Summons quashed for non-executive director not vicariously liable under NI Act - Specific allegations required

The court quashed the summoning order dated 28.11.2018 to the extent of issuing summons to the petitioner, an Independent/Non-Executive Director. The petitioner, not shown to be in charge of or responsible for the company's conduct at the relevant time, was not held vicariously liable under Section 138/141 of the Negotiable Instruments Act, 1881. The judgment emphasized the necessity for specific and detailed allegations when implicating directors not involved in the company's day-to-day management.

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Issues Involved:
1. Quashing of the summoning order dated 28.11.2018.
2. Determining the vicarious liability of an Independent/Non-Executive Director under Section 138/141 of the Negotiable Instruments Act, 1881.

Detailed Analysis:

Quashing of the Summoning Order:
The petitioner sought quashing of the summoning order dated 28.11.2018 passed by the Metropolitan Magistrate-04, Patiala House Courts, Delhi, and the consequent proceedings in Criminal Complaint no. 16201/2017. The complaint was filed under Section 138/141 of the Negotiable Instruments Act, 1881, against the accused company and its directors for dishonor of cheques issued in favor of the complainant company.

Vicarious Liability of an Independent/Non-Executive Director:
1. Petitioner's Argument:
- The petitioner was an Independent/Non-Executive Director and had no role in the transactions or day-to-day affairs of the company.
- The petitioner was neither a signatory to the cheques nor had knowledge of their issuance.
- The complaint lacked specific allegations against the petitioner, making only general and vague statements.
- Reliance was placed on several judgments, including Har Sarup Bhasin v. M/s Origo Commodities India Pvt Ltd, Anoop Jhalani v. The State & Anr., MCD v. Ram Kishan Rohatgi, Gunmala Sales Private Limited v. Anu Mehta & Ors, National Small Industries Corporation Limited v. Harmeet Singh Painwal, Sunita Palita v. Panchami Stone Quarry, and Sudeep Jain v. ECE Industries.

2. Respondent's Argument:
- The petitioner was a director at the time the cheques were dishonored and resigned only in September 2017.
- The petitioner's arguments should be dealt with during the trial.
- The amount in question was substantial (more than Rs. 106 crores), and the trial was pending.

3. Legal Provisions and Precedents:
- Section 141 of the Negotiable Instruments Act, 1881: It states that every person who was in charge of and responsible for the conduct of the business of the company at the time the offence was committed shall be deemed guilty.
- Section 149 of the Companies Act, 2013: It specifies that an independent director or a non-executive director not being a promoter or key managerial personnel shall be held liable only for acts of omission or commission by the company which occurred with their knowledge or due to their negligence.
- Supreme Court Judgments:
- S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla: Specific averments are required to show that the accused was in charge of and responsible for the conduct of the business at the relevant time.
- National Small Industries Corp. Ltd. v. Harmeet Singh Paintal: Emphasized the need for specific allegations and clear descriptions of the role of directors.
- Anita Malhotra v. Apparel Export Promotion Council: Reiterated the need for specific roles to be mentioned in the complaint.
- Pooja Ravinder Devidasani v. State of Maharashtra and Anr.: Highlighted that non-executive directors are not involved in day-to-day affairs and cannot be held liable without specific allegations.
- Sunita Palita & ors. v. Panchami Stone Quarry: Confirmed that liability depends on the role played in the company's affairs, not merely on designation.

4. Court's Observations:
- The complaint contained general allegations against all directors without specifying the petitioner's role.
- Mere designation as a director is insufficient to establish liability; specific roles and responsibilities must be detailed.
- The summoning order was passed mechanically without due application of mind, as required by law.

5. Conclusion:
- The court quashed the summoning order dated 28.11.2018 to the extent of issuing summons to the petitioner.
- The petition was allowed, recognizing that the petitioner, being an independent director, was not shown to be in charge of or responsible for the conduct of the business at the relevant time.

This judgment underscores the necessity for specific and detailed allegations in complaints under Section 138/141 of the Negotiable Instruments Act, 1881, particularly when implicating directors who are not involved in the day-to-day management of the company.

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