Case Note & Summary
The judgment pertains to two criminal writ petitions filed by directors of a company against whom an FIR was lodged under Section 138 of the Negotiable Instruments Act, 1881, read with Sections 406 and 420 of the Indian Penal Code, 1860. The petitioners, Selvapoathy and Pulliampatti Kasturiswamy, were directors of a company that had issued a cheque to Tina Oil Chemicals Ltd., which was dishonoured. The respondent-complainant alleged that the directors were liable for the dishonour. The petitioners sought quashing of the FIR on the ground that there were no specific allegations against them regarding their role in the day-to-day affairs of the company. The court examined the legal position regarding vicarious liability of directors under Section 138 of the Negotiable Instruments Act. It noted that for a director to be held liable, 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 of the offence. The court found that the FIR merely mentioned the petitioners as directors without any such specific allegations. Consequently, the court held that continuing the prosecution would be an abuse of process and quashed the FIR against the petitioners.
Headnote
A) Criminal Law - Dishonour of Cheque - Vicarious Liability of Directors - Section 138, Negotiable Instruments Act, 1881 - Requirement of Specific Allegations - The court held that for directors to be vicariously liable under Section 138, 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 of the offence. Mere mention of the designation is insufficient. (Paras 5-7)
B) Criminal Procedure - Quashing of FIR - Inherent Powers - Section 482, Code of Criminal Procedure, 1973 - Abuse of Process - The court held that where the allegations in the FIR do not disclose the essential ingredients of the offence, continuing the prosecution would be an abuse of process of law, warranting quashing under Section 482 Cr.P.C. (Paras 8-10)
Issue of Consideration
Whether directors of a company can be prosecuted for dishonour of cheque under Section 138 of the Negotiable Instruments Act, 1881, without specific allegations regarding their role in the day-to-day affairs of the company.
Final Decision
The court quashed the FIR and criminal proceedings against the petitioners.
Law Points
- Vicarious liability
- strict construction of penal statutes
- requirement of specific averments in complaint
- quashing of FIR under inherent powers
Case Details
2012 LawText (BOM) (12) 5
Criminal Writ Petition No.584 of 2008 and Criminal Writ Petition No.159 of 2009
Mr R.N. Dhorde, Senior Advocate with Mr V.R. Dhorde for petitioner; Mrs V.A. Shinde, A.P.P. for respondents no.1 & 2; Mr H.F. Pawar for respondent no.3
Selvapoathy S/o P.V. Venkataswamy Naidu and Pulliampatti Kasturiswamy
State of Maharashtra, Police Inspector, M.I.D.C. Police, Latur, and Tina Oil Chemicals Ltd.
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Nature of Litigation
Criminal writ petitions seeking quashing of FIR under Section 482 CrPC for offences under Section 138 of the Negotiable Instruments Act, 1881 and Sections 406, 420 of the Indian Penal Code, 1860.
Remedy Sought
Quashing of FIR and criminal proceedings against the petitioners.
Filing Reason
The petitioners, directors of a company, were named in an FIR for dishonour of a cheque issued by the company, without specific allegations regarding their role in the day-to-day affairs.
Issues
Whether directors can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881 without specific allegations of being in charge of and responsible for the conduct of the business.
Whether the FIR discloses essential ingredients of the offence to warrant continuation of prosecution.
Submissions/Arguments
Petitioners argued that there are no specific allegations against them regarding their role in the day-to-day affairs of the company, and mere designation as directors is insufficient for vicarious liability.
Respondents argued that the directors are liable as they were in charge of the company at the time of the offence.
Ratio Decidendi
For a director to be vicariously liable under Section 138 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 of the offence. In the absence of such allegations, the prosecution is an abuse of process and liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973.
Judgment Excerpts
The court held that for directors to be vicariously liable under Section 138, 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 of the offence.
Mere mention of the designation is insufficient.
Procedural History
The petitioners filed criminal writ petitions under Section 482 CrPC before the High Court of Judicature at Bombay, Bench at Aurangabad, seeking quashing of FIR registered against them for offences under Section 138 of the Negotiable Instruments Act, 1881 and Sections 406, 420 of the Indian Penal Code, 1860.
Acts & Sections
- Negotiable Instruments Act, 1881: 138
- Indian Penal Code, 1860: 406, 420
- Code of Criminal Procedure, 1973: 482
