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by Admin
14 December 2025 5:24 PM
“No Vicarious Liability Without Active Role: Acquittal in Cheque Dishonour Case Upheld as Statutory Preconditions Not Fulfilled” — Calcutta High Court dismissed an appeal against the acquittal of a director in a cheque dishonour case under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The judgment, authored by Justice Dr. Ajoy Kumar Mukherjee, reaffirms foundational principles of vicarious liability in corporate criminal prosecution, particularly when a company is under liquidation.
The appellant had challenged a 22 February 2024 judgment by the 14th Metropolitan Magistrate, Calcutta, acquitting accused no.4, a former director, in connection with a dishonoured cheque of ₹50 lakh issued by the company after it had gone into liquidation. The High Court, however, upheld the acquittal, stressing lack of evidence on active control by the director, and non-compliance with the statutory demand notice requirement under Section 138(b) of the NI Act.
Cheque Issued After Liquidation — Accused Had Ceased to Be Director
At the heart of the case was a cheque dated 28 October 2013, issued by the company Modern Infra Projects India Ltd. to the complainant firm. However, the company had already gone into liquidation on 29 July 2013, pursuant to an order by the Calcutta High Court in C.P. No. 63 of 2013.
The respondent-accused (Amit Jhawar) was no longer a director when the cheque was issued. As the Court observed:
“The present respondent Amit Jhawar adduced evidence as DW-1 and clearly stated that he ceased to be a director on and from 29.07.2013. This unchallenged testimony was not denied in cross-examination.” [Para 13]
The cheque in question was signed not by the respondent, but by another director (Babulal Jhawar) who died during the proceedings. There was no evidence that Amit Jhawar had any involvement in issuing the cheque, or was responsible for company affairs at the relevant time.
No Vicarious Liability Without Specific Role Allegation or Proof
Referring to the language of Section 141 of the NI Act, the Court reiterated that criminal liability is attracted only against those who were “in charge of and responsible for” the conduct of business at the time of offence.
“Merely because the respondent herein was a director prior to 29.07.2013, he would not become in charge of the conduct of the business of the accused company... unless it has been proved as to how he was in charge and responsible for the day-to-day business of company when the offence was allegedly committed.” [Para 20]
The complainant failed to establish this through pleadings or evidence. While the complaint made a generic allegation of responsibility, the prosecution did not lead any material to substantiate the claim during trial.
“Neither in the complaint nor in the evidence, the role of the respondent in issuance of the cheque has been canvassed or proved.” [Para 17]
The Court relied on SP Mani and Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685, while distinguishing it on facts, and emphasized that liability cannot be fastened in a mechanical manner without specific pleadings and proof.
Statutory Demand Notice Not Proved — Fatal to Prosecution
Crucially, the Court noted the absence of proof regarding the statutory demand notice under Section 138(b) — a mandatory precondition for criminal liability.
“No demand notice dated 16.01.2014 was proved in evidence. Instead, a notice under Section 434 of the Companies Act was marked as exhibit.” [Para 21]
The accused denied receiving any demand notice under the NI Act. The complainant failed to produce acknowledgment or postal records indicating delivery of such a notice. The Court reiterated: “Service of demand notice is an essential ingredient to constitute offence under Section 138 of the NI Act.” [Para 21]
The absence of this compliance rendered the prosecution unsustainable in law.
Acquittal Strengthens Presumption of Innocence
The High Court also cited the Supreme Court’s decision in Mallappa v. State of Karnataka, (2024) 3 SCC 544, to highlight that once an accused is acquitted, the presumption of innocence is further solidified.
“The presumption of innocence gets concretized when the case ends in acquittal, and a higher threshold is expected to rebut the same in appeal, which the appellant has miserably failed to do.” [Para 22]
The Court emphasized that criminal liability cannot be presumed, and the trial court’s acquittal based on lack of evidence and legal non-compliance was justified.
Appeal Dismissed, Acquittal Upheld
Finding no infirmity in the trial court’s reasoning, the High Court dismissed the appeal, observing:
“The Court below is justified in holding that the ingredients to constitute offence under Section 138 read with Section 141 of NI Act against present respondent remain not proved.” [Para 23]
Accordingly, the appeal was dismissed, and the acquittal of accused no.4 was upheld. The trial court records were ordered to be returned, and urgent certified copies of the judgment were permitted.
Date of Decision: 10 June 2025
