2024 (12) TMI 1291 - HC - Indian Laws

Dishonour of Cheque - vicarious liability - petitioner's involvement in the company's affairs or not - whether this Court can exercise inherent powers under Section 482 of the Code (Section 528 of the BNSS) for quashing of the complaint bearing no. 7369/2022 and summoning order dated 6th January, 2020? - HELD THAT - It is pertinent to understand the contention of the petitioner that the said complaint and the summoning order are liable to be quashed as the petitioner is not involved in the day-to-day affairs of the company and was unaware of the cheques issued to the complainant, hence, the offences under Section 138 and 141 of the NI Act are not made out. In the instant case, the complainant presented the said cheque for the second time on 19th October, 2019, which was dishonored vide memo dated 21st October, 2019 for insufficiency of funds. As required by Section 138 of the NI Act, the complainant issued a demand notice dated 2nd November, 2019, which was issued well within the statutory period of 30 days. However, despite intimating the accused persons, including the petitioner, regarding the dishonor of the cheque and payment of the due amount, the accused persons including the petitioner failed to pay the said amount, thereby, making out an offence under Section 138 of the NI Act. Accordingly, the aforesaid complaint was filed - Section 141 of the NI Act merely states the liability of certain people for the offences committed by the company, which needs to satisfy the test of who is in charge of or responsible for the conduct of company s affairs . However, the extent of their liability is discussed elaborately in a catena of judgments. In the instant case, even though the petitioner is not an authorised signatory of the cheque, she is an officer of the company, holding a directorial position at the respondent no.4-company. Therefore, not being an authorised signatory does not absolve her from the liability of the commission of offence as long as the requisites under Section 138 and 141 of the NI Act are met - this Court has observed a prima facie case against the petitioner for her involvement in the day-to-day activities of the conduct of the company affairs at the time of commission of the offence under Section 141 of the NI Act and her knowledge in issuance of the said cheque to the complainant. Conclusion - This Court is of the view that the learned MM has rightly issued summons against the petitioner after being satisfied that a prima facie case is made out under Section 138 of the NI Act. Moreover, sufficient reasons were given in the summoning order, wherein, the learned MM observed that payment was not made by the petitioner despite the issuance of the demand notice dated 2nd November, 2019 - this Court is of a considered view that the learned MM has not committed any error or illegality in passing the summoning order and therefore, this Court does not find any reason to exercise its inherent powers under Section 482 of the Code (Section 528 of the BNSS). Petition dismissed.

Summary

Issues Involved:

1. Whether the petitioner's involvement in the company's affairs justifies her liability under Sections 138 and 141 of the Negotiable Instruments Act (NI Act).
2. Whether the complaint and summoning order can be quashed under Section 482 of the Code of Criminal Procedure (now Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023).

Issue-wise Detailed Analysis:

1. Petitioner's Liability under Sections 138 and 141 of the NI Act:

The petitioner argued that she was not involved in the issuance of the cheque and not responsible for the company's day-to-day affairs, thus not liable under Sections 138 and 141 of the NI Act. Section 138 addresses the dishonor of cheques due to insufficient funds, requiring the payee to issue a demand notice within 30 days of the cheque's return, and the drawer must pay within 15 days of receiving the notice. Section 141 extends liability to individuals in charge of the company at the time of the offense. The court noted that the petitioner, as a director, was involved in the transaction and had knowledge of the cheque issuance. The complaint specifically mentioned her role in the company's affairs, fulfilling the criteria for liability under Section 141. The court referenced Supreme Court judgments emphasizing that mere directorship does not imply liability unless the director is involved in the company's daily operations. The court concluded that the petitioner was prima facie involved in the company's affairs and the issuance of the cheque, thus liable under Sections 138 and 141.

2. Quashing of Complaint and Summoning Order under Section 482 of the Code:

The petitioner sought to quash the complaint and summoning order, arguing lack of involvement in the offense. The court examined the scope of Section 482, which allows quashing to prevent abuse of process or secure justice, but must be used sparingly. The court assessed whether the complaint constituted a prima facie offense. The learned Metropolitan Magistrate (MM) had issued summons after determining a prima facie case under Section 138, observing non-payment despite a demand notice. The court found no error in the MM's order and determined that the complaint provided sufficient material against the petitioner. The court emphasized that the petitioner's directorial role and involvement in the transaction were adequately averred in the complaint, fulfilling the requirements for vicarious liability under Section 141. Consequently, the court held that the petition lacked merit and dismissed it, affirming the summoning order and complaint's validity.

In conclusion, the court dismissed the petition, affirming the petitioner's liability under Sections 138 and 141 of the NI Act due to her involvement in the company's affairs and the transaction in question, and found no grounds to exercise inherent powers under Section 482 to quash the complaint and summoning order.