2024 (5) TMI 121 - HC - Indian Laws

Dishonour of Cheque - vicarious liability of the petitioner in terms of Section 141 NI Act - Company Secretary of the company - The CS was never a Director of the Accused Company - In-charge of the day-to-day affairs of the company or not - exact role of the petitioner in the accused company and her consequent liability for the offence under Section 138 NI Act - HELD THAT - The petitioner was employed in the company as a Company Secretary. Once the same is established, the question that arises for consideration is whether the petitioner can be made vicariously liable in terms of Section 141 NI Act. A perusal of the subject complaints would show that nowhere in the said complaints has the respondent averred that the petitioner was in-charge of, and responsible for the conduct of the business of the company. The word in-charge of a business has been interpreted to mean a person having overall control of the day-to-day business of the company. In the ordinary course of business, it cannot be said that the petitioner, who was acting as a Company Secretary, would be in-charge of the day-to-day affairs of the company, as required in terms of Section 141(1). Thus, the petitioner cannot be vicariously liable in terms of Section 141(1). In view of the facts of the present case including the fact that the petitioner was employed as a Company Secretary in the accused company as well as the position of law w.r.t Section 141 NI Act and the application of the same to the subject complaints, it can be observed that the subject complaints are bereft of the adequate averments against the petitioner alleging the Petitioner s involvement in the conduct of the business of the Company beyond her statutory role as a Company Secretary, more particularly, in relation to the transaction pursuant to which cheque in question was issued. Neither, is there any averment that the offence has been committed with the consent or connivance of is attributable to any neglect on the part of the Petitioner, so as to potentially make her liable under Sub-section (2) of Section 141. There is no cavil with the proposition of law stated in the decisions cited by the respondent but in the absence of appropriate and adequate averments against the petitioner, and the fact that Petitioner s impleadment can only be in her capacity as a Company Secretary, the continuation of proceedings against the petitioners would be nothing but an abuse of the process of law. The present petitions are allowed and the criminal complaints filed under Section 138 read with Section 141 NI Act are quashed qua the petitioner.

Summary

Issues Involved:
1. Quashing of criminal complaints u/s 138 read with Section 141 of the Negotiable Instruments Act.
2. Vicarious liability of the petitioner u/s 141 NI Act.
3. Role and liability of a Company Secretary in the context of Section 141 NI Act.

Summary:

Issue 1: Quashing of criminal complaints u/s 138 read with Section 141 of the Negotiable Instruments Act

By way of present petitions filed u/s 482 Cr.P.C., the petitioner seeks quashing of criminal complaints instituted u/s 138 read with Section 141 of the Negotiable Instruments Act as well as the summoning order dated 28.01.2020 passed in all these criminal complaints.

Issue 2: Vicarious liability of the petitioner u/s 141 NI Act

The petitioner is sought to be made vicariously liable for the offence u/s 138 NI Act, by describing her as a Director of the accused company and that it was upon her assurance that the goods were provided. However, the petitioner contends that she was never a Director but a Company Secretary in the accused company and had resigned from the position vide letter dated 14.10.2019.

Learned counsel for the respondent argues that the necessary averments have been made against the petitioner in the complaints, stating that she had assured the payment and encashment of the cheques. However, the Court notes that the complaints do not specifically aver that the petitioner was in charge of, and responsible for the conduct of the business of the company as required u/s 141(1) NI Act.

Issue 3: Role and liability of a Company Secretary in the context of Section 141 NI Act

The Court discusses the statutory role of a Company Secretary as defined u/s 2(24) of the Companies Act, 2013, and concludes that the role does not include "conducting the business of the Company"� of the kind envisaged in Section 141. A Coordinate Bench in Madan Aggarwal v. State observed that a Company Secretary is a mere employee and not in charge of the day-to-day affairs of the company.

The Court further references S.P. Mani and Mohan Dairy v. Dr. Snehlatha Elangovan, noting that liability u/s 141(2) requires specific allegations of consent, connivance, or neglect, which are absent in the present complaints.

Conclusion:

The Court concludes that the subject complaints are bereft of adequate averments against the petitioner alleging her involvement in the conduct of the business of the Company beyond her statutory role as a Company Secretary. Consequently, the petitions are allowed, and the criminal complaints filed u/s 138 read with Section 141 NI Act are quashed qua the petitioner. The summoning orders dated 28.01.2020 are also set aside.