Section 141 NI Act - Not Necessary To Specifically Plead That Managing Director Is In Charge Of The Company's Affairs : Supreme Court

The Supreme Court observed that it is not necessary to make an averment that a Managing Director or Joint Managing Directors were in charge of and responsible for the conduct of the business of a company to make them accused under Section 141 of the Negotiable Instruments Act, 1881.The court reiterated that impleading of independent and non-executive directors of a Company on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company, without anything more, does not fulfil the requirements of Section 141 NI Act. The bench comprising Justices Indira Banerjee and JK Maheshwari observed that specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs.It would be a travesty of justice to drag Directors, who may not even be connected with the issuance of a cheque or dishonour thereof, such as Director (Personnel), Director (Human Resources Development) etc. into criminal proceedings under the NI Act, only because of their designation, the bench added.The court allowed an appeal against the judgment of the Calcutta High Court which dismissed a petition filed under Section 482 CrPC by directors of MBL Infrastructure Limited, a public limited company, who were made accused in a cheque bounce case filed by Panchami Stone Quarry. These accused had claimed that that they are independent non-executive Directors of the Accused Company, who are in no way responsible for the day-to-day affairs of the Accused Company.The bench observed that that three categories of persons were covered by Section 141 of the NI Act – the company who committed the offence as alleged; everyone who was in-charge of or was responsible for the business of the company and any other person who was a Director or a Manager or a Secretary or Officer of the Company with whose connivance or due to whose neglect the company had committed the offence. A Director of a company who was not in charge or responsible for the conduct of the business of the company at the relevant time, will not be liable under those provisions, the court observed."Liability depends on the role one plays in the affairs of a company and not on designation or status alone as held by this Court in S.M.S. Pharmaceuticals Ltd. (supra). The materials on record clearly show that these Appellants were independent, non-executive Directors of the company. As held by this Court in Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (supra) a non-Executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the Accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs.", the court said.The bench noticed that the High Court refused to quash the case against the accused after noticing that in the petition it had specifically been averred that all the accused persons were responsible and liable for the whole business management of the Accused Company. Quashing the complaint against the appellants, the bench observed:"As held by this Court in National Small Industries Corporation Ltd. v. Harmeet Singh Paintal quoted with approval in the subsequent decision of this Court in Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (supra) the impleadment of all Directors of an Accused Company on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company, without anything more, does not fulfil the requirements of Section 141 of the NI Act"The court also clarified that the proceedings may continue against the other accused in the criminal case, including in particular the Accused Company, its Managing Director/Additional Managing Director and/or the signatory of the cheque in question.Case detailsSunita Palita vs Panchami Stone Quarry 2022 LiveLaw (SC) 647 | SLP(Crl) 10396 of 2019 | 1 August 2022 | Justices Indira Banerjee and JK MaheshwariCounsel: Sr. Adv Sidharth Luthra HeadnotesNegotiable Instruments Act, 1881 ; Section 141 - impleadment of all Directors of an Accused Company on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company,...

Section 141 NI Act - Not Necessary To Specifically Plead That Managing Director Is In Charge Of The Company's Affairs : Supreme Court

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Section 141 NI Act - Not Necessary To Specifically Plead That Managing Director Is In Charge Of The Company's Affairs : Supreme Court

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