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2021 (7) TMI 117 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - Amicable settlement - Section 138 read with Section 141 of the Negotiable Instruments Act - HELD THAT - The prosecution under Section 138 of the Negotiable Instruments Act is against persons who have issued the cheque, which is later dishonored. Mere assurance of payment or selection of jewellery cannot be the basis to rope in the petitioners. It is vaguely stated in the complaint that the petitioners are directors and responsible for the day-to-day affairs of the A1 company. But in the given facts and circumstances of the case and particularly the uncontroverted claim of the petitioners that they are household ladies, this Court is of the opinion that vague and omnibus against the petitioners/directors as being responsible for the day-to-day affairs of A1 company is not sufficient. Mere verbatim reproduction of the words contained in Section 141 of the Negotiable Instruments Act without any specific role attributed to each of the petitioners in the A1 company, cannot be the basis to prosecute the petitioners, as the same would unjust and result in abuse of process of law. In POOJA RAVINDER DEVIDASANI's case 2014 (12) TMI 1070 - SUPREME COURT , the Supreme Court allowed the quash petition not only on the ground that there is no specific role attributed to the appellant but also on the ground that the appellant has resigned as Director much prior to issuance of the cheque. The criminal petition is allowed.
Issues:
Quashing of criminal proceedings under Section 138 of the Negotiable Instruments Act based on the liability of the accused directors. Analysis: The criminal petition sought to quash proceedings in CC. No. 1011 of 2010 against accused directors for an offence under Section 138 of the Negotiable Instruments Act. The complaint alleged that the accused purchased gold ornaments with insufficient funds, leading to dishonored cheques. The accused contended resignation from the company before the incident, disassociating themselves from the transactions. They argued that the complaint failed to attribute a specific role to them in the company's affairs, crucial for vicarious liability under Section 138. The petitioners, being household ladies, were not directly involved in the cheque issuance, making their prosecution under Section 138 unjust and an abuse of process. The judgment referred to the Supreme Court's ruling in POOJA RAVINDER DEVIDASANI v. STATE of MAHARASHTRA, emphasizing that liability under Section 138 hinges on the accused's role in the company at the time of the offence. The Court highlighted the necessity of specifying the director's involvement in the company's affairs for vicarious liability. The absence of a specific role attributed to the accused directors in the complaint rendered the prosecution unsustainable under Section 138. The Court cited previous cases to support the quashing of complaints lacking specific roles for accused directors, reinforcing the principle that vague allegations cannot sustain criminal liability under Section 138. In alignment with the Supreme Court's directives, the High Court allowed the criminal petition, quashing the proceedings against the accused directors. The Court emphasized the lack of specific roles attributed to the accused in the complaint, rendering the prosecution baseless under Section 138. The judgment underscored the importance of establishing a director's direct involvement in the company's affairs for vicarious liability, as mandated by Section 138. Consequently, the proceedings in CC. No. 1011 of 2010 were quashed against the accused directors, ensuring justice and upholding legal principles. This detailed analysis of the judgment showcases the critical legal principles applied in quashing criminal proceedings under Section 138 of the Negotiable Instruments Act based on the specific liability of accused directors.
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