[Cites 44, Cited by 0]
Madhya Pradesh High Court
Mr. Harikirat Singh Bedi vs M/S Prakash Auto Sales And Services Thr. ... on 6 April, 2026
Author: Sanjeev S Kalgaonkar
Bench: Sanjeev S Kalgaonkar
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
1 MCRC-39007-2019
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SANJEEV S KALGAONKAR
ON THE 6 th OF APRIL, 2026
MISC. CRIMINAL CASE No. 39007 of 2019
MR. HARIKIRAT SINGH BEDI AND OTHERS
Versus
M/S PRAKASH AUTO SALES AND SERVICES THR. MR. INDRA
PRAKASH BHARGAV S/O DR. CHOTELAL BHARGAV AND OTHERS
Appearance:
Shri Vinay Gandhi - Advocate for the petitioners.
Shri Sanjay Kumar Sharma - Advocate for the respondents.
ORDER
This petition under Section 482 of Cr.P.C. is filed seeking quashment of
Criminal Complaint bearing registration no. RCT 53702/2025 and the proceedings
initiated pursuant thereto pending before the Judicial Magistrate First Class, Ujjain
against the petitioners for offence punishable u/S 138 r/W 141 of Negotiable
Instrument Act(for short, referred to as "N.I. Act" hereinafter).
2. The exposition of facts, giving rise to the present petition, is as under:
A. Prakash Auto Sales and Services, Agar Road, Ujjain through its
Proprietor - Indra Prakash Bhargava filed a complaint against the
applicants/accused for an offence punishable u/S 138 of N.I. Act. It is stated
in the complaint that the complainant is a Proprietorship Firm. Indra
Prakash Bhargava is the Proprietor of firm. The accused no. 1 - IDEP
Parkway Holdings is a Private Company and accused no. 2 - 10 are office
bearers of the company and are responsible for its working. Shri H.N.
Kumar had purchased diesel and oil from the complainant and issued a
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
2 MCRC-39007-2019
cheque No. 947327 dated 25.01.2010 for an amount of Rs. 11,36,913/-.
When the complainant presented the cheque at his bank, it was returned
with dishonor slip communicating 'insufficient funds' in the account of
accused. The complainant issued demand notice. The accused did not pay
the amount of cheque despite service of statutory demand notice. Therefore,
the present complaint is filed.
B. The trial Court vide order dated 04.05.2019 mentioned that the
complaint was registered u/S 138 of N.I. Act vide order dated 16.11.2010.
Thereafter, it was returned for presentation to jurisdictional Court. The
complaint was transferred to the Court of Additional Chief Metropolitan
Magistrate, Bangalore. The Additional Chief Metropolitan Magistrate,
Bangalore again returned the complaint to the District and Sessions Court,
Ujjain vide order dated 09.02.2017. Thereafter, the trial Court, without
taking cognizance and issuing summons, had directed issuance of bailable
warrant for appearance of the accused vide order dated 04.05.2019.
3. The registration of complaint is assailed in the present petition on the
following grounds:
1. The complaint does not specifically aver regarding involvement of the
applicants in the alleged offence.
2. The petitioners were not incharge and responsible for the conduct of the
business of the accused company. The complaint does not disclose that the
respondents were incharge and responsible for conduct of business of the
company. Therefore, respondents cannot be held liable u/S 141 of the N.I.
Act. The complaint is not maintainable.
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
3 MCRC-39007-2019
3. The complaint merely states in para 2 that accused no. 2 to 9 are responsible
for functioning of accused company. Such a vague and general statement
does not make out vicarious liability of the applicants. Therefore, the
complaint is liable to be quashed. The applicants are not signatories of the
cheque. The notices were not served on the applicants. The trial Court
committed an error in issuing bailable warrants against the applicants against
the procedure established by law. Therefore, the bailable warrants deserves
to be quashed.
4. Learned trial court did not follow the procedure prescribed u/S 202 of the
Cr.P.C. The respondents are residents of Bangalore, Karnataka. Therefore, an
inquiry u/S 202 of the Cr.P.C. was necessary.
On these grounds, it is prayed that the Criminal Complaint at RCT No.
53702/2015 and subsequent criminal proceedings be quashed as against the
applicants.
4. Learned counsel for the applicants, in addition to the grounds mentioned in
the petition, contended that the trial Court committed an error in taking cognizance
against the applicants without conducting an inquiry u/S 202 of Cr.P.C. as
mandated by the amended provision of Cr.P.C., which came into effect from
23.06.2006. Therefore, the cognizance order and consequent issuance of bailable
warrants suffer from illegality. Learned counsel further refers to para 2 of the
complaint to contends that the averments of the complaint are not sufficient to
make out vicarious liability of the applicants in view of the stringent provisions of
Section 141 of N.I. Act. The complainant had failed to make out specific role of
the applicants in the statutory demand notice or the complaint. Therefore, in view
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
4 MCRC-39007-2019
of law laid down in the case of SMS Pharmaceutical Vs. Neeta Bhalla reported in
2005(8) SCC 89 , the complaint is not maintainable.
5. Per contra, learned counsel for the respondent submitted that the complainant
is not expected to know the exact role of office bearers of the company. Therefore,
specific averments with regard to role and responsibility of each of the office
bearer cannot be made in the complaint to contend that applicants were
responsible for the conduct of the business of company. The averments in
complaint are sufficient in view of law laid down in the case of SMS
Pharmaceuticals (supra). Learned counsel further submits that the general
provision contained u/S 202 of the Cr.P.C. is not applicable for registration of
complaint under Section 138 read with Section 141 of N.I. Act, 1881. Therefore,
there is no manifest impropriety in the procedure adopted by the trial Court.
Petition is meritless and deserves to be dismissed.
