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2021 (12) TMI 330 - HC - Indian LawsDishonor of cheque - insufficiency of funds - non-performing assets - Independent Director under Section 149 of the Companies Act - Section 293 of the Companies Act - HELD THAT - On a perusal of the private complaint filed by the complainant, the role played by the petitioners was nowhere mentioned, except stating that as per Section 293 of the Companies Act, all the accused being the Directors of A1 Company got full knowledge of borrowing of the loan from the complainant bank and as such liable for repayment and also punishment. Considering the judgments of the Hon'ble Apex Court and this Court in a batch of criminal petitions and in Arrakuntal V. Ganeshan case 2013 (6) TMI 904 - ANDHRA PRADESH HIGH COURT and as the petitioners were neither Managing Directors nor the authorized signatories to sign on the cheques and no specific role was attributed to the petitioners in discharge of the day to day affairs of the Company, continuation of the proceedings against the petitioners is considered as an abuse of process of law. The Criminal Petition is allowed.
Issues:
Petition to quash proceedings against A6 and A9 under Section 482 Cr.P.C. Analysis: 1. Background: The 2nd respondent, a banking company, filed a complaint alleging that A1 Company and its directors, including A6 and A9, availed a loan of ?50.00 crores, failed to repay it, and issued a bounced cheque. The complainant initiated proceedings under Sections 138 and 142 of the Negotiable Instruments Act. 2. Petitioners' Argument: A6 and A9, independent directors of A1 Company, contended that they had no involvement in the day-to-day operations or transactions of the company. They resigned from their positions before the cheque was issued, and no benefits were received. Petitioners argued that specific roles must be assigned to directors to hold them liable under Section 138 of the NI Act. 3. Legal Precedents: The petitioners cited judgments emphasizing the need for specific averments against directors to establish liability. The courts highlighted that mere directorship does not automatically imply liability. The role and responsibility of directors in the conduct of the company's business must be clearly demonstrated. 4. Court's Analysis: The court examined the complaint and found no mention of the petitioners' roles except for general liability as directors under Section 293 of the Companies Act. Referring to legal precedents, the court emphasized the necessity of demonstrating how directors were responsible for the company's actions to impose liability under Section 138 of the NI Act. 5. Resignation and Lack of Involvement: The court considered the resignation letters of the petitioners and noted that they had ceased to be directors before the cheque issuance. Citing a previous case, the court reiterated that without specific allegations of involvement, liability under Section 138 cannot be established against directors. 6. Decision: Based on the lack of specific attributions of responsibility to the petitioners and their non-involvement in the cheque issuance or day-to-day affairs of the company, the court deemed the continuation of proceedings against A6 and A9 as an abuse of process of law. Consequently, the court allowed the Criminal Petition, quashing the proceedings against the petitioners in CC No. 402 of 2013. 7. Conclusion: The judgment underscores the importance of delineating the actual roles and responsibilities of directors in company affairs to establish liability under Section 138 of the NI Act. It reaffirms that mere directorship without active involvement or specific attributions of responsibility does not warrant criminal action against directors.
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