Complainant company appealed against acquittal of a partnership firm and its partners in four Section 138 NI Act cases concerning dishonoured cheques for alleged outstanding supply dues. The High Court found no compelling reasons to disturb the acquittal, holding the complainant failed to prove the outstanding or vicarious liability.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
[3251 ]
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
WEDNESDAY, THE TWELFTH DAY OF MARCH TWO THOUSAND AND TWENTY FIVE
PRESENT
THE HONOURABLE SRI JUSTICE K.SURENDER
CRIMINAL APPEAL Nos. 523 591 592 and 627 OF 2018
CRIMINAL APPEAL NO: 523 OF 2018
Criminal Appeal filed under Section 372 of Cr.P.C., against the Judgment dated 08.02.2017passed in CC.No.81 of 2013 on the file of the Court of the lll Special Magistrate, Hyderabad.
Between:
M/s. Rallis lndia Limited, Rep. by its authorizedperson, Mr. Krishnamurthy Sudarsan, S/o. Late T.V. Krishnamurthy, aged 63yrs, Regional office.D.No. 23-11-101, N.R.P. Road, Satyanarayanapuram, Vijayawada-1'1, Andhra Pradesh.
...AppellanUComplainant
AND
...RespondenURespondent
CRiMINAL APPEAL NO: 591 OF 2018
Criminal Appeal filed under Section 378(4) of Cr.P.C., against the Judgment dated 08.02.2017 passed in CC.No.84 of 2O13 on the file of the Court of the lll Special Magistrate, Hyderabad.
Between:
M/s- Rallis lndia Limited, Rep. by its aulhorized person [\4r. Krishnamurthy Sudarsan S/o Late T.V.Krishnamurthy, aged 63 yrs, Regional Office - D.No. 23- 1 1-1 01, N. R. P. Road, Satyanarayanapuram, Vijayawada-1 1 .
...AppellanUComplainant
AND
...Respondents/Accused Nos.1,2,6 and 7
CRIMINAL APPEAL NO: 592 OF 2018
Criminal Appeal filed under Section 378(4) of Cr.P.C., against the Judgment dated 08.02.2017 passed in CC.No.82 ot 2013 on the file of the Court of the lll Special Magistrate, Hyderabad.
Between:
M/s. Rallis lndia Limited, Rep. by its authorized person Mr. Krishnamurthy Sudarsan S/o Late T.V.Krishnamurthy, aged 63 yrs, Regional Office - D.No. 23-11-1O1, N.R.P. Road, Satyanarayanapuram, Vijayawada-1 1.
...AppellanUComplainant
AND
...RespondenURespondent
CRIMINAL APPEAL NO: 627 OF 2018
Criminal Appeal filed under Section 378(4) of Cr.P.C., against the Judgment dated 08.02.2017passed in CC.No.83 ol 2013 on the file of the Court of the lll Special Magistrate, Hyderabad.
Between:
M/s. Rallis lndia Limited, Rep. by its authorizedperson Mr. Krishnamurthy Sudarsan S/o Late T.V.Krishnamurthy, aged 63yrs, Regional Office -D.No. 23-1 1 -1 0 1, N.R. P. Road, Satyanarayanapuram, Vijayawada-11.
...AppellanUCom plainant
AND
Counsel for the Appellant in all CRLAs :Sri N Naveen Kumar
Counsel for the Respondent Nos.3 & 4: _ _ _
Counsel for the Respondent No.5 : Public Prosecutor
The Court delivered the following: Common Judgment
HON'BLE SRI JUSTICE K.SURENDER
CRIMINAL APPEAL Nos.523, 59t,592 and 627 OF 2018 COMMON JUDGMENT:
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accused is a partnership firm represented by its partners A2 to A7. A3 is the signatory of the cheques in question, in all the cases. According to the complainant, all other accused, i.e., A2, A4 to A7 were responsible for the day to day activities of Al partnership ftrm and arejointly liable.
| Crl.Appealnumber AgainstCCNo. |
Parties names | Cheque No.&amount |
|---|---|---|
| Crl.A.No.523of2018 | M/s.Rallis India |
Twocheques bearing |
| Against CC No.81of | Limited. |
No.382872,382873, |
| 2013 | M s.Sri Lakshmi |
dt.31.03.2004for |
3
| Agencies&others |
Rs.15,00,OOO/ were issued |
-each | |
|---|---|---|---|
| Crl.A.No.591of2018 AgainstCCNo.84of 20r3 |
M/s.Rallis India Limited. M/s.Sri Lakshmi Agencies&others |
Three ch bearingNos.38 382882,3828 Rs.15,00,000/ foratotal amo Rs.45,00,000/- issued |
eques 2881, 83of -each unt of were |
| Crl.A.No.592of2018 against CC No.82of 20t3 |
M/s.Rallis India Limited. M/s.Sri Lakshmi Agencies& others |
Twocheques b Nos.382874,3 for15,00,000/- were issued |
earing 82875 each |
| Crl.A.No.627of2018 againstC.C.No.83of |
M/s.Rallis India Limited. |
Acheque No.382876 b |
earing |
| 20r3 | M/s.Sri Lakshmi Agencies&others |
dt.30.04.2004 5,00,000/- issued. |
for was |
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complainant firm or towards the liability of another firm namely M / s.Vaishnavi Chemicals
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(which is not an accused) since the MOU does not contain a specihc clause regarding whether the cheques were issued towards the loan of A1 hrm or M/s.Vaishnavi Chemicals. In the said circumstances, it cannot be assumed that the cheques were towards the liability of Ai firm only.
