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Dilip Hariramani vs Bank of Baroda

Criminal Appeal · 2022 INSC 539Decided 9 May 2022
Criminal Appeal No. 767 of 2022
Ajay Rastogi · Sanjiv Khanna · Bela M. Trivedi

Background

A partnership firm, M/s Global Packaging, took loans from Bank of Baroda and, in part repayment, issued three cheques worth Rs. 25 lakh each that were dishonoured for insufficient funds. The Bank filed a criminal complaint under Section 138 (cheque dishonour) read with Section 141 (offences by companies/firms) of the Negotiable Instruments Act against the firm's authorised signatory and against the appellant, Dilip Hariramani, as a partner, but crucially, never made the firm itself an accused. The trial court and, on appeal, the Sessions Court and Chhattisgarh High Court all convicted the appellant and sentenced him to imprisonment along with a heavy compensation order (enhanced up to Rs. 1.2 crore), relying on the view that a partner's personal liability under Section 141 did not depend on the firm being separately arraigned.

Decision Breakdown

The Supreme Court traced its own precedents on Section 141, holding that vicarious liability under that provision is a "deeming fiction" that necessarily presupposes the company or firm has itself committed the offence as the principal accused: a partner or officer can only be dragged into liability derivatively from the firm's guilt. Since the Bank never made the firm a party to the complaint at all (not merely a defect in the case title, but a complete failure to prosecute the firm), there was no principal offence established against which the appellant's liability could attach. The Court held its earlier three-judge decision in Aneeta Hada (and the older C.V. Parekh ruling) laid down the correct binding law on this point, and it accordingly set aside the appellant's conviction and sentence entirely, acquitting him.

Lesson Learnt

A partner or director cannot be convicted for a dishonoured cheque issued by a firm or company under Section 138/141 of the NI Act unless the firm or company itself is made an accused in the complaint: merely naming individuals as "partners" in the body of the complaint is not enough if the entity that actually incurred the debt and issued the cheque is never prosecuted.

Official source (sci.gov.in)View Judgment (PDF)

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