A director’s prosecution under Section 141 requires specific averments of being in charge of and responsible for company business.

The petitioner, one of the directors of Accused No. 1, Credforce Asia Limited, sought quashing under Section 482 of the Code of Criminal Procedure, 1973, of Complaint Case No. CS/104371 of 2021 pending before the Metropolitan Magistrate, 11th Court, Calcutta, under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (“NI Act”).

He contended that he had been impleaded solely because of his designation as a director and that the complaint contained no specific allegation that he was in charge of, or responsible for, the conduct of the company’s business at the relevant time.

Despite service, the complainant did not appear before the High Court.

On examining the complaint, the Court found that the allegations against the directors were general and that the complaint did not identify which accused had signed or drawn the dishonoured cheque.

Whether a director can be prosecuted under Sections 138 and 141 of the NI Act merely on the basis of his designation, without specific averments that he was, at the time of the offence, in charge of and responsible to the company for the conduct of its business.

Whether general allegations that the directors managed the company’s day-to-day affairs, without attributing a specific role or overt act to the petitioner, satisfy the requirements of Section 141(1) of the NI Act.

Whether continuation of the proceedings against the petitioner, in the absence of the mandatory foundational averments under Section 141 and identification of the cheque’s signatory, amounted to an abuse of the process of law warranting quashing under Section 482 CrPC.

Section 138 of the NI Act creates the offence of dishonour of cheque, while Section 141 imposes exceptional vicarious criminal liability on persons who, at the time of commission of the offence, were “in charge of, and responsible to, the company for the conduct of its business”; the expressions “in charge of” and “responsible to” are conjunctive and both requirements must be satisfied.

Mere designation as a director, or a general assertion that a person managed the company’s day-to-day affairs, is insufficient; the complaint must contain specific and clear averments regarding the director’s role and responsibility.

Managing Directors, Joint Managing Directors and the signatory of the dishonoured cheque may ordinarily fall within Section 141 by virtue of their office or conduct.

The Court relied on Pawan Kumar Goel v. State of U.P., Ashok Shewakramani v. State of Andhra Pradesh, Sunil Todi v. State of Gujarat, Sunita Palita v. Panchami Stone Quarry, Shaleen Khemani v. State of West Bengal, and N. Harihara Krishnan v. J. Thomas for these principles.

A complaint under Section 138 must also disclose the identity of the person who drew or signed the cheque, since the offence is person-specific.

The Court found that the complaint merely described the petitioner and the other directors in general terms as persons involved in managing the company’s affairs.

It did not state how the petitioner was in charge of, and responsible to, the company for the conduct of its business, nor did it allege that he negotiated the transaction, authorised issuance of the cheque, signed it, or otherwise participated in the acts leading to dishonour.

Applying the conjunctive requirement under Section 141(1), the Court held that even allegations of day-to-day management and being “in charge of the company” did not establish the statutory responsibility contemplated by the provision.

The failure to identify the cheque’s drawer or signatory further weakened the complaint.

Since the foundational averments necessary to invoke vicarious liability were absent, the Court concluded that continuation of the proceedings against the petitioner would constitute an abuse of the process of law.

The connected applications, if any, were disposed of; any interim order was vacated; and the judgment was directed to be transmitted to the trial court for necessary compliance.