Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Indian Laws Indian Laws + HC Indian Laws - 2022 (7) TMI HC This

  • Login
  • Cases Cited
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2022 (7) TMI 41 - HC - Indian Laws


Issues Involved:
1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act, 1881.
2. Specificity of allegations against the second accused (Director) under Section 141 of the Negotiable Instruments Act, 1881.
3. Vicarious liability of the Director for the offence committed by the company.

Detailed Analysis:

1. Maintainability of the Complaint under Section 138 of the Negotiable Instruments Act, 1881:
The Petitioner sought to quash the proceedings in C.C.No.794 of 2018, arguing that the complaint was not maintainable as it lacked specific allegations against the second accused, who was not a signatory of the cheques. The Respondent/Complainant had received cheques totaling Rs.1,76,43,951/- which were returned due to insufficient funds. The Petitioner contended that the complaint did not specify the role of the second accused in the alleged offence, thus making the complaint invalid in the eyes of the law.

2. Specificity of Allegations Against the Second Accused (Director) under Section 141 of the Negotiable Instruments Act, 1881:
The Petitioner argued that the complaint failed to state specific averments against the second accused, who was merely a guarantor and not involved in the day-to-day management of the company. The legal precedents cited, including *K.Janakimanoharan v. M/s.Gayatri Sugar Complex Limited*, emphasized the necessity of clear and specific allegations against Directors to hold them vicariously liable. The complaint must reveal how the Directors were responsible for the conduct of the company's business at the time of the offence.

3. Vicarious Liability of the Director for the Offence Committed by the Company:
The Petitioner relied on several rulings, including *N.K.Wahi v. Shekhar Singh* and *S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla*, which established that mere designation as a Director does not automatically impose liability under Section 141. There must be specific allegations showing the Director's involvement and responsibility for the company's business conduct. The absence of such averments in the complaint rendered it non-maintainable.

Conclusion:
Upon reviewing the rival submissions and the complaint, the Court found that the complaint lacked specific averments regarding the role played by each Director, including the second accused. The cited rulings supported the Petitioner's argument that the complaint did not meet the legal requirements under Section 141 for holding the Directors vicariously liable. Consequently, the Court concluded that the complaint filed by the Respondent/Complainant was not maintainable in law.

Order:
The Criminal Original Petition was allowed, and the complaint in C.C.No.794 of 2018 on the file of the learned Judicial Magistrate, Fast Track Court at Ambattur, Chennai was quashed. The connected miscellaneous petition was also closed.

 

 

 

 

Quick Updates:Latest Updates