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TMI Blog2021 (12) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... itions and in Arrakuntal V. Ganeshan case [ 2013 (6) TMI 904 - ANDHRA PRADESH HIGH COURT ] and as the petitioners were neither Managing Directors nor the authorized signatories to sign on the cheques and no specific role was attributed to the petitioners in discharge of the day to day affairs of the Company, continuation of the proceedings against the petitioners is considered as an abuse of process of law. The Criminal Petition is allowed. - Criminal Petition No. 5169 of 2014 - - - Dated:- 22-11-2021 - Dr. G. Radha Rani, J. For the Appellant : A. Chandra Shaker, Advocate For the Respondents : Public Prosecutor ORDER Dr. G. Radha Rani, J. 1. This petition is filed by the petitioners - A6 and A9 under Section 482 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A2 on behalf of A1 was authorized to borrow the loan in pursuance of their Board Resolution dated 16.12.2011. Therefore, as per Section 293 of the Companies Act, all the other accused being the Directors of A1 Company, got knowledge of borrowing of ₹ 50.00 crores from the complainant bank by A1 Company and were liable for repayment. Despite several demands made by the complainant, the accused did not keep up the word for repaying the interest as agreed. Their accounts were classified as non-performing assets on 19.11.2012. As per the agreement, the fixed deposit of ₹ 10.00 crores made by the accused with the complainant was closed and appropriated towards the loan account of the accused. Apart from the above said loan, A1 also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived any monetary benefit by virtue of the post of Director. As per the provisions of the Act and as per the law laid down by the Hon'ble Apex Court and High Courts, to fasten the liability against the accused for the offence under Section 138 of the NI Act, specific role had to be assigned to the accused showing as to how and in what manner, the Directors were responsible for the conduct of the business of the company. There was no presumption that every Director knew about the transactions. There was no prima facie material against the petitioners. As such, continuation of proceedings against the petitioners would amount to abuse of process of law and prayed to quash the proceedings against them. 5. Learned counsel for the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 141 of the Act does not say that a Director of the company shall automatically be vicariously liable for commission of an offence by or on behalf of the company. What is necessary is that sufficient averments should be made to show that the person who is sought to be proceeded against on the premise of he being vicariously liable for commission of an offence by the company must be incharge of, and shall also be responsible to the company for the conduct of its business. Subsection (2) of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any Director, Manager, Secretary or other officer of a company in the commission of an offence. This section operates when in a trial it is proved tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or conduct of its business. Aforesaid is in consonance with strict interpretation of penal statutes especially where such statutes create vicarious liability. To fasten vicarious liability under Section 141 on a person, law is well settled by Supreme Court, that complainant should specifically show as to how and in what manner accused was responsible. Simply because a person is a Director of defaulter Company, does not make him liable under the Act. Only the person who was at the helm of affairs of the Company and in charge of and responsible for conduct of business at the time of commission of an offence, will be liable for criminal action. Hence, for making a Director of a Company liable for offences committed by Company under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations, thus, do not satisfy the requirements of Section 141 of the Act. Allegations to satisfy the requirements of Section 138 of the Act might have been made in the complaint petition but the same principally relate to the purported offence made by the Company. With a view to make a Director of a company vicariously liable for the acts of the company, it was obligatory on the part of the complainant to make specific allegations as are required in law. 12. This Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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