Case Note & Summary
The petitioners, who were directors of Shri Sainath Nagri Sahakari Path Sanstha Ltd. (a cooperative bank), filed a writ petition under Article 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of criminal proceedings in Summary Criminal Case No. 123 of 2018 pending before the Judicial Magistrate First Class, Miraj. The case arose from a complaint filed by Respondent No. 1, Vidya Mahadev Chougule, alleging that the bank had issued a cheque for Rs. 1,00,000 which was dishonoured upon presentation. The complaint named the bank and its directors as accused. The petitioners contended that they were not in charge of the day-to-day affairs of the bank at the time of the alleged offence and that the complaint lacked specific allegations against them as required under Section 141 of the Negotiable Instruments Act, 1881. The respondents argued that the directors were liable as they were responsible for the conduct of the bank's business. The court examined the complaint and found that it did not contain any specific averments that the petitioners were in charge of or responsible for the conduct of the business of the bank. The court relied on the principle that vicarious liability under Section 141 requires strict compliance with the statutory requirements. The court held that continuing the prosecution against the petitioners would be an abuse of the process of law and quashed the proceedings against them. The court clarified that the proceedings against the bank and other accused would continue.
Headnote
A) Negotiable Instruments Act - Section 138 read with Section 141 - Vicarious Liability of Directors - Requirement of Specific Averments - For prosecution of directors under Section 141, 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 of the accused as directors is insufficient to attract vicarious liability. (Paras 10-15) B) Criminal Procedure Code, 1973 - Section 482 - Quashing of Criminal Proceedings - Lack of Vicarious Liability - Where the complaint does not make out a case against directors under Section 141 of the Negotiable Instruments Act, the criminal proceedings against them are liable to be quashed under Section 482 CrPC to prevent abuse of process of court. (Paras 16-20) C) Negotiable Instruments Act, 1881 - Section 138 - Dishonour of Cheque - Liability of Directors - Directors who are not in charge of day-to-day management and against whom no specific role is alleged cannot be prosecuted for cheque dishonour by the company. The court held that continuing prosecution against such directors would be an abuse of process. (Paras 21-25)
Issue of Consideration
Whether criminal proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 can be sustained against directors of a cooperative bank who were not in charge of the day-to-day affairs of the bank at the time of the alleged offence, in the absence of specific allegations in the complaint regarding their role and responsibility.
Final Decision
The court allowed the petition and quashed the criminal proceedings against the petitioners in Summary Criminal Case No. 123 of 2018 pending before the Judicial Magistrate First Class, Miraj. The proceedings against the bank and other accused were to continue.
Law Points
- Vicarious liability of directors under Section 141 of Negotiable Instruments Act requires specific averments that the director was in charge of and responsible for the conduct of business of the company at the time of offence
- Quashing of criminal proceedings when complaint lacks necessary allegations against directors
- Directors not involved in day-to-day management cannot be held liable for cheque dishonour by company
