2020 (9) TMI 594 - HC - Indian Laws

Dishonor of Cheque - vicarious liability of Director of being accused - no specific allegation as against the petitioner to attract the offences under Section 141 of NI Act - issuance of summons without application of mind - principles of natural justice - HELD THAT - The Hon ble Supreme Court of India in various cases repeatedly held that the complaint has to specifically say as to how and in what manner Director was responsible for the conduct of the business of the company. Unfortunately in the impugned complaint, the allegations did not satisfy the requirements of Section 141 of NI Act. That apart, the petitioner is being implicated as third accused who is inducted as Non Executive Director of the first accused company, therefore the petitioner is not being made responsible for the day to day affairs of the company and she cannot be held liable vicariously for the offence committed by the company. Therefore, in order to secure ends of justice and to prevent the abuse of process of court, this Court has to necessarily interfere with the proceedings in exercise of its jurisdiction under Section 482 of Cr.P.C. These Criminal Original Petitions are allowed.

Summary

Issues Involved:
1. Whether the petitioner, a Director of the accused company, can be held liable under Section 138 and Section 141 of the Negotiable Instruments Act (NI Act).
2. Whether the complaint contains specific averments to make the petitioner vicariously liable under Section 141 of the NI Act.
3. Whether the proceedings against the petitioner should be quashed under Section 482 of the Criminal Procedure Code (Cr.P.C.).

Issue-Wise Detailed Analysis:

1. Liability of the Petitioner Under Section 138 and Section 141 of the NI Act:
The petitioner was arrayed as the third accused in the complaint for offences under Section 138 of the NI Act. The respondent alleged that the company availed term loans and issued cheques that were dishonored. The petitioner, a Director, was claimed to be in charge of the company's business activities. However, the petitioner argued that merely being a Director does not make one liable under Section 141 of the NI Act unless it is specifically averred that the Director was responsible for the conduct of the company's business at the time of the offence. The court reiterated that criminal liability under Section 141 can only be fastened on those in charge of and responsible for the conduct of the company's business at the relevant time.

2. Specific Averments in the Complaint:
The court emphasized the necessity of specific averments in the complaint to hold a Director vicariously liable under Section 141. The complaint must detail how and in what manner the Director was responsible for the conduct of the company's business. The petitioner relied on several Supreme Court judgments, including National Small Industries Corporation Limited vs. Harmit Singh Panital, N.K. Wahi vs. Shekhar Singh, Pooja Ravinder Devidasani vs. State of Maharashtra, and Ashok Mal Bafna vs. M/s Upper India Steel Mfg & Engg Co. Ltd, which consistently held that a mere designation as a Director is insufficient. The complaint must spell out the Director's role and responsibilities. In this case, the court found that the complaint did not meet these requirements, as it lacked specific allegations against the petitioner.

3. Quashing of Proceedings Under Section 482 Cr.P.C.:
Given the absence of specific averments in the complaint and the petitioner's role as a Non-Executive Director, the court concluded that the petitioner could not be held vicariously liable for the company's offence. The court decided to quash the proceedings against the petitioner to prevent the abuse of the legal process and secure the ends of justice. The court directed the trial court to complete the trial against the other accused within six months.

Conclusion:
The court allowed the criminal original petitions and quashed the proceedings against the petitioner in CC.No.1706 of 2019, CC.No.5827 of 2019, and CC.No.5828 of 2019. The trial court was instructed to expedite the trial against the remaining accused within a specified timeframe. The judgment underscored the importance of specific averments in complaints to establish vicarious liability under Section 141 of the NI Act.