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        2024 (12) TMI 1292 - HC - Indian Laws

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        Specific averments for director liability in cheque dishonour complaints are essential before vicarious criminal liability can arise. Vicarious criminal liability under Section 141 of the Negotiable Instruments Act arises only where the complaint contains clear, specific averments that ...
                        Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.

                            Specific averments for director liability in cheque dishonour complaints are essential before vicarious criminal liability can arise.

                            Vicarious criminal liability under Section 141 of the Negotiable Instruments Act arises only where the complaint contains clear, specific averments that the accused was in charge of and responsible for the company's business at the time of the offence; mere designation as a director is insufficient. Section 482 of the Code of Criminal Procedure may be invoked sparingly, but quashing is appropriate where the complaint, even on its face, lacks the essential ingredients of the offence or does not disclose a prima facie case. Where the accused had ceased to be a director before the cheques were drawn, was not a signatory, and there was no material showing control over day-to-day affairs, the complaint does not support liability.




                            Issues: Whether the criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, read with Section 141 of the Negotiable Instruments Act, 1881, could be quashed under Section 482 of the Code of Criminal Procedure, 1973, on the ground that the petitioner had ceased to be a director before the cheques were issued and the complaint lacked specific averments showing that he was in charge of and responsible for the conduct of the company's business at the relevant time.

                            Analysis: The power under Section 482 of the Code of Criminal Procedure, 1973 is to be exercised sparingly, but quashing is justified where the complaint, even if taken at face value, does not disclose the essential ingredients of the offence or where no prima facie case is made out. For vicarious liability under Section 141 of the Negotiable Instruments Act, 1881, the complaint must contain clear and specific averments that the accused was, at the time of commission of the offence, in charge of and responsible for the conduct of the company's business. Mere designation as a director is not sufficient. On the facts, the petitioner had ceased to be an additional director before the cheques were drawn, was not a signatory to the cheques, and there was nothing on record to show control over the company's day-to-day affairs at the relevant time.

                            Conclusion: The complaint did not disclose a prima facie case against the petitioner under Section 141 of the Negotiable Instruments Act, 1881, and quashing was warranted under Section 482 of the Code of Criminal Procedure, 1973.

                            Ratio Decidendi: Vicarious criminal liability of a company officer under Section 141 of the Negotiable Instruments Act, 1881 arises only from specific averments and material showing that the person was in charge of and responsible for the conduct of the business at the time of the offence; mere status as a director is insufficient.


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                            ActsIncome Tax
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