Code of Criminal Procedure, 1973 — Whether the High Court is justified in dismissing the petitions sought for the quashing of criminal proceedings initiated against the Appellant(s) under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 — Correctness:
Held: The dispute stems from an Inter-Corporate Deposit (“ICD”) agreement executed between the accused company and the Respondent – Notedly, the Appellants were the Director of the company but neither attended the board meeting wherein the said transaction was approved, nor were they signatories to the agreement or any related financial instruments — The Appellant(s) directorship was non-executive and limited to corporate governance oversight in compliance with SEBI regulations — Subsequently, both the appellants resigned from the Company — It is a trite principle that non-executive and independent director(s) cannot be held liable under Section 138 read with Section 141 of the NI Act unless specific allegations demonstrate their direct involvement in affairs of the company at the relevant time — The Appellant(s) neither issued nor signed the dishonored cheques nor had any role in their execution – There is no material on record to suggest that they were responsible for the issuance of the cheques in question — The mere fact that Appellant(s) attended board meetings does not suffice to impose financial liability on the Appellant(s), as such attendance does not automatically translate into control over financial operations – Thus, the Appellant(s) cannot be held vicariously liable under Section 141 of the NI Act – Therefore, criminal proceedings against the Appellant(s) are quashed. [4, 10, 17, 18, 19]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Gaurav Upadhyay, Hony. Associate Editor (Verified by: Abhinav Mukherjee, Sr. Adv.). Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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