SABITHA RAMAMURTHY AND ANR. versus R.B.S. CHANNABASAVARADHA

Citation: [2006] SUPP. 6 S.C.R. 126 · Decided: 13-09-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
SABITHA RAMAMURTHY AND ANR. 
V. 
R.B.S. CHANNABASA V ARADHY A 
SEPTEMBER 13. 2006 
[S.B. SINHA AND DALVEER BHANDARI, JJ.] 
Negotiable Instruments Act, 1881-Sections 138 to 141-Dishonour of 
cheque issued on behalf of company-Complaint petition uls.138 not stating 
C that accused-directors were in charge of business of the company-liability 
of accused-directors under S.141-Held: Merely being a director of a company 
is not sufficient to make the accused liable under S.141-It is necessary to 
specifically aver that at the time of commission of offence, accused were in 
charge oj and responsible for the conduct of business of the company--
Liability-Vicarious liability. 
D 
The K Company had borrowed a sum of money from the respondent. 
Towards payment of the said loan, the appellants issued two cheques to 
the respondent on behalf of K Company which on presentation were 
dishonoured for insufficiency of funds. Respondent filed cpmplaint petition 
u/s. 138 of Negotiable Instruments Act, 1881. The processes were directed 
E to be issued for commission of an offence u/s. 138 of the Act. Appellants 
filed an application u/s. 482 CrPC praying for quashing of the processes 
issued against them in the said proceedings. High Court dismissed the 
application. Hence the present appeal. 
F 
Allowing the appeal, the Court 
HELD: I.I. 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. Although it is not necessary 
for the complainant to specifically reproduce the wordings of the section 
G 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, 
H 
126 
SABITHA RAMAMURTHY 1·. R.B.S. CHANNABASAVARADHYA 
J 27 
. 1956 is concerned only if the requisite statements, which are required to A 
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 of the statutory 
requirements would be insisted. 113-C-Fl 
1.2. The averments made in the complaint petitions do not meet the B 
said statutory requirements. The sworn statement made by the son of 
Respondent also does not contl!in any statement that Appellants were in 
charge of the business of the ·company. In a case where the court is 
required to issue summons which would put the accused to some sort of 
harassment, the court should ins!st strict compliance of the statutory C 
requirements. In terms of Section 200 of the Code of Criminal procedure, 
the complainant is bound to make statements on oath as to how the offence 
has been committed and how the accused persons are responsible therefor. 
In the event, ultimately, the prosecution is found to be frivolous or 
otherwise mala fide, the court may direct registration of case against the 
complainant for ma/a fide prosecution of the accused. The accused would D 
also be entitled to file a suit for damages. 1130-F-H; 131-AI 
2.1. 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. E .. 
Without this averment being made in a complaint, the requirements of 
Section 141 cannot be said to be satisfied. 1132-C-D) 
2.2. 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 F 
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. 1132-D-FI 
Monaben Ketanbhai Shah and Anr. v. State of Gujarat and Ors. (20041 
7 SCC 15; Katta Sujatha (Smt) v. Fertilizers & Chemicals Travancore Ltd. 
and Anr., 12002) 7 SCC 655; K.P.G. N
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