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        2022 (1) TMI 192 - HC - Indian Laws

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        Director liability under the Negotiable Instruments Act depends on specific averments of charge and responsibility; quashing was refused. A director's vicarious liability in a prosecution under Sections 138 and 141 of the Negotiable Instruments Act depends on a specific averment that she was ...
                      Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.

                          Director liability under the Negotiable Instruments Act depends on specific averments of charge and responsibility; quashing was refused.

                          A director's vicarious liability in a prosecution under Sections 138 and 141 of the Negotiable Instruments Act depends on a specific averment that she was in charge of and responsible for the company's business when the offence occurred. At the process stage, the complaint is tested for a prima facie case on its allegations and supporting material; mere designation as a director is insufficient, but a basic assertion of responsibility for day-to-day affairs can sustain summoning unless unimpeachable material shows otherwise. On that basis, quashing of the summoning order was not justified, and the proceedings against the director were directed to continue.




                          Issues: Whether the summoning order against a director in a complaint under Sections 138 and 141 of the Negotiable Instruments Act, 1881 could be quashed for want of specific averments and supporting material showing that she was in charge of and responsible for the conduct of the company's business at the relevant time.

                          Analysis: Liability of a director under Section 141 of the Negotiable Instruments Act, 1881 depends on a specific averment that, at the time of the offence, the director was in charge of and responsible for the conduct of the company's business. At the stage of issuance of process, the complaint must disclose sufficient material to proceed, and the Court is to examine the allegations in the complaint along with supporting material to see whether a prima facie case is made out. Mere status as a director is not enough, but where the complaint contains a basic averment regarding responsibility for day-to-day affairs and there is no unimpeachable material showing the contrary, quashing is not warranted. A bare denial of involvement, without more, does not displace the prima facie case.

                          Conclusion: The challenge to the summoning order failed. The complaint contained the necessary basic averment, no incontrovertible material was shown to negate the respondent's responsibility, and the director could not be discharged at the threshold.

                          Final Conclusion: The revisional order setting aside the summoning of the director was interfered with, and the trial court was directed to proceed against her in accordance with law.

                          Ratio Decidendi: For prosecution of a company director under Section 141 of the Negotiable Instruments Act, 1881, the complaint must contain a specific averment that the director was in charge of and responsible for the conduct of the company's business at the relevant time; if such basic averment exists and no unimpeachable material is produced to the contrary, quashing at the threshold is not justified.


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                          ActsIncome Tax
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