The Supreme Court recently, in a Criminal Appeal challenging a common judgment and order passed by the High Court of Judicature at Madras whereby the High Court rejected the prayer of the Appellant to quash two Complaints in against her, in relation to offences under Section 138 read with Section 142 of the Negotiable Instruments Act (hereinafter referred to as ‘N.I Act’) before the XVIII Metropolitan Magistrate, Saidapet, Chennai, reiterated the settled position of law that, “for making a Director of a Company liable for the offences committed by the Company under Section 141 of the N.I. Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company.”

The Respondent before the Apex Court had filed two complaints under Section 190(i)(a) of Cr.P.C, for offences punishable under Section 138 & 142 of the N.I. Act, before the learned XVIII Metropolitan Magistrate, Saidapet, Chennai against three accused persons, firstly, a Company namely, Fibtel Telecom Solutions, arrayed as Accused No. 1; secondly, a Director and Authorized Signatory of the Company, namely, Manju Sukumaran Lalitha, arrayed as Accused No. 2 & and finally the Appellant before the Supreme Court, Susela Padmavathy Amma, being a Director of the said company, and was arrayed as Accused No. 3.

The Appellant approached the High Court under Section 482 Cr.P.C for quashing of the criminal complaints qua her, however, the High Court by virtue of the impugned order and judgment dismissed the Petition with a direction to the Trial Court to dispose the cases within a period of three months. 

Before the Supreme Court, the plea of the Appellant was that she is an aged-lady and was not involved in the day-to-day affairs of the Company, and that the Appellant was also not a signatory to the cheque in question. However, the Respondent controverted the arguments of the Appellant by submitting that the grounds raised are the defense of the accused/appellant and the same can only be raised at the stage of the trial and therefore, no interference is warranted in the appeal by the Supreme Court. 

The Court in order to decide the controversy relied on various previous judgments of the Apex Court wherein it has been settled that, “simply because a person is a director of the company, it does not necessarily mean that he fulfils the twin requirements of Section 34(1) of the said Act so as to make him liable. It has been held that a person cannot be made liable unless, at the material time, he was in-charge of and was also responsible to the company for the conduct of its business.” [State of Haryana vs. Brij Lal Mittal and others- (1998) 5 SCC 343]

The Court further observed that merely because a person is a director of a company, it is not necessary that he is aware about the day-to-day functioning of the company. The Court observed, “there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of day-to-day affairs of the company or responsible to the affairs of the company.”

Applying the settled legal position to the case at hand, the Court noted that the only allegation against the appellant in the Complaints is that the appellant and the accused No.2 had no intention to pay the dues that they owe to the complainant. However, there is no averments to the extent that the Appellant was in-charge of and responsible for the day-to-day affairs of the Company. Neither was it the case of the respondent that the appellant is either the Managing Director or the Joint Managing Director of the Company, in which case as the Court noted, “these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company”.

Therefore, the Court observed that the averments made are not sufficient to invoke the provisions of Section 141 of the N.I. Act qua the appellant, and hence, allowed the Appeal and quashed and set-aside the impugned order and judgment of the High Court, as also the Criminal Complaints before the Trial Court, qua the Appellant.