2023 (4) TMI 500 - HC - Indian Laws

Dishonour of Cheque - funds insufficient - infusion of share capital for augmenting the working capital to sustain the operations - Invocation of inherent powers of this Court under Article 226 of the Constitution of India, read with Section 482 of the Code of Criminal Procedure - impleadment of Directors or persons of an accused Company, on the basis of the statement that, they are incharge of and responsible for the conduct of the business of the company, without anything more, does not fulfill the requirement of Section 141 of the N.I. Act - HELD THAT - It is clear that, despite his resignation from the company, as a Director, the applicant herein came into contact with the complainant and others and being an authorized power of attorney holder of the promoters, entered into two agreements and accordingly, parties have acted upon as per the terms and conditions of the understanding. The accused no.2 to 6 belongs to business family and doing their business jointly. The applicant herein had signed the agreements in the capacity as POA of the promoters and authorized signatory. The copy of the income tax returns for the Assessment Year 2017-18 filed by the applicant Zafar Sareshwala would show that at the relevant time, he was serving with the accused no.1- company as a Chief Operating Officer (Sales Marketing). It is duty of the applicant to produce the copy of power of attorney, to substantiate the allegations leveled in the complaint. It is his duty to explain why he had signed two agreements as an authorized signatory. Considering his power to sign the agreement as authorized signatory and attorney of the promoters would rise reasonable inference that at the relevant time, he was representing the accused no.1 company and its promoters and was involved in day to day affairs of the company and having knowledge about the entire transaction including the return of cheque. Thus, this Court is of prima-facie opinion that, the averments in the complaint are sufficient for the purpose of summoning the applicant herein and the trial Court has rightly issued summons. The criminal complaint pending before the trial Court is at the stage of completion as the matter is at the stage of recording further statement of the accused-applicant. In light of the settled principle of law and applying it to the facts of the present case, this Court is of considered opinion that, the averments made in the complaint are sufficient to summon the applicant herein and at this stage, it cannot be said that, prima-facie, no offence is made out against the applicant. This Court, therefore, find no merits in the applications - Hence, all the applications stand dismissed.

Summary

Issues Involved:
1. Whether the applicant, being a signatory of two agreements, can be held liable under Section 138 and 141 of the Negotiable Instruments Act.
2. Whether the applicant's resignation as a Director absolves him of liability.
3. Whether the applicant's involvement in day-to-day affairs of the company can be established.
4. Whether the private complaints are liable to be quashed under Section 482 of the Code of Criminal Procedure.

Summary:

Issue 1: Liability Under Section 138 and 141 of the N.I. Act
The applicant was arraigned as accused no. 6 primarily for being a signatory to two agreements. The court noted that merely signing the agreements as a power of attorney holder does not make the applicant a director or representative of the company. However, the complaint contains specific averments that the applicant was involved in the day-to-day affairs and management of the company, thereby attracting Section 141 of the N.I. Act. The court held that the averments in the complaint are sufficient for summoning the applicant and that the trial court rightly issued summons.

Issue 2: Resignation as a Director
The applicant contended that he had resigned as a Director effective from 01.02.2013, which was notified to the ROC. The court acknowledged the resignation but noted that despite this, the applicant continued to interact with the complainant and others as a power of attorney holder and authorized signatory of the promoters. This involvement raised a reasonable inference that he was representing the company and its promoters, thus not absolving him of liability.

Issue 3: Involvement in Day-to-Day Affairs
The court observed that the applicant's role as a Chief Operating Officer (Sales & Marketing) and his signing of agreements as an authorized signatory indicated his involvement in the company's day-to-day affairs. The court held that it is the applicant's duty to produce evidence to substantiate his claims and explain his actions. The court found the averments in the complaint sufficient to establish prima facie involvement and knowledge of the transactions, including the dishonored cheques.

Issue 4: Quashing of Private Complaints
The court referred to the principles laid down in various judgments, including S.M.S. Pharmaceuticals Limited vs. Nita Bhalla, emphasizing that specific averments are necessary to attract Section 141 of the N.I. Act. The court held that the averments in the complaint, if taken at face value, constitute a prima facie case against the applicant. Therefore, the court found no merit in the applications for quashing the complaints and dismissed them, discharging the rule and vacating the interim relief.

Conclusion:
The court dismissed the applications, holding that the averments in the complaint are sufficient to summon the applicant and that the trial should proceed. The court emphasized that the trial court should decide the case on its merits without being influenced by the observations made in this judgment. The request for extension of interim relief was also denied.