2017 (2) TMI 925 - HC - Indian Laws

Dishonour of cheques - Summon for offences punishable under Section 138 of the NI Act - grounds taken by the petitioners seeking quashing of the complaint that neither at the time of the settlement nor at the time of issuance of the cheques nor at the time when the cheque in question was dishonoured, the petitioners were the directors of the company much less responsible for the day-to-day affairs of the company Held that - It is not disputed that the petitioners have been summoned only for offences punishable under Section 138 of the NI Act. The factum that the two petitioners ceased to be the Directors of the company with effect from 7th August, 2013 and 15th March, 2013 respectively has not been denied. Thus, at the time when the cheque in question was dishonoured, the petitioners were not the Directors of the company and were not even liable when the cause of action arose i.e. non-payment within 15 days of the receipt of the legal notice. Moreover, the petitioners have placed on record impeccable evidence in the form of copy of Form-32 filed before the Registrar of Companies showing their resignation from the dates as noted above. The petitioners have not been summoned for offences under Section 420/120B IPC or dishonour of the earlier cheque. Hence for dishonour of the cheque in question vicarious liability cannot be fastened on the petitioners. Petitions and applications are disposed of quashing the order to the extent it summons the petitioners for offence punishable under Section 138 read with Section 142 NI Act.

Summary

Issues:
Complaint filed under Section 138 of the Negotiable Instruments Act, challenge to order summoning petitioners, petitioners' claim of non-involvement as directors, reliance on resignation dates, absence of liability at the time of dishonour.

Analysis:
The complaint was filed under Section 138 of the Negotiable Instruments Act by the respondent against the accused company and several individuals. The accused company had issued post-dated cheques as part of a settlement agreement, one of which was dishonored due to insufficient funds. Legal notice was issued, but no payment was made, leading to the complaint. The petitioners, who were non-executive independent directors of the accused company, challenged the order summoning them, claiming they were not directors at the time of the settlement, cheque issuance, or dishonour. They argued that they were not responsible for the company's day-to-day affairs and were not named as accused in other complaints.

The petitioners contended that they had resigned from their director positions before the events in question, supported by evidence of filing Form-32 with the Registrar of Companies. The court noted that the petitioners were only summoned for offenses under Section 138 of the NI Act, not for other charges or previous dishonored cheques. As the petitioners were no longer directors at the time of the dishonour and had provided evidence of resignation, vicarious liability could not be imposed on them for the dishonour of the specific cheque in question.

The respondent did not file a reply and relied on a previous submission. The court acknowledged the resignation dates of the petitioners and the lack of liability at the time of the dishonour. Considering the evidence presented and the specific charges the petitioners were summoned for, the court quashed the order summoning the petitioners for the offense under Section 138 of the Negotiable Instruments Act. The petitions and applications were disposed of accordingly, relieving the petitioners of vicarious liability in this case.