2020 (3) TMI 993 - HC - Indian Laws

Dishonor of Cheque - Proceedings against the Director of the company - No averments against the director in the complaint - offence under Section 141(2) of the Negotiable Instruments Act - HELD THAT - The complaint in question is wanting on material particulars. The requirement of law in respect of creating vicarious liability must be strictly construed. Since it is a penal provision, creating vicarious liability, therefore, it is not sufficient to make bald and cursory statement in the complaint that Director is incharge and responsible to the company for the conduct of the business of the company without anything more. Rather in the instant case, no such averments have been made in respect of the petitioner being Director is also incharge and responsible to the company for the conduct of the business. The complaint must contain as to how and in what manner, the Director was incharge or was responsible to the company in conduct of its business. This should be in consonance with strict interpretation of penal statutes, especially, where such statute creates vicarious liability. In NATIONAL SMALL INDUSTRIES CORPN. LTD. VERSUS HARMEET SINGH PAINTAL 2010 (2) TMI 590 - SUPREME COURT the Hon'ble Apex Court has interpreted on the aforesaid lines that requirement in terms of pleading has to be construed not only to the extent of mentioning the Director to be incharge of and responsible to the company for doing its business, but strictly spell out as to how and in what manner, he was incharge and responsible for the conduct of its business. The provisions of Section 141 of the Negotiable Instruments Act are pari materia with the provisions of Insecticide Act. In the absence of specific averments in the complaint, no Director can be proceeded against. No Director is required to prove his innocence by leading evidence in the trial, once the averments to this effect are not incorporated in the complaint. The averments made in the present complaint are fell short of statutory requirement. The prosecution against Director cannot be held sustainable in the absence of mandatory requirement in the pleadings. Petition allowed.

Summary

Issues Involved:
1. Validity of the summoning order under Section 138 of the Negotiable Instruments Act.
2. Requirements for vicarious liability under Section 141 of the Negotiable Instruments Act.
3. Specific averments needed in a complaint to make a director liable under Section 141.

Issue-wise Detailed Analysis:

1. Validity of the Summoning Order under Section 138 of the Negotiable Instruments Act:
The petitioner sought to set aside the order dated 31.01.2017 by the Judicial Magistrate Ist Class, Patiala, summoning the petitioner and others to face trial under Section 138 of the Negotiable Instruments Act, and the order dated 01.03.2018 by the Additional Sessions Judge, Patiala, which dismissed the revision petition against the summoning order. The complaint alleged that the petitioner, along with others, was involved in issuing a cheque that was dishonored due to insufficient funds. However, the petitioner contended that she did not sign the cheque and the complaint did not specify her role in the company's day-to-day business.

2. Requirements for Vicarious Liability under Section 141 of the Negotiable Instruments Act:
The court emphasized that for a director to be held vicariously liable under Section 141, it must be specifically averred in the complaint that the director was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. The court cited several precedents, including *S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla* and *Pooja Ravinder Devidasani Vs. State of Maharashtra*, to highlight that mere designation as a director is insufficient for liability under Section 141. The complaint must detail how and in what manner the director was responsible for the company's business.

3. Specific Averments Needed in a Complaint to Make a Director Liable under Section 141:
The court scrutinized the complaint and found it lacking in specific averments regarding the petitioner's role in the company's business. It noted that the complaint did not state that the petitioner was in charge of or responsible for the company's day-to-day operations. The court reiterated that such averments are mandatory to invoke vicarious liability under Section 141. The absence of these details in the complaint rendered the summoning order unsustainable.

Conclusion:
The court concluded that the complaint did not meet the statutory requirements for holding the petitioner vicariously liable under Section 141 of the Negotiable Instruments Act. Consequently, the petition was allowed, and the complaint, along with the summoning orders dated 31.01.2017 and 01.03.2018, was quashed.