2022 (11) TMI 431 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - vicarious liability of directors - Section 141 of NI Act - HELD THAT - It is an admitted case of the petitioner that Letter of Credit Facility was availed on 26.12.2014. The impugned cheque issued in discharge of liability dated 16.06.2015. Further, the print out taken from the website of Ministry of Corporate Affairs, it is seen that the petitioner had resigned from the post of Director on 24.01.2012. Added to it, except for the said reference in Paragraphs 5 and 8 made about the petitioner, there is nothing more. In the case of S.M.S. Pharmaceuticals Limited vs. Neeta Bhalla and another 2007 (2) TMI 311 - SUPREME COURT . , it has been held that a person, who is arrayed as an accused invoking Section 141 of the Negotiable Instruments Act amounts to vigorous liability, which cannot be automatic. There is no specific averments in the complaint to show that the petitioner was in-charge and responsible for the conduct of the business of the company. Further, the two requirements in Section 141 of the Act has to be read conjointly and not disjointly. Liability of directors to be determined on the date on which they resigned. In the present case the petitioner resigned in the year 2012. Dishonored cheque issued in the year, 2015 - The dismissal of the quash petitions filed by A2, A4 and A5 would no way affect the case of the petitioner, since in that case the ground taken was that the cheque was issued as security, which is not the case herein. Petition allowed.

Summary

Issues:
Quashing of complaint against Accused No.3 in C.C.No.3645 of 2015 pending before II Fast Track Metropolitan Magistrate, Egmore, Chennai.

Analysis:
The petitioner, Accused No.3, argued that he resigned as Director from the company before the cheque in question was issued and he was not an authorized signatory. The complaint lacked specific allegations against him regarding the negotiation or signing of the cheque. The petitioner relied on previous judgments and contended that mere directorship does not automatically invoke liability under Section 141 of the Negotiable Instruments Act. The resignation date of the petitioner was established through Ministry of Corporate Affairs records, and the dismissal of similar quash petitions by other accused did not impact his case.

The respondent, a Bank, claimed that the petitioner, as a Director, was involved in the company's financial transactions. The complaint alleged that the cheque issued by the company was dishonored, leading to the legal proceedings. The respondent argued that factual issues regarding the petitioner's resignation should be determined at trial, citing a previous Supreme Court decision. The respondent emphasized the need for trial to resolve disputed factual defenses.

The Court noted the dates of the Letter of Credit Facility, cheque issuance, and the petitioner's resignation. It highlighted the absence of specific averments in the complaint linking the petitioner to the offense, as required by Section 141 of the Act. The Court referenced previous judgments to support quashing the proceedings against the petitioner due to lack of specific allegations. The Court directed the trial to proceed promptly to avoid further delays caused by adjournments, ultimately quashing the proceedings against the petitioner.

In conclusion, the Court allowed the petition to quash the complaint against Accused No.3, emphasizing the lack of specific averments connecting the petitioner to the offense. The Court directed the trial to proceed expeditiously to prevent further delays and ensure timely resolution of the case.