2018 (6) TMI 1788 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - absence of any allegations in the complaint with details as to how the petitioner is authorized in day-to-day affairs of the company - vicarious liability u/s 141 of NI Act - HELD THAT - Though the petitioner is one of the Directors of the company merely because he has transferred a sum of 1, 00, 000/- from his account to the account of the complainant it is difficult to hold that the petitioner is actively participating in day-to-day affairs of the business of company. Mere payment by the petitioner being one of the Directors is not sufficient to fasten liability under Section 141 of the Act - While dealing with the vicarious liability of the Directors of the company the Apex Court in SUNIL BHARTI MITTAL VERSUS CENTRAL BUREAU OF INVESTIGATION 2015 (9) TMI 1339 - SUPREME COURT is of the view that the principle which is laid down is to the effect that the criminal intent of the alter ego of the company that is the personal group of persons that guide the business of the company would be imputed to the company/corporation. The averments made in paragraph No.5 of the complaint are not sufficient to fasten the liability against the petitioner and in the absence of such details the complaint against the petitioner who is arrayed as A2 for the offence under Section 138 of the Act and under Section 420 IPC is not maintainable and consequently the proceedings against the petitioner are liable to be quashed - Petition allowed.

Summary

Issues:
Quashing of proceedings under Section 482 Cr.P.C. regarding offences under Section 138 of Negotiable Instruments Act, 1881 and Section 420 IPC against the petitioner/A2.

Detailed Analysis:

Issue 1: Quashing of Proceedings
The petition was filed under Section 482 Cr.P.C. to quash the proceedings in C.C.No.751 of 2012 against the petitioner/A2. The petitioner argued that as a Director of the company, he was not involved in the day-to-day administration, and there were no specific allegations in the complaint regarding his authorization in the company's affairs. The petitioner contended that vicarious liability cannot be imposed on directors under Section 141 of the Act. The counsel for the petitioner reiterated these grounds during the hearing.

Issue 2: Vicarious Liability of Directors
The second respondent argued that the petitioner/A2 participated in the day-to-day affairs of the company by transferring funds to the complainant, thus implying liability under Section 141 of the Act. The court noted that while the petitioner was a Director of the company, mere financial transactions were insufficient to establish active participation in the business's day-to-day operations. Citing relevant case laws, the court emphasized that vicarious liability of directors requires specific evidence of their involvement in the company's affairs to hold them accountable under Section 141 of the Act.

Judgment:
The court held that the allegations in the complaint were insufficient to establish the petitioner's liability under Section 141 of the Act. The court referred to previous judgments to emphasize that vicarious liability of directors necessitates concrete evidence of their role in the company's affairs. Consequently, the petition was allowed, and the proceedings in C.C.No.751 of 2012 were quashed against the petitioner/A2. The trial court was directed to expedite the disposal of the case within four months. The second respondent was advised to pursue civil litigation for recovery against the petitioner/A2. Any pending miscellaneous petitions in the matter were ordered to be closed.