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2018 (9) TMI 94 - HC - Indian LawsDishonor of Cheque due to insufficiency of funds - Order of issuance of process and the proceedings filed against the applicants by respondent no.02 - Section 138 of the Negotiable Instruments Act, 1881 - Held that - No doubt, all those things which had happened before the National Company Law Tribunal were not put before the learned Magistrate when the complaint was filed and the order of issuance of process was passed. Each and every complainant is expected to be fair in prosecution and, therefore, the circumstances in which the cheque came to be issued in favour of the complainant ought to have been disclosed by the complainant. The prohibitory orders and appointment of I.R.P. were made by the National Company Law Tribunal on 24.07.2017 - if the complainant had knowledge about the proceedings and the prohibitory orders, whether cheque would have been issued by the Finance Officer or Advisor or Manager of accused no.01, is a question. Further, though the cheques were given on the aforesaid dates, the cheque in S.C.C. No. 7882 of 2017 was presented by the complainant for encashment on 11.09.2017. That means, with full knowledge that I.R.P. has taken over the affairs of accused no.01, the said cheque was presented. In Form B , the complainant has not whispered that such cheques were given by the responsible officer of accused no.01 - definitely, some cloud has been created on the issuance of cheque. No doubt, all these facts would be required to be addressed by the trial court at the time of final hearing. As regards the legal position about maintainability of the complaint is concerned, it can still be kept open for the simple reason that the proceedings is also instituted against accused no.01. Accused no.01 is not a party in this proceedings. Directors of accused no.01, who are in-charge and responsible for the conduct of the affairs of the company - Held that - Admittedly, accused nos.02 to 12 are not the signatories to the disputed cheques. In fact, in para no.05 of the complaint, the complainant has stated that accused nos.01 to 12 issued a cheque. None of them i.e. accused nos.02 to 12 had issued that cheque but somebody else is the signatory to the cheque. This fact is also suppressed by the complainant - it was necessary for the complainant to specifically aver and demonstrate as to how each one of accused nos.02 to 12 were incharge and responsible for the conduct of the business of accused no.01. Therefore, the order of issuance of process passed by the learned Magistrate cannot be allowed to be sustained. Applications allowed - The orders of issuance of process passed on 16.11.2017 in Summary Criminal Case No. 7882 of 2017 and on 02.11.2017 in Summary Criminal Case No. 7504 of 2017, by the learned Judicial Magistrate (F.C.), Court No.07, Aurangabad, as well as both the proceedings are hereby quashed and set aside as against the present applicants i.e. original accused nos.02 to 12.
Issues Involved:
1. Quashing of the order of issuance of process and proceedings under Section 138 of the Negotiable Instruments Act, 1881. 2. Applicability of the Insolvency and Bankruptcy Code, 2016 on the proceedings under Section 138 of the N.I. Act. 3. Responsibility of directors (accused nos. 2 to 12) for the conduct of the business of the company (accused no. 1). Detailed Analysis: 1. Quashing of the Order of Issuance of Process and Proceedings under Section 138 of the N.I. Act: The applicants sought to quash the orders dated 16.11.2017 and 02.11.2017, which issued process against them in Summary Criminal Case Nos. 7882 of 2017 and 7504 of 2017, respectively, under Section 138 of the Negotiable Instruments Act, 1881. The cheques issued by accused no. 1 were dishonored due to insufficient funds, leading to the filing of the complaints. The learned Magistrate issued the process after considering the complaint, documents, and examination under Section 200 of the Cr.P.C. 2. Applicability of the Insolvency and Bankruptcy Code, 2016: The applicants argued that the proceedings under the Insolvency and Bankruptcy Code, 2016, initiated by Corporation Bank against accused no. 1 before the National Company Law Tribunal (NCLT), should bar the criminal proceedings under Section 138 of the N.I. Act. The NCLT had appointed an Interim Resolution Professional (I.R.P.) and issued prohibitory orders on 27.07.2017, which included a moratorium on the institution or continuation of suits or proceedings against the corporate debtor. The complainant had knowledge of these proceedings and submitted a claim in Form 'B' to the I.R.P. on 08.08.2017. Despite this, the cheques were presented for encashment after the moratorium was in place. The court noted that the complainant should have disclosed these facts to the Magistrate. The presentation of cheques despite the moratorium raised questions about the validity of the complaint. However, the court left the legal position on the maintainability of the complaint open for trial, as accused no. 1 was not a party in the present proceedings. 3. Responsibility of Directors (Accused Nos. 2 to 12): The applicants contended that the complaint did not specifically aver how each director was responsible for the conduct of the company's business, as required under Section 141 of the N.I. Act. The complaint only made omnibus statements that all directors were in charge and responsible. The court referred to the Supreme Court's decisions in N.K. Wahi vs. Shekhar Singh and Mrs. Aparna A. Shah vs. M/s. Sheth Developers Pvt. Ltd., which emphasized the need for specific allegations against directors. The court found that the complainant failed to provide specific details about the responsibility of each director. The directors were not signatories to the cheques, and the complaint did not disclose who signed the cheques. The learned Magistrate should have considered these factors before issuing the process. The court concluded that the order of issuance of process could not be sustained due to the lack of specific averments regarding the directors' responsibility. Conclusion: The court allowed the applications, quashing the orders of issuance of process dated 16.11.2017 and 02.11.2017, and the proceedings in Summary Criminal Case Nos. 7882 of 2017 and 7504 of 2017 against accused nos. 2 to 12. The orders of issuance of non-bailable warrants against these accused were also set aside. The trial court was directed to proceed against accused no. 1.
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