Negotiable Instruments Act, 1881 — Sections 138 & 141 — Director — Liability — Requirement — Merely being a Director is not sufficient to fasten criminal liability — It is mandatory to aver that the accused was in charge of and responsible for the conduct of the business of the company at the relevant time — Absence of such averment renders summoning unsustainable. (Paras 7–8)

advocatemmmohan

Negotiable Instruments Act, 1881 — Sections 138 & 141 — Director — Liability — Requirement —

Merely being a Director is not sufficient to fasten criminal liability — It is mandatory to aver that the accused was in charge of and responsible for the conduct of the business of the company at the relevant time — Absence of such averment renders summoning unsustainable.

(Paras 7–8)

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Section 141 NI Act — No deemed liability —

There is no deemed liability of a Director — Liability arises only on proof/averment of active role in day-to-day affairs — Director cannot be presumed to be responsible merely by virtue of designation.

(Para 7)

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Director — Board Resolution — Effect —

Signing of Board Resolution does not establish involvement in day-to-day business — Board decisions relate to policy or major matters and do not imply participation in routine business operations — Cannot justify prosecution.

(Para 8)

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Complaint under Section 138 — Specific averments — Mandatory —

Complaint must contain clear, specific allegations regarding role of Director in conduct of business — Absence of even a “whisper” of such allegation is fatal — Summoning order liable to be quashed.

(Para 8)

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Cheque dishonour — Reason — “Signature differs / corrections” — Effect —

Dishonour on ground of “drawer’s signature differs” or “alterations/corrections on instrument” still constitutes dishonour within meaning of Section 138 — Proceedings maintainable subject to compliance of statutory requirements.

(Para 3 — factual context)

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CrPC — Section 482 — Quashing — Scope —

High Court may exercise inherent powers to quash proceedings where:

• basic ingredients of offence not made out, or
• continuation of proceedings amounts to abuse of process —

Power to be exercised sparingly but not barred merely because revision under Section 397 was filed.

(Paras 7, 10)

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Section 397 & Section 482 CrPC — Interplay —

Availability or exhaustion of remedy under Section 397 does not bar exercise of inherent jurisdiction under Section 482 — High Court retains power to prevent miscarriage of justice.

(Paras 9–10)

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High Court — Error — Restricting Section 482 —

High Court erred in holding that after dismissal of revision, petition under Section 482 is not maintainable on same grounds — Such view contrary to settled law.

(Para 11)

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RATIO DECIDENDI 

For fastening liability under Section 141 of the Negotiable Instruments Act, it is essential to specifically aver and establish that the Director was in charge of and responsible for the conduct of the business of the company; mere designation or signing of board resolutions is insufficient, and in absence of such averments, proceedings are liable to be quashed under Section 482 CrPC.

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RESULT

• Proceedings against appellant (Director) quashed
• Appeal allowed

(Para 11)