The main legal point established in the judgment is that an independent non-executive nominee director cannot be held vicariously liable for the company's conduct under the NI Act and the Companies Act, 2013, unless specific averments in the complaint establish the director's knowledge, consent, or connivance in the offence.

Mukta Gupta, J.

1. Petitioner by way of Crl.M.C. Nos. 3303, 3310, 3312, 3314, 3317, 3318, 3319, 3320, 3321, 3323, 3324, 3325, 3327, 3328, 3329, 3331 & 3334 of 2016 challenges the order dated 9th May, 2016 summoning him for offence punishable under Sections 138 read with 142 of the Negotiable Instruments Act (in short the NI Act) in Criminal Complaint cases Nos. 6/1/16, 18/1/16, 20/1/16, 19/1/16, 21/1/16, 12/1/16, 11/1/16, 14/1/16, 8/1/16, 13/1/16, 10/1/16, 15/1/16, 9/1/16, 17/1/116, 16/1/16, 7/1/16, 22/1/16 and seeks quashing of complaints as well. By way of Crl.M.C. Nos. 3311, 3313, 3315, 3316, 3322, 3326, 3330, 3332, 3333, 3335 of 2016 the petitioner challenges the order dated 30th March, 2016 summoning him for offence punishable under Sections 138 read with 142 of the NI Act in Criminal Complaint cases Nos. 33/1/16, 28/1/16, 29/1/16, 31/1/16, 32/1/16, 36/1/16, 35/1/16, 23/1/16, 24/1/16, 27/1/16 and seeks quashing of complaints as well.

2. Complaints as noted above were filed by two respondents (separately) Raja Arora and Ashok Arora against M/s. Vasan Health Care Private Limited (in short Vasan Health Care) and its Directors alleging that the complainants were the joint owners of the various built up properties which were leased out to Vasan Health Care. The terms of the lease deed between the complainant and the accused persons inter alia fixed monthly rents and a security deposit. The accused in the complaint i.e. Vasan Health Care and its Directors issued cheques towards part-payment of the monthly rents. However, when the cheques were presented, the same were dishonoured for the reason ‘payment stopped by drawer’. On the assurance of the accused persons, the cheques were represented, however they were again returned unpaid with remarks ‘payment stopped by drawer’. Legal demand notices were issued to which replies were sent. Since despite expiry of the period of 15 days after the receipt of notice, the amount was not paid, the respondents filed the complaints as noted above.

3. The two-fold contentions of learned counsel for the petitioner are that the petitioner is the independent non-executive nominee director and thus cannot be fastened with the vicarious liability to pay the dues of the company, and that the petitioner resigned from the company on 10th November, 2015 before the cause of action accrued i.e. payment was not made despite service of legal demand notice. Hence the complaints and the impugned order summoning him are liable to be quashed qua the petitioner.

4. In the reply affidavits filed, the respondents do not dispute that the petitioner is the non-executive nominee independent director. Contention of learned counsel for the respondent is that the petitioner is the Director of Sequoia India Investment Holding which finances Vasan Health Care, hence is a nominee director of Vasan Health Care. Since he is responsible for the finances of the company he is vicariously liable.

5. The vicarious liability in case of a company or firm under Section 141, NI Act would arise if a person is in charge and responsible for the conduct of the business of the company or the firm. The Hon'ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, held as under:-

“10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are ‘every person’. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words:-

‘Who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence, etc.’

What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in c