“Mere Designation Not Enough: Calcutta HC Quashes NI Act Proceedings Against LLP Partner, Finds ‘Bald Statement’ Insufficient to Establish Vicarious Liability”
Safiya Malik
The Calcutta High Court, Single Bench of Justice Ajoy Kumar Mukherjee quashed the criminal proceedings initiated against a designated partner of a Limited Liability Partnership (LLP) under Sections 138/141 of the Negotiable Instruments Act, 1881.
The petitioner sought quashing of the cognizance order dated 1 July 2021 and the entire proceeding in Complaint Case No. CN 673 of 2021 pending before the 14th Metropolitan Magistrate, Calcutta. The petitioner challenged the vicarious liability attributed to him in connection with a cheque dishonour matter.
According to the complaint, the LLP named Prakriti Eminent Heights had taken a short-term accommodation loan of Rs. 26 lakhs in August 2018 from the complainant HUF. The loan was allegedly obtained through accused no. 2, and a cheque bearing no. 982918 dated 1 January 2021, drawn on Axis Bank Ltd., was issued in discharge of this debt. The cheque was dishonoured on presentation due to insufficient funds.
The complainant issued a statutory notice under Section 138(b) of the N.I. Act on 22 April 2021. Upon non-payment of the cheque amount within the stipulated period, the complaint was filed.
The petitioner argued through counsel Mr. Sabyasachi Banerjee that he was not the authorised signatory of the LLP at the relevant time and that accused no. 2 alone was responsible for the financial decisions. Citing judgments from the Supreme Court, including SMS Pharmaceuticals Ltd. v. Neeta Bhalla (2007) 4 SCC 70, K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 , and Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. (2012) 5 SCC 661 , counsel asserted that specific allegations and averments are necessary to implicate a person under Section 141 of the N.I. Act.
It was submitted that the complaint lacked such specific averments regarding the petitioner’s role and responsibility. The petitioner contended that he became aware of the transaction only upon receipt of the statutory notice. A detailed reply dated 10 June 2021 was issued denying any involvement or knowledge of the transaction or the issuance of the cheque.
In response, counsel for the complainant Mr. Achin Jana contended that the petitioner, being a designated partner of the LLP, was by default responsible for the conduct of business and was therefore vicariously liable under Section 141 of the N.I. Act. It was argued that the complaint, when read as a whole, satisfied the legal requirements to proceed under the said provisions. Mr. Jana relied on the Supreme Court judgement in S.P. Mani and Mohan Dairy v. Snehalatha Elangovan to argue that the complaint need not contain verbatim reproduction of Section 141, provided the allegations fulfil the statutory mandate.
Mr. Jana also referred to provisions of the LLP Act, 2008, including Sections 7(3), 17, 18, 26, 27, and 73, and specific clauses of the LLP agreement which, according to him, showed the petitioner’s involvement in the management of the LLP. It was submitted that as a designated partner, the petitioner was bound by acts authorised in the agreement and responsible for the LLP's compliance and conduct.
The court examined whether the complaint fulfilled the statutory requirement under Section 141 to fasten vicarious liability on the petitioner. Justice Mukherjee recorded that:
"It is no more res integra...that merely being a director of company is not sufficient to make the persons liable under section 141 of the N.I. Act and that a director of a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business."
The judgment further noted:
"In paragraph 3 of the complaint it has been stated that the petitioner herein along with other accused persons are the key persons responsible for the management of accused no. 1. However,...there is no bar to proceed with the complaint and while construing a complaint a hyper technical approach...should not be adopted so as to stifle a criminal proceeding."
Despite this, the court considered the detailed reply sent by the petitioner to the demand notice. It observed that the complaint failed to rebut the factual assertions and denials made in the reply. The court stated:
"It cannot be said that mere mentioning in the complaint that the petitioner is the key person responsible for the management of the accused no.1 and thereby is jointly and severally liable for the offence under section 138/141 of the N.I. Act...is sufficient compliance of section 141."
The LLP agreement clauses stated that certain acts, including loan transactions, required written consent of other partners, and specific financial authorisation rested with accused no. 2. The complaint did not make any averment contradicting the petitioner's denial or demonstrating his involvement in the issuance of the cheque.
"The statutory requirement contained in section 141 of N.I Act had not been complied with in respect of present petitioner, specially in the context of reply given by the petitioner herein denying his liability."
The court quashed the criminal proceedings against the petitioner.
"The result of the aforesaid discussion is that the averment in the complaint filed by the opposite party herein are not sufficient to satisfy the mandatory requirements under section 141 of N.I Act. Since the averments in the complaint are not sufficient to attract the rigour of section 141 to create vicarious liability upon the petitioner herein, he is entitled to succeed in this Application."
"The impugned proceeding being complaint case no. CN 673 of 2021 presently pending before learned 14th Metropolitan Magistrate at Calcutta is quashed qua the petitioner Dipanjan Bhattacharjee."
Advocates Representing the Parties:
For the Petitioner: Mr. Sabyasachi Banerjee, Mr. Nigam Ashish Chakraborty, Ms. Ankita Paul
For the Respondent: Mr. Falguni Bandyopadhyay, Ms. Sreetama Neogi, Ms. Riya Ballav, Mr. Achin Jana
Case Title: Dipanjan Bhattacharjee Vs. M/S Shantilal Jain & Sons HUF
Case Number: C.R.R. 1045 of 2022
Bench: Justice Ajoy Kumar Mukherjee
[Read/Download order]
