Case Note & Summary
The petitioners, Heena Thirumali Sateesh and Hanumanth Inamdar, were directors of Hoysala Projects Private Limited. The respondent, M/s Minimelt Engineers India, a proprietorship firm, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the company and its directors, including the petitioners, for dishonour of a cheque issued by the company. The petitioners were arraigned as accused Nos. 3 and 4 in C.C.No.8836/2021 pending before the XX Additional S.C.J. and A.C.M.M., Bengaluru. They filed a petition under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of the proceedings against them. The petitioners contended that they were not in charge of the day-to-day affairs of the company at the time of the alleged transaction and that the complaint did not contain any specific averments regarding their role. The respondent argued that as directors, they were vicariously liable. The Court examined the complaint and found that it contained only general allegations against all directors without specifying that the petitioners were in charge of and responsible for the conduct of the business. Relying on the settled legal position that vicarious liability under Section 138 NI Act requires the accused to be in charge of the company's affairs at the time of the offence, the Court held that the proceedings against the petitioners were an abuse of process and liable to be quashed. The Court allowed the petition and quashed the proceedings against the petitioners.
Headnote
A) Criminal Law - Negotiable Instruments Act - Section 138 - Vicarious Liability of Directors - Quashing of Proceedings - The petitioners, directors of a company, sought quashing of proceedings under Section 138 NI Act on the ground that they were not in charge of the company's day-to-day affairs at the time of the transaction. The Court held that for vicarious liability to attach, there must be specific averments that the director was in charge of and responsible for the conduct of the business. In the absence of such averments, proceedings are liable to be quashed. (Paras 1-10) B) Criminal Procedure Code - Section 482 - Inherent Powers - Quashing of Criminal Proceedings - The Court exercised its inherent powers under Section 482 CrPC to quash proceedings against the petitioners as the complaint lacked specific allegations regarding their role in the company's affairs. The Court relied on the principle that criminal proceedings cannot be continued if they are an abuse of process of law. (Paras 8-10)
Issue of Consideration
Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 against directors who were not in charge of the day-to-day affairs of the company at the time of the alleged offence can be quashed under Section 482 of the Code of Criminal Procedure, 1973.
Final Decision
The petition is allowed. The entire proceedings in C.C.No.8836/2021 pending on the file of the XX Additional S.C.J. and A.C.M.M., Bengaluru, are quashed insofar as the petitioners are concerned.
Law Points
- Vicarious liability under Section 138 NI Act requires the accused to be in charge of and responsible for the conduct of business at the time of the offence
- mere designation as director is insufficient
- quashing of criminal proceedings under Section 482 CrPC when no specific averments of role in day-to-day affairs
