Mere Allegation Of Being Involved In “Day-To-Day Activities” Of Company Insufficient To Attract Liability U/S 138 NI Act: Delhi High Court

The Delhi High Court has held that a mere allegation that a person was involved in the “day-to-day business activities” of a company is not sufficient to attract vicarious liability under Section 141 of the Negotiable Instruments Act (NI Act) in cheque dishonour cases.Justice Dr. Swarana Kanta Sharma made the observation while quashing criminal proceedings initiated against a man who had been summoned in a cheque bounce complaint despite not holding any position in the accused company.The case arose from a complaint filed under Section 138 of the NI Act alleging that the complainant had invested ₹6 lakh with a company after being assured of safe returns. According to the complaint, while ₹2.5 lakh was repaid, the remaining amount was not returned, following which a cheque of ₹4 lakh was issued by the company. The cheque was dishonoured upon presentation, and the complainant initiated criminal proceedings.The Metropolitan Magistrate had issued summons against the company, its director and petitioner who was alleged to be involved in the business affairs of the company. The Sessions Court later dismissed a revision petition challenging the summoning order, following which the accused approached the High Court.Before the High Court, the petitioner argued that he was neither a director, employee nor office bearer of the company. It was contended that the cheque in question had been issued from the company's account and was signed by the sole director, and that there were no specific averments in the complaint showing that the petitioner was responsible for the conduct of the company's business.The Court examined the statutory framework of Sections 138 and 141 of the NI Act and reiterated that vicarious liability in cheque dishonour cases can be imposed only on persons who were in charge of and responsible for the conduct of the business of the company at the time of the offence.“There is no averment, nor any material placed on record by the complainant, to indicate that the petitioner held any office or position whatsoever in the accused company, even as an employee. Therefore, precisely, the petitioner herein has no role or status in the accused company,” it said.Reliance was placed on S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) and Ashok Shewkramani v. State of Andhra Pradesh (2023) where the Supreme Court emphasised that a complaint must contain specific averments demonstrating that the accused had control over the business affairs of the company. The High Court added,“For implicating a person under Section 141(1) of the NI Act, the complaint must contain specific averments demonstrating that such person was, at the time of commission of the offence, both in charge of and responsible for the conduct of the business of the company. The emphasis is not merely on participation or involvement, but on control and responsibility in relation to the business of the company,” the Court said.Accordingly, it quashed the summoning order and the complaint against the Petitioner.Appearance: Mr. A Mishra, Mr. Ravi Pal, Mr. Sahil and Mr. Nidish Gupta, Advs. for Petitioner; Mr. Mayank Mehandru, Ms. Charu Tandon, Mr. Raghav Tandon, Mr. Nikhil Kharaliya, Ms. Diksha Jaspal and Mr. Ashutosh Singh, Advs. for R-1.Case title: Ram Kumar Pathak v. Shashi Devi & Ors.Citation: 2026 LiveLaw (Del) 254Case no.: CRL.M.C. 1143/2019Click here to read order

Mere Allegation Of Being Involved In “Day-To-Day Activities” Of Company Insufficient To Attract Liability U/S 138 NI Act: Delhi High Court

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