 herein) have been discharged of the offences contained under Sections 138 and 141 of  

the Negotiable Instruments Act, 1881 (hereinafter shall be referred to as 'Act').   

3. For the sake of convenience, facts mentioned in SLP (Crl.) No. 1874 of 2008 are taken  

into consideration.

4. Appellant  as  Complainant  filed  a  criminal  complaint  before  the  Chief  Judicial  

Magistrate, Gautam Budh Nagar, Noida (U.P.) on 23.7.2004, under Sections 138 and  

141 of the Act.  It was alleged in the said complaint that cheques bearing nos.382874  

and 382875 dated 31.03.2004 for Rs.15,00,000/- each drawn on Union Bank of India,  

Vijaywada Main Branch were issued by the accused persons.  The said cheques, when  

presented to their banker, were returned as unpaid vide Cheques Return Advices dated  

29.05.2004, with the remarks, 'Payment stopped by Drawer'.  In the said complaint, the  

following specific plea is raised by the Appellant:

“That the Accused No. 1 is a partnership firm and Accused No. 2 to  7  are  partners  thereof  and  Accused  No.  3  is  signatory  of  the  impugned  cheques and all partners are looking after day to day affairs of the accused  firm and thus the liability as raised by them is joint and several.”

5. It may be pertinent to mention here that the Appellant herein had filed substantially  

similar complaints before the Criminal Courts of competent Jurisdiction at Chandigarh,  

Vijayawada  and Jammu & Kashmir  as  well.  The partnership firm M/s Sri  Lakshmi  

Agency was  therefore,  constrained  to  file  T.P.  (Crl.)  Nos. 161-171  of  2005,  which  

came to be

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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disposed of by this Court on 03.03.2006 and all criminal cases (excluding those pending in  

the State of Jammu & Kashmir) filed by Appellant against Respondents were directed to be  

tried  by  Competent  Criminal  Court  at  Hyderabad  as  a  series  of  composite  criminal  

complaints. Consequently all the complaints are now pending before XIV Additional Chief  

Metropolitan Magistrate, Nampally, Hyderabad, for disposal in accordance with law. The  

Respondents herein arrayed as Accused Nos. 4, 6 and 7 in the said complaints thereafter  

filed applications in the High Court of Judicature of Andhra Pradesh at Hyderabad under  

Section 482 of the Cr.P.C. for their discharge.  

6. It was, inter alia, contended by the Respondents before the High Court as under :

“That the aforesaid complaint depicted the applicants as the partners  of M/s Sri Lakshmi Agencies.

 That the aforesaid averments is a false one. Particularly  when the  complainant M/s Rallis India Ltd. was fully aware that the applicants had  severed their  connections  with  M/s Lakshmi  agencies  much prior  to the  execution of the Memorandum of Understanding dated 31.03.2004 and also  the issuance of the dishonoured cheques on 31.03.2004.”

The learned Single Judge of the High Court after perusal of the record and hearing the  

parties found it fit and proper to discharge the Respondents. Hence this Appeal.

7. We have, accordingly, heard learned counsel, Mr. Ajay Dahiya for Appellant and Mr.  

G.V.R. Choudary, for Respondents at length and perused the record.

8. At the outset, learned counsel appearing for Appellant contended that in the light of the  

aforesaid averments having been made categorically in the original complaints, no case  

was   made   out   for   discharge  of  the  Respondents.  It  was  also  contended  that  

Respondents

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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have denied their vicarious liability for the offences under Section 138/141 of the Act, on  

the ground that they had retired from the partnership firm in 2001/2002, i.e., much prior to  

the issuance of the cheques in question in 2004.  It is further contended by the learned  

counsel for the Appellant that the said denial cannot be accepted as it would be a matter of  

evidence to be considered by the Trial Court. Even the question whether or not they would  

be responsible for the impugned liabilities would be required to be answered only after the  

parties go to trial as it is disputed question as to when the Respondents had actually retired  

from the partnership firm, before the issuance of dishonoured cheques.

9. On the other hand, learned Counsel appearing for Respondents strenuously contended  

that  the  Appellant  had  failed  to  impute  criminal  liability  upon  the  Respondents  

specifically, which is a matter of record and therefore, at the very threshold, High Court  

was  justified  in  discharging  them  rather  than  directing  them  to  face  the  Criminal  

prosecution  unnecessarily.   According  to  them,  in  this  view  of  the  matter,  no

interference  is  called  for  against  the  impugned  order  and  Appeals  deserve  to  be  

dismissed.

10. To analyze the case before us in proper perspective, it is necessary to scrutinize all the  

Criminal Complaints one by one. On perusal of the complaints, we observe that the  

specific averment of vicarious criminal liability as mandated by the three Judge Bench of  

this  Court   in  the  case  of   S.M.S.  Pharmaceuticals  Limited Vs.  Neeta  Bhalla  and  

Another, reported in 2005 (8) SCC 89,  is contained in them in the form mentioned in  

Para 4 hereinabove.

