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.

ORDER

The petitioner is the 3^rd accused in S.T.No.981 of 2022 on the file of the Court of the Judicial Magistrate of First Class-III (Mobile), Ernakulam ('Trial Court', in short), which has been filed by the 2^nd respondent alleging the commission of the offences punishable under Sections 138 to Section 143 of the Negotiable Instruments Act , 1881 ('N.I Act', for brevity).

2. The case of the 2^nd respondent in Annexure A1 complaint, in a nutshell, is as follows:

The complainant (2nd respondent) had leased her building to the 1^st accused company (3^rd respondent), represented by its Managing Director, the 2^nd accused (4^th respondent) and its other directors, namely, the accused Nos. 3 and 4 (the petitioner and the 5^th respondent). In discharge of the arrears of rent, the 1^st accused had issued four cheques to the complainant. The cheques were executed by the 2^nd accused with the knowledge and consent of accused Nos.3 and 4. The accused Nos. 2 to 4 are in charge of the 1^st accused company and are responsible for the conduct of the business. Two cheques, on presentation to the bank, were dishonoured due to insufficient funds in the 1^st accused's bank account. Although the complainant issued statutory demand notices to the accused persons, they failed to pay the cheque amount. Thus, the accused persons have committed the above offences.

3. The petitioner has filed this Criminal Miscellaneous Case (Crl.M.C.) to quash the complaint (Annexure A1) on the assertion that she was not the Director of the 3rd respondent company at the time the cheques were issued to the 2^nd respondent. In fact, her husband and the 4^th respondent were friends, and they started the 3^rd respondent company. The company's affairs are managed by the 4^th respondent. The petitioner had no active participation or specific role in the company's affairs. Her husband passed away on 17.05.2018. The petitioner had no knowledge of the rental agreement or of the understanding between respondents 2 and 3. The petitioner is permanently residing in Hyderabad. The petitioner is not a signatory to the agreement. She has resigned from the post of director of the 3^rd respondent company. The resignation was communicated by the Board of Directors on 10.01.2012, as per Annexure A11 communication. As the petitioner is no longer a director of the company, the prosecution against the petitioner is unsustainable in law and is, therefore, liable to be quashed.

4. When the Crl. M.C. came up for consideration, this Court directed the petitioner to produce the details of the directors of the company issued by the Registrar of Companies. Accordingly, the petitioner has produced Annexure A12 document issued by the Ministry of Corporate Affairs dated 12.06.2025, which shows that the petitioner has been a director of the company since 01.08.2011.

5. I have heard the learned counsel for the petitioner and the learned Public Prosecutor.

6. The learned counsel for the petitioner vehemently argues that the petitioner is a director of the company only on record. She has not participated in, and is not responsible for, the company's day-to-day business. Therefore, the prosecution against the petitioner will not lie. The learned Counsel relies on the decision of the Hon'ble Supreme Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal and others [(2010) 3 SCC 330] to support his contention that criminal prosecution against a formal director will not lie under Sections 138 and 141 of the N. I Act.

7. The trump card of the petitioner’s contention in the Crl.M.C. is that she is not the Director of the 3^rd respondent company. Therefore, the complaint against her is unsustainable in law.

8.