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2018 (10) TMI 1777 - HC - Indian LawsDishonor of Cheque - liability of a person who admittedly ceased to be a Director - offences by Companies - section 141 of NI Act - summoning order has been issued by the Judicial Magistrate 1st Class - revision under Section 397 of the Code of Criminal Procedure 1973 - HELD THAT - In the present case the petitioner had ceased to be a Director in the Company long before the cheque was issued and being an ex-Director to make him liable it was necessary to aver in the complaint regarding the manner in which he was incharge of the affairs of the Company but no specific averment regarding the involvement of the petitioner has been made in the complaint. Thus it can not be said that there was any material on record to show that prima facie the petitioner had committed any offence - Under the aforementioned circumstances summoning of the petitioner is an abuse of the process of law and the complaint and summoning order deserve to be quashed. In HARSHENDRA KUMAR D. VERSUS REBATILATA KOLEY 2011 (2) TMI 1278 - SUPREME COURT the facts were that the accused - Company had issued certain cheques which were dishonored. The complaints under Section 138 of the Act were filed and it was averred that the Managing Director and two Directors of the accused-Company including the appellant were responsible for its day to day affairs. Upon summons being issued the appellant challenged the complaint and the summoning order on the ground that he had resigned from the post of Director more than a month before the date of issuance of cheques and this fact is recorded in Form No. 32 filed by the accused-Company. The High Court rejected the petition filed by the appellant on the ground that resignation by a Director of the accused-Company is a matter for consideration in defence during the course of the trial. Reverting to the facts of this case it is clear that the petitioner had resigned w.e.f. 10.02.2006. The cheque in dispute had been issued much later. Form No. 32 and the annual return of the Company have been placed on record and the same have not been denied. For imposing vicarious liability upon the petitioner as a person responsible for the business of the company it was necessary to make specific averments in the complaint regarding his role in the conduct of the business of the Company. No such averment having been made in this case the Magistrate was not justified in summoning the petitioner. Petition allowed.
Issues Involved:
1. Maintainability of the petition under Section 482 Cr.P.C. 2. Vicarious liability of a person who ceased to be a Director. 3. Specificity of allegations in the complaint regarding the role of the accused. 4. Relevance of public documents like Form No. 32 and annual returns. 5. Directions for trial courts regarding summoning of Directors. Issue-wise Detailed Analysis: 1. Maintainability of the petition under Section 482 Cr.P.C.: The court addressed the objection regarding the maintainability of the petition, which sought quashing of the complaint and summoning order. The court clarified that revisional courts do not possess the power to quash a criminal complaint; this power is exclusive to the High Court under Section 482 Cr.P.C. The court emphasized that the inherent powers of the High Court are meant to prevent abuse of the process of any court or to secure the ends of justice. Therefore, the petition was maintainable. 2. Vicarious liability of a person who ceased to be a Director: The petitioner argued that he ceased to be a Director of the Company as of 10.02.2006, supported by Form No. 32 and the annual return of the Company. The court noted that under Section 141 of the Negotiable Instruments Act, 1881, every person in charge of and responsible to the company for the conduct of its business is vicariously liable. The court highlighted that an ex-Director is not liable unless specific allegations are made regarding their involvement in the business at the time of the offence. The court cited several Supreme Court judgments, including Harshendra Kumar D. v. Rebatilata Koley, Anita Malhotra v. Apparel Export Promotion Council, and Pooja Ravinder Devidasani v. State of Maharashtra, which supported the petitioner’s argument that public documents like Form No. 32 can be looked into at the prima facie stage to ascertain the role of the accused. 3. Specificity of allegations in the complaint regarding the role of the accused: The court examined the allegations in the complaint, which merely reproduced the words of Section 141 of the Act without specifying the petitioner’s role in the conduct of the business. The court reiterated that for imposing vicarious liability, specific averments regarding the accused's role are necessary. The court referred to judgments like Gunmala Sales Private Ltd. v. Anu Mehta and Standard Chartered Bank v. State of Maharashtra, which emphasized the need for specific allegations to establish vicarious liability. 4. Relevance of public documents like Form No. 32 and annual returns: The court acknowledged that documents like Form No. 32 and annual returns are public documents under Section 74(2) of the Indian Evidence Act, 1872. These documents can be looked into at the prima facie stage to ascertain whether an accused person was a Director at the time of the offence. The court relied on precedents set by the Supreme Court, which allowed such documents to be considered for quashing criminal proceedings under Section 138 of the Act. 5. Directions for trial courts regarding summoning of Directors: The court directed that in cases where the accused is a company, trial courts should seek copies of Form No. 32 and the latest annual return filed by the company before issuing summons to the accused persons. This is to ensure that only those who were Directors on the date of the offence are summoned. The court specified that for summoning a Chairman, Managing Director, Joint Managing Director, or authorized signatory of the cheque, no specific averment regarding their role is necessary. However, for summoning any other Director or officer, specific averments regarding their role in the conduct of the business must be made. Conclusion: The petitions were allowed, and the summoning orders and complaints were quashed. The court emphasized the need for specific allegations in complaints and the importance of considering public documents at the prima facie stage. The court also provided directions to trial courts to ensure proper summoning procedures in cases involving company Directors.
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