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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11. Thus, in the light of the aforesaid averments as found by us in the Criminal Complaint,  

we are of the considered opinion that sufficient averments have been made against the  

Respondents that they were the partners of the firm, at the relevant point of time and  

were looking after day to day affairs of the partnership firm. This averment has been  

specifically mentioned by the Appellant in the complaint even though denied by the  

Respondents but the burden of proof that at the relevant point of time they were not  

the partners,  lies specifically on them. This onus is required to be discharged by them  

by leading evidence and unless it is so proved, in accordance with law, in our opinion,  

they cannot be discharged of their liability. Consequently, High Court committed an  

error  in  discharging  them.  Also,  at  the  cost  of  repetition,  by  virtue  of  their  own  

submissions before the High Court (reproduced in Para 6 above), the Respondents have  

admitted the fact that the Appellant had referred to them in their capacity as partners

who were incharge of the affairs of the firm in the initial complaints. The question as to  

whether or not they were partners in the firm as on 31.03.2004, is one of fact, which has  

to be established in trial. The initial burden by way of averment in the complaint has  

been made by the Appellant.

12. The primary responsibility of the complainant is to make specific averments  in the  

complaint  so  as  to  make  the  accused  vicariously  liable.  For  fastening  the  criminal  

liability,  there is no legal  requirement for the complainant to show that the accused  

partner of the firm was aware about each and every transaction.   On the other hand,  

proviso to Section 141 of the Act clearly lays down that if the accused is able to prove  

to the satisfaction of the

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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Court  that  the offence was committed without his  knowledge or he had exercised due  

diligence to prevent the commission of such offence, he will not be liable of punishment.  

Needless  to  say,  final  judgment  and  order  would   depend  on  the  evidence  adduced.  

Criminal liability is attracted only on those, who at the time of commission of the offence,  

were in charge of and were responsible for the conduct of the business of the firm. But  

vicarious  criminal  liability  can  be  inferred  against  the  partners  of  a  firm  when  it  is  

specifically averred in the complaint about the status of the partners “qua” the firm. This  

would  make  them  liable  to  face  the  prosecution  but  it  does  not  lead  to  automatic  

conviction. Hence, they are not adversely prejudiced – if they are eventually found to be  

not guilty, as a necessary consequence thereof would be acquitted.

13. At the threshold, the High Court should not have interfered with the cognizance of the  

complaints  having  been  taken  by  the  trial  court.  The  High  Court  could  not  have  

discharged the respondents of the said liability at the threshold. Unless parties are given  

opportunity to lead evidence, it is not possible to come to definite conclusion as to what  

was  the  date  when  the  earlier  partnership  was  dissolved  and  since  what  date  the  

Respondents ceased to be the partners of the firm.

14. Before  concluding  the  present  discussion,  we  also  take  this  opportunity  to  strike  a  

cautionary note with regard to the manner in which High Courts ought to exercise their  

power  to  quash  criminal  proceedings  when  such  proceeding  is  related  to  offences  

committed   by   companies.    The  world   of   commercial   transactions   contains  

numerous

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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unique intricacies, many of which are yet to be statutorily regulated. More particularly, the  

principle laid down in Section 141 of the  Act (which is pari materia with identical sections in  

other  Acts  like  the  Food Safety  and Standards  Act,  the  erstwhile  Prevention  of  Food  

Adulteration  Act  etc.  etc.)  is  susceptible  to  abuse  by  unscrupulous  companies  to  the  

detriment of unsuspecting third parties. In the present case, there are several disputed facts  

involved – for instance, the date when the partnership came into being, who were the initial  

partners, if and when the Respondents had actually retired from the partnership firm etc.

15. Strictly speaking, the ratio of the SMS Pharmaceuticals (supra) can be followed only,  

after  the  factum  that  accused  were  the  Directors  or  Partners  of  a  Company  or  Firm

respectively at the relevant point of time, stands fully established. However, in cases like the  

present, where there are allegations and counter-allegations between the parties regarding  

the very composition of the firm, the above rule of ‘specific averment’ must be broadly  

construed. Indeed, it would be nothing short of a travesty of justice if the Directors of a  

Company  of  Partners  of  a  Firm,  who,  having  duped  a  third-party  by  producing  false  

documents (like a fake partnership deed) or making false statements (that some others were  

in charge of the Company/Firm), at a subsequent stage, seek protection from prosecution  

on the ground that they were not directly indicted in the complaint – such a proposition  

strikes against one of the very basic tenets of the law of natural justice, which is, that none  

shall be allowed to take advantage of his own default. Of course, the above observation is  

of a general nature, and has no bearing on the present case,  but  nonetheless, the power to  

Crl. A. @ SLP(Crl.)No.1874 of 2008 etc. …. (Contd.)

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quash a criminal proceeding with respect to an offence under Section 141 of the Act, must  

be exercised keeping this advisory note and caveat in mind.  

16. On account  of  foregoing discussion,  we are  of  the  considered  opinion that  the  

impugned judgment and order passed by learned Single Judge exercising the jurisdiction  

conferred on him under Section 482 of the Cr.P.C. cannot be sustained in law. The same  

are hereby set aside and quashed. The trial court is directed to dispose of the Criminal  

complaints filed by Appellant at an early date, after giving opportunity of hearing to both  

sides, in accordance with law.   However, the Trial Court would not be influenced by any of

the observations made hereinabove and would decide the matters in accordance with law.  

The appeals are allowed. Parties to bear their respective costs.

  ……………………………J.

            [Dalveer Bhandari]

 ……………………………J.                      [Deepak Verma]

New Delhi April 13, 2011.