Vicarious Liability Under Section 141 NI Act Requires Specific Averments of Control Over Corporate Conduct

The Petitioner (Accused No. 3) challenged a summoning order dated 26.05.2018

a subsequent revision dismissal dated 28.01.2019

The Respondent/Complainant alleged that she invested ₹6,00,000 in a "One Person Company" (Accused No. 1) managed by its sole Director (Accused No. 2)

A cheque for ₹4,00,000 issued to discharge the remaining liability was dishonoured

The Complainant alleged the Petitioner was involved in day-to-day business and acted under the Director's instructions

However, the Petitioner was neither a Director, signatory, nor employee of the company according to MCA records

Whether the summoning of the Petitioner for offences under Sections 138 and 141 of the NI Act was legally sustainable despite him not being a Director or signatory of the cheque

The Court applied Section 138 of the Negotiable Instruments Act, 1881, regarding the dishonour of cheques

Section 141, which governs vicarious liability for companies

It relied on *S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla*, establishing that a complaint must specifically aver that an accused was "in charge of and responsible for" the conduct of business at the time of the offence

It further applied *Ashok Shewkramani v. State of Andhra Pradesh*, holding that bald assertions of being "busy with day-to-day affairs" are insufficient for vicarious liability

and *S.P. Mani & Mohan Dairy v. Snehalatha Elangovan*, distinguishing between liability arising from control (SS. 1) and liability from consent/neglect (SS. 2)

The Court observed that under Section 141(1), vicarious liability requires a person to be both "in charge of" and "responsible to" the company for its business conduct

In the present case, the Complainant admitted that Accused No. 1 was a "One Person Company" and Accused No. 2 was the sole Director

The allegations against the Petitioner—that he "acted under the instructions" of the Director—not only failed to meet the statutory threshold of being "in charge" but actually suggested a lack of independent control

The Court reasoned that even if the Petitioner induced the investment or handed over the cheque, such acts as an associate or agent do not satisfy the strict requirements of Section 141 without evidence of formal responsibility for the company's management

The High Court quashed the summoning order and the complaint (CC No. 749/2018) specifically against the Petitioner

The proceedings against the other accused persons remain unaffected