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IN THE HIGH COURT AT CALCUTTA
Shampa Dutt (Paul), J.
Namarta Vashisht – Petitioner
Versus
M/s Transmission Line Products & Ors. – Opposite Parties
CRR 958 of 2020
Decided On : 18-07-2023
NI ACT - SECTION 138/141 - QUASHING OF COMPLAINT - COMPANY SECRETARY - NO CRIMINAL LIABILITY: The revision petition was filed to quash the complaint under Section 138/141 of the Negotiable Instrument Act, 1881, against the petitioner, who was the Company Secretary of the accused company. The court held that the petitioner, as a Company Secretary, was not involved in the day-to-day affairs of the company and was not liable for the dishonored cheque. The court relied on various Supreme Court judgments, including Sunita Palita vs. M/s. Panchami Stone Quarry, to establish that only those persons who were in charge of and responsible for the conduct of the business of the company at the time of the commission of an offence would be liable for criminal action.
Fact of the Case:
The petitioner, the Company Secretary of the accused company, was named as an accused in a complaint under Section 138/141 of the Negotiable Instrument Act, 1881, for a dishonored cheque issued by the company. The petitioner argued that there was no criminality involved on her part as she was neither a Director nor a signatory to the cheque.
Finding of the Court:
The court found that the petitioner was not involved in the day-to-day affairs of the company and was not responsible for the conduct of its business. The court held that the petitioner, as a Company Secretary, was not liable for the dishonored cheque.
Issues: Whether the petitioner, as a Company Secretary, could be held criminally liable for a dishonored cheque issued by the company.
Ratio Decidendi: The court relied on various Supreme Court judgments, including Sunita Palita vs. M/s. Panchami Stone Quarry, to establish that only those persons who were in charge of and responsible for the conduct of the business of the company at the time of the commission of an offence would be liable for criminal action. The court held that the petitioner, as a Company Secretary, was not involved in the day-to-day affairs of the company and was not liable for the dishonored cheque.
Final Decision: The revision petition was allowed, and the complaint under Section 138/141 of the Negotiable Instrument Act, 1881, was quashed in respect of the petitioner.
JUDGMENT :
Shampa Dutt (Paul), J.
1. The present revision has been preferred praying for quashing of the complaint under Section 138/141 of the Negotiable Instrument Act, 1881 (as amended up to date) registered as Case No. C.S No. 93322 of 2018 pending before the court of the learned Chief Metropolitan Magistrate at Calcutta.
2. The petitioner's case is that the petitioner is neither the Director nor the signatory of the accused company and it is well settled law by the Hon'ble Supreme Court that complaint under Section 138 read with Section 141 of the Negotiable Instrument Act can only be initiated against the Director of the Company and as such, there is no criminality involved on the part of the petitioner. If the complaint under Section 138/141 of N.I. Act before the learned Metropolitan Magistrate, Kolkata is allowed to proceed it will amount to gross abuse of the process of Court/law.
3. It is alleged that the post dated cheque drawn at State Bank of India, Mandi, Gobindgarh, District- Fatehgarh Sahib, Punjab bearing No.561491 dated 08.06.2018 for a sum of Rs.6,60,499/- was issued in favour of the opposite party no.1 herein and admittedly the said cheque was signed by the authorised signatory/Director of the opposite party no.2 herein and the said cheque was later dishonoured by the Banker of the opposite party no.2 with the remarks “Funds Insufficient” and the opposite party no.1 received the said dishonoured cheque along with “Cheque Return Memo” dated 11.09.2018 from its bank on 11.09.2018.
4. It is also submitted that it is well settled law by the Hon'ble Supreme Court that complaint under Section 138 read with Section 141 of the Negotiable Instrument Act can only be initiated against the Director of the company and as such, there exists no criminality on the part of the petitioner. The petitioner is not even a signatory of the said cheque.
5. Mr. Jibantaraj Dan Roy, learned counsel for the petitioner has submitted that the learned trial court erred in admitting the complaint against the petitioner as the petitioner is neither the Director nor the signatory of the opposite party no.2 and as such, the case does not require further continuance and should be quashed.
6. That the impugned proceeding is otherwise bad in law and is thus liable to be set aside.
7. There is no representation on behalf of the opposite parties, in spite of service upon the opposite parties.
8. From the petition of complaint it appears that the petitioner has been made an accused as the Company Secretary of accused no.1 Company (opposite party no. 2 herein).
9. The case in the petition of complaint is that the accused (company, accused no.1) issued the cheque.
10. There is no averment as to who issued the cheque on behalf of the accused no.1, company.
11. Section 203 of the Companies Act, 2013 and Rules 8 and 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, provides for appointment of a Company Secretary as a key Managerial Personnel. The duties of a Company Secretary are as follows:-
Provide the company Directors guidance as they may require concerning their powers, duties and responsibilities.
Facilitate the convening of meetings, attend general, board and committee meetings, and maintain the minutes of these meetings.
Obtain approvals from the general and board meetings, government, and other required authorities as provided under the provisions of the Act.
Represent before several regulators and other authorities under the Act connected with the discharge of duties under the Act.
Assist the company board in the conduct of the company affairs.
Advice and assist the board in complying with the corporate governance requirements, ensuring good corporate governance and best practices.
Discharge such other duties as specified under the Act or rules.
12. The Supreme Court in Sunita Palita vs. M/s. Panchami Stone Quarry, in Criminal Appeal No. …… of 2022 (arising out of SLP (Crl.) No. 10396 of 2019)
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....
Specific averments regarding a director's responsibility for a company's conduct are essential for establishing vicarious liability under Section 141 of the Negotiable Instruments Act.
Specific averments regarding a director's responsibility for a company's conduct are essential for vicarious liability under Section 141 of the Negotiable Instruments Act.
A director cannot be held vicariously liable under the Negotiable Instruments Act without specific allegations demonstrating their active responsibility in the company's operations.
An individual in a company cannot be vicariously liable for criminal offenses under the NI Act unless they are responsible for the company's conduct at the time of the offense.
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.
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