LI Network
Published on: October 12, 2023 at 12:21 IST
The Supreme Court has restated that merely managing a company’s affairs does not automatically make a person responsible for the company’s conduct or liable for its actions.
This reaffirmation came in response to an appeal against a High Court order related to a complaint filed under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (NI Act).
The appellant argued that the complaint against him should be dismissed because he had resigned from the partnership firm before the issuance of the check in question and because the complaint did not contain the necessary averments as required by Section 141(1) of the NI Act.
A two-judge Bench, Justice C.T. Ravikumar and Justice Sanjay Kumar, referred to a recent judgment in Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr., 2023 and reiterated that vicarious liability is only applicable when the conditions of Section 141(1) of the NI Act are met.
The court emphasized that merely managing a company’s affairs does not make one responsible for its conduct.
The court determined that the complaint against the appellant lacked the specific averments required by Section 141(1) of the Negotiable Instruments Act. Section 141(1) stipulates that only the person in charge of and responsible for the company’s business at the time the offense was committed can be deemed guilty and liable for punishment. The complaint did not specify that the appellant held such a role.
The court clarified that vicarious liability is only applicable when the accused person was in charge and responsible for the company’s business at the time of the offense. Since the complaint did not contain these essential averments regarding the appellant’s role, it failed to establish vicarious liability.
As a result, the court quashed the criminal complaint against the appellant, allowing the appeal without awarding any costs.
Case Title: Siby Thomas v. M/s. Somany Ceramics Ltd.