Section 138 of the Negotiable Instruments Act, 1881(for short “NI Act” or “the said Act”) makes dishonor of cheques for insufficiency of funds in the account a criminal offence. Section 141 of the said Act, in case of offence by Company, provides for vicarious liability on every 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.
There are various judicial pronouncements as to when a Director, Manager, Officer of Company, Secretary is vicariously liable. There has also been a debate as to whether the Company needs to be arrayed as an Accused in order to make those responsible for the Company vicariously liable. The said controversy has been put to rest by three-Judge Bench decision of the Hon’ble Supreme Court in Aneeta Hada v. Godfather Travels and Tours Private Limited [1]. wherein it has been held that when the Company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the complaint. To summarize, they cannot be any vicarious liability unless there is prosecution against the Company.
A three-Judge Bench of the Hon’ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. [2]. referred to Section 138 and 141 of the Act and Sections 203 and 204 of Cr.P.C. and observed that complaint must contain material to enable the Magistrate to make up his mind for issuing process. What is required is that the persons who are sought to be criminally liable u/s 141 should be, at the time the offence was committed, in charge of and responsible to the Company for the conduct of the business of the Company. Every person connected with the Company shall not fall within the ambit of the provision. The liability arises from being in charge of and responsible for the conduct of the business of the Company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a Company. Section 141 (2) of the Act envisages direct involvement of any Director, Manager, Secretary or other Officer of the Company in the commission of the offence. It is because a person who is in charge of and responsible for the conduct of the business of the Company would naturally know why a cheque in question was issued and why it got dishonoured. The liability arises, as the three-Judge Bench opined, on account of conduct, act or omission on the part of an Officer and not merely on account of holding office or position in a Company and, therefore, in order to bring case within Section 141 of the Act, the complaint must disclose the necessary facts which makes a person liable……
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