Vicarious liability under the Negotiable Instruments Act requires arraigning the company before proceeding against a director or signatory.

Section 141 of the Negotiable Instruments Act, 1881 creates vicarious liability for directors, officers, and similar persons only when the company, as the principal offender in a cheque dishonour prosecution, is arraigned as an accused. Where a cheque is issued in the name of the company, prosecution against a signatory or managing director alone, without joining the company, suffers from a foundational defect. Here, although the applicant signed the cheque as managing director, the company was not made an accused, so the process issued against the applicant alone could not be sustained and was quashed.

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Issues: Whether a prosecution under Sections 138 and 141 of the Negotiable Instruments Act, 1881 can be maintained against a signatory or managing director alone without arraigning the company as an accused, and whether the process issued against such applicant is liable to be quashed.

Analysis: The governing principle is that Section 141 of the Negotiable Instruments Act, 1881 creates vicarious liability and the company, being the principal offender in a corporate prosecution, must be arraigned as an accused before directors, partners, or officers can be proceeded against on that basis. The reasoning applied treats the company as an essential party where the cheque is issued in the name of the company and the accused seeks to fasten liability only through the role attached to the company. In the present case, although the cheque was signed by the applicant in his capacity as managing director, the company itself was not made an accused, and the prosecution was therefore found to suffer from a foundational defect.

Conclusion: The process issued against the applicant alone could not legally be sustained and was quashed and set aside. The application was allowed.

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