2022 (10) TMI 916 - HC - Indian Laws

Dishonor of Cheque - proceeds against a company which has already been sold out - vicarious liability of the Director - Whether the petitioner No.2 being the Managing Director of the company is responsible as per provision of section 141 N.I. Act while he had not issued the cheques in question? - HELD THAT - There is no quarrel at the Bar that before issuing cheques in question the company has been sold out. Despite the cheques were issued by the accused which returned unpaid on presentation to the banker due to not availability of the fund in the account of the accused. There is nothing on the record to show that the company was legally forbidden from making payment of the cheque amounts on account of the same being sold out. This being the position the accused persons cannot be allowed to escape from the penal liability and to seek the shield that the company being sold out. In the case in hand the petitioner No.2 had not issued any cheque. There is no averment in the complaint petitions as to how and in what manner the petitioner No.2 was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning though an omnibus statement is made in paragraph No.2 of the complaint that he and the accused No.3 and 4 are the person responsible for conduct of the business of the company. How he is responsible for dishonour of the cheque has also not been stated. Nothing is averred in the said Affidavit against the petitioner No. 2 - Shri Shiv Kumar Kanoi let alone any averment that he was the person responsible for day to day conduct of the affairs of the company. As stated herein the complainant had made averment against one Joydev Kumar Kanoi as Director the company in the Affidavit. Thus the bald assertion made in paragraph 2 of the complaint do not satisfy the requirements of Section 141 of the Act. In Pooja Ravinder Devidasani Vs. State of Maharashtra and another 2014 (12) TMI 1070 - SUPREME COURT Hon ble Supreme Court held that putting criminal law into motion is not a matter of course. A Magistrate taking cognizance of an offence under Section 138/141 of the N.I. Act making a person vicariously liable has to ensure strict compliance of the statutory requirements. The impugned order of taking cognizance against the petitioner No.2 by the learned Addl. Chief Judicial Magistrate Dibrugarh under section 138 N.I. Act dated 30.04.2016 stands set aside and quashed - petition allowed in part.

Summary

Issues Involved:
1. Whether the case proceeds against a company that has already been sold out.
2. Whether the petitioner No.2, being the Managing Director of the company, is responsible as per the provision of section 141 N.I. Act, even though he had not issued the cheques in question.

Detailed Analysis:

Issue 1: Whether the case proceeds against a company that has already been sold out.
The court examined whether the sale of the company impacts the enforceability of the debt and the consequent liability under Section 138 of the N.I. Act. The court noted that the cheques were issued by the accused company, which were dishonored due to insufficient funds. Despite the company being sold, there was no legal prohibition preventing the company from making the payment. The court referenced the Supreme Court decision in *Pankaj Mehra and Another vs. State of Maharashtra and Others* (2000) 2 SCC 756, which established that the enforceability of a debt is not negated by the sale or liquidation of a company. The court concluded that the accused cannot escape penal liability by claiming the company was sold.

Issue 2: Whether the petitioner No.2, being the Managing Director of the company, is responsible as per the provision of section 141 N.I. Act, even though he had not issued the cheques in question.
The court scrutinized the complaint and supporting affidavit to determine if there were sufficient averments implicating petitioner No.2 (the Managing Director) in the issuance of the cheques. The court found that the affidavit did not specify any role of petitioner No.2 in the conduct of the company's business or in the issuance of the cheques. The court cited several Supreme Court rulings, including *S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla* (2005) 8 SCC 89, which stressed the necessity of specific allegations against a director to hold them vicariously liable under Section 141 of the N.I. Act. The court determined that the bald assertions in the complaint were insufficient to meet the statutory requirements for vicarious liability.

Conclusion:
The court concluded that the impugned order of the Addl. Chief Judicial Magistrate, Dibrugarh, dated 30.04.2016, taking cognizance against petitioner No.2, did not withstand the test of legality, propriety, and correctness. The court quashed the order against petitioner No.2 and the subsequent judgment by the Sessions Judge, Dibrugarh, dated 04.04.2018, upholding the order. However, the proceedings against petitioner No.1 and other accused were allowed to continue. The court emphasized that its observations were solely for the purpose of disposing of the revision petition and directed the lower court to proceed without being influenced by these observations.

Separate Judgments:
There were no separate judgments delivered by different judges in this case.