The necessity of specific averments to establish vicarious liability under Section 141 of the Negotiable Instruments Act, 1881.

Crl.M.A. No. 5630/2013 (Exemption)

Crl.M.A. No. 5632/2013 (Exemption)

Exemption allowed subject to all just exceptions. The applications stand disposed of.

Crl. M.C. No. 1821/2013 & Crl.M.A.No. 5629/2013(Stay) Crl. M.C. No. 1822/2013 & Crl. M.A. No. 5631/2013(Stay)

1. By these petitions filed under Section 482 of Cr. P.C., the petitioner – Sudeep Jain is seeking quashing of summoning order dated 29.09.2012 passed by Shri Arul Verma, Metropolitan Magistrate, Patiala House, New Delhi against him in two complaint cases being CC Nos. 422/1/12 and CC Nos. 423/1/12 titled as M/s. ECE Industries Ltd. vs. GEI Industrial Systems Ltd. and Ors.

2. Grievance raised by Mr. Krishan Kumar, Advocate appearing for the petitioner, is that the petitioner is a Company Secretary in the accused company M/s. GEI Industrial Systems Ltd., Bhopal and his duty is restricted to ensure the proper observance and compliances made by the said company in terms of various statutory requirements laid down under the Companies Act. He further submits that the petitioner is neither obliged nor is actually instrumental in the day to day functioning of the said company and in fact has no knowledge or any role in the issuance of any cheque on behalf of the said company in favour of the complainant company. It is further the case of the petitioner that no specific averments, as to how and in what manner the petitioner was responsible for the day to day conduct of the business of M/s. GEI Industrial Systems Ltd., have been made by the complainant company in the complaint against the petitioner. Counsel for the petitioner also apprises this court that 12 other persons have been issued summons in the said case and some of them have already approached this court for quashing of the said summoning order.

3. In support of the above, learned counsel for the petitioner submits that the legal position is now well settled that the liability for an offence punishable under Section 138 r/w Section 141 of the Negotiable Instruments Act, 1881 will not arise by merely stating that the accused person holds some designation in the accused company or by merely reproducing the language of Section 141 of the Act in the complaint. The complainant has to make a specific averment in the complaint as to how and in what manner the person accused of the offence under Section 138 of the Negotiable Instruments Act, 1881 was responsible or had a role in the conduct of the business of the accused company at the relevant time. A mere fact that the accused person was a Director or was holding some other office in the company cannot make a person vicariously liable to face the prosecution as per the mandate of Section 141 of the Negotiable Instruments Act, 1881.

4. I have heard the learned counsel for the petitioner.

5. Chapter XVII was incorporated in the Negotiable Instruments Act, 1881 by the Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1998 with effect from 1.4.1989 for the purpose of imposing penalties in case of dishonor of cheque due to insufficiency of funds in the account of drawer of the cheque, in addition to the remedy of filing a recovery suit already available to the aggrieved under the civil law. Finding the punishment contained in this chapter inadequate and the procedure to deal with such matters cumbersome, this chapter was further amended by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 for the purpose of early disposal of the cases related to dishonor of cheques as well as for enhancing punishment for the offenders. It would not be inappropriate to say that while this chapter’s introduction has, on the one hand, reduced the civil litigation to a great extent, but, on the other hand, has led to the filing of countless complaints before the criminal courts which are mostly against companies, whether Private or Public Ltd., registered under the Companies Act.

6. Section 141 of the Negotiable Instruments Ac