2010 (3) TMI 914 - HC - Companies Law

Quashing of the order of cognisance prayed - Held that - Section 141 of the Act was required to be strictly complied with and by making ambiguous statement regarding involvement of other directors other than the managing director, the requirement of section 141 of the Negotiable Instruments Act was not complied with and therefore, in the absence of any such statement as required under section 141 of the Negotiable Instruments Act vis-a-vis the present petitioner, there is no scope for her prosecution and therefore, the cognisance order passed against the present petitioner is quashed. As the case has remained pending before the learned Sub-Divisional Judicial Magistrate, Bhubaneswar since 2008 and thus, more than two years have lapsed in the meantime prays for a direction for early disposal, therefore, the learned Sub-Divisional Judicial Magistrate is directed to take up the matter and dispose of the same expeditiously in accordance with law preferably within a period of four months from the date of communication of this order.

Summary

Issues:
Quashing of order of cognisance under section 482 of the Code of Criminal Procedure, 1973 based on section 138 of the Negotiable Instruments Act, 1881.

Analysis:
1. The petitioner sought quashing of the order of cognisance dated March 17, 2008, passed in a case under section 138 of the Negotiable Instruments Act, 1881. The petitioner, a director of a company, was implicated solely based on her directorship. Other directors had similar petitions quashed due to lack of specific averments under section 141 of the Act, as observed in a previous judgment.

2. The respondent relied on a Supreme Court judgment emphasizing that directors can be held liable if they were in charge of the company's affairs when the offense occurred. However, the petitioner's counsel cited a recent Supreme Court judgment stressing the need for specific averments against directors to establish liability under section 141 of the Act.

3. The complaint alleged that the petitioner, along with other directors, was responsible for the company's business and the issuance of a dishonored cheque. However, the court found that the complaint did not clearly implicate the petitioner for connivance or neglect, as required by section 141.

4. Considering the complaint and section 141, the court concluded that the necessary averments to implicate the petitioner were lacking. Previous judgments highlighted the strict compliance required under section 141 and the need for specific allegations against directors for their prosecution under the Act.

5. The court quashed the order of cognisance against the petitioner, emphasizing the importance of adhering to the provisions of section 141 in cases involving vicarious liability of directors under the Negotiable Instruments Act.

6. The court directed the expeditious disposal of the case pending since 2008, urging the Sub-Divisional Judicial Magistrate to resolve the matter within four months from the date of the order, vacating any interim orders in place.