Landmark judgment emphasizes the necessity of direct nexus for vicarious liability under Negotiable Instruments Act
In a significant judgment passed on March 20, 2026, the Calcutta High Court, presided by Justice Uday Kumar, quashed criminal proceedings against Masud Tarif, a non-signatory director of M/s Amrit Feeds Ltd., accused in a cheque bounce case under Sections 138 and 141 of the Negotiable Instruments Act, 1881. The judgment underscores the importance of specific factual averments linking a director to the transaction in question as a jurisdictional prerequisite for vicarious liability.
The case originated from a commercial transaction in August 2013, where M/s Garvit Consultancy Services Pvt. Ltd., the complainant, extended a monetary accommodation to the accused company, M/s Amrit Feeds Ltd. Following a default in 2017, insolvency proceedings were initiated. A settlement agreement in February 2018 restructured the debt, leading to the issuance of post-dated cheques, including one that was dishonored due to insufficient funds.
Despite being a director, Masud Tarif was neither a signatory to the dishonored cheque nor involved in the settlement negotiations. The complaint against him was deemed "fatally barren" of jurisdictional facts necessary for vicarious liability under Section 141 of the Negotiable Instruments Act. Justice Kumar highlighted the absence of specific factual averments in the complaint linking Tarif to the day-to-day management of the company or the transaction, a substantive failure that breaks the chain of liability.
The Court cited precedents, including the landmark judgment in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, to emphasize that criminal liability cannot be a "game of chance" and must be supported by factual links. The judgment clarifies that a director’s mere designation does not establish liability, and vicarious liability must be confined to those directly involved in the transaction or settlement process.
Justice Kumar exercised inherent powers under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, to prevent an abuse of process of law, highlighting that procedural delay cannot validate a summoning order lacking jurisdictional competence. The proceedings against Masud Tarif were quashed, and he was discharged from his bail bonds, marking a pivotal development in ensuring justice for non-executive directors facing undue prosecution.
Bottom Line:
Quashing of proceedings against a non-signatory director under Negotiable Instruments Act, 1881 due to absence of specific factual averments linking the individual to the transaction, emphasizing that vicarious liability requires a direct nexus.
Statutory provision(s): Section 138, Section 141, Negotiable Instruments Act, 1881; Section 528, Bharatiya Nagarik Suraksha Sanhita, 2023
Masud Tarif v. State of West Bengal, (Calcutta) : Law Finder Doc id # 2869739
