Dormant Partner- Wife Not Vicariously Liable for Benami Transactions: Madras HC confirms Charges against Husband and Firm [Read Order]

The Madras High Court has delivered a split ruling in a Rs 68.71 crore benami matter. The court cleared the wife of the prosecution as there were no specific averments to fix vicarious liability on the wife under Section 62 of the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), while upholding the prosecution against her husband, the Managing Partner, and the partnership firm.

The prosecution was initiated by the Deputy Commissioner of Income Tax (Benami Prohibition), Chennai, who alleged that the partnership firm M/S V.P.C. & Co., managed by R. Ramesh and his wife, R. Kalaivani, had deposited ₹68.71 crore in cash during the demonetization period of 2016–17. Authorities contended that the firm’s prior financial turnover was of just Rs 2.31 lakh in 2015-16, Rs 1.70 Lakh in 2016-17, and Rs 24.36 lakh in 2017-18, which was clearly inconsistent with such massive deposits.

The prosecution further alleged that the firm fabricated sales bills and vehicle records to justify the deposits, with registration numbers corresponding to two‑wheelers rather than trucks or lorries, thereby pointing to bogus documentation.

For the Firm and Husband (A1 & A2), the Counsel argued that the deposits represented accumulated cash sales and advances over seven months before demonetisation, and that the absence of a traced “beneficial owner” should have warranted discharge.

They placed their dependence on various Supreme Court and High Court precedents (Sanjay Dutt v. State of Haryana, 2025 INSC 34; Umanga Vohra v. State of Tamil Nadu, 2025‑1‑LW(Crl) 848) to argue the lack of specific averments against the Managing Partner.

For the Wife (A3), the counsel stressed that she was only a dormant partner, uninvolved in day‑to‑day affairs, and that the complaint failed to invoke Section 62 PBPT Act, which governs vicarious liability of partners and officers.

The Special Public Prosecutor countered that the firm’s financial records claimed a Rs 68 crore turnover has highly improbable, as its outstanding dues of nearly Rs 4.93 crore as of November 2016. Witnesses and documentary evidence allegedly established the fabrication of bills. The prosecution insisted that as Managing Partner, Ramesh was directly responsible and that Kalaivani actively assisted him in business transactions. Justice Sunder Mohan held that as Managing Partner, Ramesh’s consent was indispensable for such deposits. His signatures on balance sheets and documents indicated knowledge and responsibility. The defence of genuine income could not be adjudicated at the discharge stage. Hence, the trial against him and the firm must proceed.

On the Wife (A3) the Court noted her reply to the show cause notice claiming dormancy, and observed that the complaint lacked specific averments showing she was in charge of the firm’s affairs.

The court placed its dependence on Dilip Hariramani v. Bank of Baroda (2024 SCC) and reiterated that vicarious liability in criminal law requires precise pleadings and proof, not mere partnership. Accordingly, Kalaivani was discharged.

The Court clarified that if future evidence surfaces establishing her role, the prosecution may invoke Section 319 CrPC (corresponding to Section 358 BNSS) to array her again. Thus, Crl. R.C. No. 872/2023 (Wife) was allowed, and discharge was granted, whereas Crl. R.C. No. 956/2023 (Firm & Husband) was dismissed, and prosecution was to continue. 

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