2016 (5) TMI 769 - SC - Indian Laws

Supreme Court quashes summons under Section 141 emphasizing strict vicarious liability

Jayantilal Vashrambhai Modia & Anr Versus M/s Orient Bell Ltd & Ors

The Supreme Court allowed the appeal, setting aside the High Court's order and quashing the summons issued to the appellant. The Court emphasized that ... Complaint made under Section 141 of the Negotiable Instruments Act - validity of summons - Held that:- We find that in the complaint, the appellant has not made a specific statement that the appellant as a Director and arrayed as an accused was in-charge and was responsible to the Company for the conduct of the business of the Company in its day-to-day affairs. In view of that, we do not find that the complaint which has been lodged is in consonance with the requirements made under Section 141 of the Negotiable Instruments Act and the law laid down by this court in in National Small Industries Corporation Limited vs. Harmeet Singh Paintal and Another, [2010 (2) TMI 590 - SUPREME COURT OF INDIA ] . The order so passed by the High Court is thus set aside and we quash the order passed by the High Court vis-a-vis the appellant issuing the summons dated 03.08.2013. Issues:High Court's dismissal of applications under Section 482 of Cr.P.C. for quashing summoning order based on vicarious liability of a Director.Analysis:The Supreme Court granted leave and heard arguments from both parties. The High Court had dismissed the appellants' applications under Section 482 of Cr.P.C. seeking to quash the summoning order in a criminal complaint. The ground for dismissal was that the appellant, a Director of the accused Company, could not be prosecuted based on vicarious liability. The appellants argued that the High Court's order did not consider the Agreement disclosing that another individual managed the Company's affairs. Counsel for the appellants referred to a previous judgment by the Supreme Court in a similar case, emphasizing the requirement for vicarious liability under Section 141 of the Negotiable Instruments Act. The Court highlighted that vicarious liability must be strictly construed and that merely holding a designation in a company is not sufficient for liability. The complaint did not specify how the appellant, as a Director, was in charge and responsible for the Company's business conduct.The Supreme Court found that the complaint did not meet the requirements of Section 141 of the Negotiable Instruments Act and the precedent set by the Court. As a result, the Court set aside the High Court's order and quashed the summons issued to the appellant. The appeal was allowed on this basis.