No Vicarious Liability When Principal Offender Is Acquitted: Calcutta High Court Reiterates Binding Precedent Under Section 141 of NI Act

“Liability of Partner Is Co-Extensive with That of the Firm — If Firm Is Not Guilty, the Partner Cannot Be Punished”: Calcutta High Court reaffirmed the settled principle of law that vicarious liability under Section 141 of the Negotiable Instruments Act, 1881, cannot arise in the absence of a finding of guilt against the firm or company. The Court, presided over by Dr. Justice Ajoy Kumar Mukherjee, upheld the acquittal of a partner who had been convicted by the trial court despite the acquittal of the firm itself.

Relying on the authoritative decision in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., (2012) 5 SCC 661, the Court ruled that once the firm is acquitted, the partner cannot be convicted, as the vicarious liability under Section 141 is contingent upon the firm being found guilty under Section 138.

“Commission of offence by the said juristic person namely the partnership firm is pre-requisite to convict the partners referred under section 141 of the N.I. Act or to hold such partner guilty of the said offence.” [Para 12]

The complainant M/s Maa Durga Trading Co. had initiated a proceeding under Section 138 read with Section 141 of the NI Act against the partnership firm M/s Shiva Steels (accused no.1) and two of its partners — Sujeet Kumar Jaiswal (accused no.2) and Sandeep Kumar Jaiswal (accused no.3), alleging dishonour of a cheque for ₹14,63,427/- issued in discharge of a liability.

The Trial Court acquitted the firm and accused no.3, but convicted accused no.2 — solely because he had signed the dishonoured cheque. Importantly, the complainant did not challenge the acquittal of the firm. Accused no.2, however, challenged his conviction and the Appellate Court acquitted him, finding that there could be no vicarious liability in the absence of the firm’s guilt.

This appeal before the High Court was filed by the complainant challenging the appellate acquittal.

The High Court found that the complaint was not based on any personal liability of accused no.2, but entirely on the claim that the cheque had been issued by the partner on behalf of the firm.

“It has not been averred that accused no.2/respondent purchased any goods from complainant in his personal capacity or he issued the cheque in his personal capacity and as such he cannot have any liability de hors the liability of the company.” [Para 13]

The Court further observed that no appeal had been preferred by the complainant against the acquittal of the firm, and hence, that acquittal had attained finality. Since the firm had been found not guilty, the partner could not be punished for acting on its behalf.

Quoting from the binding Supreme Court precedent in Aneeta Hada, the Court emphasized:

“When the company can be prosecuted, then only the persons mentioned in other categories could be vicariously liable for the offence, subject to the averments in the petition and proof thereof.” [Para 11]

The Court further clarified that Section 141 creates no independent offence against partners or directors; it only fastens derivative liability on those who are in charge of and responsible for the conduct of the business of the firm. Thus, without the firm being found guilty, there is no principal offender, and the vicarious liability collapses.

“The vicarious liability of partners under Section 141 of N.I. Act is contingent upon the partnership firm’s conviction. If the firm is not found guilty, there is no principal offender for the partners to be vicariously liable for.” [Para 13]

The High Court also reiterated that in an appeal against acquittal, interference is warranted only when the order suffers from manifest illegality, perversity or irrationality — none of which was present in this case.

“The presumption of innocence of the accused being primary factor, in absence of exceptional compelling circumstances and perversity in the ultimate finding of the judgment impugned, it is not open to the High Court to interfere with the judgment of the court below in a routine manner.” [Para 15]

The High Court upheld the appellate court’s order acquitting Sujeet Kumar Jaiswal, finding no perversity or illegality in the reasoning. The conviction by the trial court, despite the firm’s acquittal, was contrary to binding precedent.

“Since the firm is not convicted rather acquitted, its partner cannot be held vicariously liable and thereby cannot be convicted for committing offence under section 138 of the N.I Act.” [Para 15]

The appeal was thus dismissed, with the Court reiterating the binding nature of the principle laid down in Aneeta Hada.

Date of Decision: 2 July 2025