Crl.R.C.Nos.872 & 956 of 2023

IN THE HIGH COURT OF JUDICATURE AT MADRAS

RESERVED ON : 06.01.2026

PRONOUNCED ON : 19.01.2026

CORAM

THE HONOURABLE MR.JUSTICE SUNDER MOHAN

Crl.R.C.Nos.872 & 956 of 2023

and

Crl.MP.Nos.7771 & 6805 of 2023

Crl.RC No.872 of 2023

R.Kalaivani ... Petitioner/A3

Vs.

Deputy Commissioner of Income Tax,

(Benami Prohibition),

Initiating Officer, Chennai. … Respondent/Complainant

Crl.R.C.No.956 of 2023

1. M/s.V.P.C. & Co.,

No.3/11, Natesan Colony,

Dadubaikuttai, Salem-636 015,

Rep. by its Partners

-R.Ramesh & R.Kalaivani ... Petitioner/A1

2.R.Ramesh ... Petitioner/A2

Vs.

Page No.1 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

Deputy Commissioner of Income Tax,

(Benami Prohibition),

Initiating Officer, Chennai – 600 034… Respondent/Complainant

COMMON PRAYER : Criminal Revision Petitions filed under Section 397

r/w Section 401 of the Code of Criminal Procedure, 1973, to call for the

records in Crl.MP.No.5042/2022 in C.C.No.20/2021 on the file of the

learned IX Additional Special Judge, for CBI Cases, Chennai and set aside

the Order dated 20.03.2023 passed by the learned IX Additional Special

Judge, for CBI Cases, Chennai in Crl.MP.No.5042/2022 in C.C.No.20/2021

and consequently discharge the petitioners from the above case in

C.C.No.20 of 2021.

For Petitioner : Mr.R.John Sathyan, Sr. Counsel

in Crl.RC.No.872 of 2023 for Mr.S.Manuraj

For Petitioner

in Crl.RC.No.956 of 2023: Mr.S.Manuraj

For Respondent : Ms.M.Sheela

in both cases Spl. Public Prosecutor (Income Tax)

COMMON ORDER

These two Criminal Revision Cases have been filed by the accused

facing prosecution in C.C.No.20 of 2021 filed under Section 53 of the

Prohibition of Benami Property Transactions Act, 1988 (as amended by Act

43 of 2016) [hereinafter referred to as 'the PBPT Act']. Crl.R.C.No.872 of

Page No.2 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

2023 has been filed by Accused No.3 and Crl.R.C.No.956 of 2023 has been

filed by Accused Nos.1 and 2. For the sake of convenience, the parties are

referred to as per their ranking before the trial Court.

2. (i) It is the case of the respondent that post-demonetisation in the

year 2017 there were cash deposits to the tune of Rs.68.71 Crores made into

the bank of the Partnership Firm viz., first accused, in which the second

accused and the third accused are the Partners; that the accused did not have

the requisite sources to make such a huge deposits; that the accused could

not produce the source of making such huge deposits; that the income

declared during the previous years was very less; that the sudden increase in

profits declared by the first accused is improbable and does not

commensurate with the business and financial standing of first accused and

hence, first accused along with second accused, who is its Managing Partner

and third accused, who is the Director, are jointly liable for the aforesaid

offence.

(ii) The petitioners sought for discharge on various grounds before the

trial Court. The learned Judge dismissed the discharge petitions on the

Page No.3 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

ground that the Court at the stage of charge framing cannot shift and weigh

the evidence and that the respondent has made out a prima facie case to

proceed further against the petitioners. Being aggrieved, the petitioners are

before this Court.

