Case Note & Summary
The applicant, Gaurav Vijay Bhatia, was accused No. 3 in a criminal complaint filed by Ramnath P. Subramaniam (respondent No. 1) under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The complaint alleged that a cheque issued by accused No. 4 company (M/s. Tricom India Limited) for Rs. 54,000 towards repayment of a loan was dishonoured due to insufficient funds. The complainant issued a statutory notice, and upon non-payment, filed the complaint. The Metropolitan Magistrate, 7th Court at Dadar, Mumbai, issued process against all accused including the applicant. The applicant, a director of the company, filed an application under Section 482 of the Code of Criminal Procedure, 1973 to set aside the order of issuance of process and quash the proceedings against him. The applicant argued that the complaint did not contain any specific allegations that he was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. He contended that he was not involved in the day-to-day affairs of the company and that the process was issued mechanically without application of mind. The court examined the complaint and found that the only allegation against the applicant was that he was a director of the company. There were no averments that he was responsible for the conduct of the business or that he had any role in the issuance of the cheque. The court relied on the settled legal position that for vicarious liability under Section 141 of the NI Act, there must be specific allegations that the director was in charge of and responsible for the conduct of the business. In the absence of such allegations, the process cannot be sustained. The court allowed the application, set aside the order of issuance of process against the applicant, and quashed the criminal proceedings to the extent of the applicant.
Headnote
A) Criminal Law - Negotiable Instruments Act - Vicarious Liability of Directors - Section 138 r/w 141 NI Act - Quashing of Process - The court considered whether a director who was not involved in the day-to-day affairs of the company could be prosecuted without specific averments of his role and responsibility. The court held that in the absence of specific allegations that the director was in charge of and responsible for the conduct of the business of the company, the process issued against him was an abuse of process and liable to be quashed. (Paras 5-8) B) Criminal Procedure Code - Inherent Powers - Section 482 CrPC - Quashing of Criminal Proceedings - The court examined the scope of its inherent powers to quash proceedings to prevent abuse of process. It held that where the complaint lacks essential averments to make out a case against a director, the proceedings can be quashed under Section 482 CrPC. (Paras 5-8)
Issue of Consideration
Whether the order of issuance of process against the applicant (accused No. 3) under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 can be sustained in the absence of specific allegations regarding his role and responsibility as a director of the company.
Final Decision
The court allowed the application. The order of issuance of process dated 12/08/2013 passed by the Metropolitan Magistrate, 7th Court at Dadar, Mumbai, in Criminal Complaint Case No. 2916/SS/2013 was set aside. The criminal proceedings were quashed to the extent of the applicant (accused No. 3). Rule made absolute.
Law Points
- Vicarious liability of directors under Section 141 NI Act requires specific averments of role and responsibility
- Director not involved in day-to-day affairs cannot be prosecuted without specific allegations
- Quashing under Section 482 CrPC for abuse of process
