Case Note & Summary
The case involves two criminal petitions filed under Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of proceedings in C.C. No. 15686/2022 (old C.C. No. 3095/2021) pending before the XLII Additional Chief Metropolitan Magistrate, Bengaluru (Special Court for trial of cases against MPs/MLAs). The complaint was filed by the State Bank of India against M/s. Jamkhandi Sugars Limited and its directors for an offence under Section 138 of the Negotiable Instruments Act, 1881, arising from the dishonour of a cheque issued by the company. The petitioners in Criminal Petition No. 6481/2022 are three directors (Rajiv, Laxman, and Rajendra) who were arrayed as accused Nos. 3, 4, and 6. The petitioners in Criminal Petition No. 7203/2022 are the company itself, its chairman Anand, and another director Gurulingappa. The core legal issue is whether the directors can be held vicariously liable under Section 141 of the Negotiable Instruments Act in the absence of specific averments that they were in charge of and responsible for the conduct of the business. The petitioners argued that the complaint merely described them as directors without any specific allegations of their role in the day-to-day affairs. The respondent bank contended that the directors are liable as they were in charge of the company. The court analyzed the requirements of Section 141 and relied on the settled principle that vicarious liability cannot be imposed without specific averments. The court found that the complaint lacked the necessary averments to make the directors liable. Consequently, the court quashed the proceedings against the directors in Criminal Petition No. 6481/2022 and against the chairman and director in Criminal Petition No. 7203/2022, but allowed the proceedings to continue against the company and the signatory of the cheque.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Section 138 read with Section 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 description of the accused as director is insufficient to attract vicarious liability. The court quashed proceedings against petitioners who were directors but not signatory to the cheque, as the complaint lacked necessary averments. (Paras 10-15) B) Criminal Procedure Code - Quashing of Proceedings - Section 482 - Inherent Powers - Where the complaint does not disclose the essential ingredients of the offence, the High Court can exercise its inherent powers to quash the proceedings to prevent abuse of process of law. The court held that continuing such proceedings would be an abuse of process. (Paras 16-18)
Issue of Consideration
Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881, can be sustained against directors of a company in the absence of specific averments that they were in charge of and responsible for the conduct of the business of the company at the time the offence was committed.
Final Decision
The court allowed both criminal petitions and quashed the proceedings against the petitioners (directors) in C.C. No. 15686/2022. However, the proceedings against the company and the signatory of the cheque were allowed to continue.
Law Points
- Vicarious liability under Section 141 of the Negotiable Instruments Act
- 1881 requires specific averments that the accused was in charge of and responsible for the conduct of the business
- Quashing of criminal proceedings under Section 482 Cr.P.C. when complaint lacks essential ingredients
- Directors not liable merely because they are directors
