Merely because person was in charge of company when offence was committed doesn’t attract liability u/s 141(1) of NI Act

Siby Thomas Vs Somany Ceramics Ltd. (Supreme Court of India)

Supreme Court held that vicarious liability couldn’t be attracted under section 141(1) of the Negotiable Instruments Act, 1881 merely based on the reason that the person was in charge of the company at the time when the offence was committed. Accordingly, criminal complaint quashed.

Facts- This Appeal by accused in the complaint filed by the respondent herein u/s. 138 read with Section 141 of the Negotiable Instruments Act, 1881 is directed against the order dated 06.12.2019 passed by the High Court of Punjab and Haryana at Chandigarh. As per the impugned order, the High Court declined to quash the complaint qua the appellant in exercise of the power u/s. 482 of the Code of Criminal Procedure.

The appellant set up twin grounds to seek quashment of the complaint against him; firstly, that he had resigned from the partnership firm on 28.05.2013 whereas the cheque in question was issued on 21.08.2015 and secondly, that the complaint is devoid of mandatory averments required to be made in terms of sub-Section 1 of Section 141 of the NI Act, as relates him. The High Court found that the contention in regard to the maintainability of the complaint against the appellant, owing to his retirement from the partnership firm prior to the issuance of the cheque in question, is a matter of evidence and ultimately, the appellant would have to lead evidence and prove that fact. Consequently, it was held that the complaint could not be rejected qua the appellant at the initial stage in exercise of the powers u/s. 482 Cr.PC.

Conclusion- Held that a vicarious liability would be attracted only when the ingredients of Section 141(1) of the NI Act, are satisfied. It would also reveal that merely because somebody is managing the affairs of the company, per se, he would not become in charge of the conduct of the business of the company or the person responsible to the company for the conduct of the business of the company. A bare perusal of Section 141(1) of the NI Act, would reveal that only that person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company alone shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

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