Case Note & Summary
The applicants, Kulwant Chauhan and Upneet Chauhan, were directors of a company that issued cheques to Transasia BioMedicals Ltd. The cheques were dishonoured, leading to complaints under Section 138 of the Negotiable Instruments Act, 1881. The Metropolitan Magistrate issued process against the applicants. The applicants challenged this order by filing criminal applications under Section 482 CrPC, arguing that the complaint did not contain specific allegations that they were in charge of and responsible for the conduct of the business of the company at the time of the offence, which is necessary to attract vicarious liability under Section 141 of the Act. The court examined the complaint and found that it merely described the applicants as directors without any specific averments regarding their role and responsibility. The court held that the essential ingredients of Section 141 were not satisfied, and therefore, the process issued against them was not sustainable. The court allowed the applications, quashed the process, and set aside the impugned order.
Headnote
A) Criminal Law - Negotiable Instruments Act - Vicarious Liability of Directors - Section 138 r/w 141 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 to attract vicarious liability. The court quashed the process issued against the applicants as the complaint lacked such specific allegations. (Paras 5-10)
B) Criminal Procedure Code - Quashing of Criminal Proceedings - Section 482 Code of Criminal Procedure, 1973 - The High Court can exercise inherent powers to quash proceedings if the complaint does not disclose any offence or is an abuse of process of law. Where the complaint fails to make out a prima facie case against the directors, the process issued is liable to be quashed. (Paras 11-14)
Issue of Consideration
Whether the issuance of process against the applicants (directors) for offence under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 was justified in the absence of specific allegations 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 criminal applications, quashed the order dated 03rd February 2018 issuing process against the applicants, and set aside the process issued in all the connected matters.
Law Points
- Vicarious liability of directors under Section 141 NI Act requires specific averments that the director was in charge of and responsible for conduct of business
- Quashing of criminal process when complaint lacks essential ingredients
- Section 482 CrPC for inherent powers to prevent abuse of process
Case Details
2019 LawText (BOM) (09) 84
Criminal Application No. 1433 of 2018 with Criminal Application Nos. 1023-1032 of 2019
Mr. Niranjan Mundargi a/w. Mr. Dnyaneshwar Jadhav, Ms. Anuja Desai and Ms. Saloni Vyas i/by. Legasis Partners for Applicants. Mr. A.R. Patil, APP for Respondent no. 1 – State. Ms. Shyamli Hajela i/by. H & M Legal Associates for Respondent No. 2.
Kulwant Chauhan and Upneet Chauhan
The State of Maharashtra and Transasia BioMedicals Ltd.
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Nature of Litigation
Criminal applications under Section 482 CrPC challenging the order of issuance of process under Section 138 r/w 141 of the Negotiable Instruments Act, 1881.
Remedy Sought
Quashing of the order dated 03rd February 2018 passed by the learned Metropolitan Magistrate, 44th Court at Andheri, Mumbai issuing process against the applicants.
Filing Reason
The applicants, being directors of the company, were issued process despite the complaint lacking specific allegations that they were in charge of and responsible for the conduct of the business of the company at the time of the offence.
Previous Decisions
The learned Metropolitan Magistrate issued process against the applicants on 03rd February 2018.
Issues
Whether the complaint under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 contained specific allegations that the applicants were in charge of and responsible for the conduct of the business of the company at the time of the offence.
Whether the issuance of process against the applicants was justified in the absence of such specific allegations.
Submissions/Arguments
The applicants argued that the complaint did not disclose any offence against them as it lacked specific averments regarding their role and responsibility in the company, which is essential for vicarious liability under Section 141 of the NI Act.
The respondent (complainant) argued that the process was rightly issued as the applicants were directors and therefore liable.
Ratio Decidendi
For vicarious liability under Section 141 of the Negotiable Instruments Act, 1881, the complaint must contain specific allegations 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 a director is insufficient. The absence of such specific averments renders the process liable to be quashed under Section 482 CrPC.
Judgment Excerpts
If the allegations in the complaint are taken on its face value and read in its entirety an alleged offences are not disclosed.
The learned Metropolitan Magistrate has not appreciated the legal position concerning the vicarious liability of a director in a company which is being prosecuted for the offence under Section 138 r/w. 141 of the Said Act.
Procedural History
The complaint was filed by Transasia BioMedicals Ltd. under Section 138 r/w 141 of the Negotiable Instruments Act, 1881. The learned Metropolitan Magistrate, 44th Court at Andheri, Mumbai issued process against the applicants on 03rd February 2018. The applicants filed criminal applications under Section 482 CrPC challenging the order. The court heard all matters together and disposed of them by this judgment.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 141
- Code of Criminal Procedure, 1973: 482
