Vicarious Liability under Negotiable Instruments Act arises only to the person who was in Charge of Business while the Offence committed: Supreme Court sets aside Order of Conviction [Read Judgment]

Vicarious liability - Negotiable instrument act - business - Supreme Court - Conviction - taxscan

The Supreme Court has quashed the Chhattisgarh High Court order as the vicarious liability under the Negotiable Instrument Act arises only to the person who was in charge of business while the offence was committed.

The bench consisting of Mr Justice Ajay Rastogi and Mr Justice Sanjiv Khanna ruled in favour of the appellant-Dilip Hariramani, managing partner ofM/s. Global Packaging, by set aside the order of the High Courtconfirming the convictionunder Section 138 of the Negotiable Instrument Act and sentence passed by First ClassJudicial Magistratewith compensation of Rs. 97,50,000/- under Section 357(3) of the Code of Criminal Procedure, 1973 for dishonouring of cheque in Bank of Baroda in terms of the loan

The appellant contended that Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when the offence is done as the primary offender.Further contended that the appellant cannot be liable vicariously merely because he was a partner of the firm.

In light of various precedence, the bench observed that”Vicarious liability under sub-section (1) to Section 141 of the Negotiable Instrument Act can be invoked 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 officers of the company”.The court acquitted the appellant and cancelled the bail bonds if any executed by the appellant.

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