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        Case ID :

        2018 (8) TMI 2077 - HC - Indian Laws

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        Director liability under the Negotiable Instruments Act requires specific averments of control and responsibility for company business. Vicarious criminal liability of company directors under Section 141 of the Negotiable Instruments Act arises only where the complaint specifically avers ...
                      Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.

                          Director liability under the Negotiable Instruments Act requires specific averments of control and responsibility for company business.

                          Vicarious criminal liability of company directors under Section 141 of the Negotiable Instruments Act arises only where the complaint specifically avers that they were in charge of, and responsible for, the conduct of the company's business at the time of the offence. Mere statements that persons were directors or active participants in management are insufficient. As the complaint contained no foundational averment linking the respondents to responsibility for the company's affairs when the cheque offence occurred, the summoning order could not be sustained. The revisional court was therefore right in closing the proceedings, and the challenge to that order was dismissed.




                          Issues: Whether the respondents, alleged only to be directors and active participants in the company's management, could be summoned for an offence under Section 138 of the Negotiable Instruments Act, 1881 by invoking Section 141, and whether the revisional court's order closing the criminal proceedings against them called for interference under Section 482 of the Code of Criminal Procedure, 1973.

                          Analysis: For fastening liability under Section 141, it must be specifically averred that the persons sought to be prosecuted were in charge of, and responsible for, the conduct of the business of the company at the time the offence was committed. Mere description as directors, or as active participants in day-to-day affairs, is insufficient. The complaint here did not contain any averment connecting the respondents with responsibility for the company's affairs at the time of the offence. In the absence of such foundational pleading, the revisional court correctly held that the summoning order could not be sustained.

                          Conclusion: The respondents were not liable to be proceeded against on the basis of the complaint as framed, and no ground for interference with the revisional court's order was made out.

                          Final Conclusion: The petition challenging the discharge of the respondents from the criminal complaint was dismissed, leaving the revisional court's order undisturbed.

                          Ratio Decidendi: Vicarious criminal liability of company directors under Section 141 of the Negotiable Instruments Act, 1881 arises only on a specific averment that they were in charge of and responsible for the conduct of the business of the company at the time of the offence; bare assertions of directorship or participation in management are insufficient.


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