Hdfc Bank Ltd vs State Of Maharashtra

2025 INSC 759 REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. OF 2025 (@ SPECIAL LEAVE PETITION (CRL.) NO. 6964 OF 2024)

HDFC BANK LIMITED APPELLANT (s)

VERSUS

STATE OF MAHARASHTRA AND ANR. RESPONDENT(s)

JUDGMENT

K.V. Viswanathan, J.

1. Leave granted.

2. The present appeal calls in question the correctness of the

judgment dated 10.01.2024 passed by the High Court of Judicature at

Bombay in Criminal Writ Petition No. 275 of 2022. By the said

judgment, the High Court has quashed the criminal proceedings under

Section 138 of the Negotiable Instruments Act, 1881 (for short ‘NI Signature Not Verified Digitally signed by babita pandey Date: 2025.05.22

Act’) insofar as it was against Respondent No. 2-Mrs. Ranjana 17:52:34 IST Reason:

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Sharma was concerned. The proceedings have been quashed on the

ground that there were no sufficient averments in the complaint filed

by the appellant to invoke the vicarious liability against the

respondent No. 2 under Section 141 of the NI Act. Aggrieved, the

appellant is before us.

BRIEF FACTS: -

3. The facts lie in a narrow compass. The respondent no. 2 - Mrs.

Ranjana Sharma along with her daughter Ms. Rachana Sharma and

one Mr. Rakesh Rajpal were directors of a company named M/s R

Square Shri Sai Baba Abhikaran Pvt. Ltd. According to the complaint

filed by the appellant, the accused no. 1 - company along with

respondent no. 2 (accused no.2) and other two directors approached

the appellant/complainant for grant of credit facility in the form of

Revolving Loan Facility as Inventory Funding for the working capital

requirements. According to the appellant, loan amounts were

extended and on account of the failure of the accused to repay the

outstanding dues, the account of the company was classified as a

Non-Performing Asset on 27.03.2018 in accordance with the

2 guidelines issued by the Reserve Bank of India. It is the case of the

appellant that a cheque issued by the accused for a sum of Rs.

6,02,04,217/- on deposit was dishonored for the reason “account

blocked”. According to the appellant, a legal notice was issued to all

the accused. However, the said notice was returned back as

“unclaimed”. The appellant thus prosecuted the company and the

three directors and prayed for appropriate punishment of

imprisonment as well as direction to pay fine up to double the amount

of the dishonored cheque. On 16.12.2018, the Trial Court issued

process to the respondents in the complaint.

4. Since the complaint has been quashed on the ground of lack of

adequate averments, it will be necessary to extract the crucial

averments that are made in the complaint:-

“2. That, Accused No 1 is a Company registered and incorporated under the provisions of Indian Companies Act, 2013 [existing within the purview of Companies Act, 1956] and having it registered and corporate office at the address mentioned aforesaid and engaged in the business of sale of cars and spare parts manufactured by Hyundai Motors (I) Ltd Accused Nos 2 to 4 are the Directors of Accused No 1 Company and is responsible for its day to day affairs, management and working of the Accused No 1 Company furthermore the Accused No 3 is the signatory of the dishonored cheque.

3 3. That, Accused No 1, through Accused Nos 2 to 4, had approached the complainant above named for grant of credit facility in the form of Revolving Loan Facility as Inventory Funding for the working capital requirements That after due deliberation and negotiations with Accused Nos 2 to 4 the complainant granted the Revolving Loan facility initially to the extent of Rs 5,00,00,000/ (Rupees Five Crores only) [Inventory funding Rs 3.00 Crores + Inventory Funding Adhoc: Rs 2.00 Crores vide sanction letter dated 09.08.2014 Hereto annexed and marked as Exhibit B is the copy of said Sanction letter dated 09. 08.2014 for Revolving Loan Facility granted to Accused No. 1.

