Directors & Other Persons Responsible For Conduct Of Business Can't Be Held Liable If No Offence Is Attributed To Company: Delhi High Court

The Delhi High Court has observed that if no offence is attributed to the company, it is but the natural corollary, that its Directors and other persons responsible for the conduct of its business cannot be saddled with any liability.

Observing that the Company being arrayed as the accused must be found to have committed an offence, Justice Asha Menon added:

"Thereafter, through the legal fiction created by Section 141 of the N.I. Act, the Directors and other persons responsible for the conduct of its business also become vicarious liable."

"Thus, it is the Company upon which the primary liability rests and a person who is sought to be made vicariously liable for an offence of which the principal accused is a company, would need to have a role to play in relation to the incriminating act. Section 141 of the N.I. Act operates only when the offence under Section 138 of the N.I. Act is committed by a company."

The Court dismissed a petition filed by the complainant for setting aside the orders dated 28th August, 2015 and 23rd October, 2017, passed by the Trial Court and the Appellate Court respectively, dismissing his complaint case.

The petitioner had filed a complaint case under sec. 138 of Negotiable Instruments Act, 1881 against the respondent company. It was stated in the complaint that the commercial space owned by the petitioner had been let out upon terms and conditions incorporated in the registered Rent Agreement dated 23rd February, 2010.

This was executed between the petitioner (landlord) and the respondent‟s company, through its Managing Director i.e., the respondent. In March-April, 2013 the respondent was alleged to have issued five cheques across the company duly signed by him as Managing Director to discharge the company‟s liability to pay the rent aggregating to Rs.16,95,000. These bounced. As a result of which, the complaint was filed.

It was thus submitted by the petitioner that the Trial Court dismissed the complaint observing that since the company had not been impleaded as an accused, the liability of the respondent as its Managing Director could not be attached under section 141 of the N.I. Act.

"A perusal of the complaint placed on the record as Annexure P-1 would show that in the present matter, the company has not been impleaded, leave alone a wrong company, as was the case in U.P. Pollution Control Board (supra). That makes a material difference in the fact situation in the present case," the Court observed.

The Court was of the view that there was no pleading which suggested that the Company had committed any offence.

Observing that when no offence is attributable to the Company, the Court said that it was not possible to attach liability on the Managing Director by the deeming provisions of Section 141 of the N.I. Act.

"Amendments of simple technical infirmities alone can be allowed but not the filing of a fresh complaint with improved pleadings, in the garb of amendment. Thus, following these very judgments relied upon by the learned counsel for the petitioner, this Court does not consider it appropriate to grant such permission to amend the complaint," the Court added at the outset.

Accordingly, the plea was dismissed.

Case Title: SHRI HARI SHAMSHER KAUSHIK v. SHRI JASBIR SINGH, MANAGING DIRECTOR, M/S ACCURA CARE PHARMACEUTICALS PVT. LTD.

Citation: 2022 LiveLaw (Del) 448

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