2021 (12) TMI 842 - HC - Indian Laws

Dishonor of cheque - petitioner is dormant Director - Sections 138/141 of the Negotiable Instruments Act, 1881 - HELD THAT - A perusal of the complaints would show that the complainant alleged that the present petitioner, who has been arrayed as accused No. 2, had agreed to guarantee repayment of all payments payable by the accused company in terms of the Factoring Agreement. It was also alleged that the present petitioner along with other accused persons was in-charge and responsible for making financial decisions of the accused company. This Court is of the opinion that the N.I. Act being a penal statute should receive strict construction. Thus, specific averments in a criminal complaint which satisfy the requirements of Section 141 N.I. Act are imperative. On a prima facie view of the material placed on record in the present case, it is apparent that specific allegations have been levelled against the petitioner. Apart from the basic averment that the petitioner was in-charge of and responsible for the day-to-day business of the accused company, it was further averred in the complaint that the petitioner, being a Director, was in charge of the financial decision-making of the accused company and he had agreed to guarantee repayment of all amounts payable by the accused company to the complainant in terms of the Factoring Agreement. On an overall reading of the complaints, it cannot be said that the allegations levelled are bald and vague. The petitioner has also not placed on record any material of unimpeachable quality in support of his claim that he was a dormant Director which issue, alongwith other defences raised, shall be a matter of trial. Suffice it to say, the complaint cases ought not be quashed qua the petitioner at this stage. Petition dismissed.

Summary

Issues:
1. Quashing of Complaint Case Nos. 627314/2016 and 618548/2016 under Sections 138/141 of the Negotiable Instruments Act, 1881.
2. Dismissal of the application seeking discharge/dropping of the proceedings by the Metropolitan Magistrate.

Analysis:
Issue 1: The petitioner sought quashing of the complaint cases under Sections 138/141 N.I. Act, alleging vague allegations and lack of necessary ingredients. The petitioner argued he was a dormant Director not involved in day-to-day affairs, not a signatory to relevant agreements or cheques. The court noted specific allegations against the petitioner, including his responsibility for financial decisions and guaranteeing repayment. Citing legal precedents, the court emphasized strict construction of penal statutes, indicating the need for specific averments satisfying Section 141 N.I. Act requirements. The court concluded that the allegations were not bald and vague, and the issue of whether Section 141 conditions were met would be determined at trial, hence dismissing the quashing petitions.

Issue 2: The petitioner contended that security cheques were provided as a special condition precedent, which required trial for determination. Legal precedents highlighted the need for trial to assess defenses and establish facts. The court referenced recent judgments emphasizing that the determination of Section 141 conditions is a trial matter. The court found no grounds to entertain the petitions, upholding the impugned order and dismissing the petitions, indicating that the complaint cases should proceed to trial for further examination of defenses and factual assertions.

In summary, the court rejected the petitioner's plea to quash the complaint cases, emphasizing the need for trial to assess specific allegations and defenses. The court highlighted the importance of strict construction of penal statutes and the trial process for determining Section 141 N.I. Act conditions. The petitions were dismissed, and the complaint cases were directed to proceed for further examination in trial court.