4. That, upon further request made by Accused No. 1, complainant had enhanced the said facility from Rs 5.00 Crore to Rs. 6.00 Crores vide sanction letter dated 27.10.2015 The said facilities were further enhanced from Ra 6.00 Crores to Rs 6.50 Crores vide sanction letter dated 22.02.2016 and lastly the said facility was enhanced from Rs 6.50 Crores to Rs 8.00 Crores vide sanction letter dated 12.09.2016. Hereto annexed and marked as Exhibit C-1 to Exhibit C-3 are the copies of sanction letter dated 27.10.2015, 22.02.2016 and 12.09.2016 respectively

5. The Loan account of Accused No. 1 maintained by complainant was numbered as loan account No 02400450029354. That in consideration of grant of the said facilities, accused(s) had executed various loan and security documents in favor of Complainant from time-to time inter alia accepting the terms and conditions of respective documents It is submitted that the Accused No. 1 lastly, amongst other, entered into Loan agreement with Complainant on 17.09.2016 and executed Demand Promissory Note for a sum of Rs. 8,00,00,000/- on 20.09.2016 Hereto annexed and marked as Exhibit 'D-1 IS the copy of Supplemental and Amendatory Loan Agreement dated 17.09.2016 and Exhibit' D 2" is the Demand Promissory Note dated 20 09 2016.

6. Be that as it may, the Complainant states that the sanctioned/renewed credit facilities were duly availed and utilized by the Accused without any demur. The Complainant further states that after availing the aforementioned credit facilities, Accused No. 1 failed to maintain the account with Complainant Bank in the manner agreed to and defaulted in making timely repayments.

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7. Thus, owing to the failure on the part of Accused(s) to repay the outstanding dues on time, thereby willfully defaulting in the same, Complainant was constrained to classify the account of the Accused No. 1 as a Non-Performing Asset on 27.03.2018 in accordance with the guidelines issued by the Reserve Bank of India from time to time.

8. That, complainant states that despite various oral and written requests, the Accused failed to regularize and maintain the account. It is submitted that Accused Company did not pay any heed to the requests and reminders of the Complainant and willfully neglected discharging their obligations thereby depriving the Complainant its legitimate dues.” (Emphasis supplied)

5. It will be noticed that in Para 2 of the complaint quoted above, it

has been categorically averred as under:

“Accused Nos. 2 to 4 are the directors of the accused no. 1 - company and is responsible for its day-to-day affairs, management and working of the accused no. 1 – company. Furthermore, the accused no. 3 is the signatory of the dishonored cheque”.

(Emphasis supplied)

6. Not only this, it is further averred in Para 3 that accused no. 1

(the company) through accused nos. 2 to 4 had approached the

complainant above named for grant of credit facility in the form of

Revolving Loan Facility as inventory funding for the working capital

requirements. It has been stated : -

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“That, after, due deliberation and negotiations with Accused nos. 2 to 4, the Complainant granted the Revolving Loan facility initially to the extent of……”.

7. In the Board resolution of the accused no. 1 - company dated

28.09.2018 annexed to the complaint the following statement

occurs: -

“RESOLVED FURTHER THAT Ms. Rachana Sharma and/or Mrs. Ranjana Sharma be and are hereby authorized jointly and/or severally to further negotiate with HDFC Bank and accept the revised terms and conditions the securities on behalf of the company.” It is further resolved as under: -

“RESOLVED FURTHER THAT the property(s) (belonging to the Company, stipulated as security ‘owe’ me Additional Credit Facility(ies) sanctioned by HDFC Bank shall be mortgaged in favor of the Bank, by way of Equitable or Registered Mortgage as may be required by HDFC Bank and Ms. Rachana Sharma and/or Mrs. Ranjana Sharma be to and are hereby authorized, jointly and/or severally to be present in HDFC Bank and deposit /redeposit the original tittle deeds of the Company's immovable properties with an intention to create security thereof and to make necessary declarations on behalf of the Company.” (Emphasis supplied)

8. It will be seen that apart from negotiations, Mrs. Ranjana

Sharma - respondent no. 2, was also authorized to deposit the original

6 title deeds of the company’s immovable property. Further the board

resolution provides as under: -

“RESOLVED FURTHER THAT the draft of the document received from HDFC Bank (a) respect credit facility (ies) be and is/are hereby approved and Ms. Rachana Sharma and/or Mrs. Ranjana Sharma and/or hereby authorized, jointly and/or to execute, sign and issue all/any such Demand Promissory notes Hypothecation Agreements, mortgages (in such form as HDFC bank may require), guarantees, indemnities all/any other documents, writings and instruments and all renewals and/or amendments there to including after Acknowledgement of Debt/balance confirmations HDFC Banks(s) may require from time to time in this regard, RESOLVED FURTHER THAT Ms. Rachana Sharma and/or Mrs. Ranjana Sharma be and are hereby authorized jointly and/or severally on behalf of the company to file the requisite particulars of charge created in favor of HDFC Bank with the Registrar of Companies or any other regulatory body within the time frame prescribed therefor, RESOLVED FURTHER THAT Ms. Rachana Sharma and/or Mrs. Ranjana Sharma be and are hereby authorized jointly and/or severally to be present at the office of Sub-Registrar for effecting the regulation of various documents on behalf of the Company whenever required and to do all such acts, deeds and things as may be necessary or expedient to implement/give effect to this resolution.

