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2019 (6) TMI 1619 - HC - Indian LawsDishonor of Cheque - petitioner was a Nominee Director of the Company at the time of offence or not - cheque given as security or otherwise? - HELD THAT - In the instant case not only completely self-contradictory stand has been taken, no offence had been made out which discloses the offence under section 420 of the Indian Penal Code. Learned Magistrate had taken cognizance off offence under sections 406, 419, 420 read with section 120B of the Indian Penal Code - Here this Court is considering the existing liability of section 138 of the N.I. Act. The petitioner though does not dispute that liability, it has spoken of a litigant, which has travelled civil litigation, which is pending and also litigation which has travelled to NCLT. Even while accepting that the cheques, which are accepted and said to have been dishonored, and endorsement on the back side of the same being given towards the security with no dispute with regard to non-payment of electricity charges for all the three months being July, 2016 to September, 2016 and the dispute with regard to respondent complainant not having obtained captive power plant status and the letter of credit having been furnished by the company and where the same was, according to the required format of the bankers of respondent or where there was any other difficulty in getting the same negotiated are some of the questions, which are being disputed questions of facts and also being essentially the defence of the petitioner, shall need to go before the trial Court for it to adjudicate in accordance with law. In such circumstances to prevent the abuse of process of law, the Court can step in and indulge. However, where the complaint filed is genuine, the High Court as per this decision is not to travel beyond the prescribed limit and sometimes on the very same set of facts, civil and criminal both proceedings are maintainable.
Issues Involved:
1. Quashing of Criminal Complaint under Section 138 of the Negotiable Instruments Act. 2. Liability of Nominee Directors and Non-Executive Directors. 3. Existence of enforceable debt or liability. 4. Jurisdiction of High Court under Section 482 of the Code of Criminal Procedure. Issue-wise Detailed Analysis: 1. Quashing of Criminal Complaint under Section 138 of the Negotiable Instruments Act: The petitioner sought to quash Criminal Complaint No. 1220 of 2017, filed under Section 138 of the N.I. Act, on the grounds that the petitioner was a Nominee Director and not in charge of day-to-day management. The petitioner argued that the cheque in question was given as security and not for payment, and that he had ceased to be a Director before the cheque was dishonored. The court considered the facts and found that the petitioner was not responsible for the cheque's dishonor as he was not in charge of the company's daily operations at the relevant time. Consequently, the complaint against the petitioner was quashed. 2. Liability of Nominee Directors and Non-Executive Directors: The petitioner was appointed as a Nominee Director by Punjab National Bank and ceased to be a Director on 01.05.2017. The court referred to the case of DCM Financial Services Limited vs. J.N. Sareen & Anr., where it was held that a person who resigned as Director could not be held responsible for the company's actions after their resignation. Similarly, the complaint against petitioner No. 5, a Non-Executive Director, was quashed as she was not involved in the day-to-day management. The court emphasized that directors not involved in daily operations should not be held liable under Section 138 of the N.I. Act. 3. Existence of Enforceable Debt or Liability: The court examined whether the cheques represented an enforceable debt or liability. The petitioner argued that the cheques were given as security and not for payment. The court referred to the case of Sampelly Satyanarayana Rao vs. Indian Renewable Energy Development Agency Limited, which distinguished between cheques given for discharge of existing liability and those given as security. The court held that the question of whether the cheques were for security or payment was a factual dispute to be determined by the trial court. The court also noted that the company had initiated civil litigation and proceedings before the NCLT, indicating ongoing disputes about the debt. 4. Jurisdiction of High Court under Section 482 of the Code of Criminal Procedure: The court discussed the scope of its jurisdiction under Section 482 of the Code of Criminal Procedure, emphasizing that it should be exercised sparingly and in exceptional cases. The court referred to several precedents, including HMT Watches Ltd. vs. M.A. Abida and S. Krishnamoorthy vs. Chellammal, which held that disputed questions of fact should be determined by the trial court. The court concluded that it should not quash the proceedings based on disputed facts and that the trial court should adjudicate the matter. Separate Judgments Delivered: - Special Criminal Application No. 351 of 2018: The petition was allowed, and the complaint against the petitioner was quashed. - Special Criminal Application No. 9753 of 2017 and Special Criminal Application No. 9754 of 2017: The petitions were not entertained except for petitioner No. 5 in Special Criminal Application No. 9754 of 2017, whose complaint was quashed. Conclusion: The court quashed the criminal complaint against the Nominee Director and the Non-Executive Director, as they were not involved in the day-to-day management of the company. The court emphasized that disputed questions of fact should be determined by the trial court and that the High Court's jurisdiction under Section 482 should be exercised sparingly. The petitions for other directors were not entertained, leaving their defenses open for trial.
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