2017 (10) TMI 457 - HC - Indian Laws

Dishonour of cheque - Maintainability of complaint u/s 138 of NI Act - whether petitioner is not a signatory to the cheque and that she being a nominal director is in no way connected with the day today affairs of the company - Held that - In the complaint other than the cause title depicting the petitioner as director and impleading her as the third accused no other averment has been made that she is a person who at the time of the commission of the offencce was incharge of and was responsible to the company for the conduct of the company as well as the company. As per the dictum laid down in S.M.S.Pharmaceuticals Ltd. vs. Neeta Bhalla 2005 (9) TMI 304 - SUPREME COURT OF INDIA that absolutely when there is no averment in the complaint that the petitioner was in charge and responsible for the day to day affairs of the company the essential requirements under Section 141 of the N.I Act is not satisfied. Excepting the oral submissions raised by the counsel for the respondent at the time of the arguments before this court that the petitioner is the wife of the second accused who is the Managing Director and that she is also involved in the day to day affairs of the business no other averment has been made against her in the complaint. In view of Section 141 when there is no averment against the petitioner the proceedings against the petitioner is an abuse of process of law and is liable to be quashed. In the result this Criminal Original Petition is allowed and the complaint as against the petitioner alone is quashed.

Summary

Issues Involved:
1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act against the petitioner.
2. Applicability of Section 141 of the Negotiable Instruments Act regarding the liability of directors.

Issue-wise Detailed Analysis:

1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act against the petitioner:

The petitioner, who is Accused No.3 and a Director of the first Accused company, filed a quash petition to dismiss the proceedings against her under Section 138 of the Negotiable Instruments Act. The main contention by the petitioner was that she was not a signatory to the cheque and was merely a nominal director, not involved in the day-to-day affairs of the company. The complaint lacked any specific averment implicating her as required under Section 141 of the Negotiable Instruments Act, which would justify her implication in the alleged offence. The respondent argued that the petitioner, being the wife of the Managing Director, was involved in the company's daily affairs and thus liable for prosecution.

2. Applicability of Section 141 of the Negotiable Instruments Act regarding the liability of directors:

The court examined Sections 138 and 141 of the Negotiable Instruments Act. Section 138 deals with the dishonour of cheques due to insufficient funds, while Section 141 extends liability to every person in charge of and responsible for the company's business at the time the offence was committed. The court noted that the complaint did not contain any specific averments that the petitioner was in charge of or responsible for the company's day-to-day affairs, as required under Section 141.

The court referred to the precedent set by the Supreme Court in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla (2005) and Pooja Ravinder Devidasani vs. State of Maharashtra (2014), which emphasized that for a director to be held liable under Section 141, there must be clear and specific allegations indicating their involvement in the company's day-to-day affairs. Simply holding a position as a director is insufficient to attract liability under Section 141.

Conclusion:

The court concluded that the complaint lacked the necessary averments to implicate the petitioner under Section 141 of the Negotiable Instruments Act. The oral submissions made by the respondent's counsel that the petitioner was involved in the company's daily affairs were not supported by the complaint. Thus, the proceedings against the petitioner were deemed an abuse of process of law and were quashed.

Order:

The Criminal Original Petition was allowed, and the complaint in C.C.No.1811 of 2010 on the file of II Metropolitan Magistrate, Egmore, Chennai, against the petitioner was quashed. The learned Magistrate was directed to proceed with the trial against the other accused and complete it within four months from the date of receipt of the order.