Susela Padmavathy Amma vs. M/s. Bharti Airtel Ltd. [March 15, 2024]
Background
This Supreme Court case arose from criminal complaints filed by Bharti Airtel Ltd. against Fibtel Telecom Solutions (India) Pvt. Ltd. and its directors, including Susela Padmavathy Amma, for dishonor of five post-dated cheques issued as part of a commercial transaction. The cheques were returned unpaid with the remark “payment stopped by drawer,” leading to proceedings under Sections 138 and 142 of the Negotiable Instruments Act, 1881 (NI Act).
Susela Padmavathy Amma sought quashing of the complaints against her, arguing that she was not responsible for the day-to-day affairs of the company and that the complaints lacked specific averments regarding her role, as required by Section 141 of the NI Act.
Legal Issue
The central question was whether a director can be held vicariously liable under Section 141 of the NI Act merely by virtue of their position, or whether the complaint must contain specific allegations showing their responsibility for the conduct of the company’s business at the relevant time.
Supreme Court’s Analysis
The Court reaffirmed that vicarious liability under Section 141 NI Act arises only if, at the time of the offence, the director was in charge of and responsible for the conduct of the company’s business.
Relying on precedents such as S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and State of Haryana v. Brij Lal Mittal, the Court held that mere reproduction of the statutory language or a bald assertion of directorship is insufficient. There must be clear, specific averments as to how the accused was in charge of or responsible for the company’s business.
In this case, the only specific allegation was that Susela Padmavathy Amma, along with another director, had no intention to pay the dues. However, the complaint also stated that only the second accused was the authorized signatory and in charge of day-to-day affairs. There was no assertion that Susela Padmavathy Amma was the Managing Director, Joint Managing Director, or otherwise in control of the company’s daily operations.
Judgment
The Supreme Court allowed the appeals and set aside the High Court’s order refusing to quash the proceedings against Susela Padmavathy Amma.
The Court quashed the criminal complaints against her, holding that the absence of specific averments regarding her role in the conduct of the company’s business was fatal to the prosecution’s case under Section 141 NI Act.
Significance
The judgment reiterates that directors cannot be prosecuted for cheque dishonor merely by virtue of their position. There must be clear, specific, and substantive allegations of their involvement in the conduct of the company’s business at the relevant time.
The decision protects individuals from unwarranted criminal liability in corporate offences where their involvement is not clearly established.
Citation:
Susela Padmavathy Amma vs. M/s. Bharti Airtel Ltd., Supreme Court of India, Criminal Appeal Nos. 1577-1578 of 2024, decided on March 15, 2024.
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