Case Note & Summary
The case involves an application under Section 482 of the Code of Criminal Procedure, 1973, filed by Anil Kumar Singhal and Meenu Maheshwari, directors of Gupta Synthetics Limited, seeking to quash the order of issuance of process dated 26 June 2019 passed by the Metropolitan Magistrate, Bandra, Mumbai, in CC No. 25/SS/2019 for an offence under Section 138 read with 141 of the Negotiable Instruments Act, 1881. The complainant, Kotak Mahindra Bank (formerly ING Vysya Bank), had extended financial facilities to Gupta Synthetics Limited. After the company defaulted, consent terms were executed before the Debt Recovery Tribunal, Mumbai, in Original Application No. 114 of 2012, wherein the company and its directors agreed to pay a sum of Rs. 15,11,00,000/- in installments. Post-dated cheques were issued, but some were dishonoured. The bank filed a complaint under Section 138 NI Act against the company and its directors, including the applicants. The Magistrate issued process against all accused. The applicants challenged the process, arguing that the complaint did not contain specific averments that they were in charge of and responsible for the conduct of the business of the company at the time of the offence, as required under Section 141 NI Act. The court examined the complaint and found that it merely stated that the applicants were directors of the company, without any specific averment regarding their role in the day-to-day affairs. Relying on the principle that vicarious liability under Section 141 requires strict compliance with the statutory requirements, the court held that the issuance of process against the applicants was not sustainable. The court quashed the process against the applicants, allowing the application.
Headnote
A) Criminal Law - Negotiable Instruments Act - Vicarious Liability of Directors - Section 141 NI Act - Requirement of Specific Averments - The court held that for a director to be vicariously liable 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 designation as a director is insufficient. (Paras 10-15) B) Criminal Procedure - Quashing of Criminal Process - Section 482 CrPC - Abuse of Process - The court held that where the complaint lacks necessary averments to attract vicarious liability under Section 141 NI Act, the issuance of process against such directors amounts to an abuse of process of law and is liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973. (Paras 16-20)
Issue of Consideration
Whether the order of issuance of process under Section 138 read with 141 of the Negotiable Instruments Act, 1881 against the applicants, who are directors of the accused company, can be sustained in the absence of specific averments that they were in charge of and responsible for the conduct of the business of the company at the time of the offence.
Final Decision
The court allowed the application and quashed the order of issuance of process dated 26 June 2019 passed by the learned Metropolitan Magistrate, 58th Court, Bandra, Mumbai in CC No. 25/SS/2019, qua the applicants.
Law Points
- Section 138 read with 141 of Negotiable Instruments Act
- 1881
- vicarious liability of directors
- requirement of specific averments
- quashing of criminal process under Section 482 CrPC
