Directors relieved from liability under Sections 138 and 141 of the Negotiable Instruments Act due to absence of company as party in complaints.
In a significant ruling, the Allahabad High Court, under Justice Brij Raj Singh, has quashed multiple criminal proceedings against directors and managing directors for cheque bounce cases due to the non-joinder of the company in the complaints. The judgment, delivered on March 11, 2026, pertains to several applications filed by Rajiv Gupta and Santosh Kumar Bajpayi, who were accused under Section 138 of the Negotiable Instruments Act, 1881.
The court observed that the vicarious liability under Sections 138 and 141 of the Act could not be imposed on directors or managing directors unless the company itself was made a party to the complaint. Justice Singh emphasized that the commission of an offence by the company is a prerequisite for attracting vicarious liability on its directors or managing directors.
The judgment referenced the Supreme Court's decision in Aneeta Hada v. Godfather Travels and Tours Private Ltd. (2012), reinforcing that both the company and the individuals responsible must be named as parties in complaints to establish liability. The court noted that the company, M/s Slim Care Herbal Product Pvt. Ltd., was not impleaded as an accused, violating the statutory requirements of Section 141 of the Act. Consequently, the complaints against Gupta and Bajpayi, in their personal capacities, could not be sustained.
The ruling affects several complaint cases, including those numbered 41 of 2012, 1109 of 2012, 28 of 2012, among others, which have been quashed. The court clarified that it remains open for the complainant to seek other legal remedies to recover the dues.
This decision underscores the importance of correctly impleading all necessary parties in corporate criminal liability cases under the Negotiable Instruments Act, aligning with established legal precedents to ensure due process.
Bottom Line:
Section 138 read with Section 141 of Negotiable Instruments Act - Vicarious liability cannot be imposed on directors or managing directors if the company is not made a party to the complaint.
Statutory provision(s):
Negotiable Instruments Act, 1881 - Sections 138, 141
Rajiv Gupta Complaint Case v. State of U.P, (Allahabad)(Lucknow) : Law Finder Doc id # 2864417
