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2022 (6) TMI 1303 - HC - Indian LawsDishonor of Cheque - petitioner would contend that the petitioner having resigned as Director of the Company cannot be hauled into these proceedings as he is neither the signatory to the cheque nor was present in the deliberations prior to issuance of the cheque - HELD THAT - The petitioner in the capacity of being a Director of the Company M/s.Wardwiz India Solutions Pvt. Ltd., had signed the agreement that was entered into between accused No.1 and the respondent-complainant. The agreement was signed on 17.8.2018. Long after execution of the agreement to which the petitioner was signatory, the petitioner tenders his resignation as Director of the company with effect from 04.07.2019. This is accepted and notified in Form No.DIR-11 as per the proviso to Section 168(1) of the Companies Act, 2013 and Rule 16 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and in DIR-12 as per the proviso to Sections 7(1)(c), 168 and 170(2) of the Companies Act, 2013 and Rule 17 of the Companies (Incorporation) Rules 2014 and 8, 15, 18 of the Companies (Appointment and Qualification of Directors) Rules, 2014. The admitted fact is, the cheques were issued in the month of December 2019 and January 2020 not by the petitioner but by accused No.2, the other Director of the Company representing accused No.1/Company of which accused No.2 is the signatory to the instruments involved in the transaction. Therefore, it becomes an admitted fact that the petitioner was not a Director of the Company when the cheques were issued - The notices though were issued, the petitioner did not reply to the notices, ostensibly on the ground that he has nothing to do with the Company after his resignation. This cannot become a ground for the complainant to initiate proceedings dragging the petitioner, notwithstanding him becoming an Ex-Director on the date of the transaction. In the teeth of the admitted facts, the submission of the learned counsel appearing for the respondent that the petitioner will have to come out clean in a trial, after him producing the documents with regard to resignation is unacceptable, as those documents without doubt are public documents, which would clearly demonstrate that the petitioner has resigned on 4.7.2019 - the power under Section 482 of the Cr.P.C. is to be exercised in the case at hand and the proceedings against the petitioner are to be obliterated. Petition allowed.
Issues:
1. Whether an ex-director can be held liable under Section 138 of the Negotiable Instruments Act for cheques issued after resignation? 2. Interpretation of legal precedents regarding the liability of ex-directors in criminal proceedings. Issue 1: Liability of Ex-Director under Section 138 of NI Act: The petitioner, accused No.3, resigned as a Director of a company before certain cheques issued by the company were dishonored. The petitioner argued that being an ex-director, he cannot be held liable under Section 138 of the Negotiable Instruments Act. The respondent contended that the petitioner, as a signatory to the agreement with the complainant, was involved in the transaction leading to the issuance of the cheques, even though they were signed by another director after the petitioner's resignation. The court examined the documents filed with the Registrar of Companies, which confirmed the petitioner's resignation before the cheque issuance. Citing legal precedents, the court emphasized that an ex-director cannot be dragged into criminal proceedings under Section 138 of the NI Act. The court held that the petitioner's resignation before the cheque issuance absolved him of liability, and the proceedings against him were quashed. Issue 2: Interpretation of Legal Precedents: The court analyzed legal precedents cited by both parties, including the judgments in cases like SUNIL TODI v. STATE OF GUJARAJ, N.RANGACHARI v. BHARAT SANCHAR NIGAM LTD., A.S.PATTABIRAMAN v. SHOBHA S. HALDI, and PRUDENTIAL ENGINEERS/BUILDERS & DEVELOPERS v. KUSKOOR BHARATH RAM. The court particularly highlighted the decision in HARSHENDRA KUMAR .D. v. REBATILATA KOLEY AND OTHERS, where the Supreme Court clarified that an ex-director cannot be held liable in criminal proceedings under Section 138 of the NI Act. The court emphasized that public documents, such as those confirming the petitioner's resignation, are crucial in determining an ex-director's liability. The court underscored the importance of preventing injustice and abuse of process in criminal cases, especially when the accused's resignation is documented before the alleged offense. Consequently, relying on legal principles and the facts of the case, the court quashed the proceedings against the petitioner, affirming the principle that an ex-director cannot be prosecuted under Section 138 of the NI Act. This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, the court's interpretation of legal precedents, and the final decision reached by the court in quashing the proceedings against the ex-director under Section 138 of the Negotiable Instruments Act.
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