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2022 (2) TMI 950 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - Vicarious liability of directors - whether the company was being only run by the Accused No.2 i.e. son of the petitioner herein or whether the Petitioner herein is also involved in the affairs of the company? - HELD THAT - Admittedly, there are only two directors of the company. As laid down by the Apex Court, specific averments have been made that accused, who are the Directors of the company and are responsible for the day-to-day affairs and acts of the company and had been conducting the same by being present and actively controlling all the operations on site at the office on a day-to-day basis from the start of the operation of the channel. It is not the case of the petitioner herein that he is a non-executive director. The petitioner is a full-time director. The complaint read as a whole indicates that at the time of cheques being issued by the company and returned by the bank, the son of the petitioner and the petitioner were the only directors of the company and were responsible for the conduct of the business of the company. This Court is, therefore, not inclined to interfere with the order dated 03.02.2021 issuing summons to the petitioner herein - Supreme Court in ASHUTOSH ASHOK PARASRAMPURIYA ANR. VERSUS M/S. GHARRKUL INDUSTRIES PVT. LTD. ORS. 2021 (10) TMI 431 - SUPREME COURT , squarely covers the present case. It is for the petitioner to establish in trial that he was not responsible for the conduct of the business of the company owing to his age and the mere ipse dixit of the petitioner that he is 80 years of age and is unable to manage the affairs of the company cannot be accepted at this stage and the complaint cannot be quashed on that basis. The observations made by this Court is limited to the issue as to whether the complaint should be quashed or not because of the fact that the complaint does not state the exact role of the petitioner in the conduct of the business of the company - Petition dismissed.
Issues Involved:
1. Quashing of Criminal Complaint under Section 138 of the Negotiable Instruments Act. 2. Quashing of the order issuing summons to the petitioner. 3. Vicarious liability of directors under Section 141 of the NI Act. Issue-wise Detailed Analysis: 1. Quashing of Criminal Complaint under Section 138 of the Negotiable Instruments Act: The petitioner sought to quash Criminal Complaint No.5799/2020 filed under Section 138 of the NI Act. The complaint was initiated by respondent No.2, who was the CFO of India Ahead News Pvt. Ltd., alleging non-payment of salary dues through dishonored cheques. The complaint detailed that the petitioner and his son, as directors, were responsible for the company’s operations. Despite legal notice demanding payment, the dues were not settled, leading to the filing of the complaint. 2. Quashing of the Order Issuing Summons to the Petitioner: The petitioner challenged the order dated 03.02.2021 by the Trial Court, which issued summons based on the complaint. The petitioner argued that he was over 80 years old, suffering from physical ailments, and not involved in the day-to-day affairs of the company. He contended that the complaint did not specify the role of each director adequately to justify the issuance of summons. The petitioner relied on several judgments to support his claim that the complaint lacked necessary averments to hold him vicariously liable. 3. Vicarious Liability of Directors under Section 141 of the NI Act: The Court examined the principles laid down by the Apex Court regarding vicarious liability under Section 141 of the NI Act. It emphasized that specific averments must be made in the complaint to hold directors liable. The complaint must show that the directors were in charge of and responsible for the conduct of the company’s business at the time of the offense. The Court noted that the complaint explicitly stated that the petitioner and his son were the only directors and actively controlled the company’s operations. The Court referred to the Supreme Court’s judgment in Ashutosh Ashok Parasrampuriya & Anr. v. Gharrkul Industries Pvt. Ltd., which underscored the necessity of averments indicating the directors’ responsibility for the company’s affairs. Conclusion: The Court found that the complaint contained specific averments about the petitioner’s role and responsibility in the company. It concluded that the petitioner, being a full-time director, could not claim non-involvement solely based on his age and health without trial evidence. The Court dismissed the petition, stating that the petitioner could present evidence during the trial to prove his non-responsibility for the company’s conduct. The complaint was not quashed, and the summons order stood valid. The petitioner’s age and health conditions were not sufficient grounds for quashing the complaint at this stage. The petition was dismissed with the observation that the petitioner could substantiate his claims during the trial.
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