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TMI Blog2025 (2) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... tor's active involvement in the company's affairs at the relevant time. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another, [2005 (9) TMI 304 - SUPREME COURT], this Court laid down that mere designation as a director is not sufficient; specific role and responsibility must be established in the complaint. Upon perusal of the record and submissions of the parties, it is evident that the Appellant was neither a signatory to the dishonoured cheques nor was he actively involved in the financial decision-making of the company. Moreover, he resigned from the post of independent non-executive director on 03.05.2017, duly notified through Form DIR-11 and DIR-12 to the Registrar of Companies - Petitioner's role in the accused company was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onor of cheques issued by the company. The High Court, while dismissing the Appellant's plea, observed that the role of the director is a matter of trial and that the complainant has made sufficient averments regarding the Appellant's involvement. BACKGROUND 4. The Appellant was appointed as an additional independent non-executive director on 02.01.2008 and subsequently designated as an independent non-executive director on 27.09.2008. Vide the resolution passed at the annual general meeting held on 30.09.2014, and formally confirmed through a letter dated the same day, the Appellant was reappointed as an independent non-executive director. Notedly, the Appellant had no role in the financial operations or key-management of the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2017, filed on 31.07.2017, qua Cheque No. 455494. 2. Complaint No. 645/SS of 2017, filed on 23.02.2017, qua Cheque No. 455495. 3. Complaint No. 697/SS of 2017, filed on 07.04.2017, qua Cheque No. 455496. 4. Complaint No. 1595/SS of 2017, filed on 22.05.2017, qua Cheque No(s). 455497, 455498, 455499, and 455500. 10. The High Court dismissed the Appellant's applications under Section 482 CrPC (Criminal Application Nos. 21, 22, 116 & 255 of 2019) seeking quashing of the proceedings pending before Learned Metropolitan Magistrate 28th Court, Esplanade, Mumbai. SUBMISSION BY THE PARTIES 11. The learned counsel for the Appellant argued that the Appellant was a non-executive director and had no involvement in the financial affairs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll Industries Corporation Limited v. Harmeet Singh Paintal and Another, (2010) 3 SCC 330 observed: "13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plays a governance role, and are not involved in the daily operations or financial management of the company, held that to attract liability under section 141 of the NI Act, the accused must have been actively in-charge of the company's business at the relevant time. Mere directorship does not create automatic liability under the Act. The law has consistently held that only those who are responsible for the dayto- day conduct of business can be held accountable. 16. Upon perusal of the record and submissions of the parties, it is evident that the Appellant was neither a signatory to the dishonoured cheques nor was he actively involved in the financial decision-making of the company. Moreover, he resigned from the post of independent non-ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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