2024 (9) TMI 1488 - HC - Indian Laws

Dishonour of cheque - Seeking to set aside Summoning Order - petitioner described as managers and are the wives of the Directors - accused or not - Petitioners' role in the functioning of the company - appellants are busy with the day-to-day affairs of the Company - vicarious liability under Section 141 of the NI Act to the Petitioners. Whether the Petitioner herein, who have been described as managers and are the wives of the Directors, can be arrayed as accused or not? - HELD THAT - The Principal accused is the company, i.e. M/s RBT Pvt. Ltd., and Accused No.2, 3, 4, 5 6 are the Directors of the Accused No. 1 company; Accused No. 7 8 are the Petitioners herein, who have been described as Managers - There is no averment in the Complaint that the Petitioners herein were involved in the transaction against which the cheques in question were issued. There is no averment in the complaint as to what is the role of the Petitioners herein in the functioning of the company. It is well settled that there is no vicarious liability in the criminal law. Section 141 of the NI Act has an explanation which postulates that if the persons an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The requirement of sub-section (1) of Section 141 of the NI Act is something different and higher. Every person who is sought to be roped in by virtue of sub-section (1) of Section 141 of the NI Act must be a person who at the time the offence was committed, was in charge of and was responsible to the Company for the conduct of the business of the Company. Merely because somebody is managing the affairs of the Company, per se, he does not become in charge of the conduct of the business of the Company or the person responsible for the Company for the conduct of the business of the Company. For example, in a given case, a manager of a Company may be managing the business of the Company. Only on the ground that he is managing the business of the Company, he cannot be roped in based on sub-section (1) of Section 141 of the NI Act. Petitioners' role in the functioning of the company - appellants are busy with the day-to-day affairs of the Company - HELD THAT - The allegation that they are in charge of the Company is neither here nor there and by no stretch of the imagination, on the basis of such averment, one cannot conclude that the allegation of the second respondent is that the appellants were also responsible to the Company for the conduct of the business. Only by saying that a person was in charge of the Company at the time when the offence was committed is not sufficient to attract sub-section (1) of Section 141 of the NI Act - On a plain reading, it is apparent that the words was in charge of and was responsible to the Company for the conduct of the business of the Company cannot be read disjunctively and the same ought be read conjunctively in view of use of the word and in between. Thus, what would apply to a Director should also apply to a Manager and in the present case, the Petitioners are only the wives of the Accused No. 3 4 in the complaint. There is nothing in the Complaint which shows that there is any role of the Petitioners herein the day-to-day functioning of the company. In the absence of any specific averment against the Petitioners herein in the complaint, this Court is of the opinion that the complaint against the Petitioners cannot be sustained. Petition disposed off.

Summary

Issues Involved:
1. Whether the Petitioners, who are described as managers and are the wives of the Directors, can be arrayed as accused under Section 138 read with 142 of the Negotiable Instrument Act, 1881.
2. Whether there is sufficient averment in the complaint regarding the Petitioners' role in the functioning of the company.
3. The applicability of vicarious liability under Section 141 of the NI Act to the Petitioners.

Issue-wise Detailed Analysis:

1. Whether the Petitioners, who are described as managers and are the wives of the Directors, can be arrayed as accused under Section 138 read with 142 of the Negotiable Instrument Act, 1881:

The core issue is whether the Petitioners, who are described as managers and are the wives of the Directors, can be held liable under Section 138 read with 142 of the NI Act. The complaint describes the Petitioners as managers of the company and wives of the Directors. However, there is no specific averment regarding their involvement in the transaction against which the cheques were issued or their role in the day-to-day functioning of the company. The court emphasized that mere designation as managers and being related to the Directors does not suffice to hold them liable under the NI Act.

2. Whether there is sufficient averment in the complaint regarding the Petitioners' role in the functioning of the company:

The complaint lacks specific averments regarding the Petitioners' role in the company's functioning. The complaint only mentions that the Petitioners are managers and wives of the Directors but does not detail their involvement in the day-to-day operations or the transaction in question. The court noted that there must be clear statements of fact to show how and in what manner the Petitioners were responsible for the conduct of the company's business. The absence of such specifics in the complaint means that the allegations against the Petitioners are insufficient to sustain the complaint.

3. The applicability of vicarious liability under Section 141 of the NI Act to the Petitioners:

Section 141 of the NI Act creates vicarious liability for individuals who are in charge of and responsible for the conduct of the company's business at the time the offence was committed. The court referred to several precedents, including the Supreme Court's rulings in Pooja Ravinder Devidasani v. State of Maharashtra and Ashok Shewakramani v. State of A.P., which stress that vicarious liability under Section 141 requires specific averments showing the individual's role in the company's business. The court concluded that the complaint does not meet this requirement for the Petitioners, as it lacks specific allegations about their involvement in the company's operations.

Conclusion:

The court found that the complaint does not contain sufficient averments to hold the Petitioners liable under Section 138 read with 142 of the NI Act. The Petitioners are merely described as managers and wives of the Directors without any specific allegations about their role in the company's business. Therefore, the complaint against the Petitioners cannot be sustained, and the petitions are disposed of accordingly.