The Delhi High Court set aside four summons issued under the Negotiable Instruments Act after finding that the petitioner, a former director, had resigned before the disputed cheques were issued and that the complaint lacked any specific allegation of his involvement, thereby reinforcing the requirement of precise averments for invoking vicarious liability under Section 141.
Background & Facts
The Dispute
The petitioner, Achin Kumar Roy, challenged two summoning orders dated 29.05.2019 and two summoning orders dated 23.04.2019 passed by the Metropolitan Magistrate, Dwarka Courts, Delhi, in criminal complaints (CC Nos.18725, 18727, 13868 and 13869 of 2019) filed by Bajaj Finance Ltd. under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881.
Key Facts
- The respondent filed complaints alleging dishonour of multiple cheques issued by Leel Electricals Limited (the accused company) under an "Amendatory Loan Agreement - Short Term Loan" dated 12.12.2018.
- Cheques issued:
- Nos. 972039 and 9720340 dated 24.03.2019 and 25.03.2019 for Rs.1,00,00,000 each.
- Nos. 972041 and 97042 dated 26.03.2019 and 28.03.2019 for Rs.50,00,000 each.
- No. 972043 dated 29.03.2019 for Rs.20,00,000.
- Nos. 972035 and 972036 dated 24.02.2019 and 26.02.2019 for Rs.50,00,000 and Rs.1,00,00,000 respectively.
- Nos. 972037 and 972038 dated 27.02.2019 and 28.02.2019 for Rs.1,00,00,000 each.
- All cheques were dishonoured with the remark “Funds Insufficient” on 30.03.2019, 26.02.2019, 28.02.2019 and 01.03.2019.
- Legal notices were sent by the respondent on 20.03.2019 and 13.04.2019 to the accused company and its officers, including the petitioner.
- The petitioner resigned from the accused company effective 08.01.2019, as evidenced by Form DIR-12 filed under Section 168 of the Companies Act, 2013 and a letter dated 25.11.2024 confirming the upload on 25.01.2019.
- The petitioner was a whole-time director overseeing the AC manufacturing plant in Uttarakhand and Himachal Pradesh but did not sign any of the disputed cheques.
Procedural History
- 29.05.2019 and 23.04.2019: Trial Court issued summons to the petitioner in the four complaints (CC Nos.18725, 18727, 13868, 13869 of 2019).
- 2022: Petitioner filed petitions CRL.M.C. 3877/2022, 3878/2022, 3894/2022 and 3919/2022 under Section 482 CrPC seeking quash of the summons.
- 17.09.2024: The High Court passed an order (referred to by the petitioner) concerning the filing of Form DIR-12.
- 13 August 2026: The present judgment delivered, setting aside the summons and quashing the complaints.
Parties' Positions
- Petitioner: Asserted that he had ceased to be a director before any cheque was issued, had no role in day-to-day affairs, did not sign the cheques, and that the complaint contained no specific averment linking him to the offence. Requested quash of the summons.
- Respondent: Contended that as a whole-time director the petitioner was in charge of the company’s business, invoking Section 141 for vicarious liability, and that the summons were lawfully issued.
Relief Sought
The petitioner sought a declaration that the summons dated 29.05.2019 and 23.04.2019 be set aside and that the four criminal complaints (CC Nos.18725, 18727, 13868, 13869 of 2019) be quashed as vexatious and unsupported by specific allegations.
The Legal Issue
Whether a former director who resigned before the issuance of cheques can be summoned under Section 138 of the Negotiable Instruments Act and held liable under Section 141 in the absence of specific averments that he was "in charge of" and "responsible for" the company’s business at the time of the offence.
Arguments Presented
For the Petitioner
- The petitioner had resigned on 08.01.2019, two months prior to the cheque dates, as proved by Form DIR-12 and the accompanying letter.
- He did not sign any of the disputed cheques and was only overseeing a plant, not the company’s overall operations.
- Citing S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, the petitioner argued that the complaint must contain a specific allegation of his involvement; generic statements are insufficient.
- Relied on Saroj Pandey v. Govt. of NCT of Delhi to emphasize that vicarious liability under Section 141 is not automatic and requires proof of knowledge, consent, connivance or neglect.
For the Respondent
- Asserted that the petitioner, as a whole-time director, was in charge of the company’s business and therefore liable under Section 141.
- Maintained that the cheques were issued by the company, attracting vicarious liability irrespective of the individual’s direct participation.
- Relied on the plain language of Section 141(1), arguing that the petitioner’s position as director sufficed to deem him guilty.
The Court's Analysis
The Court began by interpreting Section 141 of the Negotiable Instruments Act, which makes every person who, at the time of the offence, was “in charge of, and was responsible to, the company for the conduct of the business of the company” liable as if he had committed the offence himself. The Court reiterated the Supreme Court’s line of authority from S.M.S. Pharmaceuticals Ltd., National Small Industries Corporation Ltd., Central Bank of India and Saroj Pandey, emphasizing that mere designation as a director does not automatically satisfy the statutory requirement.
"There is no whisper of any specific averment(s) against the petitioner herein as to how he was in charge of and/or responsible for the business of the accused company at the time of commission of the offence(s) therein, nor are there any other specific allegation(s) pertaining to him therein."
The Court observed that the complaint contained only generic references to the petitioner’s status as a director, without detailing his role at the critical time. It highlighted that the petitioner had ceased to be a director on 08.01.2019, as evidenced by the certified Form DIR-12 and the accompanying letter dated 25.11.2024, which was uploaded on 25.01.2019. This resignation pre-dated the issuance of all disputed cheques (the earliest being 24.02.2019).
Further, the Court noted that none of the cheques bore the petitioner’s signature, and the petitioner had consistently asserted that he was not involved in the day-to-day affairs of the company. In line with Saroj Pandey, the Court held that without a specific allegation of knowledge, consent, connivance or neglect, the statutory provision cannot be invoked.
Consequently, the Court concluded that the summons were issued without the requisite application of mind, violating the principle that criminal summons must not be mechanically issued. The Court exercised its inherent powers under Section 482 CrPC to prevent abuse of process and to secure the ends of justice.
The Verdict
The petition was allowed. The two summoning orders dated 29.05.2019 and 23.04.2019 were set aside. All four criminal complaints (CC Nos.18725, 18727, 13868 and 13869 of 2019) were quashed as they lacked specific averments against the petitioner. The petition was disposed of, and no further proceedings shall be taken against the petitioner.
What This Means For Similar Cases
Specific Averments Are Mandatory
- Practitioners must ensure that complaints invoking Section 141 contain detailed allegations showing how the individual was “in charge of” and “responsible for” the company’s business at the time of the offence.
- Generic references to a person’s title (e.g., director) are insufficient and may lead to dismissal of summons.
Resignation Prior to Offence Breaks Vicarious Liability
- Evidence of resignation, such as Form DIR-12 or equivalent statutory filings, can effectively shield former officers from liability under Section 141 if the resignation predates the alleged offence.
- Counsel should obtain and attach such documents at the earliest stage of defence.
Courts Will Scrutinise the Basis for Summons
- The High Court reiterated that issuance of summons is a serious step; courts will examine whether the statutory conditions for vicarious liability are satisfied before allowing criminal proceedings to proceed.
- Lawyers should be prepared to challenge summons on the ground of lack of specific averments and procedural impropriety.
Practical Checklist for Defence
- Verify the date of resignation or cessation of directorship.
- Obtain certified copies of Form DIR-12 or equivalent proof of cessation.
- Scrutinise the complaint for specific allegations linking the client to the offence.
- File a petition under Section 482 CrPC promptly if the summons lack requisite specificity.
