A director's responsibility under the Negotiable Instruments Act must be sufficiently averred in the complaint to establish vicarious liability, adhering strictly to Section 141 requirements.

JUDGMENT

K.V. Viswanathan, J.

1. Leave granted.

2. The present appeal calls in question the correctness of the judgment dated 10.01.2024 passed by the High Court of Judicature at Bombay in Criminal Writ Petition No. 275 of 2022. By the said judgment, the High Court has quashed the criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 (for short ‘NI Act’) insofar as it was against Respondent No. 2-Mrs. Ranjana Sharma was concerned. The proceedings have been quashed on the ground that there were no sufficient averments in the complaint filed by the appellant to invoke the vicarious liability against the respondent No. 2 under Section 141 of the NI Act. Aggrieved, the appellant is before us.

BRIEF FACTS: -

3. The facts lie in a narrow compass. The respondent no. 2 - Mrs. Ranjana Sharma along with her daughter Ms. Rachana Sharma and one Mr. Rakesh Rajpal were directors of a company named M/s R Square Shri Sai Baba Abhikaran Pvt. Ltd. According to the complaint filed by the appellant, the accused no. 1 - company along with respondent no. 2 (accused no.2) and other two directors approached the appellant/complainant for grant of credit facility in the form of Revolving Loan Facility as Inventory Funding for the working capital requirements. According to the appellant, loan amounts were extended and on account of the failure of the accused to repay the outstanding dues, the account of the company was classified as a Non-Performing Asset on 27.03.2018 in accordance with the guidelines issued by the Reserve Bank of India. It is the case of the appellant that a cheque issued by the accused for a sum of Rs. 6,02,04,217/- on deposit was dishonored for the reason “account blocked”. According to the appellant, a legal notice was issued to all the accused. However, the said notice was returned back as “unclaimed”. The appellant thus prosecuted the company and the three directors and prayed for appropriate punishment of imprisonment as well as direction to pay fine up to double the amount of the dishonored cheque. On 16.12.2018, the Trial Court issued process to the respondents in the complaint.

4. Since the complaint has been quashed on the ground of lack of adequate averments, it will be necessary to extract the crucial averments that are made in the complaint:-

“2. That, Accused No 1 is a Company registered and incorporated under the provisions of Indian Companies Act, 2013 [existing within the purview of Companies Act, 1956] and having it registered and corporate office at the address mentioned aforesaid and engaged in the business of sale of cars and spare parts manufactured by Hyundai Motors (I) Ltd Accused Nos 2 to 4 are the Directors of Accused No 1 Company and is responsible for its day to day affairs, management and working of the Accused No 1 Company furthermore the Accused No 3 is the signatory of the dishonored cheque.

3. That, Accused No 1, through Accused Nos 2 to 4, had approached the complainant above named for grant of credit facility in the form of Revolving Loan Facility as Inventory Funding for the working capital requirements That after due deliberation and negotiations with Accused Nos 2 to 4 the complainant granted the Revolving Loan facility initially to the extent of Rs 5,00,00,000/ (Rupees Five Crores only) [Inventory funding Rs 3.00 Crores + Inventory Funding Adhoc: Rs 2.00 Crores vide sanction letter dated 09.08.2014 Hereto annexed and marked as Exhibit B is the copy of said Sanction letter dated 09. 08.2014 for Revolving Loan Facility granted to Accused No. 1.

4. That, upon further request made by Accused No. 1, complainant had enhanced the said facility from Rs 5.00 Crore to Rs. 6.00 Crore