2022 (8) TMI 607 - HC - Indian Laws

Dishonor of Cheque - insufficient funds - cheques in question has been issued after tendering of resignation by the petitioner (resignation from Directorship) or cheques were issued prior to the date of generation of Form no. DIR-12 and during his tenure of Directorship? - vicarious liability of the petitioner u/s 141 of NI Act after tendering such resignation. Whether the petitioner was in any way connected with the affairs of the company when the cheques were issued or whether he was continuing as a Director of the company when the cheques were issued? HELD THAT - A prosecution under Section 138 of the Act could be launched not only against the company on behalf of which the cheque has been dishonoured but it could also be initiated against every person who at the time the offence was committed was in charge of and was responsible for the conduct of the business of the company. In fact Section 141 of the Act deems such persons to be guilty of such offence liable to be proceeded against and punished for the offence leaving it to the person concerned to prove that the offence was committed by the company without his knowledge or that he has exercised due diligence to prevent commission of such offence. To fasten vicarious liability under section 141 of the Act on a person the law is well settled by the Hon ble Supreme Court in catena of decisions that the complainant should specifically state as to how and in what manner the accused was responsible. A bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible for the conduct of the business of the company without anything more as to the role of the Director is not sufficient to make him liable. Whether the petitioner at the material time of offence was in charge of the affairs of the company and responsible for the conduct of the business of the company? - HELD THAT - It is found from the documents appended to the petition that the petitioner sent an application (Annexure P1 at page 13 of the petition) to the Board of Directors of M/s Arcuttipore Tea Company Ltd. tendering resignation from the Directorship on 13th March 2020. The extracts of the minutes of the Board of Directors dated 22nd November 2021 (at page 20 of the petition) shows that it was resolved that the resignation of the petitioner from the Directorship of the company is accepted with effect from 13th March 2020 - At the time of hearing learned advocate for the opposite party-complainant fairly submitted that the petitioner is not the drawer/signatory of the cheques that were dishonoured. These facts leave no manner of doubt that on the date of offence the petitioner was not a Director of the company and he had nothing to do with the affairs of the company. Therefore the petitioner being the erstwhile Director of the company who was not in charge of affairs of the company and was not responsible for the conduct of the business of the Company at the relevant time cannot be held liable for an offence under Section 138 of the Act. In view of the materials discussed the accusation against the petitioner cannot stand and it would be travesty of justice if the petitioner is relegated to trial and is asked to prove his defence before the trial court. Therefore for promotion of justice or to prevent the injustice or abuse of process it would be proficient to exercise jurisdiction under Section 482 of the Code of Criminal Procedure - The criminal proceeding under section 138 of the Negotiable Instruments Act pending before the learned Judicial Magistrate 4th Court Siliguri stands quashed so far as the present petitioner (Accused no.5) is concerned. Application disposed off.

Summary

Issues Involved:
1. Quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881.
2. Vicarious liability of a director who has resigned before the issuance of the cheques.
3. Adequacy of complaint allegations regarding the director's role in the company.

Issue-wise Detailed Analysis:

1. Quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881:
The petitioner sought to quash the proceedings under Section 138 of the Negotiable Instruments Act, 1881, pending before the Judicial Magistrate, 4th Court, Siliguri, in CR case No. 559 of 2021. The petitioner contended that he had resigned from the directorship of the company on 13th March 2020, and thus, could not be held liable for the cheques issued subsequently.

2. Vicarious liability of a director who has resigned before the issuance of the cheques:
The petitioner argued that he had resigned from the directorship on 13th March 2020, as evidenced by Form DIR-12 and documents from the Ministry of Corporate Affairs. The cheques in question were issued after his resignation, and hence, he could not be held vicariously liable under Section 141 of the Act. The court referred to the Supreme Court's decisions in Harshendra Kumar D., Pooja Ravinder Devidasani, and other cases, which established that a director could not be held liable if he was not in charge of the company's affairs at the time the offence was committed.

3. Adequacy of complaint allegations regarding the director's role in the company:
The court noted that the complaint only contained a cursory statement that the petitioner was a director and in charge of the company's day-to-day activities. The court emphasized that specific allegations detailing the director's role and responsibility in the company's affairs are necessary to establish vicarious liability. The court found that the complaint lacked such specific averments and thus did not meet the requirements set by Section 141 of the Act.

Conclusion:
The court concluded that the petitioner had resigned from the directorship before the issuance of the cheques and was not involved in the company's affairs at the relevant time. Therefore, the petitioner could not be held liable under Section 138 of the Act. The court allowed the criminal revision, quashing the proceedings against the petitioner in CR case No. 559 of 2021. The court also referenced similar cases where proceedings were quashed under comparable circumstances. The judgment emphasized the necessity of specific allegations in the complaint to establish vicarious liability and the importance of preventing injustice or abuse of process by exercising jurisdiction under Section 482 of the Code of Criminal Procedure.