Case Note & Summary
The applicants, who were directors of M/s. Morarjee Textiles Limited, filed an application under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of the order of issuance of process dated 9.3.2016 passed by the Judicial Magistrate First Class, Nagpur in Criminal Complaint Case No.2181/2011. The complaint was filed by respondent No.2, Adit s/o Dilip Chhajed, Director of D.C. Weaving Mills Private Limited, alleging an offence under Section 138 of the Negotiable Instruments Act, 1881. The complaint arose from an agreement dated 22nd May, 2006 between the complainant and the accused company. The cheque in question was issued by accused No.10, Dilip Bhatnagar, who was not a party to the proceedings. The applicants were accused Nos.1 to 9. The complainant alleged that the cheque was dishonoured and that the applicants, being directors, were liable. The applicants contended that there were no specific allegations against them regarding their role in the conduct of the business of the company. The court examined the complaint and found that the only allegations against the applicants were that they were directors of the company. There were no specific averments that they were in charge of and responsible for the conduct of the business of the company at the time of the offence. The court held 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. Mere designation as director is insufficient. The court also noted that the cheque was signed by accused No.10, not by any of the applicants. Therefore, the process issued against the applicants was quashed as it amounted to an abuse of process of law. The court allowed the application and set aside the order of issuance of process against the applicants.
Headnote
A) Criminal Procedure - Quashing of Process - Section 482 CrPC - Abuse of Process - Complaint under Section 138 of Negotiable Instruments Act, 1881 against directors without specific allegations of their role in conduct of business - Held that process issued against directors who are not signatories to the cheque and against whom no specific role is alleged is liable to be quashed as it amounts to abuse of process of law (Paras 1-16). B) Negotiable Instruments Act - Dishonour of Cheque - Section 138 - Vicarious Liability of Directors - Requirement of Specific Averments - For a director to be vicariously liable under Section 138, there must be specific allegations that the director was in charge of and responsible for the conduct of the business of the company at the time of the offence - Mere designation as director is insufficient (Paras 7-12). C) Negotiable Instruments Act - Dishonour of Cheque - Section 141 - Liability of Directors - Requirement of Specific Role - Section 141 of NI Act requires that the person sought to be made liable must be in charge of and responsible for the conduct of the business of the company - In the absence of such specific averments, the complaint against directors is not maintainable (Paras 13-16).
Issue of Consideration
Whether the order of issuance of process against the applicants (directors of a company) under Section 138 of the Negotiable Instruments Act, 1881 can be sustained in the absence of specific allegations regarding their role in the conduct of the business of the company.
Final Decision
The application is allowed. The order of issuance of process dated 9.3.2016 passed by the Judicial Magistrate First Class, Nagpur in Criminal Complaint Case No.2181/2011 against the applicants is quashed and set aside.
Law Points
- Section 138 NI Act requires specific averments of role in conduct of business
- vicarious liability not automatic
- directors not liable merely because of designation
