Summoning orders quashed for lack of involvement in cheque issuance or dishonor under Section 138 NI Act.

The court quashed the summoning orders under Section 138 of the Negotiable Instruments Act, 1881, as the petitioners, who were directors of the accused company, were not directly involved in the issuance or dishonour of the cheques. It emphasized that vicarious liability under Section 141 of the NI Act requires specific allegations of involvement in the offense. The court found the summoning orders lacked proper application of mind and were issued mechanically, leading to their quashing. The petitioners were relieved of any liability, and all related proceedings were terminated.

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Issues Involved:
1. Quashing of summoning orders under Section 138 of the Negotiable Instruments Act, 1881.
2. Vicarious liability of directors under Section 141 of the NI Act.
3. Application of mind by the Magistrate in issuing summons.

Summary:

Issue 1: Quashing of Summoning Orders under Section 138 of the NI Act
The petitioners sought quashing of summoning orders dated 08.03.2017 issued by the learned Metropolitan Magistrate, District Courts, Saket, Delhi, in relation to dishonoured cheques issued by respondent No. 2 company. The cheques were dishonoured for reasons including "insufficient funds" and "other reasons." The court noted that the petitioners were directors of the accused company but were neither signatories to the cheques nor specifically alleged to have been in charge of or responsible for the conduct of the business of the company at the relevant time.

Issue 2: Vicarious Liability of Directors under Section 141 of the NI Act
The court emphasized that under Section 141 of the NI Act, liability arises only if a person was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. The court cited multiple Supreme Court judgments, including *S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla* and *Sabitha Ramamurthy vs. R.B.S. Channabasavaradhya*, to underscore that merely holding a designation such as a director does not automatically make one liable. The complaint must contain specific averments detailing the role of the directors in the alleged offence.

Issue 3: Application of Mind by the Magistrate in Issuing Summons
The court found that the summoning orders lacked application of mind and were issued mechanically. The court referred to the Supreme Court's decision in *Pepsi Foods Ltd. vs. Special Judicial Magistrate*, which mandates that the Magistrate must apply their mind to the facts and the law before issuing summons. The summoning orders in this case did not contain any reference or discussion about the allegations against the petitioners, indicating a lack of application of mind.

Conclusions:
1. The court concluded that there were no specific allegations against the petitioners in the criminal complaints regarding their role in the issuance or dishonour of the cheques.
2. The petitioners could not incur vicarious liability merely because they were directors of the accused company.
3. The issuance of the summoning orders was not based on any application of mind but was a mechanical process.

Order:
The summoning orders dated 08.03.2017 and all proceedings arising from them, insofar as they relate to the petitioners, were quashed. The petitions were disposed of accordingly.

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