RESOLVED FURTHER THAT Ms. Rachana Sharma and/or Mrs. Ranjana Sharma be and are thereby authorized jointly and/or severally to affix the Common Seal of the company on all the agreement documents writing and instruments and all renewals/amendments after Acknowledgement of debt/barar (sic.) conditions there of mentioned above as may be required by HDFC Bank in conformity with provisions of the Articles of Association, the Companies Act, 1956 and the Companies Act, 2013 of the Companies (sic.)” (Emphasis supplied)

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9. Under the resolution, the respondent no. 2-Ranjana Sharma was

authorized to sign demand promissory notes, hypothecation

agreements, mortgages, guarantees and indemnities and any other

documents, writings and instruments, as may be required, from time

to time. Further, respondent no. 2 was also authorized to file the

requisite particulars of charge created in favor of the bank with the

Registrar of Companies. The respondent no. 2 was also authorized to

be present at the office of Sub-Registrar for registration of various

documents and also authorized to affix the common seal on all the

relevant documents.

10. In the sanction letter dated 22.02.2016 which was also annexed

to the complaint, under the head “Security for Inventory Funding

(AUIF)”, the performance guarantee of the directors - Ms. Rachana

Sharma and respondent no. 2 - Mrs. Ranjana Sharma were required to

be given. This clause occurs in the further sanction letter dated

12.09.2016 also.

8 11. It is in this background that the correctness of the judgment of

the High Court needs to be appreciated.

12. We have heard learned Senior Counsel/Counsel for the parties

and perused the records. Learned Senior Counsel for the appellant

contends that a perusal of the averments in the complaint read with

the documents filed leave no manner of doubt that the respondent no.

2 - Ranjana Sharma was in charge of, and was responsible for the

conduct of the business of the company inasmuch as she had

participated in the negotiations and was authorized to sign all the

relevant documents and her performance guarantee was also taken. In

view of this, learned Senior Counsel contends that the High Court was

not justified in quashing the complaint insofar as the respondent no. 2

- Ranjana Sharma was concerned.

13. Learned Senior Counsel for the appellant contends that

respondent No.2-Mrs.Ranjana Sharma is the Director of the Accused

No.1-Company and she submitted a personal guarantee and also

signed a supplemental continuing guarantee dated 17.09.2016 for the

loan transaction. It is submitted that the Company is a family-run

9 private entity. Learned Senior Counsel for the appellant relied upon

certain judgments of this Court in support of his submission.

14. In response, learned counsel for the respondent No.2 submitted

that the averments in the complaint fell short of the requirement

mandated in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and

Another, (2005) 8 SCC 89; that the words “was in charge of” and

“was responsible to the company for the conduct of the business of

the company” cannot be read disjunctively and the same ought to be

read conjunctively; that as held in Siby Thomas vs. Somany

Ceramics Limited, (2024) 1 SCC 348 if it is not averred in the

complaint that the accused was “in charge of the conduct of the

business” at the relevant time, the prosecution must fail; and that not

only the basic averment as enshrined in Section 141 of the NI Act has

to be incorporated in the complaint but also the specific role should be

attributed to the persons who are directors or employees of the

company. Learned counsel for the respondent also relied on certain

other judgments which will be dealt with in the course of the

discussion herein below.

10 QUESTION FOR CONSIDERATION: -

15. In the above background, the question that arises for

consideration is whether the High Court was justified in quashing the

complaint insofar as respondent no. 2 – Mrs. Ranjana Sharma was

concerned on the ground that necessary averments were lacking?

ANALYSIS AND REASONING: -

16. Section 141(1) of the NI Act along with its provisos reads as

under:-

“141. Offences by companies.—(1) If the person committing an offence under Section 138 is a company, 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, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.”

