Vicarious liability under Section 141 of the NI Act requires proof that a director was in charge of the company at the time the offence was committed, mere prior association is insufficient.

JUDGMENT :

AMIT MAHAJAN, J.

1. By the present petition, the petitioner challenges the proceedings in Complaint Case No. 476576/2016 filed by the respondent under Section 138 of the Negotiable Instruments Act, 1881 (‘NI Act’).

2. The complaint was filed alleging that the petitioner and other co-accused persons, acting on behalf of the accused company namely M/s Fresco Foods Pvt. Ltd., entered into an agreement dated 12.03.2009 with the complainant whereby the respondent disbursed a sum of Rs. 1,60,00,000/- as a venture capital amount to the accused. This venture capital assistance was refundable upon the full repayment of the term loan. It is the case of the respondent that the accused undertook that in the event of the venture capital amount not being refunded on the same date as that of the repayment of the term loan from the bank, the same would attract interest at the same rate as that being charged by the bank for the term loan.

3. It is further the case of the respondent that the accused company had issued a cheque for a sum of Rs. 1,60,00,000/- being cheque no. 970600 dated 26.09.2016. The said cheque, upon presentation, was dishonoured with remarks “funds insufficient” vide Bankers memo dated 04.10.2016. The respondent had earlier written a letter dated 08.07.2016 to the accused company, to either pay the venture capital amount or keep sufficient amount so that the post dated cheque issued by the accused company would not be dishonoured. Thereafter, M/s Fresco Foods Pvt. Ltd, vide letter dated 22.09.2016 informed the respondent that the accused persons had settled the entire liability of the claim of the respondent for a sum of Rs. 1,60,00,000/- with the bank. It is the respondent’s case that such contention is baseless, and the accused company owed a liability for a sum of Rs. 1,60,00,000/- to the respondent. Upon the failure of the accused persons to make the payment despite the service of notice, the respondent filed the subject complaint.

4. The present petition is filed on the ground that the petitioner had resigned from M/s Fresco Foods Pvt. Ltd. way back on 05.12.2009. The petitioner relied upon Form-32 filed with the Registrar of Companies. The learned counsel for the petitioner submitted that the petitioner was not the director of the company at the time of the dishonour of the cheque on 04.10.2016. He submitted that since the petitioner had already resigned on 05.12.2009, and was not in charge of managing the affairs of the company at the time of the alleged dishonour of the cheque, no liability would be attracted under Section 138 read with Section 141 of the NI Act. He further submitted that no specific averment regarding the role of the petitioner in the transaction has been made either in the complaint, or in the demand notice.

5. The learned counsel for the respondent submitted that the petitioner was a director of the company when the agreement was executed on 12.03.2009. He submitted that the petitioner was in charge of the day-to-day business of M/s Fresco Foods Pvt. Ltd. He submitted that the petitioner had also signed as a witness in the agreement dated 12.03.2009. He further submitted that the petitioner, by way of a resolution dated 28.02.2009, had been specifically appointed as the director who had to accompany the managing director as a witness for executing the Agreement at the SFAC office, New Delhi. He submitted that at the time of the execution of the agreement dated 12.03.2009, it was made known that the accused company had 4 directors, including the petitioner, who are responsible for the functioning of the company. He consequently submitted that the petitioner is liable to be proceeded agai