Vicarious criminal liability in cheque dishonour cases requires specific averments against non-executive independent directors.

Vicarious criminal liability under the Negotiable Instruments Act requires specific pleadings showing how and in what manner a director was in charge of and responsible for the company's business at the relevant time. Mere designation as a non-executive independent director is insufficient, and the exception for managing directors, joint managing directors, or cheque signatories did not apply here. As the complaint contained only bald averments and the appellants were not cheque signatories, continuation of the proceedings against them was not justified. The refusal to quash the prosecution and to dispense with personal appearance was therefore unsustainable, and the proceedings were quashed insofar as the appellants were concerned.

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Issues: (i) Whether a complaint under Section 141 of the Negotiable Instruments Act, 1881 can proceed against non-executive independent directors without specific averments showing that they were in charge of and responsible for the conduct of the company's business. (ii) Whether the refusal to quash the proceedings and to dispense with personal appearance of the appellants was sustainable in the facts of the case.

Issue (i): Whether a complaint under Section 141 of the Negotiable Instruments Act, 1881 can proceed against non-executive independent directors without specific averments showing that they were in charge of and responsible for the conduct of the company's business.

Analysis: Section 141 creates vicarious criminal liability and must be strictly construed. Mere designation as a director is not enough. A complaint must contain specific averments showing how and in what manner the director was in charge of and responsible for the conduct of the business at the relevant time, unless the accused is a Managing Director, Joint Managing Director, or the signatory of the cheque. The materials showed that the appellants were independent, non-executive directors and not signatories of the cheque. In the absence of particulars in the complaint, their continuation in the criminal proceedings could not be justified.

Conclusion: The complaint was not maintainable against the appellants on the basis of the bald averments made against them, and the proceedings were liable to be quashed as against them.

Issue (ii): Whether the refusal to quash the proceedings and to dispense with personal appearance of the appellants was sustainable in the facts of the case.

Analysis: The High Court failed to give due weight to the appellants' status as non-executive independent directors and to the absence of any specific role attributed to them in relation to the cheque transaction. Once the company was represented through an authorised officer, there was no justification for insisting on the appellants' personal appearance in the circumstances. The High Court therefore ought to have exercised its inherent jurisdiction to prevent abuse of process and secure the ends of justice.

Conclusion: The refusal to grant relief under Section 482 of the Code of Criminal Procedure, 1973 was unsustainable.

Final Conclusion: The appellants succeeded, the High Court's order was set aside, and the criminal proceedings were quashed insofar as the appellants were concerned while continuing against the remaining accused.

Ratio Decidendi: For fastening vicarious liability in cheque dishonour cases, a complaint must specifically plead the director's role in the conduct of the company's business at the relevant time; absent such averments, non-executive independent directors who are not signatories to the cheque cannot be proceeded against merely on the basis of their designation.

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