Director liability under cheque dishonour law can proceed on specific averments of business responsibility at the threshold.

In a prosecution under section 138 read with section 141 of the Negotiable Instruments Act, a complaint can sustain issuance of process where it contains specific averments that the company committed the offence and that the directors were in charge of and responsible for its business, or had consented to, connived in, or neglected the default. At the pre-trial stage, the court is confined to whether the complaint, verification and supporting material disclose sufficient grounds to proceed, and cannot test the defence version as if at trial. On the pleaded facts, the directors were held prima facie liable to face prosecution.

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Issues: Whether the order issuing process against the company and its directors for an offence under section 138 of the Negotiable Instruments Act, 1881, was liable to be quashed on the ground that the complaint and verification did not disclose sufficient averments showing that the directors were in charge of and responsible for the conduct of the company's business.

Analysis: For prosecution under section 138 read with section 141 of the Negotiable Instruments Act, 1881, the complaint must disclose a prima facie case that the company committed the offence and that the persons arrayed as accused were, at the relevant time, in charge of and responsible to the company for the conduct of its business, or that the offence was committed with their consent, connivance or neglect. At the stage of issuance of process, the enquiry is limited to whether the complaint, verification and supporting material make out sufficient ground for proceeding, and the defence version or disputed facts cannot be examined as if in trial. The complaint and verification in the present case contained specific assertions that the accused directors were responsible for the company's business and that non-payment of the cheque amount was attributable to their negligence. The signatory and managing functionaries could not avoid prosecution, and the other directors could also be proceeded against on the basis of the averments made at the pre-trial stage. The court also noted that the statutory presumption and the company's borrowing arrangements supported the prosecution case at this stage.

Conclusion: The challenge to the issuance of process failed, and the directors were held prima facie liable to be proceeded against.

Ratio Decidendi: In a prosecution under section 138 of the Negotiable Instruments Act, 1881, a complaint containing specific averments that directors were in charge of and responsible for the company's business is sufficient to sustain process at the threshold, and the question of their actual liability is to be tested at trial.

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