Case Note & Summary
The petitioners, Satish Panchariya, Arun Panchariya, and Sanjay Tripathi, were directors of a company. They filed a petition under Article 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of criminal proceedings initiated against them under Section 138 of the Negotiable Instruments Act, 1881, for dishonour of cheques issued by the company. The respondent No.2, K Sera Sera Limited, had filed a complaint alleging that the cheques issued by the company were dishonoured. The petitioners contended that they were not in charge of the conduct of the business of the company at the relevant time and that the complaint did not contain specific averments to satisfy the requirements of Section 141 of the NI Act, which deals with vicarious liability of directors. The State of Maharashtra was the first respondent. The court examined the complaint and found that it lacked specific allegations that the petitioners were in charge of and responsible for the conduct of the business of the company at the time the offence was committed. The court held that in the absence of such averments, the directors cannot be held vicariously liable. The court further held that continuing the proceedings would be an abuse of the process of law. Consequently, the court allowed the petition and quashed the criminal proceedings against the petitioners.
Headnote
A) Criminal Law - Negotiable Instruments Act, 1881 - Section 138 read with Section 141 - Vicarious Liability of Directors - Quashing of Proceedings - The petitioners, directors of a company, sought quashing of criminal proceedings for dishonour of cheques issued by the company. The court examined whether the directors could be held vicariously liable under Section 141 of the NI Act. Held that for vicarious liability to attach, there must be specific averments that the director was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. In the absence of such averments, proceedings against the directors are liable to be quashed. (Paras 1-10) B) Criminal Procedure Code, 1973 - Section 482 - Inherent Powers - Quashing of Criminal Proceedings - The court held that where the complaint does not disclose the essential ingredients of the offence against the directors, continuing the proceedings would be an abuse of the process of law. The inherent powers under Section 482 CrPC can be invoked to quash such proceedings to secure the ends of justice. (Paras 11-15)
Issue of Consideration
Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 can be quashed against directors who were not in charge of the conduct of the business of the company at the relevant time, in the absence of specific averments satisfying the requirements of Section 141 of the Act.
Final Decision
The court allowed the petition and quashed the criminal proceedings against the petitioners.
Law Points
- Vicarious liability under Section 141 of Negotiable Instruments Act
- 1881 requires specific averment that accused was in charge of and responsible for conduct of business at the time of offence
- Directors not automatically liable
- Quashing under Section 482 CrPC for abuse of process
