Calcutta HC: Mere Designation As Director Insufficient For Vicarious Liability Under NI Act

Vicarious criminal liability cannot be automatically fastened upon company directors for cheque dishonour unless the complaint specifically demonstrates their active role and conjunctive responsibility in the business. The Calcutta High Court has quashed proceedings against a director, ruling that general allegations lacking precise factual foundations regarding the execution of transactions or the signing of cheques fail the mandatory statutory threshold.

Justice Shampa Dutt (Paul) presided over the matter, considering a revisional application filed by a director of Credforce Asia Limited who was arraigned as an accused in a complaint filed under Section 138 and Section 141 of the Negotiable Instruments Act, 1881. The petitioner contended that he was targeted solely due to his designation, without any specific attribution of an overt act or responsibility for the conduct of the company's business at the relevant time.

The Requirement of Specific Averments for Vicarious Liability

Summarizing the main holding, the Court clarified that Section 141 of the Negotiable Instruments Act, 1881 creates a legal fiction of vicarious liability which must be strictly construed. The Court observed that for a director to be held liable, the complaint must contain clear, specific, and unambiguous averments regarding their role. Relying on Shaleen Khemani & Ors. Vs. The State of West Bengal & Anr. and Sunita Palita vs M/s. Panchami Stone Quarry ( "Criminal Appeal No…..of 2022 (arising out of SLP (Crl.) No. 10396 of 2019) on 1 August, 2022": 2022 CaseBase(SC) 949), the Court noted that a director is not deemed to be in charge of a company's affairs merely by virtue of their office.

The Court, in its reasoning, observed: "Every Director need not be and is not in fact, in charge of the business of the accused company. In absence of the specific role qua the participation of a director in the alleged transaction with the complainant, no director can be implicated by virtue of Section 141 of the NI Act."

Strict Construction of the Conjunctive Requirement under Section 141

The 'And' Test for Liability

The Court emphasized that the expressions "was in charge of" and "was responsible to the Company" in Section 141(1) of the Negotiable Instruments Act, 1881 must be read conjunctively. Referring to Ashok Shewakramani & Ors. vs. State of Andhra Pradesh & Anr. ( "2023 INSC 692": 2023 CaseBase(SC) 1023) and Pawan Kumar Goel v. State of U.P & Anr. ( "2022 (16) SCALE": 2022 CaseBase(SC) 109), the Court highlighted that the legislature's use of the word "and" makes both requirements cumulative. A mere statement that a director is managing day-to-day affairs is "neither here nor there" if it does not satisfy the higher threshold of being responsible for the specific conduct that led to the offence.

The Court has the following directions:

"The proceedings of Case No. CS/96388 of 2021 under Sections 138/141 of the Negotiable Instruments Act, 1881 pending before the Court of the Learned Metropolitan Magistrate, 11th Court, Calcutta, is quashed, in respect of the petitioner namely Sanjeeva Shukla @ Sanjiv Shukla."

Key Takeaways

Strict Pleading Mandate

Complaints must detail the specific 'how and why' a director was responsible for the transaction, moving beyond generic assertions of management.

Signatory Identification

Failure to identify the specific signatory of a dishonoured cheque in the complaint weakens the case for vicarious liability against non-signing directors.

Conjunctive Liability Rule

Courts must strictly interpret the 'and' in Section 141, requiring proof of both being 'in charge of' and 'responsible to' the company for its business conduct.

Ratio

Under Section 141 of the Negotiable Instruments Act, 1881, vicarious criminal liability of a director is not a deemed fiction arising from status alone; it requires specific factual averments in the complaint establishing that the director was, at the time of the offence, both in charge of and conjunctively responsible to the company for the conduct of its business.

Background:

The dispute originated from a complaint (Case No. CS/96388 of 2021) filed by Shruti Daruka against Credforce Asia Limited and its directors. The petitioner, Sanjeeva Shukla, challenged the proceedings before the High Court, arguing that the complaint was silent on his specific involvement in the issuance of the cheque or the underlying transaction. The Court found that the allegations were general in nature, merely stating the directors were engaged in managing day-to-day affairs without identifying who signed the cheque. Citing Siby Thomas V. Somany Ceramics Limited, Sunil Todi & Ors. V. State of Gujarat & Anr. ( "2021(14) SCALE": 2021 CaseBase(SC) 404), and N. Harihara Krishnan vs. J. Thomas ( "(2018) 13 SCC 663": 2017 CaseBase(SC) 1063), the Court concluded that allowing the prosecution to continue against the petitioner without foundational pleadings would constitute an abuse of process. Consequently, the High Court allowed the revisional application and quashed the proceedings specifically against the petitioner.

Case Details:
Case No.: CRR 2624 of 2024
Case Title: Sanjeeva Shukla @ Sanjiv Shukla Vs Shruti Daruka
Appearances:
For the Petitioner(s): Mr. Sandipan Ganguly, Sr. Adv., Ms. Priyanka Sarkar.
For the Respondent(s): None.

Source: 2026 CaseBase(CAL) 46