A) ABSTRACT / HEADNOTE

This case addresses the invocation of Section 138 read with Section 142 of the Negotiable Instruments Act, 1881, against a director of a company whose cheques were dishonored due to “payment stopped by drawer.” The Supreme Court considered whether vicarious liability could be imposed on the appellant, a director of the accused company, based on averments in the complaint. It emphasized that a person cannot be held liable merely for holding a directorial position unless specific allegations demonstrate their responsibility for the company’s day-to-day affairs. The court quashed the proceedings against the appellant, holding that the allegations lacked the necessary specifics to invoke Section 141 of the Act.

Keywords: Negotiable Instruments Act, vicarious liability, dishonor of cheque, in-charge of company, criminal proceedings.

B) CASE DETAILS

• Judgement Cause Title: Susela Padmavathy Amma v. M/S Bharti Airtel Limited
• Case Number: Criminal Appeal Nos. 1577-1578 of 2024
• Judgement Date: March 15, 2024
• Court: Supreme Court of India
• Quorum: Hon’ble Justices B.R. Gavai and Sandeep Mehta
• Author: Justice B.R. Gavai
• Citation: [2024] 3 S.C.R. 647 : 2024 INSC 206
• Legal Provisions Involved: Sections 138, 141, and 142 of the Negotiable Instruments Act, 1881; Section 482 of the Code of Criminal Procedure, 1973.
• Judgments Overruled by the Case: None explicitly mentioned.
• Law Subjects: Criminal Law, Corporate Law, Negotiable Instruments Law.

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appellant, a director of Fibtel Telecom Solutions, was implicated in two criminal complaints filed under the Negotiable Instruments Act. The complaints arose from dishonored cheques issued by the company, totaling ₹2.55 crores, given as part of its dues to M/S Bharti Airtel Limited. The appellant challenged the criminal proceedings against her on the grounds of lack of specific averments indicating her involvement in the company’s operational affairs.

D) FACTS OF THE CASE

1. M/S Bharti Airtel Limited provided telecom services to Fibtel Telecom Solutions under a service agreement, stipulating monthly payments.
2. Fibtel defaulted on payments, accumulating dues of ₹2.55 crores. Five post-dated cheques were issued by Fibtel, totaling ₹2.80 crores.
3. Upon presentation, all but one cheque were dishonored, with the reason “payment stopped by drawer.”
4. The complainant issued legal notices but received unsatisfactory responses, leading to two criminal complaints under Section 138 and Section 142 of the Negotiable Instruments Act.
5. The complaints named Fibtel as Accused No. 1, its director Manju Sukumaran Lalitha as Accused No. 2, and the appellant, another director, as Accused No. 3.
6. The appellant moved the High Court under Section 482 of the CrPC to quash the proceedings, which the High Court dismissed.

E) LEGAL ISSUES RAISED

1. Whether the appellant could be held vicariously liable under Section 141 of the Negotiable Instruments Act despite the absence of specific allegations of her involvement in the company’s operations.
2. Whether mere directorial status suffices to sustain criminal liability under the Act.

F) PETITIONER/APPELLANT’S ARGUMENTS

1. The appellant, a senior citizen, was not responsible for the company’s day-to-day affairs or operational decisions.
2. The complaint lacked specific averments detailing her role or responsibility in the alleged offense.
3. Section 141 requires clear allegations showing the accused’s involvement in the conduct of the company’s business.
4. Reliance was placed on:
   • State of Haryana v. Brij Lal Mittal (1998) 5 SCC 343
   • S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89
   • Ashoke Mal Bafna v. Upper India Steel Manufacturing Co. Ltd. (2018) 14 SCC 202.

G) RESPONDENT’S ARGUMENTS

1. The High Court’s dismissal of the quashing petition was justified as defenses should be raised during the trial.
2. The company owed substantial dues to the complainant, and as a director, the appellant was presumed to be in charge of its business.
3. The absence of specific allegations against the appellant did not warrant quashing at the preliminary stage.

H) JUDGEMENT

a. Ratio Decidendi

1. The court held that vicarious liability under Section 141 requires clear and specific averments demonstrating the accused’s role in the company’s business conduct.
2. Mere reproduction of statutory language without factual details is insufficient to establish liability.

b. Obiter Dicta

1. A director’s mere association with a company does not automatically entail criminal liability unless their role in the offense is explicitly stated.

c. Guidelines

1. Complaints under Section 141 must specifically state:
   • The accused’s role in managing the company’s operations.
   • Their involvement in the day-to-day conduct of the company’s business.
2. Vicarious liability cannot be presumed; it must be supported by factual allegations.

I) CONCLUSION & COMMENTS

The Supreme Court reaffirmed the necessity of specific averments to impose vicarious liability on directors under the Negotiable Instruments Act. The decision underscores the importance of protecting individuals from unwarranted prosecution based solely on their designation. This judgment serves as a crucial precedent in clarifying directors’ liabilities under criminal law.

J) REFERENCES

a. Important Cases Referred

1. State of Haryana v. Brij Lal Mittal (1998) 5 SCC 343.
2. S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89.
3. Ashoke Mal Bafna v. Upper India Steel Manufacturing Co. Ltd. (2018) 14 SCC 202.
4. Pooja Ravinder Devidasani v. State of Maharashtra (2014) 16 SCC 1.
5. National Small Industries Corp. v. Harmeet Singh Paintal (2010) 3 SCC 330.

b. Important Statutes Referred

1. Negotiable Instruments Act, 1881 – Sections 138, 141, 142.
2. Code of Criminal Procedure, 1973 – Section 482.