- In Dilip Hariramani vs Bank of Baroda the Hon’ble Apex Court has held that criminal liability under section 138 NI Act for cheque bounce cases cannot be fastened on a person merely because he was a partner at the firm that had taken the loan, or that he stood as a guarantor for such a loan.
- Thus, the vicarious liability in terms of section 141 of the Act cannot be fastened merely because of a civil liability which falls upon a partner of the firm.
- In the instant case, the Bank of Baroda (respondent) had granted term loans and cash credit facility to a partnership firm M/s Global Packaging. In part repayment of the loan, the firm, through its authorised signatory, Simaiya Hariraman, had issued three cheques which were dishonoured due to insufficient funds.
- The Bank then filed a complaint under section 138 NI Act before the Court of Judicial Magistrate against Simaiya Hariramani and the appellant. The firm was not made an accused in the case. The two were shown as partners in the firm.
- At the outset, the Apex Court observed that the respondent bank had admitted that the appellant had not issued any of the three cheques in his personal capacity or otherwise as a partner.
- The Court referred to the case of Girdhari Lal Gupta vs DH Mehta and anr wherein it was observed that a partner on whom vicarious liability can be imposed under the NI Act refers to a person who is in overall control of the day to day activities and business of the firm. Thus, in absence of evidence to establish that the appellant was responsible for the conduct of the affairs of the firm towards the issuance of the cheques, the conviction had to be set aside.
- The Court also observed that the Partnership Act and the Indian Contract Act create civil liabilities in which the appellant may still be liable as per the Recovery of Debts Due to Banks and Financial Institutions Act of 1993, but vicarious liability in criminal law as per section 141 of the NI Act cannot be fastened merely due to a civil liability.
- Reference was also made to the case of Sharad Kumar Sanghi vs Sangita Rane (2015) SCC wherein it was observed that unless the company ot the firm has committed the offence as a principal accused, the persons mentioned in 141 NI Act cannot be made liable and convicted vicariously. Thus, the vicarious liability arises only when the company or the firm commits the offence as a primary offender.
- Thus, the appeal was allowed and appellant’s conviction under section 138 r/w 141 of NI Act was set aside.
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