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17. It will be noticed that Section 141 of the NI Act employs the

phrase “was in charge of, and was responsible to the company for the

conduct of the business of the company”. Insofar as the aspect of

vicarious liability is concerned, in the present case, the averments

made are to the following effect:-

“Accused Nos. 2 to 4 are the Directors of Accused No.1

Company” and

“Is responsible for its day-to-day affairs, management and

working of the Accused No.1-Company”

18. The real question is, is the above averment along with the other

averments in the complaint sufficient to meet the tests laid down by

this Court in the leading judgment of S.M.S. Pharmaceuticals-I

(supra).

19. Before we advert to S.M.S. Pharmaceuticals-I (supra), it will

be useful to refer to the meaning of the word “in charge of”. P.

Ramanatha Aiyar’s Advanced Law Lexicon defines the word “in

charge of” as follows:-

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“A person “in charge of” and responsible to the company for the conduct of the business of the company must be a person in overall control of the day-to-day business of the company or firm”.

20. It will be seen that the averment made in the complaint, in the

present case, clearly uses the phrase “responsible for its day-to-day

affairs, management and working of the Accused No.1 Company”,

which going by the dictionary meaning set out hereinabove in

substance is the same as “in charge of and was responsible to the

Company for the conduct of the business of the Company”.

21. Read in the background of the other averments, the above

averment clearly fulfils the requirement of Section 141. The

contention of the learned counsel for the respondent no. 2, however, is

that actual words mentioned in Section 141 in the same form be

employed in the complaint, for the complaint to be sustained. Learned

Counsel placed strong reliance on S.M.S. Pharmaceuticals-I (supra).

22. To answer this issue, a closer look at the judgment in S.M.S.

Pharmaceuticals-I (supra) needs to be undertaken. S.M.S.

Pharmaceuticals -I (supra) arose out of a reference by a two-Judge

13 Bench of this Court. This Court, in the said judgment, set out for

determination the following questions: -

“(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company.

(b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary.

(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against.”

23. The following principles are deducible from the said judgment.

(i) “Section 141 contains conditions which have to be satisfied

before the liability can be extended to officers of a company. Since

the provision creates criminal liability, the conditions have to be

strictly complied with. The conditions are intended to ensure that a

person who is sought to be made vicariously liable for an offence of

which the principal accused is the company, had a role to play in

14 relation to the incriminating act and further that such a person should

know what is attributed to him to make him liable”. [See Para 4]

(ii) “There is nothing which suggests that simply by being a director

in a company, one is supposed to discharge particular functions on

behalf of a company. It happens that a person may be a director in a

company but he may not know anything about the day-to-day

functioning of the company. As a director he may be attending

meetings of the Board of Directors of the company where usually they

decide policy matters and guide the course of business of a company.

It may be that a Board of Directors may appoint sub-committees

consisting of one or two directors out of the Board of the company

who may be made responsible for the day-to-day functions of the

company. These are matters which form part of resolutions of the

Board of Directors of a company. Nothing is oral. What emerges

from this is that the role of a director in a company is a question

of fact depending upon the peculiar facts in each case. There is

no universal rule that a director of a company is in charge of its

everyday affairs”. [See Para 8] (Emphasis supplied)

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(iii) “Mere use of a particular designation of an officer without more,

may not be enough by way of an averment in a complaint. When the

requirement in Section 141, which extends the liability to officers of

the company, is that such a person should be in charge of and

responsible to the company for conduct of business of the company,

how can a person be subjected to liability of criminal prosecution

without it being averred in the complaint that satisfies those

requirements. Not every person connected with a company is

made liable under Section 141. Liability is cast on persons who

may have something to do with the transaction complained of. A

person who is in charge of and responsible for conduct of business

of a company would naturally know why the cheque in question

was issued and why it got dishonoured”. [See Para 8]

(Emphasis supplied)

(iv) “What is required is that the persons who are sought to be made

criminally liable under Section 141 should be, at 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

16 with the Company shall not fall within the ambit of the provision.

