2018 (11) TMI 1913 - HC - Indian Laws

Dishonor of Cheque - averment made in the complaint explain the nature of the duty that the petitioners have been performing in the company or not - it is also contended that the petitioners have submitted resignation prior to the date of issuance of cheque and they no longer continue to be the directors of A1 company - Section 138 of the Negotiable Instruments Act - HELD THAT - There was an averment in the complaint therein that the appellant was responsible for the day-to-day affairs of the company, despite the said averment the Court quashed the complaint taking into consideration the resolution passed by the company wherein it was reflected that the appellant therein had resigned from the post of Director much prior to the issuance of cheque. In GUNMALA SALES PRIVATE LTD. 2014 (12) TMI 1116 - SUPREME COURT the Supreme Court referred to its earlier decision in HARSHENDRA KUMAR D. VERSUS REBATILATA KOLEY 2011 (2) TMI 1278 - SUPREME COURT in which also a similar issue came up for consideration. There was an averment in the complaint therein that the appellant was responsible for the day-to-day affairs of the company, despite the said averment the Court quashed the complaint taking into consideration the resolution passed by the company wherein it was reflected that the appellant therein had resigned from the post of Director much prior to the issuance of cheque - The Supreme Court opined that the said observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstances, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. For promotion of justice or to prevent injustice or abuse of process, the High Court may look into the material which has significant bearing on the matter at prima facie stage. It also observed that criminal prosecution is a serious matter which affects the liberty of a person and no greater damage can be done to the reputation of a person than dragging him in a criminal case. It held that the High Court therein fell into grave error in not taking into consideration the uncontroverted documents relating to the appellants resignation from the post of Director of the company and had these documents been considered by the High court, it would have been apparent that the appellant has resigned much before the cheques were issued by the company. The proceedings against the petitioners on the file of the V Additional Chief Metropolitan Magistrate cum Juvenile Court, Nampally, are hereby quashed - Petition allowed.

Summary

Issues:
Quashing of criminal proceedings under Section 138 of the Negotiable Instruments Act against the petitioners who are Directors of a company based on resignation and day-to-day involvement in company affairs.

Analysis:
The criminal petitions sought to quash proceedings against the petitioners, Directors of a company, under Section 138 of the Negotiable Instruments Act. The petitioners argued that the complaint did not specify their duties in the company and that they had resigned before the cheque issuance. The second respondent contended that the petitioners' active involvement in the company sufficed for prosecution, citing the ANITA MALHOTRA case. The court noted the necessity to aver that the accused was in charge of the company's affairs, as per SMS PHARMACEUTICALS LTD v. NEETA BHALLA. The petitioners presented Form 32 to prove resignation, similar to GUNMALA SALES PRIVATE LTD., but faced opposition as the fact required trial scrutiny.

The court referenced HARSHENDRA KUMAR D v. REBATILATA KOLEY, where a similar issue led to quashing due to resignation before the cheque issuance. The court emphasized that, at the pre-trial stage, documents beyond suspicion could be considered to prevent injustice, as seen in AWADH KISHORE GUPTA. The court highlighted that criminal prosecution impacts liberty and reputation significantly. In this case, Form 32's public document reflecting resignation on 01.10.2010 led the court to quash the proceedings, aligning with the Supreme Court's approach in similar cases.

In conclusion, the court allowed the criminal petitions, quashing the proceedings against the petitioners, Directors of the company, under Section 138 of the Negotiable Instruments Act. The court considered the resignation evidence and public document Form 32, leading to the decision to quash the proceedings, emphasizing the importance of preventing injustice and protecting the accused's rights at the pre-trial stage.