2014 (5) TMI 1221 - HC - Indian Laws

Dishonor of Cheque - vicarious liability of director who signed the cheque - no allegation in the complaint that the petitioner was responsible for conduct of the business of the company - cognizance of the offence under Section 138 of Negotiable Instruments Act - HELD THAT - It cannot be disputed that Section 141 is a penal provision creating vicarious liability and same must be strictly construed. The complaint should spell out as to how and in what manner the concerned respondent was in-charge of or was responsible to the accused/company for the conduct of its business. A company may have a number of directors and to make any or all the directors as accused in a complaint merely on the basis of a statement that they are in-charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141. It is also settled position in law that with a view to make a director of a company vicariously liable for the acts of the company it is obligatory on the part of the complainant to make specific allegations as are required under the law and under Section 141 of the Act and that in absence of such specific averments in the complaint showing as to how and in what manner the director is liable the complaint should not be entertained. In the present case a perusal of the complaint reveals that the cheque in question was signed by respondent No. 3 as director of respondent No. 2/company. The only allegation against the present petitioner is that she is the director and in-charge of the company. There is no further allegation in the complaint that the petitioner was responsible for conduct of the business of the company. There is also no allegation in the complaint in respect of part played by the petitioner in the alleged transaction - Since the complaint does not contain the specific averment as against the present petitioner as required under the law therefore the Trial Court could not have taken cognizance against the present petitioner. The vicarious liability on the part of the petitioner has not been clearly pleaded in the plaint. The petitioner had neither signed the cheque in question nor there is allegation that the petitioner is the Managing Director of the Company. There is also no allegation that the petitioner was in-charge and responsible for conduct of the business of the company at the relevant time. The Trial Court has committed an error in taking cognizance of the offence under Section 138 of Negotiable Instruments Act against the present petitioner. In view of this the impugned orders of the Trial Court cannot be sustained and are hereby set aside - Petition allowed.

Summary

Issues:
Challenge to order taking cognizance of offence under Section 138 of Negotiable Instruments Act against the petitioner and rejection of review prayer.

Analysis:
The petitioner filed a petition under Section 482 of Cr.P.C. challenging the order dated 10-9-08 taking cognizance of the offence under Section 138 of Negotiable Instruments Act against her, as well as the order dated 22-1-09 rejecting the review prayer. The complaint alleged an offence under Section 138 of NI Act, and the Trial Court took cognizance against the petitioner, who was a director of the company, without specific allegations against her in the complaint. The petitioner argued that she was not responsible for the cheque in question and should not have been included in the complaint merely based on her directorial position.

The Court emphasized that Section 141 imposes vicarious liability, which must be strictly construed. It cited precedents to highlight the necessity of specific averments in complaints to establish vicarious liability of directors. The complaint must detail how the accused director was in charge of or responsible for the company's conduct. The Court noted that the complaint against the petitioner lacked specific averments required by law to establish vicarious liability.

Referring to legal principles, the Court highlighted that vicarious liability must be pleaded and proved, not inferred. It outlined conditions under which directors can be held liable, emphasizing the need for specific allegations in complaints. The Court found that the complaint against the petitioner did not contain the necessary averments to establish her vicarious liability. It noted the absence of allegations regarding her role in the transaction or her responsibility for the company's business conduct.

Consequently, the Court held that the Trial Court erred in taking cognizance against the petitioner under Section 138 of NI Act. The impugned orders were set aside, and the complaint against the petitioner was dismissed. The petition under Section 482 of Cr.P.C. was allowed based on the lack of specific averments in the complaint to establish the petitioner's vicarious liability.