Director liability for cheque dishonour requires specific averments and material showing responsibility at the time of offence.
Vicarious criminal liability under Section 141 of the Negotiable Instruments Act applies only where the complaint contains specific averments that a director was in charge of and responsible for the company's business at the time of the offence, or that the offence occurred with the director's consent, connivance or negligence. As the record showed the director had resigned before the cheques were issued, was not the cheque signatory, and there was no material showing involvement in day-to-day affairs, prosecution under Sections 138 and 141 could not stand. A bare assertion of responsibility was insufficient, and continuation of the complaint was held to be an abuse of process, so the proceedings were quashed.
Issues: (i) Whether the appellant, who had resigned as a director before the cheques were issued, could be prosecuted under Sections 138 and 141 of the Negotiable Instruments Act, 1881 for dishonour of the company's cheques; (ii) Whether the criminal proceedings against the appellant were liable to be quashed for absence of specific averments and supporting material showing her responsibility for the company's business at the relevant time.
Issue (i): Whether the appellant, who had resigned as a director before the cheques were issued, could be prosecuted under Sections 138 and 141 of the Negotiable Instruments Act, 1881 for dishonour of the company's cheques.
Analysis: Vicarious criminal liability under Section 141 is exceptional and must be strictly construed. A director can be prosecuted only where the complaint contains specific averments showing that, at the time of the offence, the director was in charge of and responsible for the conduct of the company's business, or that the offence occurred with consent, connivance, or negligence attributable to that director. The record showed that the appellant had ceased to be a director long before the cheques were issued, and the annual return and other corporate records reflected her cessation from the board. She was not the signatory of the cheques and there was no material showing any active role in the day-to-day affairs of the company when the offence occurred.
Conclusion: The appellant could not be fastened with criminal liability under Sections 138 and 141 of the Negotiable Instruments Act, 1881.
Issue (ii): Whether the criminal proceedings against the appellant were liable to be quashed for absence of specific averments and supporting material showing her responsibility for the company's business at the relevant time.
Analysis: A complaint against a director must disclose how and in what manner that director was responsible for the company's conduct of business. A bald assertion that the director was in charge is insufficient. Where unimpeachable material shows that the accused had resigned long before the cheques were issued, continuation of prosecution amounts to abuse of process. The letter of guarantee relied upon by the respondent created at most a civil obligation and did not by itself establish criminal liability under the Negotiable Instruments Act. The complaint, read as a whole, did not attribute any specific role to the appellant in relation to the issuance or dishonour of the cheques.
Conclusion: The criminal proceedings against the appellant were liable to be quashed.
Final Conclusion: The appeals succeeded and the complaint proceedings against the appellant were set aside as an abuse of the criminal process.
Ratio Decidendi: For prosecution of a director under Section 141 of the Negotiable Instruments Act, 1881, the complaint must contain clear and specific averments showing that the director was in charge of and responsible for the company's business at the relevant time, and unimpeachable material showing prior resignation or non-involvement can justify quashing of proceedings at the threshold.
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