Additional Director cannot escape cheque dishonour liability under Section 141 without proving non-participation in business affairs

The Delhi HC dismissed a petition seeking dismissal of a cheque dishonour complaint under sections 138 and 141 of the NI Act. The petitioner, who was Additional Director of the accused company, claimed he was not responsible for the company's business affairs and was merely a Regional Sales Manager. The HC held that section 141 creates constructive liability requiring strict construction, but the petitioner failed to provide documentary evidence proving non-participation in business conduct. The court ruled that liability cannot be absolved by merely pleading lack of responsibility for day-to-day affairs, and such matters must be established during trial.

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Issues Involved:
1. Quashing of criminal complaint under Section 138 of the Negotiable Instruments Act, 1881.
2. Vicarious liability of the petitioner under Section 141 of the Negotiable Instruments Act, 1881.
3. Specific averments required to establish liability under Section 141 of the Negotiable Instruments Act, 1881.

Summary:

Issue 1: Quashing of criminal complaint under Section 138 of the Negotiable Instruments Act, 1881
The petitioner filed a petition under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash the criminal complaint filed by respondent no. 2 under Section 138 of the Negotiable Instruments Act, 1881. The complaint alleged that the petitioner, along with other directors, was responsible for the dishonor of cheques issued by the accused company. The trial court had issued notices against the accused, including the petitioner.

Issue 2: Vicarious liability of the petitioner under Section 141 of the Negotiable Instruments Act, 1881
The petitioner contended that he was not responsible for the conduct of the business of the accused company at the relevant time and did not sign the cheques in question. He argued that he was appointed as a regional sales manager and later promoted to Additional Director for convenience, but never managed the affairs of the company. The petitioner claimed that the cheques were issued by the original directors of the company, not him.

Issue 3: Specific averments required to establish liability under Section 141 of the Negotiable Instruments Act, 1881
The court emphasized that under Section 141 of the NI Act, criminal liability extends to 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. The Supreme Court's decisions in SMS Pharmaceuticals Ltd. V Neeta Bhalla and others, and other cited cases, were referred to highlight that specific averments are necessary to establish vicarious liability. The complaint must disclose how and in what manner the director was responsible for the conduct of the business.

The court observed that the complaint contained sufficient allegations to establish that the petitioner was involved in the day-to-day affairs of the accused company. The petitioner had not provided any documentary evidence to support his claim that he was not responsible for the conduct of the business. The court concluded that the petitioner's arguments were without basis and could not be factually sustained.

Conclusion:
The court dismissed the petition, stating that the complaint could not be quashed against the petitioner. The court noted that the petitioner could not be absolved from liability merely by pleading non-involvement in the company's affairs. The observations made in the judgment were not to be taken as an opinion on the final merits of the case.

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