Holding

A Deputy General Manager is not a person responsible to the company for the conduct of its business and, absent specific averments of consent, connivance or negligence, cannot be held liable under either clause of section 141 of the Negotiable Instruments Act.

Summary

The appellant filed complaints under section 138 of the Negotiable Instruments Act against a company and its officers, including the Deputy General Manager (first respondent), for dishonoured cheques. The trial court issued summons to all accused, but the Deputy General Manager sought quashing of the summons on the ground that he was not "in charge of and responsible to the company" as required by section 141 of the Act. The High Court quashed the summons, holding that the Deputy General Manager did not meet the statutory criteria for vicarious liability. On appeal, the Supreme Court examined the scope of section 141(1) and (2) and the interpretation of the Companies Act, concluding that a Deputy General Manager is not a person responsible to the company for the conduct of its business and that the complaint lacked specific averments of consent, connivance or negligence required under section 141(2). Consequently, the summons could not be sustained and the appeals were dismissed.

Issues considered

What is the meaning of "in charge of and responsible to the company for the conduct of the business of the company" under s.141(1) of the Negotiable Instruments Act?
Can a Deputy General Manager be held vicariously liable under s.141(1) of the Act?
Does the complaint satisfy the statutory requirement of averments for liability under s.141(2) (consent, connivance or negligence)?
How must penal statutes, particularly the Negotiable Instruments Act, be interpreted with respect to constructive vicarious liability?

Legislation cited

Code of Criminal Procedure, 1973s. 482
Companies Act, 1956s. 2, s. 291, s. 5
Negotiable Instruments Act, 1881s. 138, s. 141(1), s. 141(2)

Subjects

Negotiable Instruments ActSection 138Section 141Vicarious liabilityDeputy General ManagerCompanies ActStrict constructionCheque dishonourQuashing of summonsCriminal liability

Judgment

;
[2009] 9 S.C.R. 1144
1

A K.K. AHUJA "'-
v.
'111
V.K. VORA AND ANR.
._<.:--
(Criminal Appeal Nos.1130-31 of 2003)
JULY 6, 2009
B
[R.V. RAVEENDRAN AND DR. MUKUNDAKAM
SHARMA, JJ.]

Negotiable Instruments Act, 1881: ss.141(1) and (2), 138
c - Vicarious liability - Liability of Deputy General Manager of
the Company which issued the dishonoured cheque - Held:
A person is vicariously liable under sub-section (1) of s.141,
if he is responsible to the company for the conduct of the
business of the company and was also incharge of business
D of the company - Sub-section (2) of s.141 provides that t-
Director, Manager, Secretary or other officer though not in
charge of conduct of the company would be liabfe if offence
was committed in connivance or consent or was a result of
negligence on his part - Deputy General Manager is not a
E person responsible to the company for conduct of business
of company - Question whether he was incharge of the
business of the company or not becomes irrelevant Thus, he
cannot be made vicariously liable under s.141(1) - To make
him liable under s.141(2), necessary averments relating to
consent/connivance/negligence should be made - Since no
F
such averments were made in the complaint, there was no
error in the order quashing the summons against him -
Companies Act, s.291 - Interpretation of statutes - Liability
- Vicarious liability - Code of Criminal Procedure, 1973 -
s.482. ~.
G
Interpretation of statutes: Strict interpretation - Penal
statutes - Held:" To be construed "Strictly - Penal statutes
providing constructive vicarious liability to be construed much
more strictly- Negotiable Instruments Act, 1881 - s.138.
H 1144
K.K. AHUJA v. V.K. VORA AND ANR. 1145

The appellant filed a complaint under s.138 of A
Negotiable Instruments Act, 1881 against a company and
eight others including the first respondent. The
Magistrate directed issue of summons against all the
accused persons. The first respondent filed petitions for
quashing the proceedings against him on the ground that B
he was only a Deputy General Manager who was not in-
charge of the company.

The High Court quashed the orders summoning the
respondent holding that he was not a signatory to the· C
cheques nor was a party to the decision to allow the
cheques to be dishonoured. Aggrieved appellant filed
these appeals.

Dismissing the appeals, the Court
D
HELD: 1. The criminal liability for the offence by a -
COIJlpany under section 138 of the Negotiable
Instruments Act, 1881, is fastened vicariously on the
persons referred to in sub-section (1) of section 141 by
virtue of a legal fiction. Penal statutes are to be construed E
strictly. Penal statutes providing constructive vicarious
liability should be construed much more strictly. When
conditions are prescribed for extending such

- constructive criminal liability to others, courts will insist
upon strict literal compliance. There is no question of
inferential or implied compliance. Therefore, a specific F
averment complying with _the requirements of section 141
is imperative. [Para 11] [1159-F-H; 1160-A]

K. Srikanth Singh vs. North East Securities Ltd. 2007 (12)
SCC 788; Sabitha Ramamurthy vs. RBS G
Channabasavaradhya 2006 (10) SCC 581; Saroj Kumar
Poddar v State (NCT of Delhi) 2007 (3) SCC 693; SMS
Pharmaceuticals v. Neeta Bhalla 2007 (4) SCC 70; Everest
Advertising (P) Ltd. v. State, Govt. of NCT of Delhi (2007) 5
sec 54; N.K. Wahi vs. Shekhar Singh 2001 (9) sec 481; H
1146 SUPREME COURT REPORTS [2009) 9 S.C.R.