6. Heard, learned counsel for both the parties and perused the record.
7. The Constitution Bench of Supreme Court In re, Expeditious Trial of Cases
Under Section 138 of NI Act, 1881, reported in (2021) 16 SCC 116 , issued
guidelines regarding inquiry under Section 202 of the Code in relation to Section
145 of the Act, and held as under-
10. Section 202 of the Code confers jurisdiction on the Magistrate to conduct an
inquiry for the purpose of deciding whether sufficient grounds justifying the issue of
process are made out. The amendment to Section 202 of the Code with effect from
23-6-2006, vide Act 25 of 2005, made it mandatory for the Magistrate to conduct an
inquiry before issue of process, in a case where the accused resides beyond the area
of jurisdiction of the court. (See : Vijay Dhanuka v. NajimaMamtaj, (2014) 14 SCC
638, Abhijit Pawar v. Hemant Madhukar Nimbalkar, (2017) 3 SCC 528 and Birla
Corpn. Ltd. v. Adventz Investments & Holdings Ltd., (2019) 16 SCC 610). There has
been a divergence of opinion amongst the High Courts relating to the applicability of
Section 202 in respect of complaints filed under Section 138 of the Act. Certain cases
under Section 138 have been decided by the High Courts upholding the view that it
is mandatory for the Magistrate to conduct an inquiry, as provided in Section 202 of
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
5 MCRC-39007-2019
the Code, before issuance of process in complaints filed under Section 138. Contrary
views have been expressed in some other cases. It has been held that merely because
the accused is residing outside the jurisdiction of the court, it is not necessary for the
Magistrate to postpone the issuance of process in each and every case. Further, it has
also been held that not conducting inquiry under Section 202 of the Code would not
vitiate the issuance of process, if requisite satisfaction can be obtained from materials
available on record.
11. The learned Amici Curiae referred to a judgment of this Court in K.S.
Joseph v. Philips Carbon Black Ltd., (2016) 11 SCC 105 where there was a
discussion about the requirement of inquiry under Section 202 of the Code in relation
to complaints filed under Section 138 but the question of law was left open. In view
of the judgments of this Court in Vijay Dhanuka , Abhijit Pawar and Birla Corpn. ,
the inquiry to be held by the Magistrate before issuance of summons to the accused
residing outside the jurisdiction of the court cannot be dispensed with. The learned
Amici Curiae recommended that the Magistrate should come to a conclusion after
holding an inquiry that there are sufficient grounds to proceed against the accused.
We are in agreement with the learned Amici Curiae.
12. Another point that has been brought to our notice relates to the interpretation of
Section 202(2) which stipulates that the Magistrate shall take evidence of the witness
on oath in an inquiry conducted under Section 202(1) for the purpose of issuance of
process. Section 145 of the Act provides that the evidence of the complainant may be
given by him on affidavit, which shall be read in evidence in any inquiry, trial or
other proceeding, notwithstanding anything contained in the Code. Section 145(2) of
the Act enables the court to summon and examine any person giving evidence on
affidavit as to the facts contained therein, on an application of the prosecution or the
accused. It is contended by the learned Amici Curiae that though there is no specific
provision permitting the examination of witnesses on affidavit, Section 145 permits
the complainant to be examined by way of an affidavit for the purpose of inquiry
under Section 202. He suggested that Section 202(2) should be read along with
Section 145 and in respect of complaints under Section 138, the examination of
witnesses also should be permitted on affidavit. Only in exceptional cases, the
Magistrate may examine the witnesses personally. Section 145 of the Act is an
exception to Section 202 in respect of examination of the complainant by way of an
affidavit. There is no specific provision in relation to examination of the witnesses
also on affidavit in Section 145. It becomes clear that Section 145 had been inserted
in the Act, with effect from the year 2003, with the laudable object of speeding up
trials in complaints filed under Section 138. If the evidence of the complainant may
be given by him on affidavit, there is no reason for insisting on the evidence of the
witnesses to be taken on oath. On a holistic reading of Section 145 along with
Section 202, we hold that Section 202(2) of the Code is inapplicable to complaints
under Section 138 in respect of examination of witnesses on oath. The evidence of
witnesses on behalf of the complainant shall be permitted on affidavit. If the
Magistrate holds an inquiry himself, it is not compulsory that he should examine
witnesses. In suitable cases, the Magistrate can examine documents for satisfaction as
to the sufficiency of grounds for proceeding under Section 202.
8. In case of Sunil Todi v. State of Gujarat , reported in (2022) 16 SCC 762,
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
6 MCRC-39007-2019
while referring to the Constitution Bench Judgement, it was held that-
45. Section 145 of the NI Act provides that evidence of the complainant may be
given by him on affidavit, which shall be read in evidence in an inquiry, trial or other
proceeding notwithstanding anything contained in CrPC. The Constitution Bench
held that Section 145 has been inserted in the Act, with effect from 2003 with the
laudable object of speeding up trials in complaints filed under Section 138. Hence,
the Court noted that if the evidence of the complainant may be given by him on
affidavit, there is no reason for insisting on the evidence of the witnesses to be taken
on oath. Consequently, it was held that Section 202(2)CrPC is inapplicable to
complaints under Section 138 in respect of the examination of witnesses on oath. The
Court held that the evidence of witnesses on behalf of the complainant shall be
permitted on affidavit. If the Magistrate holds an inquiry himself, it is not
compulsory that he should examine witnesses and in suitable cases the Magistrate
can examine documents to be satisfied that there are sufficient grounds for
proceeding under Section 202.
46. In the present case, the Magistrate has adverted to:
(i) The complaint;
(ii) The affidavit filed by the complainant;
(iii) The evidence as per evidence list and; and
(iv) The submissions of the complainant.
