The High Court at Calcutta has held that an individual cannot be prosecuted or held vicariously liable for the dishonour of a cheque under Section 141 of the Negotiable Instruments Act, 1881 merely by virtue of holding the office of a Director in an accused company. Deciding a revisional application, Justice Shampa Dutt (Paul) ruled that for a prosecution to proceed against a director under Section 138 read with Section 141 of the Negotiable Instruments Act, the complaint must contain clear, specific, and unambiguous averments demonstrating that the director was in charge of and responsible to the company for the conduct of its business at the material time. Holding that the complaint contained only general assertions without attributing any overt act to the petitioner or identifying who signed the dishonoured cheque, the High Court quashed the criminal proceedings against the director.
Background of the Case
The petitioner, Sanjeeva Shukla (also known as Sanjiv Shukla), approached the High Court under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash Complaint Case No. CS/104375 of 2021 under Sections 138 and 141 of the Negotiable Instruments Act, 1881, pending before the Metropolitan Magistrate, 11th Court, Calcutta.
The complaint was instituted by Aradhana Nirman LLP against Credforce Asia Limited (Accused No. 1) along with its three directors, including the petitioner. The petitioner was arraigned solely on account of his designation as a director. The complaint did not allege that the petitioner was in charge of and responsible for the conduct of the business at the relevant time, nor did it attribute any role to him in the underlying transaction or disclose which director drew or signed the cheque.
Arguments of the Parties
Appearing for the petitioner, Senior Advocate Mr. Sandipan Ganguly submitted that the complainant failed to satisfy the mandatory requirements under Section 141 of the Negotiable Instruments Act. He argued that Section 141 creates a legal fiction of vicarious criminal liability for a penal offence and must be strictly construed.
Counsel contended that the expressions “was in charge of” and “was responsible to the Company for the conduct of the business of the Company” employ the conjunctive word “and”, making both requirements cumulative. Counsel emphasized that unless a complaint specifically pleads how and in what manner a director was in charge of and responsible for the business, prosecution is legally unsustainable. He noted that the complaint was silent on the petitioner’s role in the company’s affairs, participation in the transaction, authorization or issuance of the cheque, or any overt act. In support, counsel relied on Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr., Siby Thomas v. Somany Ceramics Limited, and Rahul Tantia v. State of West Bengal.
Despite due service of notice, no one appeared on behalf of the opposite party, Aradhana Nirman LLP.
Court’s Analysis
Examining the complaint and statutory provisions, the High Court emphasized that vicarious criminal liability cannot be fastened automatically upon all directors merely by virtue of their designation.
The Court observed:
“For launching a prosecution against the Directors of a Company under Section 138 read with Section 141 of the NI Act, there has to be a specific allegation in the complaint in regard to the part played by them in the transaction in question. It is also laid down that the allegations has to be clear and unambiguous showing that the Directors were in charge of and responsible for the business of the Company. This was done to discourage frivolous litigation and to prevent abuse of the process of law.”
The Court further held:
“It is trite law that in a petition of complaint, the complainant is required to aver as to how and in what manner a director was in charge of the business of the accused company and was responsible for the conduct of the accused company’s business. 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.”
Upon perusing the complaint, the Court found only a general assertion that the three directors were engaged in managing the day-to-day affairs of the company. The Court highlighted that the cheque was vaguely alleged to have been issued “by accused persons”, observing:
“Nowhere in the petition of complaint has the complainant stated as to which of the directors/accused persons had signed the cheque.”
Relying on the Supreme Court’s ruling in N. Harihara Krishnan v. J. Thomas, the Court noted that disclosing the name of the person drawing the cheque is an essential factual allegation that a complaint must contain.
The Court analyzed several precedents governing vicarious liability under Section 141:
- Pawan Kumar Goel v. State of U.P. & Anr.: Holding that merely being a director is insufficient to attract liability under Section 141 as there is no deemed liability, unlike Managing Directors, Joint Managing Directors, or signatories who are directly responsible.
- Shaleen Khemani & Ors. v. The State of West Bengal & Anr.: Ruling that involvement cannot be inferred solely from holding a directorship without articulated overt acts in the complaint.
- Sunil Todi & Ors. v. State of Gujarat & Anr. (citing Sunil Bharti Mittal v. CBI and Aneeta Hada): Reaffirming that vicarious liability cannot be imputed to directors automatically in the absence of specific statutory compliance and active individual roles.
- Sunita Palita v. M/s. Panchami Stone Quarry: Reaffirming that impleading all directors on a boilerplate statement without specific role attribution fails to meet the test of Section 141.
- Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr.: Clarifying that the statutory phrases “was in charge of” and “was responsible to the company for the conduct of the business” cannot be read disjunctively.
Decision of the Court
The High Court concluded that the mandatory requirements under Section 141 of the Negotiable Instruments Act were entirely missing from the complaint.
The Court held:
“From the petition of complaint it is clear that the requirements under Section 141 of the Negotiable Instruments Act as laid down by the Supreme Court in Pawan Kumar Goel v. State of U.P & Anr. (Supra) (para 31) are totally absent in this case and allowing the proceedings to continue in respect of the petitioner in such circumstances, would clearly amount to abuse of the process of law.”
Accordingly, Justice Shampa Dutt (Paul) allowed the revisional application (CRR 2620 of 2024) and quashed the proceedings in Case No. CS/104375 of 2021 under Sections 138 and 141 of the Negotiable Instruments Act pending before the Metropolitan Magistrate, 11th Court, Calcutta, in respect of the petitioner, Sanjeeva Shukla @ Sanjiv Shukla.
Case Details
Case Title: Sanjeeva Shukla @ Sanjiv Shukla Vs Aradhana Nirman LLP
Case No.: CRR 2620 of 2024
Bench: Justice Shampa Dutt (Paul)
Date: 28.08.2026
