2017 (6) TMI 25 - HC - Indian Laws

Offence punishable under Section 138 of the Negotiable Instruments Act - Dishonour of cheque for insufficiency, etc., of funds in the account - liability of director - Held that - The petitioner was not a director in the company on the date the cheque was presented for encashment. No notice in terms of Section 138 of the Negotiable Instruments Act was issued to or served on him. Having resigned from the position of the director, there was no occasion for him to be privy to the service of notice of demand on the company. Since he was no longer responsible for the conduct of the business of the company, and had no occasion to be aware of the dishonor of the cheque or the notice of demand served in its wake, it cannot be said by any stretch of reasoning that he had knowledge or could have exercised due diligence to prevent the commission of the offence or is guilty of connivance or neglect, there being no material shown to impute consent. For the foregoing reasons, the continuance of the criminal proceedings against the petitioner is found to be an abuse of the judicial process. This court is duty bound to secure the ends of justice by taking measures to prevent such abuse of judicial process. Thus, the petition is allowed.

Summary

Issues:
Quashing of criminal complaint case under Section 138 of the Negotiable Instruments Act, 1881.

Analysis:
1. The petitioner, a former director of a company, was accused in a criminal complaint case under Section 138 of the Negotiable Instruments Act, 1881. The complaint alleged that a cheque issued by the company was dishonored due to insufficient funds. The petitioner sought quashing of the criminal complaint through a petition invoking Articles 226 and 227 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973.

2. The petitioner contended that he had resigned from the company before the cheque was presented for encashment and that no notice under Section 138 of the Negotiable Instruments Act was issued to him. The court noted that the complainant company admitted that the petitioner had resigned before the cheque was presented for encashment, and no notice of demand was addressed to the petitioner before filing the criminal case.

3. The court highlighted the legal provisions under Section 138 and Section 141 of the Negotiable Instruments Act, 1881. Section 138 specifies the conditions for an offense related to dishonor of a cheque, emphasizing the necessity of a notice of demand to the drawer. Section 141 deals with offenses by companies, holding individuals responsible for the conduct of business at the time of the offense.

4. It was established that the petitioner, no longer a director at the time of the offense, had no knowledge or involvement in the dishonor of the cheque or the subsequent notice of demand. As he had resigned and was not responsible for the company's affairs, the court found the continuation of criminal proceedings against him to be an abuse of the judicial process.

5. Consequently, the court allowed the petition, quashing the criminal proceedings against the petitioner in the case titled Frick India Ltd. Vs. C.T. Cotton Yard Ltd. The judgment aimed to prevent the abuse of the judicial process and secure the ends of justice by dismissing the unfounded charges against the petitioner.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning behind quashing the criminal complaint case under Section 138 of the Negotiable Instruments Act, 1881.