-f
A DCM Financial Services Ltd. vs. J. N. Sareen 2008 (8) SCC
1; Ramraj Singh vs. State of MP (2009 (5) SCALE 670; K. c
Srikanth Singh vs. North East Securities Ltd 2007 (12) SCC
788, relied on.
' c

2. Section 291 of the Companies Act provides that
B
subject to the provisions of that Act, the Board of
Directors of a company shall be entitled to exercise all
such powers, and to do all such acts and things, as the
company is authorised to exercise and do. A company
though a legal entity can act only through its Board of
c Directors. The settled position is that a Managing Director
is prima facie in· charge of and responsible Jor. the
company's business and affairs and can be prosecuted ..-
for offences by the company. But insofar as other
directors are concerned, they can be prosecuted only if
D they were in charge of and responsible for the conduct
~
of th. .e company's business. A combined reading of
Sections 5 and 291 of Companies Act, 1956 with the
definitions in clauses (24), (26), (30), (31), (45) of section
2 of that Act would show that the persons responsible
E to the company for the conduct of the business of the
company are: (a) the· managing director/s; (b) the whole-
time director/s; (c) the manager; (d) the secretary; (e) any -f
person in accordance with whose directions or
instructions the Board of directors of the company is
F accustomed to act; (f) any person charged by the Board
-
with the responsibility of complying with that provision
(and who has given his consent in that behalf to the
Board.); and (g) where any company does not have any
of the officers specified in clauses (a) to (c), any director
G or directors who may be specified by the Board in this
behalf or where no director is so specified, all the
directors. It follows that other employees of the company,
cannot be said to be persons who are responsible to the
--
company, for the conduct of the business of the.
H
K.K. AHUJA v. V.K. VORA AND ANR. 1147

company. [Para 14] (1161-A-H; 1162-A-B] A
3.1. The words "every person who, at the time of the
offence was committed, was in charge of, and was
responsible for the conduct of the business of the
company" occurs not only in section 141(1) of the Act but
8
in several enactments dealing with offences by
companies. But neither section 141(1) of the Act, nor the
pari materia provisions in other enactments give any
indication as to who are the persons responsible to the
company, for the conduct of the business of the
company. Section 141 uses the words "was in charge of, C
and was responsible to the company for the conduct of
;.._1...
the business of the company". It is evident that a person
who can be made vicariously liable under sub-section (1)
of Section 141 is a person who is responsible to the '
company for the conduct of the business of the company b
and in addition is also in charge of the business of the
company. There may be many directors and secretaries
who are not in charge of the business of the company at
all. If a person does not meet the first requirement, that
·- is being a person who is responsible to the company for E
the conduct of the business of the company, the question
,.,.
-( ~ of his meeting the second requirement (being a person
' in charge of the business of the company), or the
-( question of such person being liable under sub-section
·,~
(1) of section 141 would not arise. Therefore, the averment f
in a complaint that an accused is a director and that he
is in charge of and is responsible to the company for the
conduct of the business of the company, duly affirmed
in the sworn statement, may be sufficient for the purpose
of issuing summons to him. But if the accused is not one d3
of the persons who falls under the category of 'persons
who are responsible to the company for the conduct of
the business of the company', then merely by stating that
'he was in charge of the business of the company' or by
stating that 'he was in charge of the day to day H
..
i

.,,;
1148 SUPREME COURT REPORTS [2009) 9 S.C.R. '

1
A management of the company' or by stating that he was
in charge. of, and was responsible to the company for the """"
conduct of the business of the company', he cannot be
made vicariously liable under section 141(1) of the Act.
[Paras 14, 15, 16 and 17] [1160-E-H; 1161-A; 1162-8-C, G-
B H; 1163-8-D]
Girdhari Lal Gupta v. D.N. M_ehta (1971) 3 SCC 189;
State of Kamataka v. Pratap Chand (1981) 2 SCC 335 and t
Katta Sujatha vs. Fertilizer & Chemicals Travancore Ltd.
(2002) 7 sec 655, relie~ on.
c
3.2. Sub-section (2) of section 141 provides that a
Director, Manager, Secretary or other officer, though not _,.:
in charge of the conduct of the business of the company
would be liable if the offence was committed. with his
D consent or connivance or if the offence was a result of f
any negligence on his part. The liability of persons
. mentioned in sub-section (2) is not on account of any
·1egal fiction but on account of the specific part played ....
c.onsent and connivance or negligence. Thus, even an
E officer who was not in charge of and was responsible to ~·