47. The order passed by the Magistrate cannot be held to be invalid as betraying a
non-application of mind. In Chief Controller of Imports & Exports v. Roshanlal
Agarwal, (2003) 4 SCC 139, this Court has held that in determining the question as to
whether process is to be issued, the Magistrate has to be satisfied whether there is
sufficient ground for proceeding and not whether there is sufficient ground for
conviction. Whether the evidence is adequate for supporting the conviction can only
be determined at the trial. [See also in this context the decision in Bhushan
Kumar v. State (NCT of Delhi), (2012) 5 SCC 424].
9. The material on record does not show that the inquiry, as contemplated
under the amended provision of Section 202 of Cr.P.C regarding examination of
witness (other than Complainant) on oath or affidavit, was conducted by the
Magistrate even though the petitioners were resident of Bangalore,outside local
jurisdiction of the Magistrate. The summoning order dated 04.05.2019 does not
refer to the statement under Section 200 or 202 of CrPC and the documents. It
does not indicate application of judicial mind. Thus, manifest impropriety in the
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
7 MCRC-39007-2019
process for issuance of summons to the petitioners is prima facie made out. Be
that as it may, another significant aspect of the matter deserves consideration.
10. Section 141 of the Negotiable Instruments Act, 1881 provides for offences
by companies as under-
(1) If the person committing an offence under Section 138 is a company, 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, as well
as the company, shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any person
liable to punishment if he proves that the offence was committed without his
knowledge, or that he had exercised all due diligence to prevent the commission of
such offence.
Provided further that where a person is nominated as a Director of a company
by virtue of his holding any office or employment in the Central Government or State
Government or a financial corporation owned or controlled by the Central
Government or the State Government, as the case may be, he shall not be liable for
prosecution under this chapter.
(2) Notwithstanding anything contained in sub-section (1), where any offence under
this Act has been committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to, any neglect on the
part of, any director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be guilty of that
offence and shall be liable to be proceeded against and punished accordingly.
11. In case of Monaben Ketanbhai Shah v. State of Gujarat , reported in(2004) 7
SCC 15, it was held that substance of averments should be seen to determine
vicarious liability.
4. It is not necessary to reproduce the language of Section 141 verbatim in the
complaint since the complaint is required to be read as a whole. If the substance of
the allegations made in the complaint fulfil the requirements of Section 141, the
complaint has to proceed and is required to be tried with. It is also true that in
construing a complaint a hyper technical approach should not be adopted so as to
quash the same. The laudable object of preventing bouncing of cheques and
sustaining the credibility of commercial transactions resulting in enactment of
Sections 138 and 141 has to be borne in mind. These provisions create a statutory
presumption of dishonesty, exposing a person to criminal liability if payment is not
made within the statutory period even after issue of notice. It is also true that the
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
8 MCRC-39007-2019
power of quashing is required to be exercised very sparingly and where, read as a
whole, factual foundation for the offence has been laid in the complaint, it should not
be quashed. All the same, it is also to be remembered that it is the duty of the court to
discharge the accused if taking everything stated in the complaint as correct and
construing the allegations made therein liberally in favour of the complainant, the
ingredients of the offence are altogether lacking. The present case falls in this
category as would be evident from the facts noticed hereinafter.
1 2 . A three Judge bench of the Supreme Court, in case of S.M.S.
Pharmaceuticals Ltd. (1) v. Neeta Bhalla , reported in (2005) 8 SCC 89, answering
the reference on necessity of averments in the complaint regarding liability of
Director, held as under-
This matter arises from a reference made by a two-Judge Bench of this Court for
determination of the following questions by a larger Bench:
"(a) Whether for purposes of Section 141 of the Negotiable Instruments Act,
1881, it is sufficient if the substance of the allegation read as a whole fulfil
the requirements of the said section and it is not necessary to specifically state
in the complaint that the person accused was in charge of, or responsible for,
the conduct of the business of the company.
(b) Whether a director of a company would be deemed to be in charge of, and
responsible to, the company for conduct of the business of the company and,
therefore, deemed to be guilty of the offence unless he proves to the contrary.
(c) Even if it is held that specific averments are necessary, whether in the
absence of such averments the signatory of the cheque and or the managing
directors or joint managing director who admittedly would be in charge of the
company and responsible to the company for conduct of its business could be
proceeded against."
4. In the present case, we are concerned with criminal liability on account of
dishonour of a cheque. It primarily falls on the drawer company and is extended to
officers of the company. The normal rule in the cases involving criminal liability is
against vicarious liability, that is, no one is to be held criminally liable for an act of
another. This normal rule is, however, subject to exception on account of specific
provision being made in the statutes extending liability to others. Section 141 of the
Act is an instance of specific provision which in case an offence under Section 138 is
committed by a company, extends criminal liability for dishonour of a cheque to
officers of the company. Section 141 contains conditions which have to be satisfied
before the liability can be extended to officers of a company. Since the provision
creates criminal liability, the conditions have to be strictly complied with. The
conditions are intended to ensure that a person who is sought to be made vicariously
liable for an offence of which the principal accused is the company, had a role to
play in relation to the incriminating act and further that such a person should know
what is attributed to him to make him liable. In other words, persons who had
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
9 MCRC-39007-2019
nothing to do with the matter need not be roped in. A company being a juristic
person, all its deeds and functions are the result of acts of others. Therefore, officers
of a company who are responsible for acts done in the name of the company are
sought to be made personally liable for acts which result in criminal action being
taken against the company. It makes every person who, at the time the offence was
committed, was in charge of, and was responsible to the company for the conduct of
business of the company, as well as the company, liable for the offence. The proviso
to the sub-section contains an escape route for persons who are able to prove that the
offence was committed without their knowledge or that they had exercised all due
diligence to prevent commission of the offence.
