2020 (11) TMI 462 - HC - Indian Laws

Dishonor of Cheque - vicarious liability - Complaint against the CEO / erstwhile Director (Petitioner), even though they were not signatory of the cheque - Personal assurance and knowledge - legal notice of demand was sent by the complainant but despite the receipt of the notice the Accused persons failed to remit the alleged outstanding amount - summon of Accused including the Petitioner - Sections 138/141/142 of the NIA - Whether the complaint and the summons can be quashed qua the Petitioner in the absence of the complainant? - HELD THAT - The said issue is settled and the law on this is no longer res integra. A similar situation had arisen in the case of Lafarge Aggregates Concrete India P. Ltd. vs. Sukarsh Azad Ors. 2013 (9) TMI 1188 - SUPREME COURT decided by the Supreme Court on 10.09.2013. In the said case the Respondents were the Directors in the Company at whose instance the High Court had quashed the complaint lodged by the Appellant under Section 138 of NIA. The High Court allowed the petition filed under Section 482 Cr.P.C. and quashed the proceedings, but the order was ex-parte. In case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing - Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits. There is force in the contention of counsel for the Petitioner that since the Petitioner had resigned on 15.06.2016 and was no longer responsible for the conduct of business of Accused No. 1 Company, on the date of the commission of the alleged offence, she cannot be arrayed as an Accused in the proceedings emanating out of the complaint referred to above. Form No. DIR-11 clearly evidences the resignation of the Petitioner on 15.06.2016 and the cheque in question is admittedly issued on 28.10.2016, which is post her resignation. It cannot therefore be said that the Petitioner was in-charge of and responsible for the conduct of day to day business/affairs of the Company, as contemplated in Section 141 of the NIA for being proceeded against - There is also merit in the contention of the Petitioner that the provisions of Section 141 require that there must be specific and necessary averments in the complaint regarding the nature of transactions between the parties and a complaint cannot be maintained on mere sketchy averments/allegations. Sections 138 141 of the NIA were introduced in the Act to encourage the wider use of a cheque and to enhance the credibility of the instrument. The intent of the Legislature in carrying out the Amendment was to encourage people to have faith in the efficacy of banking transactions and use of cheques as negotiable instruments. To balance, a penal provision was enacted to ensure that the drawer of a cheque does not misuse the provisions and honours his commitment. The issue herein concerns the criminal liability arising out of dishonour of a cheque. Normally the criminal liability is not vicarious i.e. one cannot be held criminally liable for the act of another. Section 141 of NIA is however an exception where the offence under Section 138 is committed by a Company but the liability extends to the officers of the Company, subject to fulfillment of the conditions under Section 141, as a caveat - Through several judicial pronouncements it has been enunciated that it must be clearly averred in the complaint made against any person that he/she, at the time the offence was committed, was in-charge of and responsible for the conduct of the business of the Company and thus liable. Perusal of the complaint shows that the allegation of issuing the cheque is against accused No.1 from the account maintained by accused No. 1 and allegations of signing are against accused No. 2, as authorized signatory of accused No.1. The allegation against accused No. 5, who is the Petitioner herein, is that an assurance was given to the complainant that the cheque shall be honoured on presentation. Petitioner is stated to be the CEO of accused No.1 Company and the wife of accused No.2. It is averred that the cheque was issued with her consent and knowledge and she attended meetings with the official of the complainant and responsible for the business of the Company. What is significant is that in the entire complaint there is not even a whisper of the alleged transaction, pursuant to which the cheque was allegedly issued in favour of the complainant. All that is mentioned is towards the discharge of part of legal debts/liability cheque was issued. There are no specific allegations or averments against the Petitioner regarding her alleged role either in the transaction or in the conduct of business of the Company. It is settled that mere designation of an officer in a Company is not enough to make the officer vicariously liable. The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant. It is relevant to note at this stage that it is not the case of the complainant that even after resigning as a CEO of accused No. 1 the Petitioner continued to be associated with the Company or was occupying any such position which made her in-charge and responsible for the conduct of its business. Vicarious liability has been imputed to the Petitioner solely on account of her being the CEO of accused No. 1. It is also not the case of the complainant that the cheque in question was dishonoured or the notice of demand was not complied with due to connivance of or with the consent of the Petitioner. The complainant has also not averred that even after resigning as CEO the Petitioner was in a position to have given instructions to the officers of the Company who were in-charge of the affairs of the Company, to ensure that the cheque when presented for encashment should be honoured. Therefore, the Petitioner is not even covered under Sub-Section (2) of Section 141 of the NIA. The summon order along with the complaint filed under Sections 138/141/142 of the NIA by the Respondent against the Petitioner pending before the Trial Court are quashed - Petition allowed.

Summary

Issues Involved:
1. Quashing of the summoning order dated 28.11.2016.
2. Quashing of the complaint bearing CC No. 6573/2017 under Sections 138/141/142 of the Negotiable Instruments Act (NIA).
3. Quashing of all further proceedings emanating from the complaint, including the order dated 04.12.2019 by the Special Judge NDPS in Criminal Revision CR No. 114/2019.

Issue-wise Detailed Analysis:

1. Quashing of the Summoning Order Dated 28.11.2016:
The petitioner sought the quashing of the summoning order issued by the Trial Court. The petitioner argued that she was not responsible for the conduct of the business of the company at the relevant time, as she had resigned from her position as CEO on 15.06.2016, prior to the issuance of the cheque on 28.10.2016. The Court found merit in this contention, noting that Form No. DIR-11 evidenced her resignation and that she could not be held liable for the alleged offence committed after her resignation.

2. Quashing of the Complaint Bearing CC No. 6573/2017 Under Sections 138/141/142 of the NIA:
The petitioner contended that the complaint lacked specific and necessary averments regarding her role in the alleged offence. The Court referred to several judgments, including S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Ors. and National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, which emphasized the necessity of specific allegations against the accused to establish vicarious liability under Section 141 of the NIA. The Court observed that the complaint did not mention the petitioner's involvement in the transaction or her responsibility for the conduct of the business at the relevant time. The absence of such averments was deemed fatal to the complainant's case.

3. Quashing of All Further Proceedings Emanating from the Complaint, Including the Order Dated 04.12.2019 by the Special Judge NDPS in Criminal Revision CR No. 114/2019:
The Court noted that the respondent had been duly served but chose not to contest the petition. Following precedents such as Lafarge Aggregates & Concrete India P. Ltd. vs. Sukarsh Azad & Ors., the Court proceeded ex-parte and examined the merits of the petition. The Court found that the petitioner could not be held liable for the alleged offence as she had resigned before the issuance of the cheque and there were no specific allegations against her in the complaint. Consequently, the summoning order, the complaint, and all further proceedings, including the order dated 04.12.2019, were quashed.

Conclusion:
The petition was allowed, and the summoning order dated 28.11.2016, the complaint bearing CC No. 6573/2017, and all further proceedings emanating therefrom, including the order dated 04.12.2019, were quashed against the petitioner. The Court emphasized the necessity of specific averments in complaints under Sections 138 and 141 of the NIA to establish vicarious liability and held that the petitioner could not be held liable for the alleged offence committed after her resignation.