Relying on unimpeachable MCA records showing that petitioner Deepak Aggarwal was never a Director, Joint Managing Director, or officer of A2Z Waste Management (Ludhiana) Limited, the Punjab & Haryana High Court (Chandigarh Bench) has held that vicarious liability under Section 141 of the Negotiable Instruments Act, 1881 cannot be fastened by mere designation or association. The Court also issued prospective directions requiring every complainant to mandatorily annex the Corporate Identification Number and certified Form DIR-12 to complaints under Section 138/141 NI Act against corporate accused.
The Court explained that vicarious liability under Section 141 of the NI Act is person-specific and arises from being in charge of and responsible for the conduct of the business of the company at the time the offence was committed, and not merely from holding a designation or office in the company. The Court also said that a Managing Director or Joint Managing Director is deemed to be in charge of and responsible for the conduct of the business of the company by virtue of the office held, and no further specific averment is required in the complaint; however, for any other officer, the complaint must disclose the position, duties, and role in regard to the issue and dishonour of the cheque.
The complaint need not mechanically reproduce the exact phraseology of Section 141 if the substance of the allegations, read as a whole, discloses the factual basis for such liability, but the criminal liability under Section 141 cannot be imposed merely by association and the role attributable to each accused must be independently discernible, added the Court.
A Single Judge Bench of Justice Jasjit Singh Bedi examined Section 141 of the Negotiable Instruments Act, 1881, which creates vicarious liability for offences committed by companies, and noted that the liability of a person arises from being in charge of and responsible for the conduct of the business of the company at the relevant time, and not merely from holding a designation or office in the company.
The Court placed heavy reliance on the three-Judge Bench decision of the Supreme Court in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla [2005(4) RCR (Criminal) 141], which laid down that necessary averments must be contained in a complaint before a person can be subjected to criminal process, that merely being described as a director is not sufficient to satisfy Section 141, and that the Managing Director or Joint Managing Director would admittedly be in charge of the company and responsible for the conduct of its business by virtue of their office.
The Court also noted the recent Supreme Court decision in HDFC Bank Ltd. vs. State of Maharashtra [(2025) 9 SCC 653], which clarified that the complaint need not mechanically reproduce the exact phraseology of Section 141 if the substance of the allegations, read as a whole, discloses the factual basis for such liability, but the criminal liability under Section 141 is person-specific and cannot be imposed merely by association. On the question of directors who had resigned, the Court reiterated that a director who has not signed the cheque and had resigned from the company before the cheque was issued or dishonoured cannot be held liable, provided there is unimpeachable evidence of such resignation communicated to the statutory authorities.
Briefly, a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 was filed by Rajinder Earthmover Filling Station Pvt Ltd. against A2Z Waste Management (Ludhiana) Limited and others, alleging that the accused company had been awarded the Integrated Solid Waste Management project in Ludhiana City by the Ludhiana Municipal Corporation and had entered into an agreement dated May 25, 2013 with the complainant for collection and transport of Municipal Solid Wastes.
The complaint named eight accused, including the petitioner Deepak Aggarwal as accused No. 8, who was described as the Joint Managing Director of the accused company. It was alleged that cheque for Rs. 4.05 crores, drawn on Bank of India Ludhiana Branch and signed by accused Nos. 3 and 4 (the authorized signatories), was dishonoured, and that despite statutory notice, no payment was made. The complaint was initially filed at Dasuya, District Hoshiarpur, where a summoning order was passed against all accused. The complaint was subsequently returned for filing at Ludhiana, where a second summoning order summoned only the two signatories and dismissed the complaint qua the remaining accused, including the petitioner.
The complainant’s challenge to this order travelled through revision and a Section 482 petition, ultimately resulting in the High Court restoring the original summoning order against all accused. Parallel proceedings involving co-accused Amit Mittal and Manoj Gupta saw the Supreme Court ultimately restoring summoning against Amit Mittal while quashing proceedings against Manoj Gupta. The petitioner Deepak Aggarwal then filed the present petition under Section 482 CrPC seeking quashing of the complaint and summoning order qua himself, contending that he was never a Joint Managing Director, Director, employee, or authorized signatory of the accused company, and that he was in fact employed as Joint Managing Director in a separate legal entity, A2Z Green Waste Management Limited (later renamed Greeneffect Waste Management Limited), from April 01, 2013, to June 30, 2017.
The petitioner further submitted that the statutory legal notice was never served upon him and was addressed only to Amit Mittal as Chief Managing Director and to the two signatories of the cheque. The respondent-complainant argued that the petitioner’s case stood on the same footing as that of Amit Mittal, whose quashing petition had been dismissed up to the Supreme Court, and that the petitioner could not claim innocence at the pre-trial stage.
