2020 (3) TMI 2 - HC - Indian Laws

Dishonor of Cheque - section 138 of NI Act - petitioners were declared as proclaimed persons - Counsel for the petitioners has argued that after the complaint was filed, the petitioners were never served with the summons as is clear from the report of the Process Server - HELD THAT - Considering the fact that the complaint filed under Section 138 of the N.I. Act was compromised and later on the same was withdrawn on 18.03.2019, there are merit in present petition as the petitioners have also shown a bona fide cause for non-appearance before the trial Court. The service was not effected at the ordinary place of residence of the petitioners and they were not aware of the said fact and immediately, on coming to know about the said order, they compromised the case with the complainant and the complaint under Section 138 of the Act was withdrawn later on. The present petition is allowed.

Summary

Issues:
Setting aside trial court order in complaint under Section 138 of the Negotiable Instruments Act, 1881 and quashing FIR under Section 174-A of the Indian Penal Code, 1860.

Analysis:
The respondent/complainant filed a complaint under Section 138 of the N.I. Act against the petitioners, who were the Chairman, Managing Director, and Director of a company. The complaint alleged dishonor of a cheque issued by the company. The petitioners argued that they were not served with summons and the service was not in accordance with the procedure under Cr.P.C. They also mentioned filing a petition before the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, leading to the appointment of an Interim Resolution Professional for the company. The complainant later withdrew the complaint after the petitioners appeared before the trial court and were granted interim bail.

The counsel for the petitioners cited previous court decisions where withdrawal of the main petition under Section 138 of the Act due to an amicable settlement led to the view that continuing proceedings under Section 174-A of IPC would be an abuse of the legal process. The State did not dispute that the FIR was registered based on the trial court order declaring the petitioners as proclaimed persons, but acknowledged that the complaint under Section 138 of the N.I. Act had been withdrawn.

Considering the compromise and withdrawal of the complaint under Section 138 of the N.I. Act, the court found merit in the petition. The petitioners demonstrated a genuine reason for non-appearance before the trial court as they were not properly served, leading to a compromise with the complainant. The court held that the service was not effective, and the petitioners acted promptly upon becoming aware of the situation, resulting in the withdrawal of the complaint. Consequently, the court allowed the petition, setting aside the trial court order and quashing the FIR and all subsequent proceedings arising from it.