JAMMU AND KASHMIR HIGH COURT
Janak Raj Kotwal, J.
Neena Mahendru —Petitioner
versus
M/s Pal Infrastructure Solutions —Respondent
561-A No.72 of 2014
Decided on 11.11.2014

IMPORTANT POINT
In order to fasten the extended liability on a Director of a company in terms of sub section (1) of section 141 of the Act and to launch prosecution against him, complainant is required to state in the complaint not only that the said Director was in-charge of and responsible for conduct of the business of the company at the relevant time but also to spell out as to how and in what manner he had been so responsible.

Headnote:Negotiable Instruments Act, 1881 — Section 141 — Vicarious liability of any other person when offence of dishonour of cheque is committed by company — Persons who are sought to be made criminally liable should be, at the time the offence was committed, in charge of and responsible to company of conduct of business of company — Necessary averments ought to be contained in complaint before a person could be subjected to criminal liability — In case of a Director, complainant should specifically spell out how and in what manner Director was in charge of or was responsible to accused company for conduct of its business — A bold statement that accused-Director was in-charge of and responsible for conduct of business of company was not sufficient to attract liability

       u/s 141 of the Act — Averment in complaint against petitioner was that she was Director and with Managing Director of accused company was in charge of and responsible for conduct of business of company — Sans any indication as regards fulfillment of requirements of section 141 of the Act, summoning order against petitioner was liable to be quashed.

       Held: Legal position in regard to the liability of the Directors of a company under section 138 read with section 141 of the Act is, thus, no more re integra and is well settled and clear too. Whereas a Managing Director or a Joint Managing Director of a company incurs criminal liability under section 138 of the Act by virtue of his status and designation and no specific averment in the complaint as regards his role in the company is required to be made, a Director cannot be made liable and prosecuted by virtue of his status and designation only. Deemed liability under section 138 read with section 141 of the Act will extend to a Director of a company and he can be prosecuted only if at the time of commission of the offence he was in-charge of and responsible to the company for conduct of the business of the company. In order to fasten the extended liability on a Director of a company in terms of sub section (1) of section 141 of the Act and to launch prosecution against him, complainant is required to state in the complaint not only that the said Director was in-charge of and responsible for conduct of the business of the company at the relevant time but also to spell out as to how and in what manner he had been so responsible. The complaint must contain a specific averment as to the role of the Director in conduct of business of the company and issue and bouncing of the cheque in question. A bald statement that accused-Director was in-charge of and responsible for conduct of the business of the company in the complaint is not sufficient to attract the application of section 141 of the Act.

       In backdrop of the legal position as stated above, it is seen that statement in paragraph 2 of the complaint filed by the respondent is nothing more than an hypothetical attempt to bring the case within the sphere of sub-section (1) of section 141 of the Act. What is averred in the complaint is that Sh. Suraj Mahendru is the Managing Director and the petitioner (accused No.2) is the Director of the accused-company and both of them are managing the affairs and are responsible on behalf of the accused-company. This is exactly similar to the averment made in one of the complaints involved in National Small Industries Corporation Ltd. (supra) referred to hereinabove. The respondent (complainant) seems to have made a casual attempt to attract sub-section (1) of section 141 to rope in the petitioner, who is a director of the company, along with the Managing Director of the company without spelling out as to how and in what manner she was responsible for the conduct of business of the company in general and issue of the cheques in question in particular. Such averment, however, cannot be held sufficient to fasten criminal liability on the petitioner and to proceed against her for commission of offence under section 138.

       I would thus hold that learned trial Magistrate has fallen into error by drawing the impugned summoning order against the petitioner and issuing process for proceeding against her. It needs to be emphasized that a complaint for offence under section 138 read with section 141 of the Act, in which, besides the Managing Director or Joint Managing Director, a Director of the company is also arraigned as an accused, calls for a special attention of the Magistrate taking cognizance in the complaint because for proceeding against the Director the Magistrate has to satisfy himself not only about the existence of a prima facie case but also as regards the fulfillment of requirement of section 141. The impugned summoning order drawn by the learned Magistrate, however, sans any indication as regards the application and fulfillment of the requirement of section 141, which, however, is not fulfilled.

       For all that said and discussed above, this petition has merit and is allowed. The summoning order dated 03.10.2013 and proceedings in the complaint in relation to the petitioner (accused No.2) are quashed. (Pras 26 to 29)

       Result: Petition allowed.