the company for the conduct of the business of the
company can be made liable under sub-section (2) of
-f ~
Section 141. [Paras 12 and 18] (1160-8-C]
4. If a mere reproduction of the wording of section
F 141(1) in the complaint is sufficient to make a person
liable to face prosecution, virtually every officer/employee
of a company without exception could be impleaded as
accused by merely making an averment that at the time
when the offence was committed they were in charge of '
G and were responsible to the company for the conduct arid t
.._
business of the company. This would mean that if a
company had 100 branches and the cheque issued from
one branch was dishonoured, the officers of all the 100
branches could be made accused by simply making an
H allegation that they we_re in charge of and were
K.K. AHUJA v. V.K. VORA AND ANR. 1149
"'
\- responsible to the company for the conduct of the A
business of the company. That would be absurd and not
intended under the Act. As the trauma, harassment and
hardship of a criminal proceedings in such cases, may
be more serious than the ultimate punishment, it is not
-~

.
J·
proper to subject all and sundry to be impleaded as B
accused in a complaint against a company, even when
the requirements of section 138 read and section 141 of
' ~ the Act are not fulfilled. [Para 21] [1165-C-G]

. 5. A Deputy General Manger is not a person who is
responsible to the company for the conduct of the
business of the company. He does not fall under any of
c
the categories (a) to (g) listed in section 5 of the
,/ Companies Act. Therefore the question whether he was
in charge of the business of the company or not, is
irrelevant. He cannot be made vicariously liable under. D
Section 141(1) of the Act. If he has to be made liable
under Section 141(2), the necessary averments relating
to consent/connivance/negligence should have been
f
made. In this case, no such averment is made. Hence the
~
first respondent, who was the Deputy ·General Manger, E
could not be prosecuted either under sub-section (1) or
,. under sub_-section (2) of Section 141 of the Act. There was
no error/infirmity in the order quashing the summons as
·- against the first respondent who was the Deputy General
Manager of the company which issued the dishonoured F
cheque. [Para 23] (1165-G-H; 1166-A-D]

Case Law Reference:
2007'(12) sec 788 relied on Para 4
G
-t 2006 (10) sec 581 relied on Para 7
.......
' 2001 (3) sec 693 relied on Para 8
·:
2001 (4) sec 10 relied on Para 9
"', H
~
SUPREME COURT REPORTS [2009] 9 $.C.R.
,_
1150
-
"
)

A (2001) 5 sec 54 relied on Para 9 i ~

2001 (9) sec 481 relied on Para 9
·"""',
2008 (8) sec 1 relied on Para 9
2009 (5) SCALE 670 relied on Para 9
B
r
2001 (12) sec 788 relied on Para 11 )..
~-

(1971) 3 sec 189 relied on Para 15 I

t ,-
k

(1981) 2 sec 335 relied on Para 15 '
c (2002) 1 sec 655 relied on Para 15 ...."
CRIMINAL.APPELLATE JURISDICTION: Criminal Appeal
Nos. 1130-1131 of 2003. ;lo~
.,,,
'
D From the Judgment & Order dated 10.10.2002 of the High
Court of Judicature of Delhi at New Delhi in Crl. Misc. Main Nos.
1616 and 1617 of 2002.

Rakesh Malhotra, Bipin K. Jha and Shekhar Prit Jha for
.the Appellants.
E :i
S.K. Verma (NP) for the Respondents.

The Judgment of the Court was delivered by -+
. R. v: RAVEENORAN, J. 1. The question as to who- can _.,.,,
F be said to .be, persons "in-charge of, and was responsible to
.__
the company for the conduct of the business of the company"
referred to in section 141 of the Negotiable Instruments Act, I'-
1881 (for short 'the Act') arises for consideration in this appeal r
by special leave by a complainant.
G
2. The appellant filed two complaints (Crl. Comp.No.58/ + _ J_
2001 and 59/2001) in the Court of the Metropolitan Magistrate,
Delhi, against Mis. Motorol Speciality Oil~ Ltd. ('the Company'
for short) and eight others under section 138 of the Act. The
H
K.K. AHUJA v. V.K. VORA AND ANR. 1151
[R.V. RAVEENDRAN, J.]