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1
Magistrate needs no interference since they are based on record and
reasonable.
Securities and Credits Private Limitedl, held as follows:
"16. This Court has con-sistentl!! held that non execuliue and independent director(s) cannot be held liable under Section 138 read ulith Section 141 of the NI Act unless specific allegations demonstrate their direct inuoluement in affairs of the compang ot the releuant time.
16-1. This Court in National Smoll Industies Corpn. Ltd. u. Harmeet Singh Paintal & Anr., (201O) 3 SCC 33O obserued.:
"13. Section 141 is a penal prouision cre.ating uicaious liabilitg, and tuhich, as per settled lau, must be stictly construed. It is therefore, not suffrcient to make a bald arsory statement in a complalnt that the Director (arraged as an accttsed) is in charge of and responsible to the compang for the conduct oJ the business of the company uithout anlJthingmore as to the role of the Director. But the complaint should spell out as to hou and in tuhat manner Respondent 1 uas in charge of or u)as responsible to the accused Compang for the conduct o/ its business- ?his is inconsonance with stict interpretation ofpenal stotures, especiallg, uheresuch statutes create uicaiou s liability.
I Arising out of SLP (criminal) No.4774 of 2024, dated 04.03.2025
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liability can be fastened only on tLtosc u.tho, at the time of thc commission of thc offence, were in charge of and tuere responsiblc for the conduct of the business of the company. (iii) Vicaious liabilitg can be infered against a companA registered or incorporated under tLLe Compan[es Act, 1956 only if the requisite statements, tthich are requ[red to be auerred in the complaint/ petition, are made so as ,o make the accused therein uicaiously liable for olfence committed bA the companq along uith auerments in the petition containing that the accused tuerc in charge of and responsible for the busine.ss of the compang ancl ltg uirtue of their position theA are liabte to be proceeded wilh. (iu) Vicaious liability on the part of a person must be pleaded and proued ond not inferred. (u) If the accused is a Managing Director or a Joint Managing Director tlaen it is not necessary to make specific auerrnent in the complaint and by ulnuc of thcir position they are liable to be proceeded with. (ui) If the accused is a Director or an oJficer of a compang u-tho signed the cheques on behalf of the companA then also il is not necessary to make specifi.c ouerment in the complaint. (uii) The person sought to be made liable should be in chargc of and responsible for the conduct of the business of the conpany at the releuant time. This has to be auerced as a fact as there is no deemed liabilitg of a Director in such cases. " 16.2. In N. K. Wahi u Shekhar Slngh & Ors., (2OO7) 9 SCC 481 this Court in Para 8 obserued..
"To launch a prosecution, against the alleged Dtrectors thcre mltst be a speciftc allegalton in the complaint as to the part plaged b! tlrcm in the transaction. There should be clear and unambiguous allegalton as to hoLU the Directors are in-charge and responsible for the concluct of lhe business of the compang. The desciption should be clear. It is true that precise uords from the proutsions of the Act need not be reproduced and the coutl can aluays come to a conclusion in facts of each case. But still, in the abscnce of ang auerment or specirtc euidence the net result LDoLLld be that complaint would not be entertainable." 16.3. 1n S.M'S-. Pharmaceuticals Ltd u. Neeta Bhalla & Anr., (2005) 8 SCC 89, this Courl laid down that mere designation as a director is not suffi.cient; speciJic role and responsibilitg must be establishcd in the complaint.
16.4. In Pooja Rauinder Deuid.asani u. State of Maharaslttrtt & Anr., (2014) 16 SCC 1, this Court u-thile taking into conslderation that a non execu.tiue director plags a gouernonce role, they are not rnuoh'ed in lhe daily operations or financial management of the compan11, held that to attract liabilitg under Section 141 of the NI Act, the accusad must haue been actiuelg in cLlarge of the companAt business at the rcleuant time. Mere directorship does not create automatic liability under tlLa Act. The knu has consistently held that only those uho are responsible lbr the day- todaA conduct of business can be held accountable.
