NATIONAL SMALL INDUSTRIES CORP. LTD. versus HARMEET SINGH PAINTAL AND ANR.

Citation: [2010] 2 S.C.R. 805 · Decided: 15-02-2010 · Supreme Court of India · Bench: P. SATHASIVAM · Disposal: Dismissed

Cited by 9 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

(2010) 2 S.C.R. 805 
NATIONAL SMALL INDUSTRIES CORP. LTD. 
v. 
HARMEET SINGH PAINTAL AND ANR. 
(Criminal Appeal No. 320-336 of 2010 ) 
FEBRUARY 15, 2010 
[P. SATHASIVAM AND H.L. DATTU, JJ.] 
A 
B 
Negotiable Instruments Act, 1881: ss.138, 141 -
Vicarious liability of Directors of a Company - Held: Director C 
of a Company who is not in-charge of and is not responsible 
for the conduct of the business of the company would not be 
liable for a criminal offence under s.138 - s.141 is a penal 
provision creating vicarious liability, and must be strictly 
construed - Complaint under s. 138 must spell out as to how D 
and in what manner the accused-director was in-charge of or 
was responsible to the accused company for the conduct of 
its business - If averments made against accused-Directors 
are unspecific and general and no particular role is assigned 
to them, then vicarious liability in accordance with s.141 
E 
cannot be fastened on them - On facts, in the absence of 
specific averment as to the role of the respondents and 
particularly since they were in no way connected with the affairs 
of the company, the summoning orders against them were 
rightly quashed by High Court -
Companies Act, 1956 -
F 
s.291. 
The question which arose for consideration in these 
appeals was whether High Court was justified in 
quashing the summoning orders passed by trial court 
against accused-Directors under Section 138 of the 
G 
Negotiable Instruments Act, 1881, on the ground that the 
averments made against them were unspecific and 
general and no particular role was assigned to them. 
805 
H 
806 
SUPREME COURT REPORTS 
[2010] 2 S.C.R. 
A 
Dismissing the appeals, the Court 
HELD: 1.1. Section 141 of the Negotiable Instruments 
Act requires that the persons who are sought to be made 
vicariously liable for a criminal offence under Section 141 
8 should be, at the time the offence was committed, were 
in-charge of, and were responsible to the company for 
the conduct of the business of the company. Every 
person connected with the company would not fall within 
the ambit of the provision. Only those persons who were 
in-charge of and responsible for the conduct of the 
C business of the company at the time of commission of 
an offence would be liable for criminal action. If a Director 
of a Company who was not in-charge of and was not 
responsible for the conduct of the business ~f the 
company at the relevant time, he would not be liable for 
D a criminal offence under the provisions. The liability arises 
from being in-charge of and responsible for the conduct 
of the business of the company at the relevant time when 
the offence was committed and not on the basis of merely 
holding a designation or office in a company. [Para 9] 
E [814-A-D] 
1.2. Section 141 is a penal provision creating 
vicarious liability, and must be strictly construed. It is 
therefore, not sufficient to make a bald cursory statement 
F 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 the 
accused was in-charge of or was responsible to the 
G 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. A company may have a number of Directors and 
to make any or all the Directors as accused in a complaint 
H 
NATIONAL SMALL INDUSTRIES CORP. LTD. v. 
807 
HARMEET SINGH PAINTAL 
merely on the basis of a statement that they are in-charge 
A 
of and responsible for the conduct of the business of the 
company without anything more is not a sufficient or 
adequate fulfilment of the requirements under Section 
141. In order to fasten the vicarious liability in accordance 
with Section 141, the averment as to the role of the 
B 
concerned Directors should be specific. The description 
should be clear and there should be some unambiguous 
allegations as to how the concerned Directors were 
alleged to be in-charge of and was responsible for the 
conduct and affairs of the company. [Paras 10 and 14] c 
[814-E-H; 815-A; 818-F-G] 
SMS Pharmaceuticals v. Neeta Bhalla and Anr. (2005) 
8 
SCC 
89; 
Sabitha 
Ramamurthy 
v. 
R.B.S. 
Channabasavaradhya (2006) 10 SCC 581; Saroj Kumar 
Poddar v. State (NCT of Delhi) (2007) 3 SCC 693; N.K. 

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