Vicarious liability under cheque dishonour law turns on basic director averments and unimpeachable proof of prior resignation.

Basic averments that a company director was in charge of and responsible for the conduct of the business are sufficient to justify issuance of process in a prosecution under the Negotiable Instruments Act; the court at the summoning stage need not conduct a mini-trial or demand detailed proof of each director's role. A director's alleged prior resignation will not justify quashing unless the material showing cessation of office is unimpeachable, uncontroverted, and clearly establishes effective resignation and acceptance before the cheque-related acts. Where resignation is disputed and supporting records do not conclusively prove timely acceptance, inherent jurisdiction to quash should not be exercised.

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Issues: (i) Whether a Magistrate can issue process against a company director in a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act on the basis of basic averments that the director was in charge of and responsible for the conduct of the business of the company. (ii) Whether the process against the petitioner-director could be quashed on the basis of her alleged prior resignation from the company, in the absence of unimpeachable and uncontroverted evidence showing effective resignation and acceptance before the relevant acts constituting the offence.

Issue (i): Whether a Magistrate can issue process against a company director in a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act on the basis of basic averments that the director was in charge of and responsible for the conduct of the business of the company.

Analysis: Section 141 creates vicarious liability only where the complaint contains specific averments that the concerned director was, at the relevant time, in charge of and responsible for the conduct of the business of the company. The complaint in the present case pleaded that the petitioner and other directors actively participated in the loan transaction, were authorized to sign and execute the connected documents, and were responsible for the issuance and dishonour of the cheque. Such averments satisfy the threshold for issuance of process, and at the summoning stage the court is not required to conduct a mini-trial or insist on detailed proof of the individual role of each director.

Conclusion: The issuance of process on the basis of the complaint averments was justified and could not be interfered with at the threshold.

Issue (ii): Whether the process against the petitioner-director could be quashed on the basis of her alleged prior resignation from the company, in the absence of unimpeachable and uncontroverted evidence showing effective resignation and acceptance before the relevant acts constituting the offence.

Analysis: A director who resigned long before the issuance or dishonour of the cheque may, in an appropriate case, be spared from prosecution if the High Court is shown unimpeachable, uncontroverted material beyond suspicion or doubt. Here, the alleged resignation was disputed, the supporting material did not conclusively establish acceptance of resignation on the stated date, Form 32 was filed much later, and there was no board resolution produced to show timely acceptance. The surrounding circumstances, including the timing of the transaction, issuance of post-dated cheques, and the absence of any prompt notice response asserting resignation, also negatived the claim of effective prior cessation. The court therefore found no basis to exercise inherent jurisdiction to quash the proceedings.

Conclusion: The alleged resignation did not furnish a valid ground for quashing the process against the petitioner.

Final Conclusion: The complaint disclosed sufficient material to proceed against the petitioner for offences under Section 138 read with Section 141 of the Negotiable Instruments Act, and the writ petition for quashing the process was rejected.

Ratio Decidendi: In a prosecution under Section 138 read with Section 141 of the Negotiable Instruments Act, process may issue against a director on basic averments of responsibility, and quashing on the ground of resignation is permissible only on unimpeachable evidence showing that the director had ceased to hold office before the relevant offence-related acts.

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