Petitioner acquitted as court finds no vicarious liability for company's check issuance

The court found that the petitioner, who was neither a director nor handling the day-to-day affairs of the accused company when the cheques were issued, could not be held vicariously liable under Section 141 of the Negotiable Instruments Act. The court emphasized the need for specific allegations to establish responsibility for the conduct of business. As a result, the summoning orders against the petitioner were set aside, and the petitioner was acquitted of the offenses alleged under Section 138 NIA.

---

---

Issues Involved:
1. Whether the petitioner was a director or handling the day-to-day affairs of the accused company at the relevant time when the cheques were issued.
2. Whether the petitioner can be held vicariously liable under Section 141 of the Negotiable Instruments Act (NIA).

Summary:

Issue 1: Director or Handling Day-to-Day Affairs

The court first needed to ascertain whether the petitioner was a director or handling the day-to-day affairs of the accused company when the cheques were issued. The petitioner was appointed as an Additional Director Non-Executive on 25.10.2019, whereas the cheques in question were issued on 24.07.2019. The petitioner argued that he was merely a salaried employee who joined the accused company on 01.10.2019, and the liability had already incurred before his appointment as an Additional Director Non-Executive. The court found that the petitioner could not have been responsible for or in charge of the company's day-to-day affairs at the relevant time when the cheques were issued.

Issue 2: Vicarious Liability Under Section 141 NIA

The court examined the provisions under Section 141 NIA, which state that every person in charge of and responsible to the company for its conduct of business at the relevant time will be held guilty. The court emphasized that merely mentioning the designation of the accused person in the company or reproducing the phraseology of Section 141 NIA is not sufficient to attract guilt. Specific allegations/averments must be made to show how and in what manner the accused was responsible for the conduct of the business at the relevant time. The court referred to several judgments, including S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, K.K. Ahuja v. V.K. Vora, and National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, to reiterate that vicarious liability can only be fastened on those who were in charge of and responsible for the conduct of the business at the time of the offence.

The court found that the petitioner was neither a signatory to the cheques nor responsible for the day-to-day affairs of the company when the cheques were issued. The complaint did not ascribe any specific role to the petitioner to attract vicarious liability under Section 141 NIA. The court held that continuing with the criminal proceedings against the petitioner would be an abuse of the process of the courts.

In view of the above, the summoning orders against the petitioner were set aside, and the petitioner was acquitted of the offences alleged under Section 138 NIA. The petitions were allowed, and the pending applications were disposed of.

---