SUPREME COURT: MERELY BECAUSE A PERSON WAS THE PARTNER OR STOOD GUARANTOR FOR LOAN, NO VICARIOUS LIABILITY FOR CHEQUE DISHONOUR UNDER SECTION 138 OF THE NI ACT

The Supreme Court in the case Dilip Hariramani vs Bank of Baroda observed merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. The court held that a person cannot be convicted for the offence of dishonour of cheque under Section 138 of the Negotiable Instruments Act.

The Court noted that such vicarious liability arises only when the company or firm commits the offence as the primary offender 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. Thereafter Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm.

It was observed by the Supreme Court the appellant was responsible for the conduct of affairs at the firm towards the issuance of the cheques, the conviction has to be set aside as there was an absence of evidence from the side of appellant and t was the appellant, admittedly, had not issued any of the cheques, which had been dishonoured, in his personal capacity or otherwise as a partner. The court further added that the conviction has to be set aside.

Further the court added the vicarious liability under Section 141 cannot be attracted, unless the company or the firm commits the offence

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 further the court observed that. 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.

The bench comprising of justice Ajay Rastogi and the justice Sanjiv Khanna observed that the Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day- to-day business of the company or firm. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company because of the civil liability the vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened. The appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Partnership Act, 1932 creates civil liability. Further, the guarantor’s liability under the Indian Contract Act, 1872 is a civil liability

an appeal challenging the conviction of the appellant for the dishonour of a cheque issued by a firm in which he was a partner, The firm was not made an accused in the complaint and the cheque was signed by another partner, the bench was deciding.

The post SUPREME COURT: MERELY BECAUSE A PERSON WAS THE PARTNER OR STOOD GUARANTOR FOR LOAN, NO VICARIOUS LIABILITY FOR CHEQUE DISHONOUR UNDER SECTION 138 OF THE NI ACT appeared first on The Daily Guardian.

Recommended For You

About the Author: - -