Directors cannot be held vicariously liable for a company's dishonoured cheque without specific allegations of their involvement in the company's operations, as required under Section 141 of the N.I. Act.

ORDER :

K.SURESH REDDY, J.

Accused No.7 in C.C.No.464 of 2014 on the file of the learned Judicial First Class Magistrate, Alamuru, East Godavari District, filed the present criminal petition, under Section 482 Cr.P.C., seeking to quash the proceedings against her in the said C.C.

2. The aforesaid C.C. has been registered against the petitioner/A7 and other accused for the offences punishable under Sections 138 and 142 of the Negotiable Instruments Act, 1881 (for short, 'the N.I. Act'), on the basis of a private complaint filed by respondent No.1 herein.

3. The contents of the complaint filed by the 1st respondent/complainant, in brief, are as under:

Complainant is carrying on trade in waste paper. Accused No.1 is a Private Limited Company having its registered office at D.No.12-1/B, Sanagam Road, Tapeswaram Village, Mandapeta Mandal, owning a paper board unit based on waste paper. Accused No.2 is the Managing Director and accused Nos.3 to 8 are Directors of accused No.1-Company. During the course of business, accused No.1-Company purchased waste paper from the complainant from about 06.06.2010 on credit and made part payments from time to time and as per the regularly maintained account of the complainant, an amount of Rs.5,77,726/- was due and payable by accused No.1-Company to the complainant as on 15.03.2011. While things stood thus, accused No.1- Company was sold out to accused No.8 and as per the arrangement made between accused Nos.2 and 8, accused No.8 undertook to discharge the subsisting liability of creditors of accused No.1-Company, including the amount due and payable to the complainant, and arrived at a settlement to pay a sum of Rs.4,20,207/- to the complainant in full quittance of the amount due to it. Accordingly, accused No.8, as one of the Directors of accused No.1, issued a cheque bearing No.067502 dated 25.05.2012 for a sum of Rs.4,20,207/-, drawn on State Bank of India, Mandapeta. When the complainant presented the said cheque for collection through its banker, the same was dishonoured with endorsement ‘Exceed Arrangements’. When the complainant confronted accused Nos.2 and 8 about the dishonor of the cheque, accused No.8 had again issued a cheque bearing No.067524 dated 30.06.2012 for the said sum of Rs.4,20,207/- drawn on State Bank of India, Mandapeta, and both accused Nos.2 and 8 assured the complainant that sufficient funds would be made available in the last week of August, 2012.

On such assurance, the complainant presented the said cheque for collection through its banker – Indian Bank, Rajahmundry, on 24.08.2012, but the said cheque was also dishonoured and returned vide cheque return memo dated 24.08.2012 with an endorsement ‘funds insufficient’. As the accused evaded phone calls of the complainant, the complainant got issued registered legal notice under Section 138 of the N.I. Act on 11.09.2012 calling upon the accused to repay the cheque amount of Rs.4,20,207/- within a period of 15 days after receipt of notice. While accused Nos.1, 6 and 8 willfully returned the notices, the other accused received the notices. Accused No.2, who is the Managing Director, received the notice on 12.09.2012. The accused neither replied to the notice nor paid the cheque amount. Hence, the complaint was filed.

4. Heard Mr. P.R.K. Amarendra Kumar, learned counsel for the petitioner/A7, and the learned Assistant Public Prosecutor appearing for the 2nd respondent/State. Despite service of notice, none appeared for the 1st respondent/complainant.

5. Learned counsel for the petitioner contends that the petitioner/A7 is in no way responsible for the conduct of business of A1-Company and its day-today affairs and, thus, she cannot be vicariously held liable for dishonour of the cheque. He further contends that in the complaint, it was specifically averred that as per the arrangement made between A2 and A8, A8 agreed to discharge the liability of creditors of A1 including the amount due and payable to the complainant, and there is