Case Note & Summary
The petitioners, including a company and its directors, challenged the order issuing process under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, passed by the learned Magistrate on 29th April 2013, which was confirmed in revision by the Adhoc District Judge on 3rd April 2014. The complaint was filed by respondent no.2, M/s. Dhalumal Holdings, alleging dishonour of a cheque issued by the company. The petitioners argued that the complaint did not contain specific averments regarding the role of the directors in the day-to-day affairs of the company, which is necessary to attract vicarious liability under Section 141. The court examined the complaint and found that while it alleged that the directors were in charge of and responsible for the conduct of the business, it did not specify how each director was involved. The court held that mere designation as director or chairman is not enough; there must be specific allegations. The court quashed the process against petitioners 2 to 6 (the individual directors) but upheld the process against petitioner no.1 (the company). The court also noted that the company did not challenge the process. The decision was based on the principle that vicarious liability under Section 141 requires strict compliance with the averments.
Headnote
A) Criminal Law - Negotiable Instruments Act - Section 138 r/w 141 - Vicarious Liability of Directors - 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 director or chairman is insufficient to attract vicarious liability. The court quashed the process against petitioners 2 to 6 for lack of such allegations. (Paras 1-20) B) Criminal Law - Negotiable Instruments Act - Section 138 - Dishonour of Cheque - The cheque in question was issued by the company and dishonoured. The company (petitioner no.1) did not challenge the process. The court upheld the process against the company. (Paras 1-20) C) Criminal Procedure Code - Section 482 - Inherent Powers - Quashing of Criminal Proceedings - The High Court can exercise inherent powers to quash proceedings if the complaint does not disclose the essential ingredients of the offence or if it is an abuse of process of law. The court quashed the process against the individual directors as the complaint lacked specific allegations. (Paras 1-20)
Issue of Consideration
Whether the order issuing process against the petitioners under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 can be sustained in the absence of specific allegations regarding their role in the day-to-day affairs of the company.
Final Decision
The petition is partly allowed. The order issuing process dated 29th April 2013 and the revisional order dated 3rd April 2014 are quashed and set aside insofar as petitioners 2 to 6 are concerned. The process against petitioner no.1 (the company) is upheld.
Law Points
- Vicarious liability under Section 141 NI Act requires specific averments of role in day-to-day affairs
- Directors not liable merely by designation
- Quashing of criminal process for abuse of process