It is only those persons who were in charge of and responsible for

the 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 who was not in charge of and

was not responsible for the conduct of the business of the company at

the relevant time will not be liable under the provision”. [See Para 10]

(Emphasis supplied)

(v) “Therefore, in order to bring a case within Section 141 of the

Act, the complaint must disclose the necessary facts which make a

person liable”. [See Para 12]

24. After setting out the above principles, this Court in S.M.S.

Pharmaceuticals-I (supra), cited a whole host of judgments of

various High Courts and this Court, including the judgment of this

Court which was then the latest in line, namely, Monaben Ketanbhai

Shah and Another vs. State of Gujarat and Others, (2004) 7 SCC

15. This Court in S.M.S. Pharmaceuticals-I (supra) cited Monaben

Ketanbhai Shah (supra) which had held that it was not necessary to

17 reproduce the language of Section 141 verbatim in the complaint

since the complaint was required to be read as a whole. Monaben

Ketanbhai Shah (supra) had held that if the substance of the

allegations made in the complaint fulfil the requirements of Section

141, the complaint has to proceed and is required to be tried with. It

was further held in Monaben Ketanbhai Shah (supra) that in

construing a complaint, a hypertechnical approach should not be

adopted and the laudable object of preventing bouncing of cheques

and sustaining the credibility of commercial transactions had to be

borne-in-mind.

25. After setting out the holding in Monaben Ketanbhai Shah

(supra), this Court in S.M.S. Pharmaceuticals-I (supra) in para 18

held as follows:-

“18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to

18 be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial.” (Emphasis supplied)

26. Thereafter, in para 19, the conclusion was recorded in the

following terms:-

“19. In view of the above discussion, our answers to the questions posed in the reference are as under:

(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint.

Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the 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 a fact as there is no deemed liability of a director in such cases.

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(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.” (Emphasis supplied)

27. Hence, it is very clear that the conclusion in para 19(a) in S.M.S.

Pharmaceuticals-I (supra) has to be read with the other holdings in

judgment especially the ratio extracted hereinabove culminating in

para 18. Merely reading para 19(a) to contend that what is required is

parroting of the words of the section for a complaint to be sustained is

completely unjustified. Para 19(a) does not mention that the words of

the Section 141 has to be mechanically parroted. In fact, the cases

that we discuss hereinbelow have expressly rejected the said

contention.

28. After the reference in S.M.S. Pharmaceuticals-I (supra) was

answered by the three-Judge Bench and before the case of the said

20 parties could be taken up for disposal by the two judge Bench, came

the judgment in Sabitha Ramamurthy and Another vs.

R.B.S.Channabasavaradhya, (2006) 10 SCC 581. This Court, after

noticing S.M.S. Pharmaceuticals-I (supra), held that it was not

necessary for the complainant to specifically reproduce the wordings

of the section but what was required was a clear statement of fact so

as to enable the Court to arrive at a prima facie opinion that the

accused are vicariously liable. Such vicarious liability can be inferred

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. It was

also held that before a person can be made vicariously liable, strict

compliance with the statutory requirements should be insisted. On

facts, the Court found that the averments did not meet the

requirements in the said case.

29. Thereafter, came the judgment in S.M.S. Pharmaceuticals Ltd.

vs. Neeta Bhalla and Another, (2007) 4 SCC 70 (hereinafter referred

to as S.M.S. Pharmaceuticals-II (supra). Referring to para 18 and 19

of the order in the three-Judge Bench reference in S.M.S. 21 Pharmaceuticals-I (supra) and following the judgment in Sabitha

Ramamurthy (Supra), the averments in the complaint were tested and

it was found that the complaint petition when read in its entirety, the

averments therein fell short of the requirements to implicate the

respondent-accused in that case.

30. To the same effect is the judgment of this Court in A.K.

Singhania vs. Gujarat State Fertilizer Company Limited and

Another, (2013) 16 SCC 630, wherein this Court categorically ruled

as under:-

“14. From a plain reading of the aforesaid provision it is evident that every person who at the time the offence was committed was in charge of and responsible to the company shall be deemed to be guilty of the offence under Section 138 of the Act. In the face of it, will it be necessary to specifically state in the complaint that the person accused was in charge of and responsible for the conduct of the business of the company? In our opinion, in the case of offence by the company, to bring its Directors within the mischief of Section 138 of the Act, it shall be necessary to allege that they were in charge of and responsible to the conduct of the business of the company. It is a necessary ingredient which would be sufficient to proceed against such Directors. However, we may add that as no particular form is prescribed, it may not be necessary to reproduce the words of the section. If reading of the complaint shows and the substance of accusation discloses necessary averments, that would be sufficient to proceed against such of the Directors and no particular form is necessary. However, it may not be necessary to allege and prove that, in fact, such of the Directors 22 have any specific role in respect of the transaction leading to issuance of cheque. Section 141 of the Act makes the Directors in charge of and responsible to the company “for the conduct of the business of the company” within the mischief of Section 138 of the Act and not particular business for which the cheque was issued. We cannot read more than what has been mandated in Section 141 of the Act.” (Emphasis supplied)

