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2019 (9) TMI 418 - HC - Indian LawsDishonor of Cheque - section 138 of NI Act - case of petitioner is that they are neither a party to the agreement nor is an authorised signatory - petitioner was prosecuted in the capacity of the director of the company - subsisting debt or liability or not - section 141 of NI Act. Whether the petitioner, being the director of the company, which issued the cheque in question, could be deemed guilty of the offence punishable under section 138 of the Act? HELD THAT - When the managing director or joint managing director is sought to be prosecuted for the offence under section 138 of the Negotiable Instruments Act, there need not be any specific averment in the complaint that the managing director was in charge and responsible for the conduct of the business of the company. It stands to reason that the affairs of the company being managed by the managing director, he is answerable to the acts of commission or omission by the company without further proof of the fact that at the time of the commission of the offence he was in charge of the affairs of the company. In a case as in the instant case, when the managing director and also a director of the company are sought to be prosecuted, it cannot be presumed that the director was also running the affairs of the company and was in charge and management of the company. The IDEB Projects P. Ltd., did not owe any debt or liability to the complainant. According to the complainant, the cheque in question was issued to satisfy the liabilities or the debt incurred by M/s. IDEB Parkway Holdings P. Ltd., and M/s. IDEB PSB Estates P. Ltd. Under the said circumstances, without there being any further material to show that as on the date of occurrence of the liability, the petitioner being one of the directors of the company was fully aware of the affairs of the company and with her knowledge and consent, the cheque in question was issued through IDEB Projects P. Ltd., merely by reproducing the ingredients of section 141(2) of the Act , the criminal liability cannot be fastened on her. The petitioner cannot be prosecuted in her capacity solely on the ground that she was director of the said company as on the date of the issuance of the said cheque. The prosecution of the petitioner for the alleged offence under section 138 of the Act is bad in law and cannot be sustained. - the prosecution of the petitioner has turned out to be an abuse of the process of court and is liable to be quashed - application disposed off.
Issues Involved:
1. Whether the petitioner in Crl. P. No. 5676 of 2012 can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881. 2. Whether the necessary averments constituting the offence under Sections 138 and 141 of the Negotiable Instruments Act are present in the complaint. 3. Whether the liability had arisen as on the date of issuance of the cheque dated November 1, 2009. Issue-wise Detailed Analysis: 1. Prosecution under Section 138 of the Negotiable Instruments Act: The petitioner in Crl. P. No. 5676 of 2012 is accused No. 3 in C. C. No. 26221 of 2011. The complainant, Bennett Coleman and Co. Ltd., initiated proceedings based on an advertising agreement dated February 23, 2009, with M/s. IDEB Parkway Holdings P. Ltd. and M/s. IDEB PSB Estates P. Ltd. The agreement stipulated that if the company failed to obtain an NOC from HDFC and register the definitive documentation by October 31, 2009, it would pay ?4,00,00,000 to BCCL by November 3, 2009. The complainant alleged that a cheque issued by a subsidiary of IDEB group was dishonored due to "funds insufficient," leading to action under Section 138 of the Negotiable Instruments Act. The petitioner argued that she was neither a party to the agreement nor a signatory to the cheque, and thus, her prosecution was illegal. The court found that the petitioner, being a director, could not be deemed guilty under Section 138 solely on this ground, especially as she was not involved in the issuance of the cheque. 2. Necessary Averments under Sections 138 and 141 of the Negotiable Instruments Act: The complainant contended that necessary averments constituting offences under Sections 138 and 141 of the Act were present in the complaint, stating that the petitioner was a director responsible for the day-to-day affairs of the company. The court referred to the Supreme Court's decision in Standard Chartered Bank v. State of Maharashtra, which emphasized that specific averments are required to prosecute directors under Section 141. The court concluded that the complaint lacked sufficient material to show that the petitioner was aware of or consented to the issuance of the cheque, and merely reproducing the ingredients of Section 141(2) was insufficient to establish criminal liability. 3. Liability as on the Date of Issuance of the Cheque: The court noted that the liability under the agreement would arise only after November 3, 2009, while the cheque was issued on November 1, 2009. The complaint itself acknowledged that the obligations under the agreement had to be fulfilled by November 3, 2009. Therefore, as of the cheque issuance date, no liability had arisen. The court emphasized that without a subsisting debt or liability on November 1, 2009, the petitioner could not be held liable for the dishonor of the cheque. Conclusion: The prosecution of the petitioner in Crl. P. No. 5676 of 2012 under Section 138 of the Negotiable Instruments Act was deemed illegal and an abuse of the process of the court. The proceedings against her were quashed. However, the trial against accused Nos. 1 and 2 was allowed to proceed in accordance with the law. Order: Crl. P. No. 5676 of 2012 is allowed. Crl. P. No. 6875 of 2012 is dismissed. The proceedings in C. C. No. 26221 of 2011 are quashed only concerning Mrs. Avneet Bedi (accused No. 3). The trial shall proceed against accused Nos. 1 and 2.
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