Summary
A supplier filed cheque-bounce complaints under Section 138 of the Negotiable Instruments Act against a director of Ravi Organics Ltd, who had signed a Rs 10 lakh cheque for the company's dues. The company itself was not made an accused, and the complaint did not allege that the director was in charge of and responsible for its business. The Allahabad High Court quashed the summoning order. The Supreme Court dismissed the supplier's appeals. Under Aneeta Hada, arraigning the company is imperative, because a director's liability under Section 141 is vicarious and depends on the company's offence. Under SMS Pharmaceuticals, a specific averment that the director was in charge of the business is essential. The company could not be added after the limitation period in Section 142 had expired, and no ground for condoning the delay was shown.
Issues
- Whether a director can be prosecuted under Section 138 read with Section 141 of the NI Act without the company being arraigned as an accused.
- Whether the complaint can proceed without an averment that the director was in charge of and responsible for the company's business, and whether the company can be impleaded later.
Provisions considered
- Section 141, Negotiable Instruments Act, 1881Vicarious liability of persons in charge arises only where the company commits the offence 'as well as the company'; the company must be arraigned, and a specific averment of being in charge of and responsible for the business is required (Aneeta Hada, SMS Pharmaceuticals, K.K. Ahuja). (¶¶ 14, 16, 17, 19, 21, 31)
- Sections 138 and 142, Negotiable Instruments Act, 1881Cognizance requires a complaint containing every ingredient of the offence against a named drawer; an additional accused cannot be impleaded after the Section 142 limitation has expired absent grounds to condone delay (N. Harihara Krishnan). (¶¶ 13, 22, 23)
Held
- Arraigning the company as an accused is imperative for a prosecution relying on Section 141, and non-impleadment is fatal; describing the respondent as a director of the company in the complaint does not cure this (Aneeta Hada, Himanshu). (¶¶ 18, 20, 21)
- Merely being a director does not make a person liable; the complaint must specifically aver that at the time of the offence he was in charge of and responsible for the conduct of the company's business, and the complaint here contained no such averment. (¶¶ 18, 19, 25, 30, 31)
- The plea that the complaint could be amended to implead the company fails, since the limitation for taking cognizance had expired, no attempt to arraign the company was ever made, and no ground for condonation under the proviso to Section 142 was shown. (¶¶ 22, 23)
Result
Criminal Appeal Nos. 1999-2003 of 2022 dismissed, upholding the Allahabad High Court judgment dated 19.11.2019 in Criminal Misc. Writ Petition No. 24632 of 2013 and connected petitions quashing the summoning order dated 18.03.2013 and the proceedings.