Case Note & Summary
The petitioners, Shaju K. Nair and Riya Nair, were directors of M/s. Clariya Marketing Services Private Limited. The respondent, M/s. S.L.V. Steels & Alloys Pvt. Ltd., filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (P.C. No. 89/2012) alleging dishonour of a cheque issued by the company. The trial court took cognizance and issued process against the petitioners as directors. The petitioners filed a petition under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of the complaint and the order of issuance of process dated 24.12.2012 in C.C. No. 938/2012. The petitioners argued that they were not signatories to the cheque and that the complaint did not contain any specific averments regarding their role in the day-to-day affairs of the company, which is necessary to attract vicarious liability under Section 141 of the NI Act. The respondent was served but did not appear. The court, after hearing the petitioners' counsel, examined the complaint and found that it merely described the petitioners as directors without alleging that they were in charge of and responsible for the conduct of the business. The court relied on the principle that for vicarious liability under Section 141, there must be specific averments that the director was in charge of and responsible for the conduct of business at the time the offence was committed. Since the complaint lacked such averments, the court held that continuing the proceedings would be an abuse of process. The court allowed the petition, quashed the complaint in P.C. No. 89/2012 and all further proceedings in C.C. No. 938/2012, and set aside the order of issuance of process dated 24.12.2012.
Headnote
A) Criminal Law - Dishonour of Cheque - Section 138 Negotiable Instruments Act, 1881 - Vicarious Liability of Directors - The court considered whether directors who are not signatories to the cheque can be prosecuted under Section 138 read with Section 141 of the NI Act without specific averments of their involvement in the day-to-day affairs of the company. Held that mere description as directors is insufficient; complaint must contain specific allegations that the accused was in charge of and responsible for the conduct of business. (Paras 5-10) B) Criminal Procedure - Quashing of Complaint - Section 482 Code of Criminal Procedure, 1973 - Abuse of Process - The court examined the scope of inherent powers to quash a complaint where no prima facie case is made out against the petitioners. Held that where the complaint lacks essential averments to attract vicarious liability, continuation of proceedings would be an abuse of process of law. (Paras 11-14) C) Negotiable Instruments Act - Section 141 - Liability of Officers of Company - The court analyzed the requirement of specific averments under Section 141 of the NI Act for prosecuting directors. Held that the complaint must state that the director was in charge of and responsible for the conduct of business at the time the offence was committed; otherwise, the director cannot be vicariously liable. (Paras 7-10)
Issue of Consideration
Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881 and the order of issuance of process against the petitioners, who are directors of the accused company but not signatories to the cheque, can be quashed under Section 482 of the Code of Criminal Procedure, 1973 for lack of specific averments regarding their role in the day-to-day affairs of the company.
Final Decision
The petition is allowed. The complaint in P.C. No. 89/2012 and all further proceedings in C.C. No. 938/2012 pending on the file of the II Addl. Civil Judge (Jr.Dn.) & JMFC Court, Bellary are quashed. The order of issuance of process dated 24.12.2012 is set aside.
Law Points
- Vicarious liability of directors under Section 141 of Negotiable Instruments Act
- 1881 requires specific averments of role in day-to-day affairs
- Quashing under Section 482 CrPC for abuse of process
- Dishonour of cheque under Section 138 NI Act
