Vicarious Liablity in Cheque Bounce Cases of Companies: HC explains

 

The Delhi High Court has reiterated that it is for the Official whose been held vicariously liable, to establish in trial that he/she was not responsible for the conduct of the business of the company and High Court cannot quash a complaint merely on the basis of averments made.

The single-Judge Bench of Justice Subramonium Prasad mentioned that the latest judgments of the Supreme Court in Ashutosh Ashok Parasrampuriya Vs. M/s. Gharrkul Industries Pvt. Ltd., 2021 Latest Caselaw 492 SC has squarely settled the legal preposition around it.

The petitioner herein had sought quashing of Criminal Complaint against him filed under Section 138 of the Negotiable Instruments Act contending that he is over 80 years of age and have several physical ailments and is no longer looking into day-to-day affairs of the company. He further submitted that the complainant being the ex-CFO of the company was well aware of the affairs of the company and he knew who was responsible for the conduct of the business of the company. He states that the averments in the complaint do not reflect the role of each of the directors in the company and summons could not have been issued to him in that view.

A slew of judgements being cited by the Counsel for Peitioner which included SC decisions in Central Bank of India Vs. M/S. Asian Global Ltd.& Ors., 2010 Latest Caselaw 452 SC, National Small Industries Corp.Ltd. Vs. Harmeet Singh Paintal & ANR., 2010 Latest Caselaw 133 SC, Gunmala Sales Private Ltd. Vs. Anu Mehta & Ors., 2014 Latest Caselaw 670 SC, Saroj Kumar Poddar Vs. State (Nct of Delhi) & Anr, 2007 Latest Caselaw 45 SC, Ramrajsingh Vs. State of M.P. & ANR., 2009 Latest Caselaw 380 SC, Pooja Ravinder Devidasani Vs. State of Maharashtra & ANR., 2014 Latest Caselaw 796 SC. Harshendra Kumar D Vs Rebatilata Koley Etc., 2011 Latest Caselaw 101 SC

On the other hand, Learned Counsel for the Insurance Company agrued that there are only two directors and both the directors are responsible for the conduct of the affairs of the company. She submitted that the question as to whether the company was being only run by the son of the petitioner herein or whether the Petitioner is also involved in the affairs of the company, is a matter of trial and the complaint cannot be quashed at this stage. She further stated that offence under Section 138 of the NI Act is made out and no interference is warranted from this Court at this stage.

 High Court Observation

 The Court at the outset reflected on the factors which are necessary to be kept in mind before making a person vicariously liable for the offences committed by the company under Section 138 of the N.I. Act as succinctly laid down by the Apex Court in a number of judgments. The Court described them as following:-
(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.
(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.
(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.

The above are result of refferences from Gunmala Sales Private Ltd. Vs. Anu Mehta & Ors., 2014 Latest Caselaw 670 SC, National Small Industries Corp.Ltd. Vs. Harmeet Singh Paintal & ANR, 2010 Latest Caselaw 133 SC, Saroj Kumar Poddar Vs. State (Nct of Delhi) & Anr, 2007 Latest Caselaw 45 SC, N. Rangachari Vs. Bharat Sanchar Nigam Ltd, 2007 Latest Caselaw 355 SC

 In view of the above, the Court noted that it is not the case of the petitioner herein that he is a non-executive director and it is factual that he is a full-time director. The complaint read as a whole indicates that at the time of cheques being issued by the company and returned by the bank, the son of the petitioner and the petitioner were the only directors of the company and were responsible for the conduct of the business of the company.

 "It is for the petitioner to establish in trial that he was not responsible for the conduct of the business of the company owing to his age and the mere ipse dixit of the petitioner that he is 80 years of age and is unable to manage the affairs of the company cannot be accepted at this stage and the complaint cannot be quashed on that basis."

 

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(With input from news agency language)

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