first complaint was in regard to dishonour of five cheques (each A
for Rs.5,00,000/-, all dated 28.2.2001). The second complaint
was in regard to dishonour of three cheques (for Rs.3 lakhs, 3
lakhs and 1O lakhs dated 31.10.2000, 30.11.2000 and
20.12.2000 respectively). The cheques were alleged to have
been drawn in favour of the appellant's proprietary concern (M/ B
s Delhi Paints & Oil Traders) by the company represented by
its Chairman. In the said complaints, the appellant had
impleaded nine persons as accused, namely, the company (A-
1), its Chairman (A-2), four Directors (A-3 to A-6) as also its
Vice-President (Finance), General Manager and Deputy c
General Manager (A-7, A-8 and A-9 respectively). In the
complaint the complainant averred that "at the time of the
commission of offence, accused 2 to 9 were in-charge of and
responsible for the conduct of day to day business of accused
No. 1" and that therefore they were deemed to be guilty of
0
offence under section 138 read with section 141 of the Act and
~
section 420 of the Indian Penal Code. The appellant also
alleged that respondents 2 to 9 were directly and actively
involved in the financial dealings of the company and that the
accused had failed to make payment of the cheques which
-..
,

were dishonoured. In the pre-summoning evidence, the E
appellant reiterated that accused 2 to 9 were responsible for
the conduct of day to day business of first accused company
~
at the time of commission of offence. The learned Magistrate
by order dated 3.10.2001 directed issue of summons to all the
accused. F

3. Accused no. 9 (first respondent herein) filed two
petitions under section 482 Cr.P .C. for quashing the
proceedings against him on the ground that as "Deputy General
Manager", he was not "in-charge of and was responsible to the G
... + company for the conduct of the business of the company". He
also contended that merely stating that he was directly and
actively involved in the financial dealings of the accused or w~s
responsible for the conduct of day to day. business would not
'• H
1152 SUPREME COURT REPORTS (2009) 9 S.C.R.

A be sufficient to fasten criminal liability on him. He submitted that 1
neither the complaint nor the sworn statement gave any
particulars of the part played by him or part attributed to him in
the alleged offence. At the hearing before the High Court, the
Learned counsel for the appellant-complainant conceded that
.s details as to how the first respondent could be said to be "in
charge of, and was responsible to the company for the conduct
of the business of the company" were not given in the complaint
or the statement on oath. It was also conceded that the t
averments necessary to make out an offence under section 420
IPC were not contained in the complaint. The High Court by
c order dated 10.10.2002 allowed the said petitions and quashed
the orders summoning the first respondent on the ground that
he was not a signatory to the cheques nor was a party to the .....
decision to allow the cheques to be dishonoured. The said
order is under challenge.
D
4. The appellant contends that having regard to the f..
speGific averment in the complaint that the accused 2 to 9 were
in charge of and responsible for the conduct of day to day
business of the company, the order summoning the first
E respondent could not have been quashed under section 482
Cr.P.C. It is also submitted that at the stage of summoning the
accused, when evidence was yet to be led by the parties, the
High Court committed an error in quashing the order ~

summoning the first respondent, on the basis of an unwarranted
F assumption that the first respondent was not responsible for or
involved in the conduct of the business of the comp.any. ,~
Reliance is placed on the decision of this Court in S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. (2005 (8) SCC
89 for short 'SMS Pharma (I)').
•....
G 5. Section 141 of the Act deals with offences by
;,

companies. Relevant portions of the said section are extracted .. _.:.-.-

below:

H
K.K. AHUJA v. V.K. VORA AND ANR. 1153
[R.V. RAVEENDRAN, J.]
\ "141. Offences by companies.-(1) If the person A
committing an offence under section 138 is a company,
every person who, at the time the offence was committed,
was in chtrge of, and was responsible to the company
for the conduct of the business of the company, as well
as the company, shall be deemed to be guilty of the B
offence and shall be liable to be proceeded against and
punished accordingly:
-1
xxxxx
(2) Notwithstanding anything contained in sub-section (1), c
where any offence under this Act has been committed by
a company and it is proved that· the offence has been
committed with the consent or connivance of, or is
attributable to, any neglect on the part of, any director,
manager, secretary or other officer of the company, such D
director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to
be proceeded against and punished accordingly."

Explanation - For the purposes of this section, -
E
(a) "company means any body corporate and includes a
firm or other association of individuals; and
"
(b) "director" in relation to a firm, means a partner in the
firm. F

6. A three-Judge Bench of this Court considered the
scope of section 141 of the Act in SMS Pharma (I) and held
that it is necessary to specifically aver in a complaint under
Sections 138 and 141 of the Act, that at the time when the
offence was committed, the person accused was in charge of,
G
and responsible for the conduct of business of the company
and that in the absence of such averment, section 141 cannot
be invoked. This Court held:

