The High Court quashed the Section 138 NI Act complaints against non-executive directors for the lack of specific averments regarding their responsibility and involvement in the offence.
The Delhi High Court Single-Judge Bench of Justice Amit Mahajan addressed miscellaneous petitions and observed that non-executive directors, who are not in charge of the day-to-day affairs of the company and are not signatories to dishonoured cheques, cannot be held vicariously liable under Section 141 of the Negotiable Instruments Act unless specific averments are made regarding their role and responsibility in the commission of the offence. The continuance of proceedings against such directors, without such averments, constitutes an abuse of the judicial process, justifying the exercise of inherent powers under Section 482 of the CrPC to quash the complaints.
The petitions were filed seeking the quashing of the summoning orders and the related complaints under Section 138 of the Negotiable Instruments Act, 1881, read with Sections 141/142, in three cases. The petitioners, independent directors of the accused company, were alleged to be involved in the dishonour of cheques issued in connection with a corporate loan of ₹50 crores availed by the company from the respondent. The petitioners, who were non-executive directors, contended that they were not involved in the day-to-day management of the company and thus could not be held vicariously liable under Section 141 of the NI Act.
The Court referred to the ruling in Sunita Palita v. Panchami Stone Quarry, REEDLAW 2022 SC 08001, where it was held that non-executive directors who were not in charge of the company's business at the time of the offence cannot be held liable under Section 141 unless specific averments regarding their role are made. It was noted that in the present case, the complaints failed to provide such averments or establish the petitioners' active role in the issuance of the dishonoured cheques. Given that the petitioners were independent, non-executive directors and the complaints lacked the necessary factual averments, the Court held that continuing the proceedings would constitute an abuse of the judicial process.
The Court exercised its discretionary powers under Section 482 of the CrPC to quash the complaints and all consequential proceedings against the petitioners. The petitions were disposed of accordingly, with a directive for a copy of the order to be placed in all related matters.
Mr. Trideep Pais, Advocate (through VC) and Ms. Devika Mohan, Advocate represented the Petitioner.
Ms. Vinita Sasidharan, Advocate appeared for the Respondent.
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REEDLAW 2024 HC Del 08009
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