Bald Allegation That a Director is 'Responsible for Conduct of Business' Insufficient for S.141 NI Act Liability Without Averring They Were 'In Charge Of' Affairs: Himachal Pradesh High Court - 2025-08-22

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HP High Court Quashes Cheque Bounce Case Against Society Member, Cites Lack of Specific Allegations

Shimla, H.P. – The Himachal Pradesh High Court, in a significant ruling on vicarious liability, has quashed criminal proceedings under the Negotiable Instruments (NI) Act against a managing committee member of a co-operative society. Justice Rakesh Kainthla held that merely stating a person is "responsible for the conduct of business" is insufficient to attract liability under Section 141 of the NI Act. The complaint must specifically aver that the accused was also "in charge of" the company's affairs at the time of the offence.

The court allowed the petition filed by Hukam Chand, who was arrayed as accused No. 8 in a cheque dishonour complaint, and set aside the summoning order issued by the Additional Chief Judicial Magistrate, Theog.

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Background of the Case

The case originated from a complaint filed by Chanderkanta Chandel against M/s Pride NATC Co-operative Society Limited and its eight office bearers. The complainant alleged that the society, which had rented her premises in Theog, vacated them leaving rent arrears of ₹2,40,000.

According to the complaint, the society's President (accused No. 2) and Secretary (accused No. 6) issued a post-dated cheque for the said amount, which was subsequently dishonoured due to "insufficient funds." Consequently, a complaint was filed under Section 138 of the NI Act against the society and all its managing committee members, including the petitioner Hukam Chand.

The petitioner approached the High Court seeking to quash the proceedings against him, arguing that the complaint lacked specific allegations about his role and that he had not signed the cheque.

Arguments in Court

The petitioner's counsel, Mr. Abhishek Raj, argued that the trial court had summoned his client without proper application of mind. He contended that vicarious liability could not be fastened upon a committee member merely by virtue of their position. The complaint itself attributed the act of issuing the cheque to the President and the Secretary, making only them potentially liable alongside the society.

Conversely, the complainant's counsel argued that the petitioner's role was a disputed question of fact that should be adjudicated during the trial and not by the High Court in its inherent jurisdiction.

Court's Analysis: The Twin Requirements of Section 141

Justice Rakesh Kainthla conducted an exhaustive review of Supreme Court precedents on vicarious liability under Section 141 of the NI Act, which fastens liability on persons responsible for a company's actions.

The court underscored that Section 141 is a departure from the general rule against vicarious liability in criminal law and must be construed strictly. To hold a director or office bearer liable, the complaint must contain clear and specific averments fulfilling two conditions:

1. The person was in charge of the company's affairs.

2. The person was responsible to the company for the conduct of its business.

The court extracted a key paragraph from the complaint to highlight its deficiency:

"That the accused no. 2 to 8 are office bearers of the Management Committee of accused no.1... and they are persons responsible for the conduct of business of accused no.1 and the said cheque was issued at their behest and with their knowledge, consent and connivance to the complainant.”

Analyzing this averment, the court observed:

“It is apparent from these averments that there is no mention that the petitioner is in charge and responsible for the affairs of the society. It only mentions that the petitioner is responsible for the conduct of the business of accused No.1, which is distinct from the petitioner being in charge and responsible for the affairs of the society. Therefore, the averments do not satisfy the requirement of Section 141 of the NI Act.”

The judgment further noted that the complaint specifically stated that only accused Nos. 2 and 6 had visited the premises and issued the cheque. There was no allegation that the petitioner was present, had consented telephonically, or had authorised the issuance of the cheque. Therefore, the "mere bald reproduction of Section 141" was insufficient to implicate him.

Final Decision and Implications

Concluding that the complaint lacked the necessary averments to summon the petitioner, the High Court allowed the petition and quashed the proceedings pending before the Theog court qua Hukam Chand.

The court clarified that its observations were confined to the disposal of the current petition and would have no bearing on the merits of the case against the other accused. This ruling reinforces the principle that criminal liability, especially vicarious liability, cannot be imposed based on vague, omnibus allegations. It serves as a crucial reminder for complainants to meticulously plead the specific role of each director or office bearer they wish to prosecute in cheque bounce cases.