Vicarious criminal liability in cheque dishonour cases requires specific material against directors; CFO role may still require trial.

Independent and non-executive directors cannot be subjected to vicarious criminal liability in cheque dishonour matters unless there is specific material showing they were in charge of and responsible for the company's business; on the facts stated, the summoning order and proceedings were quashed against them. By contrast, a Chief Financial Officer, as key managerial personnel linked to financial administration, may have to face trial where the question of knowledge and control over the transaction cannot be resolved at the quashing stage; on the materials noted, the summoning order was upheld against him. The petition therefore succeeded only in part.

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Issues: (i) whether summoning and criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be quashed against Non-Executive and Independent Directors in the absence of material showing that they were in charge of and responsible for the conduct of the company's business; (ii) whether the summoning order could be interfered with in respect of the Chief Financial Officer of the company at the stage of proceedings under Section 482 of the Code of Criminal Procedure, 1973.

Issue (i): whether summoning and criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be quashed against Non-Executive and Independent Directors in the absence of material showing that they were in charge of and responsible for the conduct of the company's business.

Analysis: The protective scheme for Independent Directors under the Companies Act, 2013 recognizes that such directors are not, by status alone, responsible for the company's day-to-day affairs. Liability for an offence by the company does not automatically extend to every director. For vicarious criminal liability, there must be specific material showing active involvement or a direct nexus with the transaction and the company's business. The record showed that the petitioners in this category were Independent and Non-Executive Directors, and there was no sufficient basis to treat them as persons in charge of the company's affairs for the purpose of Section 141.

Conclusion: The issue was decided in favour of the petitioners. The summoning order and the proceedings were quashed against the Non-Executive and Independent Directors.

Issue (ii): whether the summoning order could be interfered with in respect of the Chief Financial Officer of the company at the stage of proceedings under Section 482 of the Code of Criminal Procedure, 1973.

Analysis: A Chief Financial Officer is part of the company's key managerial personnel and, by office, is connected with financial administration and monetary affairs. Whether such a person had knowledge of the transaction and exercised control over it is ordinarily a matter for trial, especially where the role is linked to financial management. On the materials before the Court, no ground was made out to conclude at the quashing stage that the summoning order was unsustainable against the Chief Financial Officer.

Conclusion: The issue was decided against the petitioner. The summoning order was upheld in respect of the Chief Financial Officer.

Final Conclusion: The petition succeeded only in part: the proceedings were terminated against the Independent and Non-Executive Directors, while the prosecution was permitted to continue against the Chief Financial Officer.

Ratio Decidendi: In prosecutions for dishonour of cheques, a director can be made vicariously liable only on specific material showing responsibility for the conduct of the company's business, whereas mere status as a director is insufficient; a key managerial officer whose role is intrinsically connected with company finances may require trial to determine involvement.

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