2023 (7) TMI 1107 - HC - Indian Laws

Court quashes proceedings under Section 138/141 NI Act against non-signatory company secretary

Namarta Vashisht Versus M/s Transmission Line Products & Ors.

The court allowed the revisional application, quashing the proceedings under Section 138/141 of the Negotiable Instrument Act against the petitioner, who ... Dishonour of Cheque - insufficiency of funds - vicarious liability - it is claimed that petitioner is neither the Director nor the signatory of the opposite party no.2, but the company secretary - HELD THAT:- The petitioner a company secretary not being the signatory to the cheque, was also not involved in running the day to day affairs of the Company. The petitioner was only the company Secretary. The job was to assist the persons involved in running the day to day affairs of the Company - the petitioner is not liable in the present case, there also being no specific averments against her in the petition of complaint. The proceeding under Section 138/141 of the Negotiable Instrument Act, 1881 (as amended up to date) pending before the court of the learned Chief Metropolitan Magistrate at Calcutta, is hereby quashed in respect of only the petitioner, Namarta Vashisht. The trial in respect of the other accused persons to proceed in accordance with law. Revision application allowed. Issues Involved:1. Quashing of the complaint under Section 138/141 of the Negotiable Instrument Act, 1881.2. The petitioner's liability as a company secretary and non-signatory to the cheque.3. Legal principles regarding vicarious liability under Section 141 of the NI Act.Summary:Issue 1: Quashing of the complaint under Section 138/141 of the Negotiable Instrument Act, 1881The petitioner sought the quashing of the complaint under Section 138/141 of the Negotiable Instrument Act, 1881, registered as Case No. C.S No. 93322 of 2018, pending before the Chief Metropolitan Magistrate at Calcutta. The petitioner argued that they were neither the Director nor the signatory of the accused company and thus, no criminality was involved on their part. The court noted that the complaint did not specify who issued the cheque on behalf of the accused company.Issue 2: The petitioner's liability as a company secretary and non-signatory to the chequeThe petitioner was made an accused as the Company Secretary of the accused company. The court highlighted that the duties of a Company Secretary include providing guidance to the company Directors, facilitating meetings, obtaining approvals, representing the company before regulators, and assisting the company board. The Supreme Court in various judgments, including Sunita Palita vs. M/s. Panchami Stone Quarry and others, emphasized that liability under Section 141 arises from being in charge of and responsible for the conduct of the business of the company at the relevant time, not merely holding a designation.Issue 3: Legal principles regarding vicarious liability under Section 141 of the NI ActThe court referred to multiple Supreme Court judgments, including S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and K.K. Ahuja v. V.K. Vora, which clarified that vicarious liability under Section 141 requires specific averments showing how the accused was responsible for the conduct of the business of the company. Non-executive Directors or those not involved in day-to-day affairs cannot be held liable without specific allegations. The petitioner, being a company secretary and not the signatory to the cheque, was not involved in the day-to-day affairs of the company and thus not liable under Section 141.Conclusion:The court allowed the revisional application, quashing the proceedings under Section 138/141 of the NI Act against the petitioner, while the trial against other accused persons would proceed in accordance with the law. There was no order as to costs, and all connected applications were disposed of. The interim order, if any, stood vacated, and a copy of the judgment was directed to be sent to the learned Trial Court for necessary compliance.