2018 (12) TMI 956 - HC - Indian Laws

High Court quashes criminal case due to lack of evidence on vicarious liability under Negotiable Instruments Act

The High Court allowed the petitions, setting aside previous orders and quashing the criminal case against the petitioners due to the lack of evidence ... Dishonor of Cheque - Vicarious liability - Section 141 of the Negotiable Instruments Act, 1881 - Held that:- The petitioners are not stated to be signatories of the cheque in question. They cannot be roped in merely because they have been directors of the company. The general averments about they being responsible for the business dealings of the company do not suffice as there is nothing shown that they were in charge of or responsible to the company accused for the conduct of its business “at the time the offence was committed” - petition allowed. Issues: Criminal vicarious liability under Section 141 of the Negotiable Instruments Act, 1881Analysis:1. The petitioners were summoned as accused in a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, based on vicarious liability under Section 141 of the Act. The petitioners challenged this summoning order through a Criminal Revision Petition, arguing that they were not responsible for the day-to-day affairs of the company at the time of the offense.2. The revisional court dismissed the petitions, leading to the current challenge in the High Court. The petitioners relied on various legal precedents, including Supreme Court decisions and a ruling of the High Court, to support their contention that vicarious liability could not be imputed against them without evidence of their active involvement in the company's affairs.3. The criminal complaint alleged that the petitioners, as directors of the company, were in charge of and responsible for its day-to-day affairs. However, apart from these general allegations, there was no specific averment or evidence showing the petitioners' participation in the company's business dealings at the time of the offense.4. The respondent argued that the petitioners were active participants in the company's affairs based on a communication received from the CBI in a related case. The respondent urged the court not to interfere in the ongoing criminal trial, emphasizing that the trial court should determine the petitioners' liability.5. The High Court analyzed the legal principles under Section 141 of the Negotiable Instruments Act, emphasizing that vicarious liability applies only to those responsible for the company's conduct at the time of the offense. Mere directorship is not sufficient to establish liability; there must be specific averments regarding the individual's role in the company's affairs at the relevant time.6. The court noted that the ongoing CBI investigation did not establish the petitioners' active involvement in the company's affairs at the time of the offense. Since the petitioners were not signatories of the dishonored cheque and there was no evidence of their direct involvement in the offense, the court quashed the criminal proceedings against them.7. Consequently, the High Court allowed the petitions, setting aside the previous orders and quashing the criminal case against the petitioners based on the lack of evidence establishing their vicarious liability under Section 141 of the Negotiable Instruments Act, 1881.