Case Note & Summary
The applicants, Nizar Noorali Rangara and another, were directors of M/s. Rangara Industries Private Limited, a company in liquidation. The respondent, M/s. Surajbhan Rajkumar Private Limited, had filed a company petition for winding up of M/s. Rangara, which was later disposed of based on consent terms where M/s. Rangara agreed to pay Rs. 4,50,00,000/- in installments. Subsequently, the respondent filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the company and its directors, alleging that cheques issued by the company were dishonoured. The Metropolitan Magistrate issued process against the applicants. The applicants filed applications under Section 482 of the Code of Criminal Procedure, 1973 to quash the process, arguing that the complaint lacked specific averments regarding their role and responsibility as directors, as required under Section 141 of the NI Act. The court examined the complaint and found that it merely described the applicants as directors without stating that they were in charge of and responsible for the conduct of the business. Relying on precedents, the court held that such vague allegations are insufficient to attract vicarious liability. The court allowed the applications and quashed the process against the applicants.
Headnote
A) Criminal Law - Negotiable Instruments Act - Section 138 read with Section 141 - Vicarious Liability of Directors - Requirement of Specific Averments - The complaint must contain 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, and mere description of the accused as director is insufficient to attract vicarious liability. Held that the complaint lacked necessary averments and the process was liable to be quashed (Paras 10-15).
B) Criminal Procedure Code - Section 482 - Inherent Powers - Quashing of Process - The High Court can exercise its inherent powers under Section 482 CrPC to quash the process if the complaint does not disclose the essential ingredients of the offence, especially when the allegations are vague and do not satisfy the requirements of Section 141 of the NI Act. Held that the applications were allowed and the process was quashed (Paras 16-20).
Issue of Consideration
Whether the order of issuance of process against the applicants for offence under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 can be sustained in the absence of specific averments as to the role and responsibility of the applicants as directors of the company.
Final Decision
The applications are allowed. The orders of issue of process against the applicants are quashed and set aside.
Law Points
- Vicarious liability under Section 141 NI Act requires specific averments of role and responsibility of directors
- Section 482 CrPC can be invoked to quash process if complaint lacks necessary averments
- Consent terms in company petition do not create liability under NI Act without specific allegations
Case Details
2022 LawText (BOM) (08) 106
Criminal Application No.589 of 2019 with Criminal Application No.590 of 2019 with Criminal Application No.591 of 2019 with Criminal Application No.592 of 2019 with Criminal Application No.593 of 2019
Mr. Ramprakash Pandey for the applicants, Ms. Anamika Malhotra APP for the State/Respondent No.1, Mr. Jatin Premji Shah a/w. Ms. Snehankita Munj, Mr. Tushar B. Patel and Ms. Shraddha Kamble for the Respondent No. 3
Nizar Noorali Rangara and Another
State of Maharashtra and Others
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Nature of Litigation
Criminal applications under Section 482 CrPC to quash orders of issue of process for offence under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Remedy Sought
Quashing of the orders of issue of process against the applicants.
Filing Reason
The applicants, directors of a company, were summoned in a complaint under Section 138 NI Act without specific averments of their role and responsibility as required under Section 141.
Previous Decisions
The Metropolitan Magistrate, 28th Court, Esplanade, Mumbai had issued process against the applicants.
Issues
Whether the complaint contains specific averments as to the role and responsibility of the applicants as directors to attract vicarious liability under Section 141 of the NI Act.
Whether the High Court can exercise its inherent powers under Section 482 CrPC to quash the process in the absence of such averments.
Submissions/Arguments
The applicants argued that the complaint lacks specific averments that they were in charge of and responsible for the conduct of the business of the company, and thus the process is liable to be quashed.
The respondent argued that the applicants being directors are vicariously liable for the dishonour of cheques issued by the company.
Ratio Decidendi
For vicarious liability under Section 141 of the Negotiable Instruments Act, 1881, the complaint must contain 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. Mere description as director is insufficient. In the absence of such averments, the process can be quashed under Section 482 CrPC.
Judgment Excerpts
The complaint must contain 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.
Mere description of the accused as director is insufficient to attract vicarious liability under Section 141 of the NI Act.
Procedural History
The complainant filed a complaint under Section 138 NI Act against the company and its directors. The Metropolitan Magistrate issued process. The applicants filed applications under Section 482 CrPC to quash the process. The High Court heard the applications and reserved judgment on 28th April 2022, pronouncing on 19th August 2022.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 141
- Code of Criminal Procedure, 1973: 482
- Companies Act, 1956: 439
