2018 (8) TMI 1599 - HC - Indian Laws

Offence punishable u/s 138 of NI Act - vicarious liability under Section 141 of the NI Act - Held that - The requirement to invoke the vicarious liability as stipulated under Section 141 of NI Act, is that the accused other than the company were incharge and responsible for the company - In the light of averments in the complaint, the submissions that they were not responsible or that they were not incharge would be probable defence which can be adjudicated at the time of trial. The complaint herein mentions details attributing sufficient role to the accused. On perusal of the averments in the present complaint, it is found that they were sufficient to issue process against the applicant. Taking into consideration the totality of circumstances, including admission in reply to notice, averments in respective reply filed in revision applications filed before Sessions Court as well as averments in present proceedings and affidavit-in-reply in these matters, no case is made out to exercise inherent powers to quash proceedings which are based on debatable issues. Petition dismissed.

Issues Involved:
1. Vicarious liability under Section 141 of the Negotiable Instruments Act, 1881.
2. Role of directors in the alleged transaction.
3. Issuance of process by the trial court.
4. Necessity of inquiry under Section 202 of Cr.P.C.
5. Grounds for quashing the proceedings.

Detailed Analysis:

1. Vicarious Liability under Section 141 of the Negotiable Instruments Act, 1881:
The judgment discusses the requirement to invoke vicarious liability under Section 141 of the NI Act. The petitioners argued that they were not in charge of the day-to-day affairs of the company and that there were no sufficient averments in the complaint to invoke vicarious liability. The court noted that the complaint mentioned details attributing sufficient roles to the accused, and these submissions are to be tested at the time of trial. The court emphasized that the basic averments regarding the directors being in charge and responsible for the conduct of the business at the relevant time are essential.

2. Role of Directors in the Alleged Transaction:
The petitioners contended that they had no role in the subject transaction, were not signatories to the cheque, and were not involved in the day-to-day affairs of the company. The court observed that the complaint alleged that the accused were in charge of the company and had represented to the complainant that they were personally responsible for all the affairs of the company. The court found that the submissions made by the counsel for the petitioners/applicant could not be accepted at this stage and needed to be tested during the trial.

3. Issuance of Process by the Trial Court:
The petitioners argued that the trial court had mechanically issued the process without understanding the requirements of Section 141 of the NI Act. The court noted that the complaint contained sufficient averments to issue process against the accused. The court held that the trial court had sufficient material to issue the process and that the Sessions Court had rejected the revision applications without any cogent reasons.

4. Necessity of Inquiry under Section 202 of Cr.P.C.:
The petitioners submitted that an inquiry under Section 202 of Cr.P.C. was necessary as they were residents of Bhavnagar, Gujarat. The court, however, held that based on earlier decisions, an inquiry under Section 202 of Cr.P.C. is not mandatory in respect of proceedings under Section 138 of the NI Act. The court found that there was sufficient material before the trial court to issue the process.

5. Grounds for Quashing the Proceedings:
The petitioners sought to quash the proceedings, arguing that they were not involved in the day-to-day affairs of the company and had grievances against the conduct of co-accused. The court referred to the Supreme Court's decision in Gunmala Sales Private Ltd., which stated that the High Court may quash the complaint if it comes across unimpeachable evidence or acceptable circumstances leading to the conclusion that the director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time. The court, however, found that no case was made out to exercise inherent powers to quash the proceedings, as the issues were debatable and required testing during the trial.

Conclusion:
The court dismissed the Criminal Writ Petition No.478 of 2017 and Criminal Application No.186 of 2017, clarifying that the observations made were only for adjudicating the issues involved and that the trial court should not be influenced by the same during the trial.

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