K. SRIKANTH SINGH versus M/S. NORTH EAST SECURITIES LTD. AND ANR.

Citation: [2007] 8 S.C.R. 452 · Decided: 20-07-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
K. SRIKANTH SINGH 
v. 
MIS. NORTH EAST SECURITIES LTD. AND ANR. 
JULY 20, 2007 
B 
[S.B. SINHA AND H.S. BEDI, JJ.] 
Negodable Instruments Act, 1881; Ss. 138 and 141: 
Complaint against a company and its directors for committing offence 
C u/s. 138 of the Act-One of the directors filing a petition u/s. 482 Cr. P. C. 
for quashing the proceedings-Dismissed by High Court-On appeal, Held: 
For showing vicarious liability of a Director of a Company, it is incumbent 
on complainant to plead that the accused was responsible for conducting the · 
business of the company-No such a/legation made by the complainant-
D Merely because the accused-director participated in negotiations for ·obtaining 
finance from the complainant, it cannot be said that he was responsible for 
day to day affairs of the company-Further, vicarious liab/ity against accused 
must be pleaded and proved and it cannot be a subject matter of mere 
inference-Under the circumstances, impugned judgment cannot be sustained, 
thus, set aside and the order taking cognizance of the complaint quashed-
E Code of Criminal Procedure, 1973; s. 482. 
F 
The question which arose for determination in this appeal was as to 
whether in the facts and circumstances of the case, the appellant, a director 
of accused company could be held vicariously liable for committing offence 
u/s. 138 of the Negotiable Instruments Act. 
Appellant-director contended that at the relevant point of time, he was 
not the director of the Company; and that no cognizance could be taken on 
the basis of the allegations made in the complaint petition as the same do not 
satisfy the requirement of the provisions under Section 141 of the Negotiable 
G Instrument Act. 
Allowing the appeal, the Court 
HELD: 1.1. For showing a vicarious liability of a Director of a Company, 
r , 
H 
452 
K. SRIKANTH SINGH~" NOR TH EAST SECURITIES LTD. [S B. SINHA, J.] 
453 
,,,._ 
upon the complaint it is incumbent to plead that the accused was responsible A 
to the Company for the conduct of the business of the Company. No such 
allegation having been made in the complaint petition, the High Court was 
not correct in passing the impugned judgment. !Para 4) 1455-D, E) 
1.2. Allegation that all the accused Directors participated in the 
B 
negotiations for obtaining financial help for accused No. 1 would not give rise 
to an inference that the appellant was responsible for day-to-day affairs of the 
')( 
Company. !Para 411455-E, Fl 
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr., 120051 8 SC 89, 
relied on. 
c 
1.3. Negotiation for obtaining financial assistance on behalf of the 
Company by its Directors itself is not an ingredient for the purpose of 
constituting ah offence under Section 138 of the Negotiable Instruments Act. 
Furthermore, a vicarious liability on the part of a person must be pleaded and 
proved. It cannot be a subject matter of mere inference. (Para 5) 1456-E) 
D 
,,. 
}---
Sabitha Ramamurthy & Anr. v. R.B.S. Channabasavaradhya, (2006) 10 
SCC 581, relied OR. 
2. In the facts and circumstances of the case, the impugned judgment 
cannot be sustained and the same is accordingly set aside. The order taking E 
cognizance is quashed. !Para 7) 1457-F) 
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 919 of 
2007. 
From the Judgment & Order dated 12.09 .2006 of the High Court of F 
Judicature, Andhra Pradesh at Hyderabad in Criminal Petition No. 4084 of 
2006. 
Anil Kumar Tandale for the Appellant. 
The Judgment of the Court was delivered by 
G 
S.B. SINHA. J. l. Leave granted. 
---.. 
2. Appellant has been proceeded against for alleged commission of an 
offence under Section 138 of the Negotiable Instruments Act. First respondent 
filed a complaint in the Court of 3rd Additional Chief Metropolitan Magistrate, H 
454 
SUPREME COURT REPORTS 
[2007] 8 S.C.R. 
A Hyderabad. In regard to the liability of the appellant, which is vicarious in 
~ 
nature, the following statement has been made in paragraph 2 of the complaint 
petition which reads· as under: 
"2. That the accused is a company doing their business in the 
name and style of Mis. Rishab Alchem India Ltd., having its Registered 
B 
office at E2, Shantinivas Apartments, Mettuguda, Secunderabad and 
1
represented by Accused No. 2 in the capacity of Managing Director 
t 
of the first accused company and accused no. 3 to 6 are the directors 
of the company. All the accused persons after negotiation with the 
)< 
Complainant firm had agreed to take
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