6. As the points of reference will show, the question for consideration is what should
be the averments in a complaint under Sections 138 and 141. Process on a complaint
under Section 138 starts normally on the basis of a written complaint which is placed
before a Magistrate. The Magistrate considers the complaint as per provisions of
Sections 200 to 204 of the Code of Criminal Procedure. The question of requirement
of averments in a complaint has to be considered on the basis of provisions contained
in Sections 138 and 141 of the Negotiable Instruments Act read in the light of the
powers of a Magistrate referred to in Sections 200 to 204 of the Code of Criminal
Procedure. The fact that a Magistrate has to consider the complaint before issuing
process and he has the power to reject it at the threshold, suggests that a complaint
should make out a case for issue of process.
7. As to what should be the averments in a complaint, assumes importance in view of
the fact that, at the stage of issuance of process, the Magistrate will have before him
only the complaint and the accompanying documents. A person who is sought to be
made the accused has no right to produce any documents or evidence in defence at
that stage. Even at the stage of framing of charge the accused has no such right and a
Magistrate cannot be asked to look into the documents produced by an accused at
that stage. (See State of Orissa v. Debendra Nath Padhi [(2005) 1 SCC 568 : 2005
SCC (Cri) 415] .)
************
12. The conclusion is inevitable that the liability arises on account of conduct, act or
omission on the part of a person and not merely on account of holding an office or a
position in a company. Therefore, in order to bring a case within Section 141 of the
Act the complaint must disclose the necessary facts which make a person liable.
******
18. To sum up, there is almost unanimous judicial opinion that necessary averments
ought to be contained in a complaint before a person can be subjected to criminal
process. A liability under Section 141 of the Act is sought to be fastened vicariously
on a person connected with a company, the principal accused being the company
itself. It is a departure from the rule in criminal law against vicarious liability. A
clear case should be spelled out in the complaint against the person sought to be
made liable. Section 141 of the Act contains the requirements for making a person
liable under the said provision. That the respondent falls within the parameters of
Section 141 has to be spelled out. A complaint has to be examined by the Magistrate
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
10 MCRC-39007-2019
in the first instance on the basis of averments contained therein. If the Magistrate is
satisfied that there are averments which bring the case within Section 141, he would
issue the process. We have seen that merely being described as a director in a
company is not sufficient to satisfy the requirement of Section 141. Even a non-
director can be liable under Section 141 of the Act. The averments in the complaint
would also serve the purpose that the person sought to be made liable would know
what is the case which is alleged against him. This will enable him to meet the case
at the trial.
19. In view of the above discussion, our answers to the questions posed in the
reference are as under:
(a) It is necessary to specifically aver in a complaint under Section 141 that at
the time the offence was committed, the person accused was in charge of, and
responsible for the conduct of business of the company. This averment is an
essential requirement of Section 141 and has to be made in a complaint.
Without this averment being made in a complaint, the requirements of Section
141 cannot be said to be satisfied.
(b) The answer to the question posed in sub-para (b) has to be in the negative.
Merely being a director of a company is not sufficient to make the person
liable under Section 141 of the Act. A director in a company cannot be
deemed to be in charge of and responsible to the company for the conduct of
its business. The requirement of Section 141 is that the person sought to be
made liable should be in charge of and responsible for the conduct of the
business of the company at the relevant time. This has to be averred as a fact
as there is no deemed liability of a director in such cases.
(c) The answer to Question (c) has to be in the affirmative. The question notes
that the managing director or joint managing director would be admittedly in
charge of the company and responsible to the company for the conduct of its
business. When that is so, holders of such positions in a company become
liable under Section 141 of the Act. By virtue of the office they hold as
managing director or joint managing director, these persons are in charge of
and responsible for the conduct of business of the company. Therefore, they
get covered under Section 141. So far as the signatory of a cheque which is
dishonoured is concerned, he is clearly responsible for the incriminating act
and will be covered under sub-section (2) of Section 141.
13. Thereafter, in case of Sabitha Ramamurthy v. R.B.S.Channabasavaradhya ,
reported in(2006) 10 SCC 581, it was observed that-
2. ...... In the complaint petition, it was averred:
"7. The complainant submits that the accused persons have failed to clear the
liability. The accused, being the Company and all the Directors, are
responsible for the clearance of liability under Section 141 of the NI Act and
the acts and deeds of the accused persons are punishable under Section 138 of
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
11 MCRC-39007-2019
the NI Act."
**********
5. The High Court by reason of the impugned judgment dismissed the said
application stating:
"3. The material on record prima facie discloses that these petitioners were
Directors on the date of the offence i.e. on 30-7-2003. The question as to
whether these petitioners were involved in day-to-day affairs of the business
of the Company is to be decided based on the material on record collected
during the course of trial."
******************
7. A bare perusal of the complaint petitions demonstrates that the statutory
requirements contained in Section 141 of the Negotiable Instruments Act had not
been complied with. It may be true that it is not necessary for the complainant to
specifically reproduce the wordings of the section but what is required is a clear
statement of fact so as to enable the court to arrive at a prima facie opinion that the
accused are vicariously liable. Section 141 raises a legal fiction. By reason of the
said provision, a person although is not personally liable for commission of such an
offence would be vicariously liable therefor. Such vicarious liability can be inferred
so far as a company registered or incorporated under the Companies Act, 1956 is
concerned only if the requisite statements, which are required to be averred in the
complaint petition, are made so as to make the accused therein vicariously liable for
the offence committed by the company. Before a person can be made vicariously
liable, strict compliance with the statutory requirements would be insisted. Not only
the averments made in para 7 of the complaint petitions do not meet the said
statutory requirements, the sworn statement of the witness made by the son of the
respondent herein, does not contain any statement that the appellants were in charge
of the business of the Company. ......................................
