2022 (2) TMI 1161 - HC - Indian Laws

Court sets aside Section 138 summons against petitioner for lack of vicarious liability.

The court set aside the order summoning the petitioner for an offence under Section 138 of the Negotiable Instruments Act. The petitioner, not being the ... Dishonor of Cheque - person responsible for day to day affairs of the company - Signatory of the cheque - vicarious liability - petitioner states that besides there being no averment in the complaint qua the petitioner, no legal notice was issued to the petitioner and notice of dishonour of cheque was issued only to the company - HELD THAT:- The accused No. 1 is the company in whose name the cheque was issued and the accused Nos. 2 and 3 were the Director and Managing Director of the company and signatories to the cheque. However, the petitioner was arrayed as accused No. 4 being the Finance Head of the accused company against whom there is no specific allegation except stating in para 3 of the complaint that the remaining accused persons were directly responsible for day to day affairs of the accused No. 1 company. In SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [2005 (9) TMI 304 - SUPREME COURT], it was held that that in order to array an accused for an offence under Section 138 of the N.I.Act who is not signatory to the cheque, specific averments have to be made in the complaint as to the role attributable to the said accused and as to how he was responsible for the conduct and affairs of the company. In the facts of the present case, the only averment in the complaint is that the remaining accused persons are directly responsible for day to day affairs of the accused No.1 company. Considering the fact that the petitioner is neither the signatory nor the Managing Director of the company nor is there any averment in the complaint as to how the petitioner is responsible and Incharge of the day to day affairs and conduct of the company, nor does the complaint attribute any conduct, act or omission on the part of the petitioner which would be sufficient to hold him vicariously liable for the act of the company, the impugned order summoning the petitioner is liable to be set aside. The impugned order of the learned Metropolitan Magistrate is set aside - Petition allowed. Issues Involved:1. Setting aside the order summoning the petitioner for an offence under Section 138 of the Negotiable Instruments Act (N.I. Act).2. Lack of specific averments in the complaint against the petitioner.3. Non-issuance of legal notice to the petitioner.4. Delay and laches in filing the petition.Detailed Analysis:1. Setting Aside the Order Summoning the Petitioner:The petitioner sought to set aside the order dated 10th May 2019 by the learned Metropolitan Magistrate summoning him for an offence under Section 138 of the N.I. Act. The petitioner argued that he was wrongfully summoned as accused No. 4 without any specific averment against him in the complaint. The cheque in question was issued by the accused company, KRF Ltd., and signed by its Director and Managing Director, not by the petitioner who was the Finance Head.2. Lack of Specific Averments in the Complaint:The petitioner contended that the complaint lacked specific averments against him, which is essential for fastening vicarious liability. The complaint only stated that 'remaining accused persons are directly responsible for day to day affairs of the Accused No. 1 Company,' without detailing the petitioner's role. The court referred to the Supreme Court's principles in *National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal* and *S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla*, emphasizing that specific averments are necessary to hold an individual vicariously liable under Section 138 of the N.I. Act.3. Non-Issuance of Legal Notice to the Petitioner:The petitioner also argued that no legal notice was issued to him, and the notice of dishonour was only sent to the company. This, according to the petitioner, meant no cause of action arose against him under Section 138 of the N.I. Act. The court noted that the complaint did not attribute any conduct, act, or omission on the part of the petitioner that would make him liable.4. Delay and Laches in Filing the Petition:The respondent argued that the petition should be dismissed due to delay and laches, as it was filed in July 2021 against an order passed in May 2019. However, the court rejected this contention, noting that no period of limitation is prescribed for filing a petition under Section 482 Cr.P.C., and the period of limitation was suspended by the Supreme Court's orders in *Suo Motu WP(C) No. 3/2020* due to the pandemic. Thus, the petition was filed within a reasonable period.Conclusion:The court concluded that the petitioner, being neither the signatory nor the Managing Director, and with no specific averments in the complaint regarding his responsibility for the company's day-to-day affairs, could not be held vicariously liable. Consequently, the impugned order summoning the petitioner was set aside, and the petition was disposed of. The application for stay was also disposed of as infructuous.