"What is required is that the persons who are sought to H
\-
'

t
1154 SUPREME COURT REPORTS [2009] 9 S.C.R.
,,

A be made criminally liable under Section 141 should be at 1
the time the offence was committed, in charge of and
responsible to the company for the conduct of the business
of the company. Every person connected with the
company shall not fall within the ambit of the provision.
B It is only those persons who were in charge of and ~
responsible for conduct of business of the company at ~
the time of commission of an offence, who will be liable ~
for criminal action. It follows from this that if a director of ·
a Company w.ho was not in charge of and was not
responsible for the conduct of the business of the company
c at the relevant time, will not be liable under the provision.
The liability arises from being in charge of and
responsible for conduct of business of the company af
the relevant time when the offence was committed and
not on the basis of merely holding a designation or office
D
in a company. Conversely, a person not holding any office
or designation in a Company may be liable if he satisfies ~

the main requirement of being in charge of and responsible
for conduct of business of a Company at the relevant time.
Liability depends on the role one plays in the affairs of a
E Company and not on designation or status. If being a
Director or Manager or Secretary was enough to cast
criminal liability, the Section would have said so. Instead
~
of "every person" the section would have said "every
Director, Manager or _secretary in a Company is
F liable" .... etc. The legislature is aware that it is a case of
criminal liability which means serious consequences so far ..
as the person sought to be made liable is concerned. '
Therefore, only persons who can be said to be connected
with the commission of a crime at the relevant time have
G been subjected to action."

"To sum up, there is almost unanimous judicial opinion that
necessary averments ought to be contained in a complaint
b~fore a person can be subjected to criminal process. A
liability under section 141 of the Act is sought to be
H
1156 SUPREME COURT REPORTS [2009] 9 S.C.R.

A to make him liable.

(iii) Director: The fact that a person is a director of a
company is not by itself sufficient to make him liable under
Section 141 of the Act. A director in a company. cannot
be deemed to be in charge of and responsible to the
B
company for the conduct of its business. The requirement
of Section 141 is that the person sought to be made liable
should be in charge of and responsible for the conduct of
the business of the company at the relevant time. This has
to be averred, as there is no deemed liability upon a
c director.
\
7. In Sabitha Ramamurthy vs. RBS
Channabasavaradhya - 2006 (10} SCC 581, this Court re-
stated the requirements of section 141 of Act thus, in the context
o of a petition for quashing the process under Sec.482 Cr PC:

"It may be true that it is not necessary for the complainant
to specifically reproduce the wordings of the section but
what is required is a clear statement of fact so as to
enable the court to arrive at a prima facie opinion that the
E accused are vicariously liable. Section 141 raises a legal
fiction.By reason of the said provision, a person although
is not personally liable for commission of such an
offence would be vicariously liable therefor. Such
vicarious liability can be inferred so far as a company
F registered or incorporated under the Companies Act, 1956
is concerned only if. the requisite statements, which are
required to be averred in the complaint petition, are made
so as to make the accused therein vicariously liable for the
offence committed by the company. Before a person can
G be made vicariously liable, strict compliance of the
statutory requirements would be insisted ........... In a case
where the court is required to issue summons which
would put the accused to some sort of harassment, the
court should insist strict compliance with the statutory
H
K.K. AHUJA v. V.K. VORA AND ANR. 1157
[R.V. RAVEENDRAN, J.]

requirements." A

[emphasis supplied]

8. In Saroj Kumar Poddar v State (NCT of Delhi) - 2007
(3) sec 693, while dealing with an appeal against the refusal
to quash the order taking cognizance, by an Ex-Director who B
had resigned from the Board prior to the date of issuance of
the cheque, this Court held that making some bald averment
was not sufficient. In that case, the complaint contained the
!!!!f' following averments:
c
"That Accused 1 is a public limited company incorporated
and registered under the Companies Act, 1956, and
Accused 2 to 8 are/were its Directors at the relevant time
and the said Company is managed by the Board of
Directors and they are responsible for and in charge of the D
\
conduct and business of the Company, Accused 1.
However, cheques referred to in the complaint have been
signed by Accused 3 and 8 for and on behalf of Accused
1 Company."

In spite of the averment that accused were Directors at the E
relevant time and were responsible for and in charge of the
conduct of the business of the company, this Court held that
allegations in the complaint, even if taken to be correct in their
entirety, did not disclose any offence by the appellant, on the
following reasoning : F
"Apart from the Company and the appellant, as noticed
hereinbefore, the Man'9ing Director and all other Directors
were also made accused. The appellant did not issue any
cheque. He, as noticed hereinbefore, had resigned from G
the Directorship of the Company. It may be true that as to
exactly on what date the said resignation was accepted
by the Company is not_ known, but, even otherwise, there
is no averment in the complaint petitions as to how and
in what manner the appellant was responsible for the
H
1158 SUPREME COURT REPORTS (2009) 9 S.C.R.

A conduct of the business of the Company or otherwise
responsible to it in regard to its functioning. He had not
issued any cheque. How he is responsible for dishonour
of the cheque has not been stated. The allegations made
in paragraph 3, thus, in our opinion do not satisfy the
B requirements of Section 141 of the Act."

