Independent Director Lacking Management Role or Signatory Status Cannot Be Held Vicariously Liable Under NI Act.

The petitioner, a Non-Executive Independent Director of D.S. Kulkarni Developers Ltd., sought to quash Criminal Case No. 11583 of 2017 filed under Section 138 of the Negotiable Instruments Act.

The complainant alleged that the company failed to pay dues for cement blocks, resulting in the dishonor of two cheques totaling ₹8,31,376/- due to "insufficient funds".

The trial court issued process against all accused, including the petitioner.

The petitioner contended he was an Independent Director not involved in day-to-day management, was not a signatory to the cheques, and that the statutory demand notice was issued beyond the prescribed period.

1. Whether a Non-Executive Independent Director can be held vicariously liable for the dishonor of cheques under Section 141 of the Negotiable Instruments Act in the absence of specific averments regarding their role in day-to-day business operations.

2. Whether the criminal proceedings against the petitioner constitute an abuse of the process of law given his designation and lack of participation in the transaction.

Section 141 of the Negotiable Instruments Act, 1881, which governs vicarious liability of corporate officers, and Section 482 of the CrPC regarding the High Court's inherent power to quash proceedings.

Pooja Ravinder Devidasani v. State of Maharashtra, establishing that a Non-Executive Director is not liable unless they were "at the helm of affairs" and responsible for the conduct of business at the time of the offence.

National Small Industries Corporation Ltd. v. Harmeet Singh Paintal and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, which mandate that a complaint must contain specific, unambiguous allegations detailing the Director’s role rather than mere "bald cursory statements".

The Court observed that the petitioner was appointed as an Independent Non-Executive Director, as evidenced by ROC Forms 32 and DIR-11.

The Court found that the complaint lacked specific averments demonstrating that the petitioner was in charge of or responsible for the company’s business conduct at the relevant time.

The Court noted that the petitioner did not sign the dishonored cheques and his role was restricted to governance rather than executive activity.

Applying the "strict construction" of penal statutes required by Harmeet Singh Paintal, the Court determined that the mere description of the petitioner as a "Director" or "Administrator" in the complaint—without material particulars of his involvement in the specific transaction—was insufficient to fasten vicarious liability under Section 141.

The Court held that continuing the prosecution against a Non-Executive Independent Director without specific evidence of involvement would be an abuse of legal process.

The Court quashed and set aside Criminal Case No. 11583 of 2017 and all consequential proceedings qua the petitioner; Rule was made absolute.