31. In Ashok Shewakramani and Others vs. State of Andhra

Pradesh and Another, (2023) 8 SCC 473, a judgment relied upon by

Respondent No.2, the averments did not satisfy the ingredients of

Section 141 and this Court observed that all that was averred in that

case (the first set of appeal therein) was that the accused were liable

for the transactions of the company and they were fully aware of the

issuance of the cheque and dishonor of the cheque. This Court held

that even taking a broad and liberal view of the pleadings in the

complaint, there was no compliance with the requirements of Section

141 (1). In the second set of appeals therein the accused directors

were not even described as directors of the first accused company

therein. On that simple ground proceedings were quashed. In the third

set of appeals therein, insofar as the directors were concerned who

23 were accused nos. 4 to 7 an omnibus averment was made in the

following terms.

"(1) It is submitted that the complainant is the proprietor of Chakra Cotton Traders, doing business in cotton, resident of bearing Door No. 3/917-1, Sri Chackra Nilayam, YMR Colony, Proddatur Town-516 360, Kadapa District, A.P. Accused 1 is the private limited Company concerned and registered under the Companies Act.

Accused 2 is Chairman of Accused 1. Accused 3 is the Managing Director of Accused 2 and Accused 4 to 7 are the Directors of Accused 1 Company and Accused 2 to 7 are managing the Company and busy with day-to-day affairs of the Company and all are managing the Company and also in charge of the Company and all are jointly and severally liable for the acts of Accused 1 Company.”

Considering these averments the Court while quashing the

proceedings held that merely because somebody is managing the

affairs of company, per se they do not become in charge of the

conduct of the business of the company or the person responsible for

the company for the conduct of the business of the company. It was

further held that the averment that the accused were busy with the

day-to-day affairs was also insufficient to attract the ingredients of

24 Section 141(1). Proceeding further, the Court held that merely

averring that the accused were in-charge of the company was neither

here nor there as such averment was insufficient to conclude that the

accused were responsible to the company for the conduct of the

business. This is vastly different from the averments in the present

case wherein it is clearly averred that the respondent no. 2 was

responsible for the day-to-day affairs, management and working of

the accused no. 1 company.

32. Ashok Shewakramani (supra) turned on the special facts of that

case. This is more so since the averments in the complaint therein

extracted hereinabove lumping the role of the directors with others

and making omnibus averments, was found to be insufficient to attract

the vicarious liability under Section 141(1) of the NI Act.

33. In Ashutosh Ashok Parasrampuriya and Another vs. Gharrkul

Industries Private Limited and Others, (2023) 14 SCC 770, after

noticing that the averments in the complaint were to the effect that the

directors of the accused company were responsible for its business

and all the appellant-accused therein were involved in the business of

25 the company and are responsible for all the affairs of the company,

this Court held that reading the complaint as a whole, the ingredients

of Section 141 were satisfied.

34. What is important to note is that the repetition of the exact

words of the Section in the same order, like a mantra or a magic

incantation is not the mandate of the law. What is mandated is that the

complaint should spell out that the accused sought to be arrayed falls

within the parameters of Section 141(1) of the NI Act. Only then

could vicarious liability be inferred against the said accused, so as to

proceed to trial. Substance will prevail over form.

35. Strong reliance is placed on Siby Thomas (supra) by learned

counsel for the respondent No.2 to contend that in the absence of the

words “was in charge of”, the present case against respondent No.2

cannot be proceeded. We are unable to countenance the said

submission. This Court, in Siby Thomas (supra), on facts, found that

on an overall reading of the complaint it did not disclose any clear and

specific role to the appellant-accused therein. It was further held that

what was averred was only that the accused being partners are

26 responsible for the day-to-day conduct of business of the company.

This is vastly different from the averments in the present case as

discussed hereinabove. In this case, it is clearly averred that the

respondent No.2 along with the accused Nos. 3 and 4 being directors

were responsible for its day-to-day affairs, management and working

of accused No.1 - Company. Hence, the judgment in Siby Thomas

(supra) can be of no help to the respondent No.2 as the case turned on

its own facts.

