Case Note & Summary
The petitioner, Mrs. Lata Pramod Dave, filed a Criminal Writ Petition under Section 482 of the Code of Criminal Procedure, 1973 and Article 227 of the Constitution of India challenging the order dated 16th September 2013 passed by the Metropolitan Magistrate, 7th Court at Dadar, Mumbai in Criminal Complaint No.1675/SS/2013 issuing process against her for the offence punishable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The respondent No.1, M/s. Mode Export Private Limited, had advanced financial facilities by way of Inter Corporate Deposit to M/s. Swajay Finance Private Limited (Accused No.1) to the extent of Rs.1,50,00,000/-. The loan was secured by pledge of shares and a Loan Agreement was executed on 13th August 2010, later renewed. Accused No.1 issued seven post-dated cheques in favour of respondent No.1. The cheques were dishonoured upon presentation, leading to the complaint. The petitioner was arraigned as Accused No.3, being a Director of Accused No.1 company. The petitioner contended that she had resigned as Director on 1st April 2010, much before the loan agreement and the issuance of cheques, and that the complaint did not contain any specific averment that she was in charge of and responsible for the conduct of the business of the company. The respondent argued that the petitioner was a Director and therefore vicariously liable. The court examined the complaint and found that it merely stated that the petitioner was a Director without any specific averment as required under Section 141 of the NI Act. The court relied on the principle that for vicarious liability, there must be a specific allegation that the accused was in charge of and responsible for the conduct of the business. The court also noted that the petitioner had resigned prior to the relevant period. Consequently, the court allowed the petition, quashed the order issuing process against the petitioner, and discharged her from the complaint.
Headnote
A) Criminal Law - Dishonour of Cheque - Vicarious Liability of Director - Section 138 r/w 141 Negotiable Instruments Act, 1881 - The complaint must contain specific averments that the accused 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 is insufficient to attract vicarious liability. The court quashed the process issued against the petitioner as the complaint lacked such averments and the petitioner had resigned prior to the relevant period. (Paras 10-15) B) Criminal Procedure - Quashing of Criminal Proceedings - Section 482 CrPC - Inherent powers can be exercised to prevent abuse of process of court when the complaint does not disclose essential ingredients of the offence. The High Court held that continuing proceedings against the petitioner would be an abuse of process as no prima facie case was made out. (Paras 16-18)
Issue of Consideration
Whether the order issuing process against the petitioner for offence under Section 138 r/w 141 of Negotiable Instruments Act, 1881 can be sustained when the complaint does not contain specific averments that the petitioner was in charge of and responsible for the conduct of the business of the company.
Final Decision
The petition is allowed. The order dated 16th September 2013 passed by the Metropolitan Magistrate, 7th Court at Dadar, Mumbai in Criminal Complaint No.1675/SS/2013 issuing process against the petitioner is quashed and set aside. The petitioner is discharged from the said complaint.
Law Points
- Vicarious liability under Section 141 NI Act requires specific averment that accused was in charge of and responsible for conduct of business
- Director cannot be held liable merely because of designation
- Quashing of process under Section 482 CrPC when complaint lacks essential ingredients
