Mere Involvement In Day-To-Day Business Activities Insufficient To Attract Vicarious Liability Under Section 141 NI Act; Delhi High Court
Sanchayita Lahkar
The High Court of Delhi, Single Bench of Justice Swarana Kanta Sharma, held that a bare allegation of involvement in the day-to-day business activities of a company falls short of the statutory threshold required to fasten vicarious liability under Section 141 of the Negotiable Instruments Act in cheque dishonour cases. The Court quashed proceedings against a person who had been summoned despite holding no office, designation, or employment in the accused company, finding the complaint devoid of specific averments establishing that he was in charge of and responsible for the conduct of the company's business.
The petition was filed seeking setting aside of an order passed by the Additional Sessions Judge, Karkardooma Courts, Delhi, which had dismissed a revision petition challenging the summoning order issued by the Metropolitan Magistrate in a complaint filed under Section 138 of the Negotiable Instruments Act, 1881. The complaint was instituted by the respondent alleging dishonour of cheque issued towards repayment of an investment.
According to the complaint, the respondent was induced to invest ₹6,00,000 in a company after representations were made regarding financial expertise and assured returns. The amount was allegedly invested partly in cash and partly through cheques. While a portion of the amount was returned, the remaining amount was not repaid despite repeated requests. Subsequently, a cheque for ₹4,00,000 was issued towards discharge of the liability. Upon presentation, the cheque was dishonoured twice with the remarks “Refer to Drawer”. A statutory notice demanding payment was issued, but the amount remained unpaid, leading to the filing of the complaint under Section 138 of the Negotiable Instruments Act.
The Magistrate issued summons against the accused persons, including the petitioner. The petitioner challenged the summoning order before the Sessions Court, which dismissed the revision petition. The petitioner contended before the High Court that he was neither the drawer nor the signatory of the cheque and was not a director, officer, or employee of the company, and therefore could not be made vicariously liable under Section 141 of the Negotiable Instruments Act.
The Court examined the scope of Sections 138 and 141 of the Negotiable Instruments Act and recorded that “Section 141 of the NI Act envisages vicarious liability and is divided into two distinct parts, i.e. sub-section (1) and sub-section (2), each operating in different factual scenarios.”
While referring to the principles governing liability in cases involving companies, the Court stated that “the guilt for the offence and the liability to be prosecuted and punished shall be extended to every person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of its business.”
The Court further recorded that “under the separate provision of sub-section (2), if it is proved that the offence was committed with the consent or connivance of or was attributable to the neglect on the part of any director, manager, secretary or other officer of the company, such person would also be deemed to be guilty for that offence.”
The judgment noted the settled legal position regarding necessary pleadings in a complaint invoking vicarious liability and stated that “it is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company.”
Referring to the averments in the complaint, the Court recorded that “while accused no. 2 has been described as the sole Director of accused no. 1-company, the only allegation against the petitioner is that he was ‘involved in the day-to-day business activities’ of the company and was ‘acting under the instructions of accused no. 2’.”
Upon examining the complaint as a whole, the Court stated that “the necessary averments to attract vicarious liability under Section 141(1) of the NI Act are conspicuously absent.”
The Court further recorded that “there is no specific assertion that the petitioner was, at the relevant time, in charge of and responsible for the conduct of the business of the accused company.”
It also noted that “the complaint itself indicates that the petitioner was ‘acting under the instructions of’ accused no. 2, who is admittedly the sole Director of the company.”
Considering the absence of any role or position attributed to the petitioner, the Court observed that “there is no averment, nor any material placed on record by the complainant, to indicate that the petitioner held any office or position whatsoever in the accused company, even as an employee.”
The Court further stated that “the petitioner’s alleged role in accompanying accused no. 2, inducing the complainant, or handing over the cheque… would not, by itself, be sufficient to attract liability under Section 141(1) of the NI Act.”
The Court directed that “the continuation of proceedings against the petitioner cannot be sustained. The complaint, insofar as it relates to the petitioner, is liable to be quashed. The present petition is therefore allowed, and the impugned summoning order and the complaint, insofar as they relate to the petitioner, are hereby quashed and set aside. This judgment however shall have no bearing on the merits of the case in respect of the other accused persons.”
Advocates Representing the Parties
For the Petitioners: Mr. A. Mishra, Mr. Ravi Pal, Mr. Sahil and Mr. Nidish Gupta, Advocates
For the Respondents: Mr. Mayank Mehandru, Ms. Charu Tandon, Mr. Raghav Tandon, Mr. Nikhil Kharaliya, Ms. Diksha Jaspal and Mr. Ashutosh Singh, Advocates
Case Title: Ram Kumar Pathak v. Shashi Devi & Ors.
Neutral Citation: 2026: DHC:1809
Case Number: CRL.M.C. 1143/2019
Bench: Justice Swarana Kanta Sharma
