Directors of a company are vicariously liable under Section 138 of the Negotiable Instruments Act if they are responsible for the conduct of the company’s business, regardless of their claim of non-involvement.

ORDER :

1. Heard Sri. Nitin R.Bolabandi, learned counsel for the petitioners and Sri. D.G.Bhat, learned counsel for respondent.

2. The petitioners have filed these petitions under Section 482 of the Code of Criminal Procedure, praying to quash the entire proceedings in C.C.No.632/2020 (arising out of P.C.No.355/2020) and C.C.No.633/2020 (arising out of P.C.No.354/2020), pending on the file of learned JMFC-VIII Court, Belagavi for the offence punishable under Section 138 of Negotiable Instruments Act, 1881 (hereinafter referred to as ‘N.I. Act’ for brevity).

3. For the sake of convenience, the parties are referred to as per their ranking before the Trial Court.

4. In both the petitions, petitioner No.1 is accused No.6 whereas, petitioner No.2 is accused No.7, who died on 02.01.2025. Hence, petitions against petitioner No.2/accused No.7, is abated.

5. The brief facts of the complainant’s case in C.C.No.632/2020 is as under; The complainant is a proprietorship concern dealing in industrial scraps and pig iron. Accused No.1 is a registered company (herein after referred to as “the company”) and accused Nos.2 to 7 are the Directors of the company. Accused Nos.2 to 7 are responsible to and in charge of the company and responsible for the conduct of the business of the company and managing the day today affairs of the company. The company represented by its directors – accused Nos.2 to 7 used to buy industrial scraps and pig iron form the complainant. The complainant used to supply scraps and pig iron to the company as per the purchase orders issued by the company. As on 31.03.2018 as per the books of account maintained by the complainant, an amount of Rs.37,60,438.15 was due to the complainant by accused the company in respect of scraps and pig iron supplied by the complainant to the company. Inspite of several request of the complainant to make the payment due to him, all the accused persons on one or the other pretext, sought time.

6. On 27.10.2020, acknowledging the amount due to the complainant, the authorized signatory of the company who operates under directions and authority of accused Nos.2 to 7, with the knowledge of accused Nos.2 to 7, issued a cheque bearing No.591158 dated 27.10.2020 drawn on State Bank of India, SME Branch, Belagavi, for a sum of Rs.37,60,438.15, towards the amount due to the complainant.

7. On being presentation of the said cheque, same was returned with shara as “Account Closed”. Hence, the complainant got issued a legal notice calling upon the accused persons to pay the amount due under the cheque. Inspite of service of legal notice on the accused they did not make any payment. On the contrary, they had issued untenable reply. Hence, the complainant filed a private complaint in P.C.No.335/2020 before the learned JMFC-VIII, Belagavi, for the offence punishable under Section 138 of NI Act.

8. In Crl.P.No.102807/2023, (arising out of C.C.No.633/2020), the complainant used to supply scraps and pig iron to the company. Accused Nos.2 to 7 are the Directors of the Company. As on 31.03.2018, as per the books of account maintained by the complainant an amount of Rs.10,95,862.75 was due to the complainant by the company in respect of scraps and pig iron supplied by the complainant to the company.

9. On 27.10.2020, acknowledging the amount due to the complainant, the authorized signatory of the company who operates under directions and authority of accused Nos.2 to 7, with the knowledge of accused Nos.2