The Supreme Court quashed the criminal proceedings against the Appellant. – Held that vicarious liability under Section 141 NI Act requires specific allegations of active involvement. – Set aside the High Court judgment dated 06.08.2019.

Acts and Sections Discussed: –

Constitution of India (COI) 

Code of Criminal Procedure, 1973 (CrPC) – Section 482 

Negotiable Instruments Act, 1881 (NI Act) – Sections 138, 141

Subjects:

Vicarious liability – Non-executive director – Quashing of proceedings – Dishonour of cheques – Specific averments – Independent director – Section 141 NI Act

Nature of the Litigation: – Criminal Appeal arising from dismissal of petitions under Section 482 of the CrPC seeking quashing of criminal proceedings under Section 138 read with Section 141 of the NI Act.

Who Sought Remedy and What Remedy: – Appellant: Kamalkishor Shrigopal Taparia – Sought Remedy: Quashing of criminal proceedings initiated under Section 138 NI Act.

Reason for Filing the Case: – The Appellant, a non-executive director of M/s D.S. Kulkarni Developers Ltd., was implicated for cheque dishonour despite having no financial responsibilities.

Prior Decisions: – The High Court of Bombay dismissed the petitions under Section 482 CrPC on 06.08.2019.

Issues: a. Whether a non-executive director can be held vicariously liable under Section 141 of the NI Act without specific allegations? b. Whether the continuation of criminal proceedings against the Appellant was justified in the absence of specific averments of his role?

Submissions/Arguments: – Appellant: a. Held a non-executive director position without financial involvement. b. Resigned on 03.05.2017, prior to the issuance of cheques. c. Complaints lacked specific averments regarding his role. – Respondents: a. Asserted vicarious liability extends to all directors under Section 141 NI Act. b. Argued that the role of the director is a matter for trial.

Ratio: a. Vicarious liability under Section 141 NI Act cannot be presumed for non-executive directors. b. Specific allegations regarding the director’s role are mandatory. c. The resignation prior to the offence negates liability.