2018 (2) TMI 2039 - HC - Indian Laws

Dishonor of cheque - Section 138 of the Negotiable Instruments Act, 1881 - vicarious liability under Section 141 of Negotiable Instruments Act - HELD THAT - A perusal of Section 141 of NI Act makes it clear that if the person committing the offence under section 138 is a company /firm then every person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, shall be liable to be proceeded against and punished besides the company/firm. Obviously, to attract the provisions of Section 141 of the Act averments have to be made in the complaint against such accused that he/she was incharge or responsible for the business affairs of the firm/company or that offence was committed with his consent, connivance or negligence. In this case, specific averments have been made against the petitioners which meet the statutory requirement of Section 141 of the N.I. Act. The pleas taken by the petitioner that they were neither incharge of the firm nor responsible for managing the day-to-day affairs of the firm, are subject matter of trial. Accordingly, both the petitions are dismissed with costs of ₹ 25,000/- to be paid by each of the petitioners to the complainant. Costs be recovered by the trial court and made over to the complainant. The applications are disposed of as infructuous.

Summary

Issues:
Petitioners seek quashing of summoning order under Section 138 of Negotiable Instruments Act, 1881. Issue involves interpretation of Section 141 of the Act regarding vicarious liability of individuals in a company for offenses committed by the company.

Analysis:

1. Petitioner's Contentions:
- Petitioner-Lata Agrawal and Rajiv Garg argue they are not liable under Section 141 of the Act as they were not in charge or responsible for the firm's business affairs when the offense occurred.
- Cite cases like Katta Sujatha vs. Fertilizers & Chemicals Travancore Ltd., S.M.S Pharmaceuticals Ltd. vs. Neeta Bhalla, among others, to support their claim.

2. Respondent's Contentions:
- Respondent contends accused nos. 2, 3, and 4 were partners and authorized signatory of the firm, dealing with the complainant on behalf of the accused firm.
- Relies on cases like Standard Chartered Bank vs. State of Maharashtra, Rallis India Limited vs. Poduru Vidya Bhushan to argue that statutory requirements under Section 141 are met.

3. Interpretation of Section 141 of the Act:
- Section 141 imposes liability on individuals in a company if the offense was committed with their consent, connivance, or negligence.
- Differentiates liability based on the position held within the company, such as Managing Director, Director, Secretary, or other officers.

4. Court's Decision:
- Court notes that specific averments in the complaint against the petitioners satisfy the requirements of Section 141 of the Act.
- Dismisses the petitions, stating that the claims of not being in charge or responsible are subject to trial.
- Orders each petitioner to pay costs of ?25,000 to the complainant, recoverable by the trial court.

In conclusion, the judgment upholds the summoning order under Section 138 of the Act, emphasizing the importance of specific averments in the complaint to establish liability under Section 141. The decision underscores that claims of lack of involvement in the firm's affairs are factual issues to be determined during trial, not at the quashing stage.