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2020 (1) TMI 340 - HC - Indian LawsDishonor of Cheque - offence punishable under Section 138 of the Negotiable Instruments Act, 1881 - vicarious liability on the petitioner or not - HELD THAT - The petitioner being an Independent and a Non-Executive Director, in the absence of any specific role attributed against the petitioner for his active participation in the day to day affairs of the company and of taking all decisions of the company, where the petitioner was not a signatory to the cheques in question, vicarious liability cannot be fastened on the petitioner in the absence of any specific role attributed to him, in as much as, the contentions that have been sought to be raised during the course of the arguments and in the affidavit in reply to the petition on behalf of the respondent in relation to the petitioner being in a Key Managerial Person and the petitioner having participated in 100% all the meetings of the accused company, are not spelt out in the complaint that had been filed by the respondent. Taking into account also the factum that even if the petitioner was a Key Managerial Person of the accused No.1 company as per the reply affidavit of the respondent as filed on 08.07.2007, he was so for the period from 01.04.2015 to 31.03.2016 and the date of the drawing of the cheques in question are 07.06.2019 - In view thereof, the impugned order dated 20.02.2017 of the Trial Court of the learned MM-01, New Delhi to the extent that summons are issued to the petitioner for an alleged commission of an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 is thus, quashed. Petition allowed.
Issues Involved:
1. Validity of the summoning order dated 20.02.2017. 2. Liability of an Independent, Non-Executive Director under Section 138 of the Negotiable Instruments Act, 1881. 3. Compliance with statutory requirements under the Negotiable Instruments Act, 1881. 4. Specificity of allegations against the petitioner. 5. Applicability of Section 149(12) of the Companies Act, 2013. Issue-Wise Detailed Analysis: 1. Validity of the Summoning Order Dated 20.02.2017: The petitioner challenged the summoning order issued by the Trial Court on 20.02.2017, which took cognizance of the offence under Section 138 of the Negotiable Instruments Act, 1881. The Trial Court observed that all statutory requirements under the NI Act were complied with, and a prima facie case was made out against the accused. However, the petitioner argued that the summoning was mechanical and did not consider his specific role or lack thereof in the company's day-to-day affairs. 2. Liability of an Independent, Non-Executive Director Under Section 138 of the Negotiable Instruments Act, 1881: The petitioner contended that as an Independent, Non-Executive Director, he was not involved in the day-to-day affairs of the company and thus could not be held liable under Section 138. He cited various judgments, including "Gunmala Sales Private Limited vs. Anu Mehta and Ors" and "Pooja Ravinder Devidasani vs. State of Maharashtra," to support his argument that mere designation as a director does not automatically result in liability unless specific involvement in the company's operations is proven. 3. Compliance with Statutory Requirements Under the Negotiable Instruments Act, 1881: The respondent argued that all statutory requirements under Section 138 were met, including the timely presentation of cheques, issuance of a demand notice, and the accused's failure to make payment within the stipulated period. However, the petitioner emphasized that he did not receive any notice and was not involved in the issuance or knowledge of the cheques. 4. Specificity of Allegations Against the Petitioner: The petitioner argued that the complaint lacked specific allegations detailing his involvement in the company's transactions. He highlighted that the complaint only made general statements about his role as a director without providing evidence of his participation in the day-to-day affairs. The petitioner relied on judgments such as "National Small Industries Corporation Limited vs. Harmeet Singh Paintal & Anr." and "S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and Anr." to argue that specific averments are necessary to establish liability. 5. Applicability of Section 149(12) of the Companies Act, 2013: The petitioner invoked Section 149(12) of the Companies Act, 2013, which limits the liability of Independent and Non-Executive Directors to acts of omission or commission that occurred with their knowledge, consent, or connivance. The court noted that the petitioner was categorized as an Independent and Non-Executive Director, and there were no specific allegations or evidence showing his active participation in the company's affairs. The court referenced the judgments in "Bhardwaj Thuiruvenkata Venkatavraghavan vs. Ashok Arora and Ors." and "Kanarath Payattiyath Balraj vs. Raja Arora" to support this view. Conclusion: The court quashed the summoning order dated 20.02.2017 to the extent that it issued summons to the petitioner for the alleged commission of an offence under Section 138 of the Negotiable Instruments Act, 1881. The court concluded that the petitioner, being an Independent and Non-Executive Director, could not be held vicariously liable in the absence of specific allegations and evidence of his involvement in the company's day-to-day affairs. The petition was disposed of accordingly.
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