16.5 In Ashok Sheuakramani & Ors. u. State of Andhra Pradesh & Anr., (2023) 8 SCC 473, this Court held:
"8. After hauing considered the submissions, u)e are of the t'icut that thcre is non-compliance on the part of the second Responclent tuith the
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requirements of Sub-section(1) of Section 141 of theNI Act.We maA note here that ue are dealing uith the AppellantsLuho hauebeen alleged tobe the Directors of the Accttsed No. 1 cornPanA. We are not dealing with the cases of a Managing Director or a tuhole time Director. The Appellants Houe not signed the cheques. In the facts of these three cases, the cheques haue been signed by the Managing Director and not bg ang of the Appellants." 16.6. In Hitesh Verma u. M/s Health Care At Home India Put. Ltd. & Ors., Crl. Appeal No. 462 of 2025, this Court held:
"4. As the appellant is not a signatory to the cheque, he is not liable under Section 138 of the 1881 Act. "As i, is only the signatory to the cheque uho is liable under Section I38, unless the case is brought within the four corners of Section 141 of the 1881 Act, no other person can be held liable...."
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'z(2022)8 SupremeCouCases 536
'12OOs110 Srpreme CourtCases450
11
"7O. In the light of the aboue, the High Court and other appellate Courts should Jollou.t the well-settled pinciples crystallizerl bg number of Judgments i,f it isqoing to ouemtle or othenuise dis.turb the tial courT's acquittal:
A number of instances arise in which the appellate court uould haue "uery substantial and compelling reasons" to discard the tial courl's decision. "Very substantial and- compelltng reasons" eist uhen:
i) The trial court's conclusion tuith regard to the facts is palpably turong: ii) The tiat court's decision wos based on an erroneous uieu of lau.t; iii) The tial court'sjudgment is likely to result in "graue miscarriage of justice";
iu) The entire approach of the tial court tn dealing with the eutdence Laas patentlA illegal;
u) The tial court'sjudgment was manifestlg unjust and unreasonable; ui) The trial court has ignored the euidence or misread the mateial euidence or has ignored mateial documents like dging declarations/ report of lhc ballistic expefl, etc.
uii)This tist is intended. to be lllustratiue, not exhaustiue. 2. The appellate courl must ahuags giucproper tueight and consideration o the f;.ndings of the tial courl.
If tuo reasonable uieu.ts can be reached- one that leads to acquittal, the other to conuiction-the High Courts/ appellate coutls mustt-ule in fauour of the accused."
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regarding the outstanding and liability against the cheques issued The transactions in between the parties are to be looked into in its entirety, and the Court cannot place reliance only on the fact that the cheques were issued. The burden that shifts onto the accused can be discharged by the preponderance of probability. Once the accused places before the Court, either by producing any evidence or on the basis of the oral and documentary evidence of the complainant that there is no outstanding, the Court can consider the evidence on record ar-rd acquit the accused. Once it is found that the complainant stated that there was sufficient evidence to prove the outstanding, however, could not prove the documents on record by admissible evidence, the complainant fails to prove its case against the accused. Only on the ground that the issuance of cheques was admitted, the same cannot be made basis to convict the accused since the complainant failed to prove the outstanding, as discussed.
).2. Learned Magistrate found that the very basis for launching prosecution is the MOU dated 31.O3.2OO4, which is inadmissible for the reason of there being no clarity regarding the liability of A1 hrm
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Further, there was no proof of supply of material and there was no evidence that the cheques 1n question were issued to pay any existing outstanding. In the present facts, when there are no specific averments to implicate A2, A4 to A7 by making them vicariously liable, or reflecting their involvement, and also the MOU has not been proved by complying with the requirements of secondary evidence,'there ts no infirmity in the hnding of the learned Magistrate. There are no compelling reasons to interfere with the said frnding.
SD/- KSHYLESHI JOINT REGISTRAR //TRUECOPY// SECTIONOFFICER
To,
ADK w
HIGH COURT
DATED:1210312025
COMMON JUDGMENT
CRLA.Nos.523, 591, 592 and 627 of 2018 .
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DISMISSING ALL THE CRLAs
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2 issues framed by the court
Whether the acquittal of the accused in cheque dishonour complaints under Section 138 NI Act could be reversed when the MOU proving outstanding liability was not proved through admissible evidence
Whether vicarious liability under Section 141 NI Act was attracted to accused who neither signed nor issued the cheques absent specific averments of their role
Colour shows how this judgement treated each authority
K.S.Mehta v. M/s.Morgan Securities and Credits Private LimitedRelied on¶7
K.S.Mehta v. M/s.Morgan Securities and Credits Private Limited
Ravi Sharma v. State (Government of NCT of Delhi)Relied on¶9
Ravi Sharma v. State (Government of NCT of Delhi)
Ghurey Lal v. State of Uttar PradeshRelied on¶10
Ghurey Lal v. State of Uttar Pradesh
4 provisions across 2 enactments
M/s. Rallis India Limited
M/s. Sri Lakshmi Agencies
B.Sudhakar
Kanuparthi Shiva Rama Gopala Krishna Murthy
Kanuparthi Ramchandra Rao
State of Telangana
K.Surender
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