3. Mr.R.John Sathyan, the learned senior counsel appearing for the

third accused, the petitioner in Crl.RC.No.872 of 2023 would submit that the

petitioner was only a dormant partner in the partnership firm/first accused;

that all the affairs was taken care of only by her husband/second accused;

that the petitioner had sent a reply to the show cause notice, although a

separate show cause notice was not sent to the petitioner; that in the reply,

the petitioner had stated that she is only a dormant partner; that even

thereafter, the respondent has not chosen to collect any evidence to establish

her role in the affairs of the firm; and that in any case, the respondent has

not even made the requisite averments in the complaint to invoke the

provisions of Section 62 of the PBPT Act, which provides for vicarious

liability of officers of the firm/company if the offence is committed by the

firm/company

Page No.4 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

4.(i) Mr.S.Manuraj, the learned counsel appearing for the first and

second accused/petitioners in Crl.RC.No.956 of 2023 would submit that the

1

st

petitioner/first accused viz., the firm had sufficient means to make the

deposit; that merely because in the previous years the profit shown is less,

the respondent cannot assume that the petitioners could not have earned the

money deposited in the bank account; that the sum of Rs.68.71 Crores is the

turn over of the first accused firm from cash sales and cash advances which

is accumulated for a period of seven months before the period of

demonetisation and was deposited after the commencement of the scheme of

demonetisation; that the alleged beneficial owner has not been traced by the

respondent and therefore, the learned Judge ought to have discharged the

petitioners.

(ii) As regards the role of the 2

nd

petitioner/second accused, the

learned counsel would submit that the respondent has not made any

averments in the impugned complaint stating that the Managing

Partner/second accused was in-charge of and responsible for the conduct of

the business of the first accused firm and in the absence of averments, the

impugned prosecution cannot be sustained.

Page No.5 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

(iii) The learned counsel relied upon the judgments of the Hon'ble

Supreme Court in Sanjay Dutt & Ors. vs. The State of Haryana & Anr.,

[Crl.A.No.11 of 2025 @ SLP(Crl.) No.7464/2024 -decided on 02.01.2025],

reported in 2025 INSC 34 and that of this Court in Umanga Vohra vs. The

State of Tamil Nadu, reported in 2025-1-LW(Crl) 848.

5.(i) Ms.M.Sheela, learned Special Public Prosecutor (Income Tax

cases) per contra submitted that the turn over of the firm for the assessment

year 2015-16 was Rs.2,31,449/-; for the year 2016-17 was Rs.1,70,203/-;

and for the year 2017-18, it was raised to Rs.24,36,212/- and such being the

financial status of the firm in the previous years, the claim of the firm that

they had made a sale of Rs.68 Crores, is a concocted story; that the

documents filed by the respondent would show that the firm had an over

due of Rs.4,93,77,687.51 as on 05.11.2016 and it is therefore impossible to

believe that an amount of Rs.68.17 Crores was the turn over of the firm and

was deposited post-demonetisation; and that the petitioners are therefore

bound to explain as to why they had kept an outstanding balance of Rs.4.93

Crores, when they had cash of Rs.68 Crores.

Page No.6 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

(ii) The learned Special Public Prosecutor also submitted that the

respondent had examined several witnesses to establish that the petitioners

had filed bogus bills and the registration numbers of the vehicles shown in

the bills are that of two-wheelers and not of lorries or trucks as stated by the

petitioners; and that in the light of such evidence, the learned Judge was

justified in dismissing the discharge petitions.

(iii) The learned Special Public Prosecutor further submitted that

admittedly the second accused is the Managing Partner and all the business

activities of the firm was only carried out by him and the third accused,

being his wife, actively assisted him in the business transactions; that her

claim that she was not in-charge and responsible for the conduct of the

business of the firm cannot be adjudicated in a discharge petition; and that

unlike the company where the Directors can claim ignorance, the first

accused in this case is a partnership firm with only two partners and

therefore prayed that the revisions may be dismissed. The respondent has

filed a common counter in both cases.

Page No.7 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

6. As stated earlier, it is the case of the respondent that a sum of

Rs.68.71 Crores was credited to the account of the first accused firm post-

demonetisation. It is seen from the counter and the other records that the

income of the first accused firm was less in the previous Academic Years.

That apart the respondent has alleged that the petitioners have filed bogus

bills and sales bills to falsely claim the sale of the products that they were

dealing with. In such circumstances, this Court is of the view that the

petitioners' defence that they had enough income and the deposits made by

them were genuine cannot be adjudicated at this stage. In fact, under

Section 2(9)(D) of the PBPT Act, 'Benami Transactions' include the

transaction in respect of the property where the person providing the

consideration is not traceable or is fictitious. Therefore, the fact that the

beneficial owner has not been identified would not be a ground for

discharge.