[emphasis supplied]
~
9. In two subsequent.decisions - SMS Pharmaceuticals v.
Neeta Bhalla - 2007 (4) SCC 70 [for short 'SMS Pharma (11)1
c and Everest Advertising (P) Ltd. v. State, Govt. of NCT of Delhi
- 2007 (5) sec 54, relating to complaints against 'Directors
of a company, the very same two-Judge Bench which decided
Saroj Kumar Poddar, clarified that the observations therein that
'the complaint should contain averments as to how and in what
D manner the accused was responsible for the conduct of the
business of the company, or otherwise responsible for its
functioning' were with ref~rence to the particular facts of that
case and should not be considered as a general proposition
of law. But latter decisions dealing with liability of directors -
E N. K. Wahi vs.· Shekhar Singh - 2007 (9) SCC 481, DCM
Financial Services Ltd. vs. J. N. Sareen - 2008 (8) SCC 1,
and Ramraj Singh vs. State of MP (a decision of a Bench of
f
three Judges) - 2009 (5) $CALE 670, have reiterated the
principle laid down in Saroj Kumar Poddar. The prevailing trend
F appears to require the complainant to state how a Director who
is sought to be made an accused, was in charge of the
business of the company, as every director need not be and is
not in charge of the business of the company. If that is the
position in regard to a director, it is needless to emphasise that
in the case of non-director officers, there is all the more the
G
need to state what his part is with regard to conduct of business
of the company and how and in what manner he is liable.
'
10. Having regard to section 141, when a cheque isst!ed
by a company (incorporated under the Companies Act, 1956)
H is dishonoured, in addition to the company, the following
K.K. AHUJA v. V.K. VORA AND ANR. 1159
[R.V. RAVEENDRAN, J.]

persons are deemed to be guilty of the offence and shall be A
liable to be proceeded against and punished :

(i) every person who at the time the offence was
committed~ was in charge of and was responsible to the
company for the conduct of the business of the company; B
(ii) any Director, Manager, Secretary or other officer of the
company with whose consent and connivance, the offence
under section 138 has been committed; and

(iii) any Director, Manager, Secretary or other officer of the c
company whose negligence resulted in the offence under
section 138 of the Act, being committed by the company.
While liability of persons in the first category arises under sub-
0
section (1) of Section 141, the liability of persons mentioned
\ D
in categories (ii) and (iii) arises under sub-section (2). The
scheme of the Act, therefore is, that a person who is responsible
to the·(:ompany for the conduct of the business of the company
and who is in charge of business of the company is vicariously
. liable by reason only of his fulfilling the requirements of sub-
section (1 ). But if the person responsible to the company for E
the conduct of business of the company, was not in charge of
..... the conduct of the business of the company, then he can be
made liable only if the offence was committed with his consent
or connivance or as a result of his negligence.
F
11. The criminal liability for the offence by a company
under section 138, is fastened vicariously on the persons
referred to in sub-section (1) of section 141 by virtue of a legal
fiction. Penal statutes are to be construed strictly. Penal statutes
)
providing constructive vicarious liability should be construed G
much more strictly. When conditions are prescribed for
extending such constructive criminal liability to others, courts will
insist upon strict literal compliance. There is no question of
inferential or implied compliance. Therefore, a specific
averment complying with the requirements of section 141 is
H
1160 SUPREME COURT REPORTS [2009] 9 S.C.R.

A imperative. As pointed out in K. Srikanth Singh vs. North East
Securities Ltd - 2007 (12) SCC 788, the mere fact that at
some point of time, an officer of a company had played some
role in the financial affairs of the company, will not be sufficient
to attract the constructive liability under section 141 of the Act.
B
12. Sub-section (2) of section 141 provides that a Director,
Manager, Secretary or other officer, though not in charge of the
conduct of the business of the company will be liable if the ~-

offence had been committed with his consent or connivance or
if the offence was a result of any negligence on his part. The
c liability of persons mentioned in sub-section (2) is not on '
)
account of any legal fiction but on account of the specific part
played - consent and connivance or negligence. If a person is
to be made liable under sub-section (2) of section 141, then it
is necessary to aver consent and connivance, or negligence on
D his part.

13. This takes us to the next question under _sub-section
(1) of section 141, as to (i) who are the persons who are
responsible to the company for the conduct of the business of
E the company, and (ii) who could be said to be in charge and
was responsible to the company for the conduct of the business
of the company.
....

