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2023 (10) TMI 4 - HC - Indian LawsDishonour of Cheque - legally enforceable debt or legal dues - vicarious liability - signatory/director can take the benefit of discharge obtained by the corporate debtor or not - HELD THAT - Considering the newly added provision of Section 32A of IBC, the corporate debtor can be exonerated from the liability if the company is dissolved, however, the natural person i.e. the partners or directors of the same cannot escape penal liability under the provisions of the NI Act. As per the provisions of Section 138 of the NI Act, if the cheque was dishonoured, statutory notice was issued, the amount is not paid within 15 days thereafter, the cause of action arises and if the complaint is filed within one month from the date of cause of action, the only question before the criminal court is whether the cheque was issued, it was bounced, and despite the service of notice, the amount is not paid. There is no bar contained in any of the provisions of the IBC restraining the complainant to approach the criminal court to seek penal action under Section 138 of the NI Act. The signatory/director cannot take the benefit of discharge obtained by the corporate debtor by operation of law under the IBC. Further, the facts of the cheques being issued, signature on the cheques, the cheques being issued in what capacity, the cheques being issued for legally enforceable debt or not, that the petitioners are/were directors of the company, what role the petitioners had in the day to day affairs of the company etc. are all facts which are required to be tested at the time of trial and the petitioner has failed to produce some impeachable and incontrovertible evidence beyond suspicion of doubt and all the contentions raised in these petitions are in the form of defence, which can be tested at the time of trial and not at the stage of quashing of the complaints. It is an undisputed fact that from bare reading of the complaint, the necessary averments are made regarding the liability of the accused persons (vicarious liability) under Section 138 read with Section 141 of the NI Act. It also transpires that Clause 9 of the MOU clearly refers to twelve cheques totalling to Rs.2,35,42,524/- of the personal bank account to be held as additional security. The petitioners have not disputed existence of MOU and cheques were issued in terms of the MOU. It is also now settled that directors are vicariously liable for the acts committed on behalf of the company. In view of Sections 138, 139 and 141 of the NI Act, it is also clear position of law that under provisions of Section 14 of IBC, the proceedings cannot continue against corporate debtor but can be initiated or continued against natural persons including persons mentioned under Sections 141(1) and 141(2) of the NI Act. It also transpires that MOU is executed between the parties, the contents of which are being interpreted differently by learned advocate for the parties, whether the cheques were issued as security or towards legally enforceable debt, are all matter of trial and this Court cannot conduct mini trial or roving inquiry at the stage of exercising the powers under Section 482 of of the Code, therefore, it is opined that this is not a fit case to exercise powers under Article 226/227 of the Constitution of India read with Section 482 of the Code, as all the points raised herein need a full fledged trial. Petition dismissed.
Issues Involved:
1. Quashing of complaints under Section 138 of the Negotiable Instruments Act (NI Act). 2. Applicability of the Insolvency and Bankruptcy Code (IBC) provisions, specifically Section 14 and Section 32A, to the liability of directors and corporate debtors. 3. Vicarious liability of directors under Section 141 of the NI Act. 4. Jurisdiction and powers of the High Court under Section 482 of the Code of Criminal Procedure (CrPC). Summary: Issue 1: Quashing of Complaints under Section 138 of the NI Act - The petitions sought to quash complaints filed for cheque dishonour under Section 138 of the NI Act, arguing that there were no outstanding legally enforceable debts post-23.09.2019 due to the commencement of the corporate insolvency resolution process (CIRP). - The petitioners contended that the cheques were security cheques and not meant for encashment, and that the complainant had admitted this in a Memorandum of Understanding (MOU). Issue 2: Applicability of IBC Provisions - The petitioners argued that the moratorium under Section 14 of the IBC, which commenced on 23.09.2019, suspended the liability of the Board of Directors and transferred it to the Interim Resolution Professional (IRP). - The respondent countered that while the IBC's moratorium applies to corporate debtors, it does not protect directors from prosecution under Section 138 of the NI Act, as per Section 141 of the NI Act and relevant case law. Issue 3: Vicarious Liability of Directors - The court examined Sections 138, 141, and 142 of the NI Act, which establish that directors can be held vicariously liable for cheque dishonour if they were in charge of and responsible for the company's conduct at the time of the offence. - The court referred to the Supreme Court's decisions, which clarified that while corporate debtors might be protected under the IBC, directors and other natural persons remain liable under the NI Act. Issue 4: Jurisdiction and Powers of the High Court under Section 482 CrPC - The court emphasized that its inherent powers under Section 482 CrPC should be exercised sparingly and only in exceptional cases to prevent miscarriage of justice. - It was noted that the facts and defenses presented by the petitioners, such as the nature of the cheques and the terms of the MOU, are matters to be examined during the trial, not at the stage of quashing the complaints. Conclusion: - The court dismissed the petitions, holding that the directors could not escape liability under the NI Act despite the corporate debtor's insolvency proceedings. - The court underscored that the trial court should adjudicate the issues based on evidence, and the High Court should not intervene at this preliminary stage. - The petitions were dismissed, and the rule was discharged.
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