Director not vicariously liable under Negotiable Instruments Act. Resignation before offense crucial.

The Court held that the petitioner, an independent non-executive nominee director, could not be vicariously liable under Sections 138 and 142 of the Negotiable Instruments Act as specific allegations of involvement were lacking. The complaints and summoning orders against the petitioner were quashed due to his resignation before the cause of action accrued, and the absence of evidence showing his role in the company's affairs. The Court emphasized that vicarious liability arises only if a person is responsible for the company's conduct at the time of the offense. The petitioner's petitions were allowed, and he was not held liable.

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Issues Involved:
1. Vicarious liability of an independent non-executive nominee director under Sections 138 and 142 of the Negotiable Instruments Act.
2. Validity of the complaints and summoning orders against the petitioner who resigned before the cause of action accrued.

Issue-wise Detailed Analysis:

1. Vicarious Liability of an Independent Non-Executive Nominee Director:

The petitioner challenged the summoning orders for offenses under Sections 138 and 142 of the Negotiable Instruments Act (NI Act). The petitioner argued that as an independent non-executive nominee director, he could not be held vicariously liable for the company's dues. The Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla held that vicarious liability under Section 141 of the NI Act arises only if a person is in charge and responsible for the conduct of the business of the company at the time the offense was committed. The Court emphasized that mere designation as a director is insufficient to attract liability; specific averments must show the person's role in the company's business.

Further, in K.K. Ahuja v. V.K. Vora, the Supreme Court reiterated that liability under Section 141 of the NI Act depends on the role played in the company's affairs, not merely on holding a designation. The Court clarified that managing directors or those signing the cheque are presumed responsible, but other directors require specific allegations of being in charge of and responsible for the company's conduct.

The petitioner, appointed as an independent non-executive nominee director on 6th February 2009 and resigned on 10th November 2015, argued that he was not involved in the day-to-day affairs of Vasan Health Care. The Reserve Bank of India's Master Circular and the Companies Act, 2013, distinguish between different categories of directors, emphasizing that independent and nominee directors are not liable for the company's acts unless specific allegations of their involvement are made.

2. Validity of the Complaints and Summoning Orders:

The petitioner contended that he resigned from the company before the cause of action accrued, i.e., before the payment was not made despite the service of a legal demand notice. The complaints alleged that Vasan Health Care and its directors issued cheques towards monthly rents, which were dishonored. Legal demand notices were issued, and upon non-payment within 15 days, the complaints were filed.

The Court noted that the petitioner was not the managing director, signatory to the cheque, or responsible for the company's day-to-day functioning. The complaints lacked specific averments showing the petitioner's role or knowledge of the offense. The Court emphasized that under Section 149(12) of the Companies Act, 2013, an independent director is liable only for acts of omission or commission with his knowledge, consent, or connivance.

Given the lack of specific allegations against the petitioner and his resignation before the cause of action accrued, the Court held that no vicarious liability could be fastened on the petitioner. The summoning orders and complaints against the petitioner were quashed.

Conclusion:

The petitions were allowed, and the impugned orders summoning the petitioner in the specified complaint cases were quashed. The Court concluded that the petitioner, as an independent non-executive nominee director, could not be held vicariously liable in the absence of specific allegations of his involvement in the company's business at the relevant time. The petitions and applications were disposed of accordingly.

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