Appeal dismissed: non-signatory directors can be prosecuted under s.138 only if complaint specifically avers s.141 responsibility

The SC dismissed the appeal, holding that directors who are not signatories must be specifically averred in the complaint to have been "in charge of and responsible for the conduct of the business" under s.141 NI Act for prosecution under s.138. Reading the complaint as a whole, the allegations sufficiently averred the appellants' responsibility at the time of cheque issuance and dishonour; the HC correctly refused to quash the complaint under s.482 CrPC. The Court directed that the related older cases be clubbed and disposed of on merits within six months after parties appear before the trial court.

---

---

Issues: (i) Whether a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 disclosed the requisite averment to fasten liability on directors who were not signatories to the cheque. (ii) Whether the High Court erred in declining to quash the complaint and summons in exercise of jurisdiction under Section 482 of the Code of Criminal Procedure, 1973.

Issue (i): Whether a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 disclosed the requisite averment to fasten liability on directors who were not signatories to the cheque.

Analysis: Liability of a director for an offence by the company is not automatic. For a non-signatory director, the complaint must contain a basic and specific averment that at the relevant time the person was in charge of and responsible for the conduct of the business of the company. Mere status as a director is insufficient. The complaint in the present matter, read as a whole, stated that the appellants were directors, were responsible for the business and affairs of the company, and were involved in the transaction culminating in issuance and dishonour of the cheque. Such allegations were treated as meeting the threshold required at the stage of summoning.

Conclusion: The necessary averment was held to be present, and the complaint was not liable to be rejected on this ground.

Issue (ii): Whether the High Court erred in declining to quash the complaint and summons in exercise of jurisdiction under Section 482 of the Code of Criminal Procedure, 1973.

Analysis: At the stage of quashing, the court is concerned with whether the complaint discloses the ingredients of the offence and whether there is material warranting trial. Where the statutory ingredients under Sections 138 and 141 of the Negotiable Instruments Act, 1881 are pleaded and the complaint contains allegations connecting the directors with the offence, interference is not justified unless the record shows unimpeachable material excluding their role. The plea that the appellants were non-executive directors was treated as a defence to be examined at trial, not a ground for quashing.

Conclusion: The High Court was held to have rightly refused interference under Section 482 of the Code of Criminal Procedure, 1973.

Final Conclusion: The complaint and summoning order were sustained, and the appeals were dismissed, leaving the accused to establish their defence in trial.

Ratio Decidendi: For non-signatory directors, a prosecution under Sections 138 and 141 of the Negotiable Instruments Act, 1881 can proceed only if the complaint contains a specific averment that they were in charge of and responsible for the conduct of the company's business, but a complaint read as a whole may satisfy that requirement and justify refusal to quash at the summoning stage.

---