K.S. MEHTA versus M/S MORGAN SECURITIES AND CREDITS PVT. LTD.

K.S. MEHTA versus M/S MORGAN SECURITIES AND CREDITS PVT. LTD.

The Appellants being non-executive directors who did not sign or issue the dishonoured cheques, and in the absence of specific averments in the complaints demonstrating that they were in charge of and responsible for the conduct of the company’s business at the relevant time, they cannot be held vicariously liable under Section 141 of the Negotiable Instruments Act; therefore the criminal proceedings against them are quashed.

Parties
Appellant: K.S. Mehta; Appellant: Basant Kumar Goswami; Respondent: M/s Morgan Securities and Credits Pvt. Ltd.
Jurisdiction
India
Judgment Date
03 March 2025
Procedural Posture
Criminal Appeal / Appeal Against High Court Order Dismissing Section 482 Cr PC Petitions Seeking Quashing of Criminal Proceedings Under Section 138 Read With Section 141 NI Act
Outcome
Appeals allowed; High Court judgment set aside; criminal proceedings quashed
Legal Topics
Director’s Liability Under Section 141 of NI Act, Vicarious Liability, Non Executive Director’s Liability
Criminal Procedure Negotiable Instruments Act Company Law Director’s Liability Under Section 141 of NI Act Vicarious Liability Non Executive Director’s Liability

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Parties

K.S. Mehta

Appellant

Basant Kumar Goswami

Appellant

M/s Morgan Securities and Credits Pvt. Ltd.

Respondent

Procedural Posture

Criminal Appeal / Appeal Against High Court Order Dismissing Section 482 Cr PC Petitions Seeking Quashing of Criminal Proceedings Under Section 138 Read With Section 141 NI Act

Legal Issues

  1. 1 Whether non-executive directors can be held vicariously liable under Section 141 of the Negotiable Instruments Act, 1881 in absence of specific allegations demonstrating they were in charge of and responsible for the conduct of the company’s business at the relevant time
  2. 2 Whether the complaints contained specific averments sufficient to fasten vicarious criminal liability on the Appellants under Section 141 NI Act

Ratio Decidendi

The Appellants being non-executive directors who did not sign or issue the dishonoured cheques, and in the absence of specific averments in the complaints demonstrating that they were in charge of and responsible for the conduct of the company’s business at the relevant time, they cannot be held vicariously liable under Section 141 of the Negotiable Instruments Act; therefore the criminal proceedings against them are quashed.

Court Disposition

Appeals allowed; High Court judgment set aside; criminal proceedings quashed

Orders

  • Impugned Judgment and Order dated 28.11.2023 of the High Court set aside
  • Criminal proceedings in Complaint Nos. 15858 of 2017 and 15857 of 2017 pending before the Court of Additional Chief Metropolitan Magistrate, New Delhi are quashed