14. In case of Saroj Kumar Poddar v. State (NCT of Delhi) , reported in(2007) 3
SCC 693, it was held that-
13. The purported averments which have been made in the complaint petitions so as
to make the appellant vicariously liable for the offence committed by the Company
read as under:
"That Accused 1 is a public limited company incorporated and registered
under the Companies Act, 1956, and Accused 2 to 8 are/were its Directors at
the relevant time and the said Company is managed by the Board of Directors
and they are responsible for and in charge of the conduct and business of the
Company, Accused 1. However, cheques referred to in the complaint have
been signed by Accused 3 and 8 i.e. Shri K.K. Pilania and Shri N.K. Munjal
for and on behalf of Accused 1 Company."
14. Apart from the Company and the appellant, as noticed hereinbefore, the
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
12 MCRC-39007-2019
Managing Director and all other Directors were also made accused. The appellant did
not issue any cheque. He, as noticed hereinbefore, had resigned from the directorship
of the Company. It may be true that as to exactly on what date the said resignation
was accepted by the Company is not known, but, even otherwise, there is no
averment in the complaint petitions as to how and in what manner the appellant was
responsible for the conduct of the business of the Company or otherwise responsible
to it in regard to its functioning. He had not issued any cheque. How he is responsible
for dishonour of the cheque has not been stated. The allegations made in para 3, thus,
in our opinion do not satisfy the requirements of Section 141 of the Act.
15. In case of S.M.S. Pharmaceuticals Ltd. (2) v. Neeta Bhalla , reported
in(2007) 4 SCC 70, it was held that-
3. In the complaint petition the allegations made inter alia are as under:
"Accused 1 is a duly incorporated Company, having its registered office at
the address mentioned above, represented by the Director, Accused 2.
Accused 3 and 4 are also the Directors of Accused 1 Company and Accused 2
to 4 are actively involved in the management of the affairs of Accused 1
Company."
4. The appellant along with the said complaint petition annexed a purported
resolution dated 15-2-1995 authorising the Managing Director of the Company to
execute the promissory note which reads as under:
"Resolved that the Company to avail an inter-corporate deposit of Rs 2 crores
(Rupees two crores only) for 15 days @ 25% p.a. from Reddy Nagar,
Hyderabad and that Mr Rajiv Anand, Director be and is hereby authorised to
sign and execute demand promissory note, post-dated cheques and other
documents as may be required by M/s S.M.S. Pharmaceuticals Ltd. on behalf
of the Company and deliver the same to M/s S.M.S. Pharmaceuticals Ltd.
Resolved further that Mr Rajiv Anand, Director of the Company be and is
hereby authorised to affix common seal of the Company on such documents
and papers as may be required in this connection pursuant to the articles of
association of the Company."
**********
20. The liability of a Director must be determined on the date on which the offence is
committed. Only because Respondent 1 herein was a party to a purported resolution
dated 15-2-1995 by itself does not lead to an inference that she was actively
associated with the management of the affairs of the Company. This Court in this
case has categorically held that there may be a large number of Directors but some of
them may not associate themselves in the management of the day-to-day affairs of
the Company and, thus, are not responsible for the conduct of the business of the
Company. The averments must state that the person who is vicariously liable for
commission of the offence of the Company both was in charge of and was
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
13 MCRC-39007-2019
responsible for the conduct of the business of the Company. Requirements laid down
therein must be read conjointly and not disjunctively. When a legal fiction is raised,
the ingredients therefor must be satisfied.
23. On a plain reading of the averments made in the complaint petition, we are
satisfied that the statutory requirements as contemplated under Section 141 of the Act
were not satisfied.
16. In case of K.K. Ahuja v. V.K. Vora , reported in (2009) 10 SCC 48, it was
held that:
21. A combined reading of Sections 5 and 291 of the Companies Act, 1956 with the
definitions in clauses (24), (26), (30), (31), (45) of Section 2 of that Act would show
that the following persons are considered to be the persons who are responsible to
the company for the conduct of the business of the company:
(a) the Managing Director(s);
(b) the whole-time Director(s);
(c) the manager;
(d) the secretary;
(e) any person in accordance with whose directions or instructions the Board of
Directors of the company is accustomed to act;
(f) any person charged by the Board with the responsibility of complying with that
provision (and who has given his consent in that behalf to the Board); and
(g) where any company does not have any of the officers specified in clauses (a) to
(c), any Director or Directors who may be specified by the Board in this behalf or
where no Director is so specified, all the Directors.
It follows that other employees of the company, cannot be said to be persons who are
responsible to the company, for the conduct of the business of the company.
22. Section 141 uses the words "was in charge of, and was responsible to the
company for the conduct of the business of the company". It is evident that a person
who can be made vicariously liable under sub-section (1) of Section 141 is a person
who is responsible to the company for the conduct of the business of the company
and in addition is also in charge of the business of the company. There may be many
Directors and secretaries who are not in charge of the business of the company at all.
The meaning of the words "person in charge of the business of the company" was
considered by this Court in Girdhari Lal Gupta v. D.H. Mehta (1971) 3 SCC 189 :
1971 SCC (Cri) 279 followed in State of Karnataka v. Pratap Chand (1981) 2 SCC
335and Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd. (2002) 7 SCC 655.
This Court held that the words refer to a person who is in overall control of the day-
to-day business of the company. This Court pointed out that a person may be a
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
14 MCRC-39007-2019
Director and thus belongs to the group of persons making the policy followed by the
company, but yet may not be in charge of the business of the company; that a person
may be a manager who is in charge of the business but may not be in overall charge
of the business; and that a person may be an officer who may be in charge of only
some part of the business.
