2024 (11) TMI 111 - HC - Indian Laws

Dishonour of Cheque - vicarious liability for the offence of the company - principal contention raised by the Petitioner is that she is the housewife and has never dealt with the affairs of the Company and that the cheque in question was not signed by her and she was not the authorised signatory of the Company - HELD THAT - It is well settled that while exercising its jurisdiction under Section 482 Cr.P.C, the High Court must be extremely cautious and slow in quashing a complaint at an initial stage. It is now well settled that the power of quashing should be exercised sparingly and that too in the rarest of rare cases and courts must not embark upon enquiry as to the reliability or genuineness or otherwise of the allegations made in the Complaint unless the allegations in the complaint are so patently absurd and inherently improbable so that no prudent person can reach such a conclusion. The Apex Court in S.P. Mani Mohan Dairy v. Snehalatha Elangovan, 2022 (9) TMI 846 - SUPREME COURT , after examining the issue as to who would be held vicariously liable for the offence of the company has held that Section 141 extends such criminal liability in case of a company to every person who at the time of the offence, was in charge of and was responsible for the conduct of the business of the company and such a person is vicariously liable to be held guilty for the offence under Section 138 and punished accordingly. The proviso to Section 141 of the NI Act states that the officer who is being accused of committing an offence under Section 138 of the NI Act as being responsible and in-charge of the company can escape the punishment if he/she proves that the offence was committed without his/her knowledge or that he/she was not responsibly for the affairs of the company. The Petitioner herein is a Director of the accused Company. In the Master Data, the Petitioner has not been shown as an independent Director or a Non-Executive Director or a Deputy Director, who can be said to be not responsible for the conduct of day-to-day affairs of the company. This Court is of the opinion that when there are only three Directors in the Company, it cannot be said that the Petitioner herein, who is one of the three Directors of the company, is not responsible for the day-to-day affairs of the company. The contentions raised by the Petitioner is a matter of trial and at this juncture, this Court is not inclined to quash the summoning Order in the absence of any unimpeachable and incontrovertible evidence beyond suspicion and doubt that the Petitioner herein was not responsible for the day-to-day affairs of the accused Company. Petition dismissed.

Summary

Issues Involved:

1. Whether the Petitioner can be held liable under Section 138 of the Negotiable Instruments Act (NI Act) despite not being the signatory of the dishonored cheque.
2. Whether the summoning order issued by the Metropolitan Magistrate can be quashed under Section 482 of the Criminal Procedure Code (Cr.P.C.) based on the Petitioner's claims of non-involvement in the company's affairs.

Detailed Analysis:

Issue 1: Liability under Section 138 NI Act

The Petitioner challenged the summons issued against her in a complaint filed under Section 138 of the NI Act, arguing that she was merely a director and not involved in the company's daily affairs or the issuance of the dishonored cheque. The complaint alleged that the Petitioner, along with another director, was responsible for the company's financial transactions after the demise of a signatory director. The Petitioner contended that she never signed the cheque or any related documents and cited several judgments to argue that without specific averments of her role, she cannot be held vicariously liable under Section 138.

The court referred to precedents such as S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, which clarified that vicarious liability under Section 141 of the NI Act extends to individuals responsible for the company's conduct at the time of the offence. The proviso to Section 141 allows an accused to escape liability by proving lack of knowledge or responsibility for the company's affairs. The court emphasized that the complainant must make specific averments about the accused's role, but the burden of proving non-involvement lies with the accused during the trial.

The court noted that the Petitioner was one of only three directors and was not designated as an independent or non-executive director, suggesting her involvement in the company's affairs. Therefore, the court concluded that the Petitioner's liability under Section 138 could not be dismissed at this stage without trial.

Issue 2: Quashing of Summoning Order under Section 482 Cr.P.C.

The Petitioner sought to quash the summoning order, claiming she was a housewife with no involvement in the company's operations. The court reiterated the principles from Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque, emphasizing that the power to quash proceedings under Section 482 should be exercised sparingly and only in rare cases where the complaint does not disclose any offence or is frivolous.

The court highlighted that the High Court should not interfere at an initial stage unless there is incontrovertible evidence proving the accused's non-involvement. In this case, the Petitioner failed to provide such evidence beyond suspicion and doubt. The court found that the allegations in the complaint, supported by the Petitioner's role as a director, warranted a trial to determine her liability.

The court concluded that the summoning order could not be quashed based on the Petitioner's claims, as the matter required thorough examination during the trial. The Petition was dismissed, affirming the necessity of a trial to address the issues raised.