14. The words "every person who, at the time of the
offence was committed, was in charge of, and was responsible
F for the conduct of the business of the company" occurs not
only in section 141(1) of the Act but in several enactments
dealing with offences by companies, to mention a few - Section
278 B of the Income Tax Act, 1961, Section 22C of Minimum
Wages Act, 1948, Section 86A o"f the Employees State
G Insurance Act, 1948, Section 14A of Employees Provident
Fund and Miscellaneous Provisions Act, 1952, Section 29 of
Payment of Bonus Act, 1965, Section 40 of The Air (Prevention
and Control of Pollution) Act, 1981 and section 47 of Water
(Prevention and Control of Pollution) Act; 1974. But neither
H section 141 ( 1) of the Act, nor the pari materia provisions in
K.K. AHUJA v. V.K. VORA AND ANR. 1161
[RV. RAVEENDRAN, J.]

"' other enactments give any indication as to who are the persons A
#--
responsible to the company, for the conduct of the business of
the company. Therefore, we will have to fall back upon the
provisions of Companies Act, 1956 which is the law relating to
and regulating companies. Section 291 of the said Act provides
that subject to the provisions of that Act, the Board of Directors B
of a company shall be entitled to exercise all such powers, and
to do all such acts and things, as the company is authorised to
exercise and do. A company though a legal entity can act only
through its Board of Directors. The settled position is that a
Managing Director is prima facie in charge of and responsible c
for the company's business and affairs and can be prosecuted
for offences by the company. But insofar as other directors are
.... concerned, they can be prosecuted only if they were in charge
of and responsible for the conduct of the company's business.
A combined reading of Sections 5 and 291 of Companies Act,
D
1956 with the definitions in clauses (24), (26), (30), (31), (45)
of section 2 of that Act would show that the following persons
are considered to be the persons who are responsible to the
. company for the conduct of the business of the company : -

(a) the managing director/s; E

(b) the whole-time director/s;
""
....... (c) the manager;

(d) the secretary; F

(e) any person in accordance with whose directions or
instructions the Board of directors of the company is
accustomed to act;

... (f) any person charged by the Board with the responsibility G

• of complying with that provision (and who has given his
consent in that behalf to the Board); and

(g) where any company does not have any of the officers
specified in clauses (a) to (c), any director or directors who H
-1162 SUPREME COURT REPORTS [2009] 9 S.C.R.

A may be specified by the Board in this behalf or where no
director is so specified, all the directors.

It follows that other employees of the company, cannot be said
--
to be persons who are responsible to the company, for the
condL:ct of the business of the company.
B
15. Section 141 uses the words "was in charge of, and was
responsible to the company for the conduct of the business of
the company". It is evident that a person who can be ·made
vicariously liable under sub-section (1) of Section 141 is a
c person who is responsible to the company for the conduct of
the business of the company and in addition is also in charge
of the business of the company. There may be many directors :"'
and secretaries who are not in charge of the business of the
company at all. The meaning of the words "person in charge
D of the business of the company" was considered by this Court
~·
in Girdhari Lal Gupta v. D.N. Mehta [1971 (3) SCC 189]
followed in State of Kamataka v. Pratap Chand [1981 (2) SCC
335] and Katta Sujatha vs. Fertiliser & Chemicals Travancore
Ltd. [2002 (7) SCC 655]. This Court held that the words refer
E to.a person who is in overall control of the day to day business
of the company. This Court pointed out that a person may be
a director and thus belongs to the group of persons making the
policy followed by the company, but yet may not be in charge t'

of the business of the company; that a person may be a j,A

F Manager who is in charge of the business but may not be in
overall charge of the business; and that a person may be an
officer who may be in charge of only some part of the business.

16. Therefore, if a person does not meet the first
requirement, that is being a person who is responsible to the
G company for the conduct of the business of the company,
neither the question of his meeting the second requirement
(being a person in charge of the business of the company), nor
._
,.
the question of such person being liable under sub-section (1)
of section 141 does not arise. To put it differently, to be
.H vicariously liable under sub-section (1) of Section 141, a person -
K.K. AHUJA v. V.K. VORA AND ANR. 1163
[R.V. RAVEENDRAN, J.]
should fulfill the 'legal requirement' of being a person in law A
..... (under the statute governing companies) responsible to the
company for the conduct of the business of the company and
also fulfill the 'factual requirement' of being a person in charge
of the business of the company.

17. Therefore, the averment in a complaint that an accused B
is a director and that he is in charge of and is responsible to
the company for the conduct of the business of the company,
duly affirmed in the sworn statement, may be sufficient for the
purpose of issuing summons to him. But if the accused is not
one of the persons who falls under the category of 'persons who c
are responsible to the company for the conduct of the business
of the company' (listed in para 14 above), then merely by stating
that 'he was in charge of the business of the company' or by"
stating that 'he was in charge of the day to day management
of the company' or by stating that he was in charge of, and was D
responsible to the company for the conduct of the business of
the company', he cannot be made vicariously liable under
section 141(1) of the Act.
18. It should, however, be kept in view that even an officer E
who was not in charge of and was ·responsible to the company
for the conduct of the business of the·company can be made
liable under sub-section (2) of Section 141. For making a
A
~- person liable under Section 141(2), the mechanical repetition
of the requirements under Section 141(1) will be of no
F
assistance, but there should be necessary averments in the
complaint as to how and in what manner the accused was guilty
of consent and connivance or negligence and therefore,
responsible under sub-section (2) of section 141 of the Act.