23 Therefore, if a person does not meet the first requirement, that is, being a person
who is responsible to the company for the conduct of the business of the company,
neither the question of his meeting the second requirement (being a person in charge
of the business of the company), nor the question of such person being liable under
sub-section (1) of Section 141 arises. To put it differently, to be vicariously liable
under sub-section (1) of Section 141, a person should fulfil the "legal requirement"
of being a person in law (under the statute governing companies) responsible to the
company for the conduct of the business of the company and also fulfil the "factual
requirement" of being a person in charge of the business of the company.
24. Therefore, the averment in a complaint that an accused is a Director and that he is
in charge of and is responsible to the company for the conduct of the business of the
company, duly affirmed in the sworn statement, may be sufficient for the purpose of
issuing summons to him. But if the accused is not one of the persons who falls under
the category of "persons who are responsible to the company for the conduct of the
business of the company" (listed in para 21 above), then merely by stating that "he
was in charge of the business of the company" or by stating that "he was in charge of
the day-to-day management of the company" or by stating that "he was in charge of,
and was responsible to the company for the conduct of the business of the company",
he cannot be made vicariously liable under Section 141(1) of the Act.
25. It should, however, be kept in view that even an officer who was not in charge of
and was responsible to the company for the conduct of the business of the company
can be made liable under sub-section (2) of Section 141. For making a person liable
under Section 141(2), the mechanical repetition of the requirements under Section
141(1) will be of no assistance, but there should be necessary averments in the
complaint as to how and in what manner the accused was guilty of consent and
connivance or negligence and therefore, responsible under sub-section (2) of Section
141 of the Act.
27. The position under Section 141 of the Act can be summarised thus:
(i) If the accused is the Managing Director or a Joint Managing Director, it is
not necessary to make an averment in the complaint that he is in charge of,
and is responsible to the company, for the conduct of the business of the
company. It is sufficient if an averment is made that the accused was the
Managing Director or Joint Managing Director at the relevant time. This is
because the prefix "Managing" to the word "Director" makes it clear that they
were in charge of and are responsible to the company, for the conduct of the
business of the company.
(ii) In the case of a Director or an officer of the company who signed the
cheque on behalf of the company, there is no need to make a specific
averment that he was in charge of and was responsible to the company, for
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
15 MCRC-39007-2019
the conduct of the business of the company or make any specific allegation
about consent, connivance or negligence. The very fact that the dishonoured
cheque was signed by him on behalf of the company, would give rise to
responsibility under sub-section (2) of Section 141.
(iii) In the case of a Director, secretary or manager [as defined in Section
2(24) of the Companies Act] or a person referred to in clauses ( e) and (f) of
Section 5 of the Companies Act, an averment in the complaint that he was in
charge of, and was responsible to the company, for the conduct of the
business of the company is necessary to bring the case under Section 141(1)
of the Act. No further averment would be necessary in the complaint, though
some particulars will be desirable. They can also be made liable under
Section 141(2) by making necessary averments relating to consent and
connivance or negligence, in the complaint, to bring the matter under that
sub-section.
(iv) Other officers of a company cannot be made liable under sub-section (1)
of Section 141. Other officers of a company can be made liable only under
sub-section (2) of Section 141, by averring in the complaint their position and
duties in the company and their role in regard to the issue and dishonour of
the cheque, disclosing consent, connivance or negligence.
28. If a mere reproduction of the wording of Section 141(1) in the complaint is
sufficient to make a person liable to face prosecution, virtually every
officer/employee of a company without exception could be impleaded as accused by
merely making an averment that at the time when the offence was committed they
were in charge of and were responsible to the company for the conduct and business
of the company. This would mean that if a company had 100 branches and the
cheque issued from one branch was dishonoured, the officers of all the 100 branches
could be made accused by simply making an allegation that they were in charge of
and were responsible to the company for the conduct of the business of the company.
That would be absurd and not intended under the Act.
17. In case of Aneeta Hada v. Godfather Travels & Tours (P) Ltd. , reported in
(2012) 5 SCC 661, three Judges Bench of the Supreme Court, reiterated the law
laid down in case of S.M.S. Pharmaceuticals Ltd (1)(supra).
18. In case of Ashok Shewakramani v. State of A.P. , reported in (2023) 8 SCC
473, it was held that:
17. The averments made in the complaints which are the subject-matter of these
three appeals are identical. We are referring to the averments made in one of the
three complaints (in Complaint Case No. 74 of 2011) in Para 1:
"(1) It is submitted that the complainant is the proprietor of Sri Chakra
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
16 MCRC-39007-2019
Cotton Traders, doing business in cotton, resident of bearing Door No. 3/917-
I, Sri Chackra Nilayam, YMR Colony, Proddatur Town-516 360, Kadapa
District, A.P.
Accused 1 is the private limited Company concerned and registered under the
Companies Act. Accused 2 is Chairman of Accused 1. Accused 3 is the
Managing Director of Accused 2 and Accused 4 to 7 are the Directors of
Accused 1 Company and Accused 2 to 7 are managing the Company and busy
with day-to-day affairs of the Company and all are managing the Company
and also in charge of the Company and all are jointly and severally liable for
the acts of Accused 1 Company."
22. In the light of sub-section (1) of Section 141, we have perused the averments
made in the complaints subject-matter of these three appeals. The allegation in Para 1
of the complaints is that the appellants are managing the Company and are busy with
day-to-day affairs of the Company. It is further averred that they are also in charge of
the Company and are jointly and severally liable for the acts of Accused 1 Company.
