Court quashes criminal proceedings under Negotiable Instruments Act, emphasizing director's lack of liability.

The court quashed the criminal proceedings against the petitioner under section 138 read with section 141 of the Negotiable Instruments Act. It was found that the petitioner, who had resigned as a director before the dishonor of the cheques, was not responsible for the conduct of the business at the relevant time. The court emphasized that vicarious liability under section 141 can only be imposed if the individual was in charge of the company's affairs when the offense occurred. The order taking cognizance against the petitioner was set aside, allowing the trial to proceed against the company and other accused persons.

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Issues Involved:
1. Quashing of the entire criminal proceeding under section 138 read with section 141 of the Negotiable Instruments Act, 1881.
2. Vicarious liability of directors under section 141 of the Negotiable Instruments Act.
3. Resignation of the petitioner as a director and its impact on liability.
4. Adequacy of averments in the complaint regarding the petitioner's responsibility for the conduct of business.

Issue-wise Detailed Analysis:

1. Quashing of the entire criminal proceeding under section 138 read with section 141 of the Negotiable Instruments Act, 1881:
The petitioner sought to quash the criminal proceedings initiated against him under section 138 read with section 141 of the Negotiable Instruments Act, 1881. The complaint alleged that the petitioner, along with others, was responsible for the issuance of dishonored cheques towards repayment of a loan and interest. The court examined whether the petitioner could be held liable under these sections.

2. Vicarious liability of directors under section 141 of the Negotiable Instruments Act:
The court analyzed section 141 of the Negotiable Instruments Act, which deals with the liability of directors and other officers of a company. It was emphasized that vicarious liability under this section can only be fastened if the person was in charge of and responsible for the conduct of the business of the company at the time the offense was committed. The court referred to the case of Ashutosh Ashok Parasrampuriya and Another v. Gharrkul Industries Pvt. Ltd. and Others, which stated that merely being a director is not sufficient to make a person liable under section 141; it must be specifically averred that the person was in charge of and responsible for the conduct of the business.

3. Resignation of the petitioner as a director and its impact on liability:
The petitioner argued that he had resigned from the company before the cheques were dishonored and thus should not be held liable. The court noted that the petitioner had resigned on 27.10.2014, which was accepted on 14.11.2014. The cheques were dishonored on 20.12.2014, and the legal notice was issued on 30.12.2014. The court found that the petitioner was not the signatory of the cheques in question and had resigned before the dishonor of the cheques, which was supported by unimpeachable evidence.

4. Adequacy of averments in the complaint regarding the petitioner's responsibility for the conduct of business:
The court examined the complaint and found that it did not adequately aver that the petitioner was responsible for the conduct of the business of the company at the relevant time. The complaint itself stated that other accused persons were responsible for the day-to-day affairs of the company. The court referred to the case of S.M.S. Pharmaceuticals v. Neeta Bhalla, which held that it is necessary to aver in the complaint that the person was in charge of and responsible for the conduct of the business.

Conclusion:
The court concluded that the complaint did not satisfy the requirements of section 141 of the Negotiable Instruments Act as it did not specifically aver that the petitioner was responsible for the conduct of the business at the relevant time. The court found that the petitioner had resigned before the cheques were dishonored and was not the signatory of the cheques. Therefore, the order taking cognizance against the petitioner was set aside. The trial would proceed against the company and other accused persons. The petition was allowed to the extent of quashing the proceedings against the petitioner.

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