Responding to demand notice on company's behalf establishes Director’s vicarious liability under Section 141 NI Act.

The petitioner, a Director of J.K. Surface Coatings Private Limited, moved the High Court to quash a criminal proceeding and a cognizance order dated 25.11.2020 for an offence under Section 138 of the Negotiable Instruments (NI) Act.

Eight cheques issued by the company and signed by co-accused persons were dishonored.

Upon receipt of a demand notice, the petitioner replied to the complainant’s advocate on behalf of the company, admitting a financial crisis and promising to release payments from November 2020 onwards—a date exceeding the 15-day statutory window.

The petitioner argued that the complaint lacked the specific averment that he was "in-charge of and responsible for" the conduct of the business, which is a prerequisite for vicarious liability under Section 141 of the NI Act.

1. Whether the absence of specific verbatim language in a complaint stating that a Director was "in-charge of and responsible for" the business is sufficient grounds to quash proceedings under Section 528 of the BNSS.

2. Whether the act of responding to a statutory demand notice on behalf of a company, acknowledging liability and promising payment, serves as sufficient evidence of being "in-charge" of the business for the purpose of Section 141 of the NI Act.

The Court applied Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, regarding the inherent powers of the High Court.

It primarily interpreted Sections 138 and 141 of the Negotiable Instruments Act, 1881, concerning the dishonor of cheques and the vicarious liability of company directors.

The court considered the precedent in Sunita Palita Others v. Panchami Stone Quarry (2022) 10 SCC 152, which emphasizes that specific averments of responsibility are essential.

Hitesh Verma v. Health Care at Home India Private Limited Others (2025) 7 SCC 623, which establishes the twin requirements of being in charge of and responsible to the company for the conduct of its business.

The court reasoned that while Section 141 of the NI Act necessitates that a person be in-charge of and responsible for the company's business to be held liable, the statute does not mandate the use of specific "verbatim" or boilerplate language in the pleadings.

The court focused on the "undisputed facts" regarding the petitioner’s conduct.

It held that because the petitioner personally responded to the demand notice on behalf of the company and made assurances regarding the settlement of the debt, such actions were "indicative" of his role as a person in-charge of the business.

The court observed that the petitioner would have had "no business" responding to the legal notice or representing the company’s financial commitments unless he was in fact responsible for its conduct.

Therefore, the evidentiary weight of the petitioner's conduct superseded the technical lack of specific phrasing in the complaint.

It held that the petitioner’s conduct in replying to the demand notice and admitting the company’s liability was sufficient to maintain the criminal proceeding under Section 141 of the NI Act.

The court refused to exercise its power under Section 528 of the BNSS to quash the proceedings, finding the petition to be without merit.