2023 (12) TMI 948 - HC - Indian Laws

Dishonour of Cheque - present complaint was filed without appreciating that the petitioner was not responsible for the conduct of the business of the Company at the relevant time - complaint does not contain any specific allegation against the petitioner to attract sections 138 and 141 of the NI Act - violation of principles of natural justice - HELD THAT - Section 141 of the NI Act provides for a constructive liability which is created by a legal fiction. Section 141 of the NI Act being a penal provision should receive strict construction and compliance. If the accused played insignificant role in the affairs of the company, it may not be sufficient to attract the constructive liability under section 141 of the NI Act. The petitioner is claiming that he was appointed as the Regional Sales Manager in the accused no. 1 with effect from 01.10.2015 vide offer letter dated 28.05.2015 at a monthly salary of Rs. 50,000/-. The accused nos. 2 and 3 are the first director of the accused no. 1 as per Memorandum of Association. If the petitioner was not responsible for affairs of the accused no. 1 despite being promoted as Additional Director of the accused no. 1, it can only be established and proved in accordance with law during the trial of the complaint under section 138 of NI Act. The petitioner has not placed or submitted any document which can reflect that the petitioner has never participated in conduct of business of the accused no. 1. The petitioner cannot be absolved from his liability qua the cheques in question by merely pleading that he was not responsible for day to day affairs and conduct of the business of the accused no. 1. The arguments advanced by the counsel for the petitioner are without any legal support. The present complaint cannot be dismissed qua the petitioner. The present petition alongwith pending application is accordingly dismissed.

Summary

Issues Involved:
1. Quashing of criminal complaint under Section 138 of the Negotiable Instruments Act, 1881.
2. Vicarious liability of the petitioner under Section 141 of the Negotiable Instruments Act, 1881.
3. Specific averments required to establish liability under Section 141 of the Negotiable Instruments Act, 1881.

Summary:

Issue 1: Quashing of criminal complaint under Section 138 of the Negotiable Instruments Act, 1881
The petitioner filed a petition under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash the criminal complaint filed by respondent no. 2 under Section 138 of the Negotiable Instruments Act, 1881. The complaint alleged that the petitioner, along with other directors, was responsible for the dishonor of cheques issued by the accused company. The trial court had issued notices against the accused, including the petitioner.

Issue 2: Vicarious liability of the petitioner under Section 141 of the Negotiable Instruments Act, 1881
The petitioner contended that he was not responsible for the conduct of the business of the accused company at the relevant time and did not sign the cheques in question. He argued that he was appointed as a regional sales manager and later promoted to Additional Director for convenience, but never managed the affairs of the company. The petitioner claimed that the cheques were issued by the original directors of the company, not him.

Issue 3: Specific averments required to establish liability under Section 141 of the Negotiable Instruments Act, 1881
The court emphasized that under Section 141 of the NI Act, criminal liability extends to every person who was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. The Supreme Court's decisions in SMS Pharmaceuticals Ltd. V Neeta Bhalla and others, and other cited cases, were referred to highlight that specific averments are necessary to establish vicarious liability. The complaint must disclose how and in what manner the director was responsible for the conduct of the business.

The court observed that the complaint contained sufficient allegations to establish that the petitioner was involved in the day-to-day affairs of the accused company. The petitioner had not provided any documentary evidence to support his claim that he was not responsible for the conduct of the business. The court concluded that the petitioner's arguments were without basis and could not be factually sustained.

Conclusion:
The court dismissed the petition, stating that the complaint could not be quashed against the petitioner. The court noted that the petitioner could not be absolved from liability merely by pleading non-involvement in the company's affairs. The observations made in the judgment were not to be taken as an opinion on the final merits of the case.