Strict pleading for vicarious liability under cheque dishonour law led to quashing against independent directors

Vicarious criminal liability under Section 141 of the Negotiable Instruments Act is a strict exception to the general rule against such liability and requires a specific averment that the accused was, at the relevant time, in charge of and responsible for the company's business. A mere description as a director is insufficient; the complaint must disclose the accused's actual role in the conduct of business. Where the company records and annual report showed the petitioners as independent and non-executive directors, and the complaint contained only a general assertion of day-to-day responsibility, the factual basis was held inadequate. The complaints were quashed insofar as they related to the petitioners.

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Issues: Whether the complaints under Section 138 of the Negotiable Instruments Act, 1881 could be quashed against the petitioners, who were shown as independent and non-executive directors, on the ground that the complaint did not contain a sufficient factual foundation to attract vicarious liability under Section 141 of the Negotiable Instruments Act, 1881.

Analysis: Vicarious criminal liability under Section 141 is an exception to the ordinary rule against vicarious liability in criminal law and must therefore be strictly construed. For a director or other officer of a company to be prosecuted along with the company, the complaint must specifically plead that the person was, at the relevant time, in charge of and responsible for the conduct of the business of the company. A mere description as director is not enough, and the pleadings must disclose the role played by the accused in the company's business. On the materials placed, the petitioners were shown in the company records and annual report as independent and non-executive directors, while the complaint contained only a general assertion of responsibility for day-to-day affairs. In the face of the reply notice and the supporting company documents, that bald averment was found insufficient to sustain prosecution.

Conclusion: The complaints, insofar as they related to the petitioners, were quashed for want of a proper factual basis to invoke vicarious liability under Section 141 of the Negotiable Instruments Act, 1881.

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