Case Note & Summary
The appeal arises from a judgment of the Bombay High Court quashing criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 against Respondent No. 2, Mrs. Ranjana Sharma, a director of M/s R Square Shri Sai Baba Abhikaran Pvt. Ltd. The appellant, HDFC Bank Limited, had filed a complaint alleging that the company, through its directors including Respondent No. 2, availed credit facilities and issued a cheque for Rs. 6,02,04,217/- which was dishonored. The High Court quashed the proceedings against Respondent No. 2 on the ground that the complaint lacked sufficient averments to invoke vicarious liability under Section 141 of the NI Act. The Supreme Court examined the complaint and the annexed documents, including board resolutions and sanction letters, which showed that Respondent No. 2 was authorized to negotiate, sign documents, deposit title deeds, and provide performance guarantees. The Court held that the averments in the complaint, read with the documents, prima facie established that Respondent No. 2 was in charge of and responsible for the conduct of the business of the company. The Court emphasized that at the stage of issuance of process, a mini-trial is not required, and the High Court erred in quashing the proceedings. The appeal was allowed, the High Court's judgment was set aside, and the trial court was directed to proceed with the complaint against Respondent No. 2.
Headnote
A) Criminal Law - Negotiable Instruments Act - Section 138 read with Section 141 - Vicarious Liability of Director - 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. Mere reproduction of statutory language may not suffice, but averments read with documents can establish liability. (Paras 2-13) B) Criminal Law - Negotiable Instruments Act - Section 141 - Quashing of Proceedings - Threshold Stage - At the stage of issuance of process, the court is not required to conduct a mini-trial. If the complaint and documents prima facie show that the director was involved in the affairs of the company, proceedings cannot be quashed. (Paras 12-13) C) Criminal Law - Negotiable Instruments Act - Section 138 - Dishonour of Cheque - Liability of Company and Directors - The company and its directors can be prosecuted if the cheque was issued for discharge of debt or liability of the company and the directors were in charge of the company's business. (Paras 2-13)
Issue of Consideration
Whether the High Court was justified in quashing criminal proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against a director of a company on the ground of insufficient averments in the complaint to invoke vicarious liability.
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the High Court dated 10.01.2024, and restored the criminal proceedings against Respondent No. 2. The trial court was directed to proceed with the complaint in accordance with law.
Law Points
- Vicarious liability under Section 141 NI Act
- Requirement of specific averments in complaint
- Quashing of criminal proceedings at threshold
- Role of director in day-to-day affairs