7. As regards the submission with regard to the second accused that

there is no averment in the impugned complaint stating that the 2

nd

accused

was in-charge of and responsible to the firm for the conduct of its business,

it is seen that admittedly, the 2

nd

accused is the Managing Partner of the

Page No.8 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

Firm. The learned counsel has relied upon the judgement of the Hon'ble

Supreme Court in Sanjay Dutt's case [cited supra]. In that case, the

Managing Director was prosecuted for the offence under the Punjab Land

Preservation Act, 1900. The allegation in the said case was that the

company destroyed a few trees belonging to the Forest Department using a

JCB machine. In the facts of that case, the Hon'ble Supreme Court had held

that there is no evidence to suggest that the Managing Director was aware of

the acts committed by its employees. In fact, the company in that case was

not made an accused. In such circumstances, the Hon'ble Supreme Court

held that the Managing Director cannot be made liable for acts committed

by its employees vicariously, especially since the company itself was not

made an accused. Therefore, the said judgment relied upon by the learned

counsel for the second accused would be of no avail to him.

8. Similarly, the judgment of this Court in Umanga Vohra's case

[cited supra], relied upon by the learned counsel for the petitioners/Accused

1 and 2, also would not be applicable to this case, as that was a prosecution

under the Drugs and Cosmetics Act wherein the officer had been

specifically named in the licence and instead of prosecuting the said person,

Page No.9 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

the Managing Director was sought to be prosecuted in the absence of any

allegation that he was aware that the drugs so manufactured were not of

standard quality. Therefore, that case also would not be applicable to the

facts and circumstances of this case.

9. In this case, the first accused is the partnership firm and the second

accused is its Managing Partner without whose consent the said cash

deposits would not have been made. Even according to the third accused,

the second accused was taking care of the affairs of the firm. He had also

signed the Balance Sheet and other relevant documents, which indicates his

knowledge and consent prima facie. Therefore, this Court is of the view that

the order of the learned Magistrate in refusing to discharge the second

accused also cannot be faulted.

10. As regards the third accused [petitioner in Crl.R.C.No.872 of

2023] who happens to be the wife of the second accused, it is the case of the

respondent that she was a partner and hence, liable. The petitioner/third

accused though not issued a separate show cause notice had replied stating

that she was only a dormant partner and that the affairs of the partnership

Page No.10 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

firm were taken care of by her husband/second accused. In the Sanction

Order relied upon by the respondent dated 21.10.2019, a reference is made

to the reply sent by the petitioner. However, there is no reference to the

exact role played by the petitioner and as to how she was in-charge and

responsible to the firm for the conduct of its business.

11. In the impugned complaint, the respondent have not made the

requisite averments to hold her vicariously liable for the offences committed

by the firm. The petitioner cannot be equated with her husband, who was

the Managing Partner. Therefore, the respondent should have specifically

averred that the petitioner was in-charge and responsible to the firm for the

conduct of its business.

12. In Dilip Hariramani vs. Bank of Baroda, reported in 2024 (15)

SCC 443 the Hon'ble Supreme Court had reiterated the legal position in a

case arising out of a complaint under Section 138 of the Negotiable

Instruments Act, which has a similar provision as regards vicarious liability.

The relevant portion from the judgment reads as follows:

“12. We would also refer to the summarisation of law on Section

141 by this Court in National Small Industries Corporation Limited v.

Page No.11 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

Harmeet Singh Paintal and Another [10 (2010) 3 SCC 330] to the

following effect:

“39. From the above discussion, the following

principles emerge:

(i) The primary responsibility is on the complainant

to make specific averments as are required under the law in

the complaint so as to make the accused vicariously liable.

For fastening the criminal liability, there is no presumption

that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors

liable for the offence. The criminal liability can be fastened

only on those who, at the time of the commission of the

offence, were in charge of and were responsible for the

conduct of the business of the company.

