2022 (8) TMI 816 - HC - Indian Laws

Court quashes proceedings against petitioner in Section 138 case, emphasizes need for specific averments

Arvind Sivakumaran Padmanabhan Versus K. Sivagnanamurthi, V. Praveen, V. Venkatachalam, Srivalli Devi, S. Sathyavathi

Arvind Sivakumaran Padmanabhan Versus K. Sivagnanamurthi, V. Praveen, V. Venkatachalam, Srivalli Devi, S. Sathyavathi - TMI Issues:1. Whether the petitioner is liable under Section 141 of the Negotiable Instruments ActRs.2. Whether the petitioner had knowledge about the issuance of impugned cheques at the time of presentationRs.Analysis:1. The petitioner, as A3, was accused in complaints under Section 138 of the Negotiable Instruments Act. The complainants alleged that the petitioner, as a Director, was responsible for the company's conduct during the offence. However, the petitioner's counsel argued that he was not a Director or signatory at the time of the offence. The court emphasized that only those in charge of the company's business during the offence are liable under Section 141. The complaint lacked specific averments regarding the petitioner's role, leading to the quashing of proceedings against him.2. The court noted that the petitioner became a Director after his father's death, who was the Managing Director and signatory of the cheques. The petitioner denied knowledge of the transactions and cheques issuance. The absence of a rejoinder from the respondents regarding the petitioner's knowledge further weakened the case. Section 141 imposes liability on those in charge at the time of the offence, requiring knowledge of cheque issuance. As the petitioner was not involved during the offence, the court quashed the proceedings against him.3. The court cited precedents emphasizing that criminal liability under Section 141 is specific to those responsible for the company's affairs during the offence. The complainant must make clear averments to establish vicarious liability. In this case, the petitioner's induction as a Director post-offence absolved him of liability. All Directors cannot be presumed to have knowledge of transactions. As the petitioner was not in charge during the offence, the court ruled in his favor, quashing the complaints against him.4. In conclusion, the court quashed the proceedings against the petitioner, A3, in the complaints under Section 138 of the Negotiable Instruments Act. The Trial Court was directed to proceed with the trial against other accused promptly. The judgment highlighted the importance of specific averments and the timing of responsibility in determining liability under Section 141, protecting individuals from unjust prosecution and abuse of legal processes.