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2025 (3) TMI 556 - HC - Indian LawsDishonour of Cheque - vicarious liability of director when he claims to have resigned before the cause of action arose - Section 141 of the NI Act - HELD THAT - It is true that section 141 of the N.I. Act mandates that when the person committing an offence under section 138 is a company every person who at the time of offence was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall deemed to be guilty of the offence and in the present context in the averments made in the complaint the words in charge of as required under section 141 of the N.I. Act is missing from the petition of complaint and in respect of which the learned counsel strenuously argued that the petition of complaint is not maintainable. However it is settled law that reproduction of section 141 in verbatim in the complaint is not necessary if the substance of the allegations made in the complaint fulfils requirements of section 141 and in such cases even if in the absence of verbatim reproduction of the language of section 141 the complaint has to proceed and is required to be tried. Before issuing process against the present petitioner Anil Bhutoria the court below ought to have made an inquiry inter alia to get answer to the aforesaid questions either from the materials available from the record or even putting questions to the complainant by himself to elicit answers to the aforesaid questions to find out whether there are grounds for proceeding against the present petitioner or not. As it is quoted above neither the initial deposition nor the order issuing process dated 08.09.2015 reflects that the magistrate on being prima facie satisfied about the questions raised herein came to a finding that there are reasons to believe that the petitioner has committed the alleged offence. Thus the order of issuance of process against the present petitioner on 08.09.2015 has not been made in compliance with either chapter XV or chapter XVI of the Code of Criminal Procedure. Conclusion - The issuance of process by the court below under section 204 of Cr.P.C. against the present petitioner Anil Bhutoria by the order dated 08.09.2015 is not sustainable in the eye of law and therefore set aside. The trial court is directed to conduct an inquiry to determine whether a prima facie case exists against the petitioner. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The case revolves around Sections 138 and 141 of the NI Act, which deal with the dishonor of cheques and the liability of directors, respectively. The legal framework requires that for a director to be held liable, it must be shown that they were in charge of and responsible for the conduct of the business of the company at the time the offense was committed. Precedents such as S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla and Ashoke Shewakramani v. State of Andhra Pradesh were referenced to argue the necessity of specific averments in the complaint. Court's interpretation and reasoning: The Court emphasized the need for specific averments in the complaint to establish the director's responsibility under Section 141. It noted that the complaint against the petitioner lacked the words "in charge of" and "responsible for the conduct of the business," which are crucial for implicating a director. The Court also highlighted that the order of the Magistrate lacked the necessary application of judicial mind, as it did not reflect an inquiry into whether a prima facie case existed against the petitioner. Key evidence and findings: The petitioner argued that he resigned on November 5, 2013, before the cause of action arose, which was after the dishonor of the cheque and the issuance of the demand notice. The complainant contended that the petitioner was still a director and responsible for the company at the relevant time. The Court found that the complaint and initial deposition did not adequately demonstrate the petitioner's role in the alleged offense. Application of law to facts: The Court applied the principles from relevant precedents to assess the sufficiency of the complaint's averments. It determined that the complaint did not meet the legal requirements to hold the petitioner liable under Section 141, as it failed to establish his role and responsibility in the company's business at the time of the offense. Treatment of competing arguments: The Court considered the petitioner's argument that he was not a signatory to the cheques and had resigned before the cause of action arose. It also evaluated the complainant's assertion that the petitioner was involved in negotiations and responsible for the business. The Court found merit in the petitioner's argument due to the lack of specific averments in the complaint. Conclusions: The Court concluded that the complaint did not adequately implicate the petitioner under Section 141 of the NI Act. It found that the Magistrate's order to issue process was not made with proper application of judicial mind, as it did not reflect a prima facie examination of the petitioner's involvement in the alleged offense. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "It is settled principle of law that the order of the magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto." Core principles established: The judgment reinforces the principle that a complaint under Section 141 of the NI Act must contain specific averments demonstrating a director's responsibility for the conduct of the company's business. It also emphasizes the necessity for a Magistrate to exercise judicial mind and conduct a prima facie inquiry before issuing process. Final determinations on each issue: The Court set aside the issuance of process against the petitioner, directing the trial court to conduct an inquiry to determine whether a prima facie case exists against the petitioner. The Court instructed the trial court to examine the complaint and evidence more thoroughly to ensure compliance with legal standards before proceeding.
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