The requirement of sub-section (1) of Section 141 of the NI Act is something
different and higher. Every person who is sought to be roped in by virtue of sub-
section (1) of Section 141 of the NI Act must be a 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. Merely because somebody is managing the
affairs of the Company, per se, he does not become in charge of the conduct of the
business of the Company or the person responsible for the Company for the conduct
of the business of the Company. For example, in a given case, a manager of a
Company may be managing the business of the Company. Only on the ground that
he is managing the business of the Company, he cannot be roped in based on sub-
section (1) of Section 141 of the NI Act.
23. The second allegation in the complaint is that the appellants are busy with the
day-to-day affairs of the Company. This is hardly relevant in the context of sub-
section (1) of Section 141 of the NI Act. The allegation that they are in charge of the
Company is neither here nor there and by no stretch of the imagination, on the basis
of such averment, one cannot conclude that the allegation of the second respondent is
that the appellants were also responsible to the Company for the conduct of the
business. Only by saying that a person was in charge of the Company at the time
when the offence was committed is not sufficient to attract sub-section (1) of Section
141 of the NI Act.
25. Therefore, even by giving a liberal construction to what is averred in Para 1 of the
complaints, we are unable to accept the submission made by the learned counsel
appearing for the second respondent that these averments substantially comply with
sub-section (1) of Section 141 of the NI Act.
19. Relying on the law laid down in case of Ashok Shewakramani (supra), the
Supreme Court in case of Siby Thomas v. Somany Ceramics Ltd. , reported in
(2024) 1 SCC 348, held as under:
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
17 MCRC-39007-2019
18. Thus, in the light of the dictum laid down in Ashok Shewakramani case , it is
evident that a vicarious liability would be attracted only when the ingredients of
Section 141(1) of the NI Act, are satisfied. It would also reveal that merely because
somebody is managing the affairs of the company, per se, he would not become in
charge of the conduct of the business of the company or the person responsible to the
company for the conduct of the business of the company. A bare perusal of Section
141(1) of the NI Act, would reveal that only that 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, as well as the company alone shall be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished.
*********
20. The upshot of the aforesaid discussion is that the averments in the complaint
filed by the respondent are not sufficient to satisfy the mandatory requirements under
Section 141(1) of the NI Act. Since the averments in the complaint are insufficient to
attract the provisions under Section 141(1) of the NI Act, to create vicarious liability
upon the appellant, he is entitled to succeed in this appeal. We are satisfied that the
appellant has made out a case for quashing the criminal complaint in relation to him,
in exercise of the jurisdiction under Section 482CrPC. .....
20. Recently, the Supreme Court, while considering the precedents on the issue
of vicarious liability of non-executive Directors, in case of K.S. Mehta v. Morgan
Securities & Credits (P) Ltd., reported in (2025) 7 SCC 615, observed and held as
under:
16. This Court in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal,
(2010) 3 SCC 330 observed:
"13. Section 141 is a penal provision creating vicarious liability, and which,
as per settled law, must be strictly construed. It is therefore, not sufficient to
make a bald cursory statement in a complaint that the Director (arrayed as an
accused) is in charge of and responsible to the company for the conduct of
the business of the company without anything more as to the role of the
Director. But the complaint should spell out as to how and in what manner
Respondent 1 was in charge of or was responsible to the accused Company
for the conduct of its business. This is in consonance with strict
interpretation of penal statutes, especially, where such statutes create
vicarious liability.
***
22. Therefore, this Court has distinguished the case of persons who are in
charge of and responsible for the conduct of the business of the company at
the time of the offence and the persons who are merely holding the post in a
company and are not in charge of and responsible for the conduct of the
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
18 MCRC-39007-2019
business of the company. Further, in order to fasten the vicarious liability in
accordance with Section 141, the averment as to the role of the Directors
concerned should be specific. The description should be clear and there
should be some unambiguous allegations as to how the Directors concerned
were alleged to be in charge of and were responsible for the conduct and
affairs of the company.
***
39. From the above discussion, the following principles emerge:
(i) The primary responsibility is on the complainant to make specific
averments as are required under the law in the complaint so as to make the
accused vicariously liable. For fastening the criminal liability, there is no
presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The
criminal liability can be fastened only on those who, at the time of the
commission of the offence, were in charge of and were responsible for the
conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or
incorporated under the Companies Act, 1956 only if the requisite statements,
which are required to be averred in the complaint/petition, are made so as to
make the accused therein vicariously liable for the offence committed by the
company along with averments in the petition containing that the accused
were in charge of and responsible for the business of the company and by
virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved
and not inferred.
(v) If the accused is a Managing Director or a Joint Managing Director then
it is not necessary to make specific averment in the complaint and by virtue
of their position they are liable to be proceeded with.
(vi) If the accused is a Director or an officer of a company who signed the
cheques on behalf of the company then also it is not necessary to make
specific averment in the complaint.
(vii) The person sought to be made liable should be in charge of and
responsible for the conduct of the business of the company at the relevant
time. This has to be averred as a fact as there is no deemed liability of a
Director in such cases."(emphasis in original)
17. In N.K. Wahi v. Shekhar Singh, (2007) 9 SCC 481, this Court in para 8 observed:
"8. To launch a prosecution, therefore, against the alleged Directors there
must be a specific allegation in the complaint as to the part played by them
in the transaction. There should be clear and unambiguous allegation as to
how the Directors are in-charge and responsible for the conduct of the
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
19 MCRC-39007-2019
business of the company. The description should be clear. It is true that
precise words from the provisions of the Act need not be reproduced and the
court can always come to a conclusion in the facts of each case. But still, in
the absence of any averment or specific evidence the net result would be that
complaint would not be entertainable."
19. In Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1, this
Court while taking into consideration that a non-executive Director plays a
governance role, they are not involved in the daily operations or financial
management of the company, held that to attract liability under Section 141 of the NI
Act, the accused must have been actively in charge of the company's business at the
relevant time. Mere Directorship does not create automatic liability under the Act.
