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Issues: (i) Whether a Director can be prosecuted for an offence under Section 138 of the Negotiable Instruments Act, 1881 in the absence of a specific averment that he was in charge of and responsible for the conduct of the company's business at the time of the offence, or that the offence was committed with his consent or connivance; (ii) Whether the proceedings could continue against the petitioner for the alleged offence under Section 420 of the Indian Penal Code, 1860 in the absence of any factual foundation.
Issue (i): Whether a Director can be prosecuted for an offence under Section 138 of the Negotiable Instruments Act, 1881 in the absence of a specific averment that he was in charge of and responsible for the conduct of the company's business at the time of the offence, or that the offence was committed with his consent or connivance.
Analysis: Section 141 of the Negotiable Instruments Act, 1881 fastens liability on a company's officers only where the complaint specifically pleads that, at the relevant time, the person was in charge of and responsible for the conduct of the business, or that the offence occurred with his consent or connivance. The complaints contained no such clear allegation against the petitioner. On the contrary, the pleadings indicated that other directors were conducting the business. A vague assertion that all accused would arrange payment was insufficient to infer consent or connivance.
Conclusion: The petitioner could not be proceeded against under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Issue (ii): Whether the proceedings could continue against the petitioner for the alleged offence under Section 420 of the Indian Penal Code, 1860 in the absence of any factual foundation.
Analysis: The complaint and the sworn statements did not disclose any factual averment constituting the ingredients of cheating. No material was pleaded to show the deception or dishonest inducement necessary to attract Section 420 of the Indian Penal Code, 1860.
Conclusion: The prosecution for the alleged offence under Section 420 of the Indian Penal Code, 1860 was unsustainable.
Final Conclusion: The criminal proceedings against the petitioner were liable to be quashed for want of necessary averments and foundational facts establishing the alleged offences.
Ratio Decidendi: A company director cannot be prosecuted for an offence under Section 138 of the Negotiable Instruments Act, 1881 unless the complaint specifically alleges that he was in charge of and responsible for the company's business at the relevant time, or that the offence was committed with his consent or connivance.
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