36. The other aspect of the matter canvassed by the learned counsel

for the respondent No.2 is that not only are the basic averments as

enshrined in Section141 to be mandatorily incorporated but also the

specific role be attributed to the persons who are mere directors or

employees of the company. We are unable to agree with the

submission of the learned counsel.

37. Recently, this Court in S.P. Mani and Mohan Dairy vs. Dr.

Snehalatha Elangovan, (2023) 10 SCC 685, after reiterating the

principle that it was not necessary to reproduce the language of

Section 141 verbatim in the complaint further reiterated the holding in

27 K.K.Ahuja vs. V.K. Vora and Another, (2009) 10 SCC 48. In K.K.

Ahuja (supra), it was held that insofar as the director was concerned,

an averment in the complaint that he was in charge of, and was

responsible to the company, for the conduct of the business of the

company was enough and no further averment was necessary though

some particulars will be desirable. Thereafter, this Court in S.P. Mani

(supra), in para 58.2 of the judgment concluded as under:-

“58.2. The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the Court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141, respectively, of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.”

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38. As was rightly held therein, the administrative role of each

director would be within the special knowledge of the company or the

director of the firm and it is for them to establish that they were not in

charge of the affairs of the company. In view of this, the contention

of the learned counsel for the respondent No.2 that the specific role

attributed to the directors should be set out in the complaint does not

merit acceptance. Reliance has been placed on National Small

Industries Corporation Limited vs. Harmeet Singh Paintal and

Another, (2010) 3 SCC 330 by the learned counsel for the respondent

No.2 in support of the proposition canvassed. We are unable to

countenance the said submission. If the learned counsel by the said

submission seeks to contend that the complainant in a Section 138

complaint is obliged to plead administrative matters which are

especially within the knowledge of the company and the directors,

then he is completely wrong in the understanding of the ingredients of

Section 141. As held in K.K. Ahuja (supra) and reiterated in S.P.

Mani (supra), the complainant is supposed to know only generally as

to who are in charge of the affairs of the company. Harmeet Singh

Paintal (supra) when it holds in para 22 that

29 “further, in order to fasten the vicarious liability in accordance

with Section 141, the averment as to the role of the Directors

concerned should be specific. The description should be clear

and there should be some unambiguous allegations as how the

Directors concerned were alleged to be in charge of and were

responsible for the conduct of the affairs of the company”

should be understood to only mean vis-à-vis the transaction

concerning the issue of the cheque, in question, which are within the

knowledge of the complainant. K.K. Ahuja (supra) where it holds that

“in the case of a Director, secretary or manager [as defined in

Section 2(24) of the Companies Act] or a person referred to in

clauses (e) and (f) of Section 5 of the Companies Act, an

averment in the complaint that he was in charge of, and was

responsible to the company, for the conduct of the business of

the company is necessary to bring the case under Section

141(1) of the Act. No further averment would be necessary in

the complaint, though some particulars will be desirable. They

can also be made liable under Section 141(2) by making

30 necessary averments relating to consent and connivance or

negligence, in the complaint, to bring the matter under that

sub-section”

sets out the correct legal position. A harmonious reading of the

judgments in K.K. Ahuja (supra), Harmeet Singh Paintal (supra)

and S.P. Mani (supra) brings out the position that there is no

obligation on the complainant to plead in the complaint as to matters

within the special knowledge of the company or the directors or firm

about the specific role attributed to them in the company.

39. Applying the said legal position to the facts of the present case,

it is found that the averments in the complaint set out hereinabove

against the respondent No.2 – Mrs. Ranjana Sharma fulfill the

requirement of Section 141(1) of the NI Act, and this is not a case

where trial against her can be aborted by quashment of proceedings.

The High Court was completely unjustified in quashing the

proceedings against her.

40. The appeal is, accordingly, allowed and the judgment of the

High Court of Judicature at Bombay dated 10.01.2024 in Criminal

31 Writ Petition No. 275 of 2022 is set aside. Consequently, the order

dated 16.12.2019 issuing process to respondent No.2 in proceeding in

C.C. No. 2486/SS/2019 is restored to the file of the Metropolitan

Magistrate, 7th Court, Bhiwandi, Dadar, Mumbai to be proceeded with

in accordance with law.

……….........................J. [MANOJ MISRA]

.……….........................J. [K. V. VISWANATHAN] New Delhi;

22nd May, 2025

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