The Single Bench of the Delhi High Court in the case of Javahar Lal vs Ovt India Pvt. Limited & Anr. consisting of Justice Asha Menon observed that being a Director of a company would not suffice to make the person vicariously liable u/s 141 N.I. Act. A Director cannot be deemed to be in-charge of and responsible to the company for the conduct of its business. It must be averred as a fact that the accused Director was in-charge of and responsible for the conduct of the business.
Facts
The petitions were filed u/s 138 read with Section 141 of the Negotiable Instruments Act, 1881(‘N.I. Act’) for dishonour of cheques issued in respect of the same transaction.
Contentions Made
Petitioner: The complaints had to be quashed since they contained no averment to the effect that the petitioner was in-charge of and responsible to the company for the conduct of its business.
Respondent: The petitioner was a Director of the accused company and execution of the MoU and Tripartite Agreements and other business decisions including the issuance of the cheques could have taken place only with the consent, permission and instructions and knowledge of the directors being the petitioner and the accused No.3 in the complaint cases.
Observations of the Court
The Bench noted that a complaint u/s 141 the complaint must contain specific averments explaining the role of the Director, particularly that at the time of the commission of the offence, he was in-charge of and responsible for the conduct of the business of the company to attach vicarious liability upon a Director and mere designation will not suffice. But, the burden of proof is on the petitioner to substantiate his contention that he was not in-charge of and responsible for the conduct of the business of the accused company.
Relying on Alka Khandu Avhad vs. Amar Syamprasad Mishra & Anr., it was also noted that a joint liability to pay a debt will not be sufficient to make a person vicariously liable u/s 148 N.I. Act.
It further noted that that the averments did not find support from the very documents relied upon by the complainant/respondent. Thus, the petitioner was not responsible for and in-charge of the business of the accused company. It was neither pleaded in the complaints that the dishonoured cheques had been signed by the petitioner nor had been so urged before this Court. Thus, the averments made in the complaints even if be fully accepted, the documents annexed thereto ex facie show that the petitioner though a director of the accused company was not in-charge of or responsible for the conduct of its business. Thus, the essential ingredient u/s 141 N.I. Act based on which vicarious liability could be attached to the petitioner was missing.
Judgment
The petitions were allowed and the complaint cases against the petitioner were quashed.
Case: Javahar Lal vs Ovt India Pvt. Limited & Anr.
Citation: CRL.M.C. 1255/2020, CRL.M.As. 4837/2020 & 4838/2020
Bench: Justice Asha Menon
Decided on: 8th August 2022
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