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2022 (12) TMI 559 - HC - Indian LawsDishonor of cheque - Vicarious liability of non-executive Director / Promoter - The petitioner challenged the impugned orders on the ground that the impugned orders are abuse of process of law. There is no proximate of direct or indirect involvement of the petitioner in the affairs of the respondent no. 2 as he was only a Non-Executive Director as such, he never involved in its day-to-day activities. - It is argued that the petitioner was appointed as director in the respondent no. 2 only to lend prestige to the respondent no. 2 due to his standing in the society. HELD THAT - The Form DIR-12 clearly reflects that the petitioner was not away from the affairs of the respondent no. 2 and was directly or indirectly involved in the affairs of the respondent no. 2. The petitioner is not an independent director of the respondent no. 2 although the petitioner is named as Non-Executive Director in Form DIR-12. Mere nomenclature in Form DIR-12 as Non-Executive Directed necessarily does not mean that the petitioner was not directly or indirectly related with the affairs of the respondent no. 2. If the petitioner is having the evidence that he was not responsible for the affairs of the respondent no. 2, it can be established and proved in accordance with law during the trial of the present complaints. Petition dismissed.
Issues Involved:
1. Quashing of summoning orders under Section 482 of the Code of Criminal Procedure, 1973. 2. Liability under Section 138 of the Negotiable Instruments Act, 1881. 3. Determination of the petitioner's role and responsibility in the company at the time of the offence. 4. Applicability of legal precedents and interpretation of relevant sections of the Companies Act, 2013. Issue-wise Detailed Analysis: 1. Quashing of Summoning Orders under Section 482 of the Code of Criminal Procedure, 1973: The petitioner sought to quash the summoning orders dated 01.04.2017 and 23.02.2017 issued by the trial court in criminal complaints under Section 138 of the NI Act. The trial court had taken cognizance of the offence against the petitioner and other directors of the respondent no. 2 company, while not summoning accused no. 5 to 8. The petitioner argued that the orders were an abuse of the process of law, as he was a Non-Executive Director with no involvement in the day-to-day affairs of the company. 2. Liability under Section 138 of the Negotiable Instruments Act, 1881: The respondent no. 1 filed complaints under Section 138 of the NI Act, alleging that the cheques issued by the respondent no. 2 company were dishonored due to insufficient funds. The trial court found sufficient material to proceed against the petitioner and other directors of respondent no. 2. The petitioner contended that he was not responsible for the company's conduct at the time of the offence and had no role in issuing the cheques. 3. Determination of the Petitioner's Role and Responsibility in the Company at the Time of the Offence: The petitioner was appointed as a director of respondent no. 2 on 10.01.2016, after the written confirmations regarding payment liabilities were issued by accused no. 5 and respondent no. 2. The court noted that the cheques in question were issued after the petitioner's appointment. According to Form DIR-12, the petitioner was a Non-Executive Director and a Promoter, indicating control over the company's affairs. The court emphasized that criminal liability under Section 141 of the NI Act arises from being in charge of and responsible for the conduct of the business at the relevant time, not merely holding a designation. 4. Applicability of Legal Precedents and Interpretation of Relevant Sections of the Companies Act, 2013: The court referred to several Supreme Court judgments, including SMS Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. and SBI v. Gaurav Varshney, which clarified that liability depends on the role played in the company's affairs, not merely on designation. The court also examined Sections 2(69) and 149(6) of the Companies Act, 2013, defining "Promoter" and "Independent Director." The petitioner, being a Promoter, was deemed to have control over the company's affairs, contradicting his claim of being a non-functional director. Conclusion: The court dismissed the petitions, holding that the petitioner could not be absolved of liability merely by claiming to be a Non-Executive Director. The cheques were issued after his appointment, and his role as a Promoter indicated involvement in the company's affairs. The petitioner was directed to appear before the trial court on the next date fixed for the case.
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