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of <h1>High Court affirms lower court, rejects petition in cheque bounce case. Detailed evidence needed for vicarious liability.</h1> The High Court upheld the lower court's orders, dismissing the petition seeking quashment of orders taking cognizance and issuing summons in a cheque ... Dishonor of cheque due to insufficiency of funds - Vicarious Liability u/s 138 of NI Act - Whether the averments made in the complaint that the applicants are ''Karta Dharta'' and authorized signatories of the Company, is sufficient to make them vicariously liable for offence under Section 138 of the NI Act or not? Held that:- Although in the present case, the words used ''Karta Dharta'' in paragraph 1 of complaint cannot be said to be happily-worded complaint but if the meaning of words ''Karta Dharta'' is considered, then it would mean that the applicants along with other co-accused persons are managing the day-to-day business of the Company, as general meaning of ''Karta Dharta'' is the person who is enjoying all the powers. Whether the allegations that the persons, who have been arrayed as accused in a complaint under Section 138 of the NI Act, are really responsible for the day-to-day business of the Company or not, cannot be adjudicated by the Trial Court at the time of taking cognizance. The basic averment is necessary and there is no reason to disbelieve the basic averment to the effect that the persons who have been arrayed as accused, are responsible/ in charge of the day-to-day business of the Company. This Court is of the considered opinion that the trial Court after considering the allegations made against the applicants in paragraphs 1 and 2 of the complaint, did not commit any mistake in taking cognizance against the applicants and issuing summons to the applicants. Petition dismissed. Issues:1. Quashment of orders dated 03/05/2016 and 18/05/2016 for taking cognizance and issuing summons.2. Vicarious liability of the applicants under Section 138 of the Negotiable Instruments Act.3. Allegations against the applicants as 'Karta Dharta' and authorized signatories.4. Interpretation of Section 141 of the Negotiable Instruments Act regarding company liability.Detailed Analysis:1. The petition sought quashment of orders taking cognizance and issuing summons. The respondents No. 2 and 3 were not served, but as co-accused, their non-service was deemed irrelevant. The complaint alleged the applicants' involvement in a cheque bounce case under Section 138 of the NI Act. The applicants argued lack of specific allegations holding them responsible for the company's day-to-day business, citing Supreme Court precedents. They presented the Memorandum of Association to show they were not directors, challenging vicarious liability.2. The complaint labeled the applicants as 'Karta Dharta' and authorized signatories, asserting they issued the bounced cheque. The court deliberated on Section 141 of the NI Act, imposing liability on those responsible for a company's business. The judgment emphasized the necessity for complainants to specify accused individuals' roles in the company's operations to establish vicarious liability.3. Comparisons were made with a Supreme Court case where the accused were identified as managing and whole-time directors, emphasizing their direct involvement in the company's affairs. Despite the use of 'Karta Dharta' in the complaint, the court inferred managerial responsibility, leaving the determination of actual involvement for trial proceedings.4. The judgment clarified that the trial court did not err in taking cognizance based on the complaint's allegations against the applicants. It highlighted that questions regarding the applicants' directorial status, business responsibilities, and vicarious liability require evidentiary examination during trial proceedings, affirming the lower court's orders.In conclusion, the High Court upheld the lower court's orders, dismissing the petition and emphasizing the need for detailed evidence to establish vicarious liability in cases of company-related offenses under the NI Act.
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