(iii) Vicarious liability can be inferred against a

company registered or incorporated under the Companies

Act, 1956 only if the requisite statements, which are

required to be averred in the complaint/petition, are made

so as to make the accused therein vicariously liable for

offence committed by the company along with averments

in the petition containing that the accused were in charge of

and responsible for the business of the company and by

virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must

be pleaded and proved and not inferred.

xx xx xx

(vii) The person sought to be made liable should be

in charge of and responsible for the conduct of the business

Page No.12 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

of the company at the relevant time. This has to be averred

as a fact as there is no deemed liability of a Director in such

cases.”

13. In the present case, we have reproduced the contents of the

complaint and the deposition of PW-1. It is an admitted case of the

respondent Bank that the appellant had not issued any of the three

cheques, which had been dishonoured, in his personal capacity or

otherwise as a partner. In the absence of any evidence led by the

prosecution to show and establish that the appellant was in charge of and

responsible for the conduct of the affairs of the firm, an expression

interpreted by this Court in Girdhari Lal Gupta v. D.H. Mehta and Another

[(1971) 3 SCC 189] to mean ‘a person in overall control of the day-to-day

business of the company or the firm’, the conviction of the appellant has to

be set aside. [State of Karnataka v. Pratap Chand and Others, (1981) 2

SCC 335.].

14. The appellant cannot be convicted merely because he was a

partner of the firm which had taken the loan or that he stood as a guarantor

for such a loan. The Partnership Act, 1932 creates civil liability. Further,

the guarantor's liability under the Indian Contract Act, 1872 is a civil

liability. The appellant may have civil liability and may also be liable

under the Recovery of Debts Due to Banks and Financial Institutions Act,

1993 and the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002. However, vicarious liability in

the criminal law in terms of Section 141 of the NI Act cannot be fastened

because of the civil liability. Vicarious liability under sub-section (1) to

Section 141 of the NI Act can be pinned when the person is in overall

control of the day to-day business of the company or firm. Vicarious

liability under sub-section (2) to Section 141 of the NI Act can arise

Page No.13 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

because of the director, manager, secretary, or other officer's personal

conduct, functional or transactional role, notwithstanding that the person

was not in overall control of the day-to-day business of the company when

the offence was committed. 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 officer of the company.

13. From the above observations, it would be clear that although a

firm is not a juristic person, a partner could not be liable unless one of the

twin requirements to make him/her vicariously liable is satisfied. In the

PBPT Act, the twin requirements are stipulated in Section 62.

14. Thus, in the light of the specific stand taken by the petitioner/third

accused in the reply to the show cause notice and in the absence of any

material to establish the role played by the petitioner/third accused, this

Court is of the view that the petitioner/third accused cannot be made

vicariously liable, especially since even the necessary averment to invoke

vicarious liability is absent in the complaint. Therefore, this Court is

inclined to set aside the impugned order insofar as the petitioner/third

accused is concerned.

Page No.14 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

15. Accordingly, the impugned order dated 20.03.2023 passed by the

learned IX Additional Special Judge, for CBI Cases, Chennai in

Crl.MP.No.5042/2022 in C.C.No.20/2021 is set aside insofar as the

petitioner/third accused alone is concerned. However, it is made clear that if

the respondent is able to adduce any evidence to prove the role played by the

petitioner/third accused to make her vicariously liable, then the respondent

is at liberty to invoke Section 319 of the Cr.P.C., corresponding to 358

BNSS.

16. With the above observations, the Crl.RC No.872 of 2023 filed by

the third accused stands allowed and the Crl.RC.No.956 of 2023 filed by the

first and second accused stands dismissed. Consequently, the connected

Criminal Miscellaneous Petitions are closed.

19.01.2026

Index : Yes/No

Speaking Order/Non Speaking Order

Neutral Citation: Yes/No

ars

Page No.15 of 16 https://www.mhc.tn.gov.in/judis

Crl.R.C.Nos.872 & 956 of 2023

SUNDER MOHAN, J.

ars

To

1. The IX Additional Special Judge for CBI Cases,

Chennai.

2. The Deputy Commissioner of Income Tax,

(Benami Prohibition)

Initiating Officer, Chennai.

3. The Public Prosecutor,

High Court, Madras.

Pre-delivery Common Order in

Crl.R.C.Nos.872 & 956 of 2023

19.01.2026

Page No.16 of 16 https://www.mhc.tn.gov.in/judis