Bench of Justice Manoj Misra and Justice K.V. Viswanathan
Introduction
This case pertains to the scope of vicarious liability of directors under Section 141 of the Negotiable Instruments Act, 1881, in cheque dishonour proceedings under Section 138 NI Act. The primary issue was whether a complaint must specifically state the administrative role of a director to proceed under Section 141(1) NI Act.
- Section 138, NI Act – Dishonour of cheque for insufficiency of funds.
- Section 141(1), NI Act – Offences by companies; vicarious liability of persons in charge.
- Section 482, CrPC (Now Section 528 of BNSS,2023) – Inherent powers of the High Court to quash criminal proceedings.
You can also read the Judgement of A Landmark Case on Triple Talaq (Popularly known as ‘The Shah Bano Case’)
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Facts of the Case
A cheque issued by M/s R Square Shri Sai Baba Abhikaran Pvt. Ltd. was dishonoured. HDFC Bank Ltd., the complainant, initiated criminal proceedings under Sections 138 and 141 of the Negotiable Instruments Act against the company and its directors, including Mrs. Ranjana Sharma. The Magistrate took cognizance and issued process against all the accused. Mrs. Sharma filed a petition under Section 482 CrPC before the Bombay High Court, seeking quashing of proceedings against her. The High Court allowed the petition, quashing proceedings against Sharma on the ground that the complaint failed to specify her exact role in the company. Aggrieved, the complainant bank filed a Special Leave Petition before the Supreme Court.
Issues
- Whether a complaint under Section 138 read with Section 141 of the NI Act must specifically state the administrative role of a director to attract vicarious liability?
- Whether a general averment of being in charge of and responsible for the conduct of the business is sufficient to maintain a complaint against a director?
Contentions of the Petitioner
The complaint sufficiently averred that Mrs. Sharma was responsible for the day-to-day affairs of the company. The requirement is not to plead specific internal administrative details but to make a general averment of being in charge of business.
- Cited precedents such as:
- K.K. Ahuja v. V.K. Vora (2009)
- S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005)
- S.P. Mani & Mohan Dairy v. Snehalatha Elangovan (2022)
to support the sufficiency of general averments at the complaint stage.
Contentions of the Respondent
Argued that no specific role or function was attributed to her in the complaint. Relied heavily on National Small Industries Corporation Ltd. v. Harmeet Singh Paintal (2010) to argue that specific allegations are necessary to establish vicarious liability. Claimed that mere designation as a director is not enough to fasten criminal liability under Section 141 NI Act.
Court’s Analysis
The Supreme Court clarified that under Section 141(1) NI Act, a specific averment that the accused was in charge of and responsible for the conduct of the business is necessary, but not in the exact language of the statute. The Court rejected the view that specific administrative duties must be detailed, as such information is within the special knowledge of the company/directors themselves.
- Relied on:
- S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla – general averment is necessary and sufficient.
- K.K. Ahuja v. V.K. Vora – reiterated sufficiency of stating that the director was in charge.
- S.P. Mani case – complainant is not expected to plead what is within the special knowledge of directors.
Distinguished Harmeet Singh Paintal, clarifying that it emphasized liability based on knowledge and responsibility, not the need for administrative detailing at the complaint stage. Noted that non-involvement or lack of knowledge is a matter of defence to be taken at trial stage, not at the threshold.
Conclusion
The Court held that a complaint under Section 138 r/w 141 NI Act need not state the specific administrative role of directors. It is sufficient if the complaint states that the accused was in charge of and responsible for the company’s conduct at the time of the offence. The High Court order quashing proceedings against Mrs. Sharma was set aside. The Magistrate's order issuing process was restored.