The law has consistently held that only those who are responsible for the day-to-day
conduct of business can be held accountable.
*********
21. In Hitesh Verma v. Health Care at Home (India) (P) Ltd. , (2025) 7 SCC 623, this
Court held:
"3. As the appellant is not a signatory to the cheque, he is not liable under
Section 138 of the 1881 Act. As it is only the signatory to the cheque is
liable under Section 138, unless the case is brought within the four corners
of Section 141 of the 1881 Act, no other person can be held liable. ...
4. There are twin requirements under sub-section (1) of Section 141 of the
1881 Act. In the complaint, it must be alleged that the person, who is sought
to be held liable by virtue of vicarious liability, at the time when the offence
was committed, was in charge of, and was responsible to the company for
the conduct of the business of the company. A Director who is in charge of
the company and a Director who was responsible to the company for the
conduct of the business, are two different aspects. The requirement of law is
that both the ingredients of sub-section (1) of Section 141 of the 1881 Act
must be incorporated in the complaint. Admittedly, there is no assertion in
the complaints that the appellant, at the time of the commission of the
offence, was in charge of the business of the company. Therefore, on a plain
reading of the complaints, the appellant cannot be prosecuted with the aid of
sub-section (1) of Section 141 of the 1881 Act."
22. Upon perusal of the record and submissions of the parties, it is evident that the
appellant(s) neither issued nor signed the dishonoured cheques, nor had any role in
their execution. There is no material on record to suggest that they were responsible
for the issuance of the cheques in question. Their involvement in the company's
affairs was purely non-executive, confined to governance oversight, and did not
extend to financial decision-making or operational management.
23. The complaint lacks specific averments that establish a direct nexus between the
appellant(s) and the financial transactions in question or demonstrate their
involvement in the company's financial affairs. Additionally, the CGR(s) and RoC
records unequivocally confirm their non-executive status, underscoring their limited
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
20 MCRC-39007-2019
role in governance without any executive decision-making authority. The mere fact
that the appellant(s) attended Board meetings does not suffice to impose financial
liability on the appellant(s), as such attendance does not automatically translate into
control over financial operations.
(also see- Susela Padmavathy Amma v. Bharti Airtel Ltd. , (2024) 12 SCC 131;
Kamalkishor Shrigopal Taparia v. India Ener-Gen (P) Ltd., (2025) 7 SCC 393)
21. The governing legal principle derived from the aforestated propositions of
law may be stated as follows:
1. Penal statutes creating vicarious liability must be strictly construed; liability arises
from conduct, act or omission not mere holding office in the organisation. Section
141 of the Negotiable Instruments Act, 1881 creates vicarious liability for offences
committed by companies under Section 138, extending criminal liability to certain
officers of the company or firm. The liability is not automatic for all Directors; only
those in charge of and responsible for conduct of the company's business at the time
of the offence are liable. The signatories to the dishonoured cheque are liable under
Section 141(2), irrespective of their designation. The non-executive Directors, whose
roles are limited to oversight, are generally not liable unless their role and
involvement in conduct ofbusiness is specifically pleaded and proved. Vicarious
liability cannot be inferred solely from stray attendance at Board meetings or passive
governance roles; active involvement in day-to-day conduct of business at the
relevant time is necessary.
2. The complaint must specifically aver that the accused was in charge ofand
responsible for the conduct of the company's business at the relevant time. Mere
designation as Director or Officer is insufficient to attract liability under Section 141
of the Act, 1881, role and responsibility must be clearly stated.The averments must
be clear, precise and establish a nexus between the accused and the conduct of
business of the company or firm,it is not sufficient tomerely reproduce statutory
language. However, Managing Directors and Joint Managing Directors are presumed
to be in charge, specific averments are not required for them.
3. The governing principle is that only those persons, who were in charge ofand
responsible for the conduct of the company's business at the relevant time and whose
role and responsibility is specifically averred in the complaint, may be held
vicariously liable under Section 141 of the Negotiable Instruments Act.
22. Petitioner Harkirat Singh Bedi (Accused no. 2) is shown as Director, IDEB
Parkway Holdings Private Limited while no designation is specified about
petitioner Avneet Bedi (Accused no. 8) in the cause title of the complaint. The para
2 of the complaint and para 1 of the statutory demand notice states that-
NEUTRAL CITATION NO. 2026:MPHC-IND:8963
21 MCRC-39007-2019
"Accused no. 1 is a company and no. 2 to 10 are fully responsible for its
activity and operations."
23. The complaint, the statutory demand notice and the statement of
Indraparkash Bhargav recorded under Section 200 of CR.P.C. do not specify role
and responsibility of the petitioners in the functioning of IDEB Parkway Holdings
Private Limited. Even the necessary statutory averments that the petitioners were in
charge of and were responsible to the company for the conduct of the business of
the company, is missing.
24. The vicarious liability of the petitioners under section 141 of the Negotiable
Instruments Act 1881 cannot be inferred merely for the reason that petitioner -
Harkirat Singh Bedi (Accused no. 2) is shown as Director, IDEB Parkway Holdings
Private Limited in the cause title of the complaint or the petitioners are alleged to be
fully responsible for its activity and operations, without specifying their role and
responsibility at all.
25. Consequently, this Court is of considered opinion that further prosecution of
the petitioners would be an abuse of process of court. Thus, in exercise of inherent
jurisdiction under section 482 of Cr.P.C., the private complaint and further
prosecution in criminal complaint case no. 53702 of 2015 of petitioners/accused
Harkirat Singh Bedi and Avneet Bedi is quashed.
26. Accordingly, the petition is allowed.
(SANJEEV S KALGAONKAR)
JUDGE
sh
