2018 (9) TMI 2030 - HC - Indian Laws

Dishonor of Cheque - limitation for filing of complaint - cheque not signed by applicant - allegation against the applicants that they were looking after and responsible for day today affairs of the company or not - whether present applicants have already resigned from the post of directors before issuance of the cheques or its presentation in the concerned bank? - HELD THAT - When the complaint was presented before the trial court it was returned to the complainant for its presentation in the proper court as per the law laid down by the Hon ble Supreme Court in case of Dashrat Rathod Vs. State of Maharashtra 2014 (8) TMI 417 - SUPREME COURT . Thus from the record it appears that in view of the law laid down by the Apex Court in the aforesaid case the complaint was returned to the complainant for presentation to the proper Court. Further record shows that the complaint was then presented before the Court at Coimbatore again due to the change in law. It was returned to the complainant for presentation in the proper Court and therefore for a second time the complaint was presented before the Judicial Magistrate First Class at Gangapur. Hence there was no fault on the part of all complainant. The return of the complaint by two Courts was due to change in the law from time to time in such situation it cannot be said that the complaint is not before limitation. It is duty of the Magistrate before summoning the accused under Section 138 of the Negotiable Instruments Act Magistrate is expected to examine the nature of the allegations made in the complaint and the evidence both orally and documentary in support thereof and than to proceed further with proper application of mind to the legal principles on the issue. It is necessary for the courts to ensure strict compliance to the statutory requirement as well as settle principles of law before making a person vicariously liable therefore simply because a person is a director of a defaulter company does not make him liable under the Act for the offence committed by the company under Section 141 of the Negotiable Instrument s Act. There must be specific averments against direct showing as to how and in what manner the directors was responsible for the conduct and business of the company. The present applicants have already resigned from the posts of directors. Secondly there are no specific and sufficient allegation against the applicants that they were looking after and responsible for day today affairs of the company. Thus application is allowed and the relief is granted in terms of prayer clause B. Application disposed off.

Summary

Issues Involved:
1. Limitation for filing the complaint.
2. Responsibility of applicants for day-to-day affairs of the company.
3. Resignation of applicants from the post of directors before issuance of cheques.
4. Vicarious liability under Section 141 of the Negotiable Instruments Act.

Detailed Analysis:

1. Limitation for Filing the Complaint:
The applicants argued that due to the return of the complaint and its re-presentation before the same court, there was no limitation for filing the complaint. The court clarified that the complaint was returned to the complainant for presentation in the proper court as per the law laid down by the Supreme Court in the case of Dashrat Rathod Vs. State of Maharashtra. The complaint was then presented before the proper court at Coimbatore and subsequently returned again due to changes in the law. Hence, the court concluded that there was no fault on the part of the complainant and the complaint was not barred by limitation.

2. Responsibility of Applicants for Day-to-Day Affairs of the Company:
The applicants contended that there were no allegations against them suggesting they were responsible for the day-to-day affairs of the company. The court examined the complaint and found the allegations in paragraph 2 to be vague, stating merely that the accused were directors and responsible for the company's affairs. The court emphasized that for vicarious liability under Section 141 of the Negotiable Instruments Act, there must be specific averments showing how and in what manner the accused were responsible for the conduct of the company's business. The court found the allegations insufficient to hold the applicants liable.

3. Resignation of Applicants from the Post of Directors Before Issuance of Cheques:
The applicants argued that they had resigned from their positions as directors before the issuance of the cheques. The court reviewed the resignation letters and certified copies from the Registrar of Companies, which confirmed that the applicants had resigned before the cheques were issued. The court noted that the complainant did not dispute the authenticity of these documents and concluded that the applicants had indeed resigned before the issuance of the cheques.

4. Vicarious Liability Under Section 141 of the Negotiable Instruments Act:
The court referred to various judgments to underline that merely being a director does not automatically make one liable under Section 141. It reiterated that specific allegations showing the director's involvement in the company's business are necessary. The court found the complaint lacking in such specific allegations against the applicants. The court cited precedents, including the Supreme Court's observation that a director not in charge of and responsible for the conduct of the business at the relevant time cannot be held liable under Section 141.

Conclusion:
The court concluded that the applicants had already resigned from their director positions before the issuance of the cheques and that there were no specific allegations against them regarding their responsibility for the company's day-to-day affairs. Consequently, the application was allowed, and the proceedings under Section 138 of the Negotiable Instruments Act against accused Nos. 2 to 4 were quashed. The court also rejected the request to stay the operation of the judgment.