2020 (1) TMI 798 - HC - Indian Laws

Dishonor of cheque - Responsibility of Director not engaged in day to day affair of the company - Director having majority shareholding - offence u/s 138 of the Negotiable Instruments Act, 1881 - HELD THAT - As per Section 141(1) of the N.I. Act, the person, who was incharge of and responsible to the Company for the conduct of the business of the Company, as well as the Company, shall be deemed to be guilty of the offence - In the present, although the petitioner is the Director of the Company, she is not responsible for the day to day affairs of the Company. The complainant in his complaint has not alleged the specific role against the petitioner, to the fact that how she is responsible for issuance of the cheque. It is also perused that even the cheque has not been signed by the petitioner. Thus, as per this section, the person, who was incharge of and responsible to the Company for the conduct of the business of the Company, as well as the Company, shall be deemed to be guilty of the offence.. In the present, although the petitioner is the Director of the Company, she is not responsible for the day to day affairs of the Company. The complainant in his complaint has not alleged the specific role against the petitioner, to the fact that how she is responsible for issuance of the cheque. It is also perused that even the cheque has not been signed by the petitioner - the criminal proceedings against the present petitioner would amount to abuse of process of law. Petition allowed.

Summary

Issues:
Quashment of Criminal complaint under section 138 of the Negotiable Instruments Act, 1881 against the petitioner.

Detailed Analysis:

1. Issue of Quashment of Criminal Complaint:
The petitioner filed a petition under section 482 of Cr.P.C for quashment of Criminal complaint no. 4861/2013 registered against her under section 138 of the Negotiable Instruments Act, 1881. The respondent company alleged that the accused company had issued three cheques which were dishonored, leading to the complaint. The petitioner argued that she was not involved in the day-to-day affairs of the company and did not sign the questioned cheques. She relied on section 141(1) of the Act, which holds persons responsible for the company's conduct. The petitioner claimed to be a sleeping director and cited relevant judgments to support her case.

2. Responsibility of Director in Criminal Offences:
The respondent contended that as a director of the company, the petitioner was equally responsible for the offense under section 138 of the Act. Specific allegations were made against the petitioner, highlighting her role in the company's affairs, including attending board meetings, holding equity shares, and guaranteeing loans. The respondent argued that the petitioner's authorization and superintendence over the company made her liable for the consequences of the dishonored cheques.

3. Interpretation of Section 141 of the Act:
The Court analyzed section 141 of the Act, which deals with offenses by companies and individuals responsible for the company's conduct. It was noted that the complainant did not allege a specific role against the petitioner in the complaint regarding the issuance of the cheques. Citing relevant judgments, the Court emphasized the necessity of averments in the complaint to establish the accused's responsibility for the company's conduct. The judgments highlighted that mere directorship does not automatically make a person liable under the Act; specific averments showing the director's responsibility are required.

4. Decision and Legal Precedents:
After considering the arguments and legal precedents, the Court found that the criminal proceedings against the petitioner amounted to an abuse of process of law. The Court allowed the petition under section 482 of Cr.P.C and quashed the criminal complaint registered against the petitioner. The judgment emphasized the importance of specific averments against a director to establish their liability for offenses committed by the company under section 141 of the Act.

This detailed analysis of the judgment from the Madhya Pradesh High Court provides insights into the legal principles governing the quashment of criminal complaints under the Negotiable Instruments Act, emphasizing the importance of specific averments to establish individual liability in cases involving company offenses.