2021 (12) TMI 1008 - HC - Indian Laws

Dishonor of Cheque - execution of guarantee deeds by the petitioner prior to issuance of cheques in question - vicariously liability of Director for the offence under Section 138 read with Section 141 NI Act - resignation tendered to the accused company prior to issuance thereof - HELD THAT - It is no longer res integra that to attract vicarious liability under Section 141 NI Act against any person, the accused person should have been in-charge and responsible for the conduct of the business of the accused company at the time of commission of offence. A person who was not a Director, and/or not in-charge of the affairs of the accused company or for the conduct of the business thereof, at the time when the offence was committed, cannot be held vicariously liable - To make a Director of a company vicariously liable under Section 141 NI Act, specific allegations have to be made out against him in the complaint. Considering that Section 141 NI Act is a deeming provision, whereby liability is attributed to Directors who were in-charge and responsible for the affairs of the accused company at the time when the offence was committed , it is discernible that regardless of a guarantee deed being executed as part of the impugned transaction, no criminal liability would be attributable to a Director of the accused company who executed such deed if he resigned therefrom prior to the issuance of the cheques in question. The petitioner had executed personal guarantee deeds dated 17.05.2011 and 18.06.2013. As the aforementioned relied-upon documents indicate, he ceased to be associated with the accused company as a Director with effect from 28.02.2014, whereas the cheques in question were issued only thereafter, i.e., from 30.03.2014 to 31.01.2016. Admittedly, the cheques were signed by respondent No. 3, who, as per the averment made in the complaints, alone undertook that the same would be duly honoured upon presentation. Such an undertaking/assurance was not attributed to the present petitioner. In this backdrop, the execution of guarantee deeds by the petitioner at an earlier point in time would not attract vicarious liability under Sections 138/141 NI Act. Besides, there is nothing on record to indicate that the petitioner was in-charge of and responsible for the conduct of the affairs of the accused company at the time of the commission of the offence under Sections 138/141 NI Act. This Court is of the opinion that the summoning orders against the petitioner are liable to be set aside - Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Summoning orders passed in various complaint cases under the Negotiable Instruments Act, 1881 challenged under Section 482 Cr.P.C.
2. Vicarious liability of a former director for offenses under Section 138 read with Section 141 NI Act.

Issue 1:
The petitioner challenged the summoning orders dated 20.01.2017, 12.04.2016, and 02.02.2016 passed by the Metropolitan Magistrate-03 (NI Act), South-East District, Saket, Delhi, in different complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The petitioner contended that the summoning orders were passed without due application of mind. The complainant company alleged that the petitioner, as a former director, was part of the senior management of the accused company and in charge of its day-to-day business. The issue revolved around whether the summoning orders were justified based on the petitioner's role and liability.

Issue 2:
The key issue in this case was whether the execution of guarantee deeds by the petitioner prior to the issuance of the cheques in question would make him vicariously liable for the offense under Section 138 read with Section 141 of the NI Act, given that he had resigned from the accused company before the cheques were issued. The court analyzed the legal principles regarding vicarious liability under Section 141 NI Act, emphasizing that a person must have been in charge of the accused company's affairs at the time of the offense to be held vicariously liable. The court referred to relevant case law, including the requirement for specific allegations against a director to establish vicarious liability.

The court noted that the complainant company alleged that the petitioner, along with another individual, had guaranteed repayment by the accused company and had executed guarantee deeds. However, the court cited a Supreme Court decision to highlight that the execution of guarantee deeds by a former director, who resigned before the offense, may attract civil liability but not criminal liability under Section 138 NI Act. The court emphasized that Section 141 NI Act attributes liability to directors who were in charge of the accused company's affairs at the time of the offense.

The court further discussed the material on record, including the petitioner's resignation as a director before the issuance of the cheques, and highlighted that the cheques were signed by another individual who had undertaken to honor them. The court found that the petitioner could not be vicariously liable under Sections 138/141 NI Act as he was not in charge of the accused company's affairs at the relevant time. The court also considered other documents signed by the managing director/authorized signatory of the accused company, supporting the petitioner's position. Consequently, the court set aside the summoning orders against the petitioner based on the undisputed material on record.

In conclusion, the court allowed the petitions and set aside the summoning orders against the petitioner, emphasizing that the petitioner's resignation before the issuance of the cheques absolved him from vicarious liability under Sections 138/141 NI Act. The court's decision was based on a thorough analysis of the legal principles surrounding vicarious liability and the specific circumstances of the case.