Director not liable under Section 138

The court quashed the complaint cases against the petitioner, a director of the accused company, under Section 138 read with Section 141 of the Negotiable Instruments Act. The court emphasized the necessity of specific allegations attributing responsibility to the director for the company's conduct to establish vicarious liability. Despite the directorship, the lack of evidence demonstrating active involvement in the company's affairs led to the complaints being dismissed, highlighting the importance of fulfilling legal criteria for liability under the Act.

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Issues:
Petitions for quashing of proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 due to lack of specific allegations against the petitioner regarding vicarious liability.

Analysis:
1. The petitions involve the quashing of proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, as they pertain to connected complaint cases against the same parties for dishonor of cheques related to the same transaction.

2. The respondents filed complaints against the petitioner, a director of the accused company, seeking to establish vicarious liability. The petitioner argued that the complaints lacked specific averments attributing responsibility to him for the company's conduct, citing the necessity of such allegations for prosecution to commence, as per the Supreme Court judgment in Ramrajsingh vs. State of Madhya Pradesh (2009) 6 SCC 729.

3. The respondents contended that the petitioner, as a director, was actively involved in business decisions leading to the issuance of the dishonored cheques, emphasizing that the liability arose from agreements signed by the petitioner. Reference was made to legal precedents like A.R. Radha Krishna vs. Dasari Deepthi (2019) 15 SCC 550 to support their argument.

4. The court considered the legal requirements under Section 141 of the N.I. Act for establishing vicarious liability, emphasizing the need for specific averments in complaints regarding the accused's role in the company's business conduct. Mere directorship does not automatically imply liability; the accused must be shown to be in charge of the company's affairs.

5. It was clarified that the legal fiction creating vicarious liability under Section 141 necessitates strict compliance with statutory requirements, distinguishing civil liability from criminal liability under the Act. The court referred to precedents like Alka Khandu Avhad vs. Amar Syamprasad Mishra & Anr. (2021) 4 SCC 675 to underscore the importance of fulfilling legal criteria for liability.

6. The court reiterated the necessity of specific averments in complaints to attach vicarious liability to a director, as established in previous judgments like S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla & Anr. (2005) 8 SCC 89. Mere designation as a director is insufficient to establish liability.

7. While recognizing the absence of specific allegations against the petitioner in the complaints, the court emphasized the need to consider the complete averments to determine if the accused director was indeed in charge of the company's business conduct.

8. Upon examination of the documents and agreements involved, the court found that the petitioner, although a director, was not responsible for the company's business conduct as alleged by the respondents. The lack of evidence showing the petitioner's active involvement led to the quashing of the complaints against him.

9. In conclusion, the court allowed the petitions and quashed the complaint cases against the petitioner, highlighting the essential requirement of specific averments to establish vicarious liability under Section 141 of the N.I. Act.

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