Dishonour of cheque under the NI Act cannot be fastened on a person merely because he was a partner at a firm – SC

CASE: Dilip Hariramani vs Bank of Baroda

BENCH: Justices Ajay Rastogi and Sanjiv Khanna 

SECTION 138 OF NI ACT: Dishonour of a cheque for insufficiency, etc., of funds in the account.

The Top Court held that criminal liability for cheque bounce cannot be fastened on a person merely because he was a partner at the firm and that firm had taken the loan or if the person stood as a guarantor for such a loan.

FACTS

The bench was considering an appeal by a partner at a firm, challenging his conviction under Section 138. 

Bank of Baroda, the respondent in this present case, granted a loan to the M/s Global Packaging. The partnership firm, through Simaiya Hariraman, issued three cheques that were dishonoured due to insufficient funds. The bank filed a complaint before Judicial Magistrate, Balodabazar, Chhattisgarh, against Simaiya Hariramani and the appellant. The firm in this present case was not made an accused.

Simaiya Hariramani and the appellant were shown as partners of the firm.

HELD

The Top Court, at the outset, noted that the bank had accepted that the dishonoured cheques were not issued by the appellant in his capacity. In the absence of evidence to prove that the appellant was responsible for the affairs at the firm towards the issuance of the cheques, the Bench set aside the appellant's conviction.

The SC further said that under the NI Act, vicarious liability can be imposed on a person who has overall control of the day-to-day business of the company/firm.

The appellant was, thus, acquitted.