19. Another aspect that requires to be noticed is that only G
.. I
,.(

a Director, Manager, Secretary or other officer can be made
liable under sub-section (2) of section 141. But under sub-
section (1) of section 141, it is theoretically possible to make
even a person who is not a director or officer, liable, as for
"' example, a person falling under category (e) and (f) of section H
1164 SUPREME COURT REPORTS [2009) 9 S.C.R.

7
A 5 of Companies Act, 1956. When in SMS Pharma (I), this Court
observed that 'conversely, a person not holding any office or ....
designation in a company may be liable if he satisfies the
requirement of being in charge of and responsible for conduct
of the business of the company', this Court obviously had in
B mind, persons described in clauses (e) and (f) of section 5 of
Companies Act. Be that as it may.

20. The position under section 141 of the Act can be t
summarized thus :

c (i) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an averment
in the complaint that he is in charge of, and is responsible
to the company, for the conduct of the business of the
company. lt,is sufficient if an averment is made that the
-
D accused was the Managing Director or Joint Managing
Director at the relevant time. This is because the prefix
'Managing' to the word 'Director' makes it clear that they
were in charge of and are responsible to the company, for
the conduct of the business of the company.
E
(ii) In the case of a director or an officer of the company
who signed the cheque on behalf of the company, there is
no need to make a specific averment that he was in \-'
charge of and was responsible to the company, for the .~.
conduct of the business of the company or make any
F specific allegation about consent, connivance or
negligence. The very fact that the dishonoured cheque was
signed by him on behalf of the company, would give rise
to responsibility under sub-section (2) of Section 141.
I
G (iii) In the case of a Director, Secretary or Manager (as
defined in Sec. 2(24) of the Companies Act) or a person
referred to in clauses (e) and (f) of section 5 of Companies
Act, an averment in the complaint that he was in charge
~

-
of, and was responsible to the company, for the conduct
H of the business of the company is necessary to bring the
K.K. AHUJA v. V.K. VORA AND ANR. 1165
[R.V. RAVEENDRAN, J.]
": case under section 141(1). No further averment would be A
necessary in the complaint. though some p~rticufars will
be desirable. They can also be made liable under section
141(2) by making necessary averments relating to consent
and connivance or negligence, in the complaint, to bring
the matter under that sub-section. B

(iv) Other Officers of a company can not be made liable
... under sub-section ( 1) of section 141. Other officers of a
company can be made liable only under sub-section (2)
of Section 141, be averring in the complaint their position
and duties in the company and their role in regard to the
c
issue and dishonour of the cheque, disclosing consent,
connivance or negligence.

21. If a mere reproduction of the wording of section 141(1)
in the complaint is sufficient to make a person liable to face D.
prosecution, virtually every officer/employee of a company
without exception could be impleaded as accused by merely
making an averment that at the time when the offence was.
committed they were in charge of and were responsible to the
....,, company for the conduct arid business of the company. This
would mean that if a company had 100 branches and the
E

' cheque issued from one branch was dishonoured, the officers
~ of all the 100 branches could be made accused by simply
.#
making an allegation that they were in charge of and were
responsible to the company for the conduct of the business of F
the company. That would be absurd and not intended under the
Act. As the trauma, harassment and hardship of a criminal
proceedings in such cases, may be more serious than the
ultimate punishment, it is not proper to subject all and sundry
to be impleaded as accused in a complaint against a company,
G
... even when the requirements of section 138 read and section
...... 141 of the Act are not fulfilled .
,.,,
22. A Deputy General Manger is not a person who is
responsible to the company for the .conduct of the business of
'°C H
1166 SUPREME COURT REPORTS [2009) 9 S.C.R.

A the company. He does not fall under any of the categories (a)
to (g) listed in section 5 of the Companies Act (extracted in para
14 above). Therefore the question whether he was in charge
of the business of the company or not, is irrelevant. He cannot
be made vicariously liable under Section 141(1) of the Act. If
B he has to be made liable under Section 141(2), the necessary
averments relating to consent/connivance/negligence should
have been made. In this case, no such averment is made.
Hence the first respondent, who was the Deputy General
Manger, could not be prosecuted either under sub-section (1)
c or under sub-section (2) of S~ctlon 141 of the Act.

23. Thus, we find no error/infirmity in the order quashing
the summons as against the first respondent who was the
Deputy General Manager of the company which issued the
dishonoured cheque. The appeals are therefore dismissed.
D
D.G. Appeals dismissed. I