Case Note & Summary
The petitioners, a private limited company and its directors, filed a petition under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of criminal proceedings in C.C. No. 12345/2021 pending before the Judicial Magistrate First Class, Bengaluru, arising out of a complaint under Section 138 of the Negotiable Instruments Act, 1881. The complaint alleged that a cheque issued by the company was dishonoured. The petitioners argued that the complaint did not contain specific allegations against each director regarding their role in the day-to-day affairs of the company, as required under Section 141 of the Act. The respondent/complainant contended that the directors were responsible for the company's affairs. The High Court analyzed the provisions of Section 141, which creates vicarious liability for directors only if they were in charge of and responsible for the conduct of business at the time of the offence. The court noted that the complaint merely stated that the accused were directors of the company without any specific averment as to their individual roles. Relying on precedents, the court held that in the absence of specific allegations, the proceedings against the directors would be an abuse of process. The court quashed the proceedings against all the petitioners.
Headnote
A) Criminal Law - Negotiable Instruments Act - Section 138 read with Section 141 - Vicarious Liability of Directors - Requirement of Specific Allegations - The court considered whether directors can be held vicariously liable for cheque dishonour without specific averments about their role in the company's day-to-day affairs. Held that mere designation as director is insufficient; there must be specific allegations that the director was in charge of and responsible for the conduct of business at the time the offence was committed. (Paras 1-10) B) Criminal Procedure - Quashing of FIR - Section 482 CrPC - Abuse of Process - The court examined the scope of inherent powers to quash criminal proceedings to prevent abuse of process. Held that where the complaint lacks essential averments to constitute the offence, continuation of proceedings would be an abuse of process, warranting quashing. (Paras 11-15)
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 company in the absence of specific allegations regarding their role in the day-to-day affairs of the company.
Final Decision
The petition is allowed. The criminal proceedings in C.C. No. 12345/2021 pending before the Judicial Magistrate First Class, Bengaluru, are quashed against all the petitioners.
Law Points
- Section 138
- Negotiable Instruments Act
- 1881
- Section 141
- vicarious liability
- director's role
- specific allegations
- quashing of criminal proceedings
