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SUPREME COURT OF INDIA
B. V. NAGARATHNA, SATISH CHANDRA SHARMA, JJ.
Kamalkishor Shrigopal Taparia – Appellant
Versus
India Ener-Gen Private Limited & Anr. – Respondents
Criminal Appeal No (s). of 2025 [Arising out of SLP (Crl.) Nos. 4051-4054 of 2020]
Decided On : 13-02-2025
Key Points: - The Court holds that mere designation as a director does not establish liability under Section 138 read with 141 NI Act; specific involvement must be alleged. (!) (!) - Vicarious liability under Section 141 requires allegations detailing how a director was in charge of and responsible for the conduct of the company's business at the relevant time; generic statements are insufficient. (!) (!) (!) - Non-executive directors cannot be vicariously liable under Section 141 unless the complaint contains clear, specific averments of their active involvement; in this case, such specifics were lacking, leading to quashing of proceedings. (!) (!) (!) - The judgment references established precedents (National Small Industries Corp. v. Harmeet Singh Paintal; N.K. Wahi v. Shekhar Singh; S.M.S. Pharmaceuticals; Pooja Ravinder Devidasani) mandating precise role-based allegations for liability. (!) (!) - The Court allowed the appeals and quashed the criminal proceedings against the appellant due to insufficiency of averments regarding his role. (!)
| Table of Content |
|---|
| 1. appellant's role and complaints (Para 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. arguments by appellant's counsel (Para 11 , 12) |
| 3. arguments by respondent's counsel (Para 13 , 14) |
| 4. court's analysis of liability (Para 15) |
| 5. principles of vicarious liability (Para 16 , 17 , 18 , 19) |
| 6. conclusion and quashing of proceedings (Para 20 , 21 , 22) |
JUDGMENT
SATISH CHANDRA SHARMA, J.
1. Leave granted.
2. The present appeals have been preferred against the Impugned common Judgment and Order dated 06.08.2019 passed by the High Court of Judicature at Bombay dismissing the petitions under Section 482 of the Code of Criminal Procedure, 1973 (the “CrPC”) seeking quashing of criminal proceedings initiated against the Appellant under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (the “NI Act”).
3. The Appellant, who was an independent non-executive director of M/s D.S. Kulkarni Developers Ltd., has been arrayed as an accused in the complaints filed under section 138 of the NI Act alleging dishonor of cheques issued by the company. The High Court, while dismissing the Appellant’s plea, observed that the role of the director is a matter of trial and that the complainant has made sufficient averments regarding the Appellant’s involvement.
BACKGROUND
4. The Appellant was appointed as an additional independent non-executive director on 02.01.2008 and subsequently designated as an independent non-executive director on 27.09.2008. Vide the resolution passed at the annual general meeting held on 30.09.2014, and formally confirmed through a letter dated the same day, the Appellant was reappointed as an independent non-executive director. Notedly, the Appellant had no role in the financial operations or key-management of the company.
5. The company allegedly availed two loans from Respondent No. 1 during 2016-2017, amounting to Rs.56,00,000/- and Rs.70,00,000/- respectively. As repayment, the company issued various cheques, which were dishonoured due to insufficient funds. Pertinently, the Appellant neither signed nor authorised the issuance of these cheques.
6. The details of the dishonoured cheques are as follows:
2. Cheque No. 455495, dated 25.12.2016, amounting to Rs.8,00,000/-.
3. Cheque No. 455496, dated 25.01.2017, amounting to Rs.8,00,000/-.
4. Cheques No. 455497, 455498, 455499, and 455500, dated 28.02.2017, amounting to Rs.10,00,000/- each.
7. Importantly, the cheques were not signed by the Appellant, and in two out of the four criminal cases, the demand notices were initially not addressed to the Appellant. It was only in the second set of demand notices that the Appellant’s name appeared, along with all directors, independent directors, non-executive directors, and additional directors.
8. The Appellant resigned from the position of independent non-executive director on 03.05.2017. His resignation was duly notified to the Registrar of Companies through Form DIR-11 and Form DIR-12, with effect from the same date.
9. The following complaints under Section 138 NI Act were filed against the company before the Learned Metropolitan Magistrate 28th Court, Esplanade, Mumbai:
2. Complaint No. 645/SS of 2017, filed on 23.02.2017, qua Cheque No. 455495.
3. Complaint No. 697/SS of 2017, filed on 07.04.2017, qua Cheque No. 455496.
4. Complaint No. 1595/SS of 2017, filed on 22.05.2017, qua Cheque No(s). 455497, 455498, 455499, and 455500.
10. The High Court dismissed the Appellant’s applications under Section 482 CrPC (Criminal Application Nos. 21, 22, 116 & 255 of 2019) seeking quashing of the proceedings pending before Learned Metropolitan Magistrate 28th Court, Esplanade, Mumbai.
SUBMISSION BY THE PARTIES
11. The learned counsel for the Appellant argued that the Appellant was a non-executive director and had no involvement in the financial affairs of the company. The complaints do not provide any
Mere designation as a director does not establish liability under Section 138 NI Act; specific allegations of involvement are necessary for vicarious liability.
Non-executive directors cannot be held vicariously liable under Section 141 of the NI Act without specific allegations of their involvement in the company's financial affairs.
Dishonour of cheque – A person cannot be made vicariously liable under provisions of Section 141 of NI Act, merely by stating that he was in-charge and responsible for day-to-day-conduct of accused c....
Non-Executive Directors cannot be held liable under Section 141 of the Negotiable Instruments Act without specific averments demonstrating their involvement in the company's day-to-day affairs.
A Company Secretary, who is not involved in the day-to-day affairs of the company and is not responsible for the conduct of its business, cannot be held criminally liable for a dishonored cheque issu....
(1) Dishonour of cheque – Impleadment of all Directors of Accused Company on the basis of a statement that they are in charge of and responsible for conduct of business of company, without anything m....
Dishonour of cheque – Offence by company – It may not be proper to split while reading complaint so as to come to a conclusion that allegations as a whole are not sufficient to fulfil requirement of ....
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