2023 (7) TMI 760 - HC - Indian Laws

Dishonour of Cheque - discharge of legal liability - vicarious liability of director - cheque was issued prior to the date of director joining the company - HELD THAT - In the present case, learned counsel for the petitioners had argued that the petitioners had joined the accused company as directors on 23.09.2015, whereas the cheques in question had been issued on 30.12.2013 i.e. about two years prior to their joining. It was also argued that the instructions for stop-payment of the cheques were issued in April, 2015 i.e. about five months prior to the joining of petitioners as directors in the accused company. In this regard, this Court notes that the cheques in question are all dated 21.09.2017 i.e. about two years after the petitioners had joined the accused company as directors and had been dishonored on 01.12.2017. As regards the contention that the cheques were blank and undated when issued in the year 2013, and the same had later been filled and presented for encashment by the complainant, this Court notes that whether or not the cheques in question were undated or blank or issued as security cheques are all triable issues, to be decided upon leading evidence, and the same cannot be gone into by this Court at this stage. This Court deems it appropriate to refer to the decision of Hon ble Apex Court in case of Sunil Todi v. State of Gujarat 2021 (12) TMI 175 - SUPREME COURT whereby it has been held The order of this Court in Womb Laboratories holds that the issue as to whether the cheques were given by way of security is a matter of defence. This line of reasoning in Womb Laboratories is on the same plane as the observations in HMT Watches, where it was held that whether a set of cheques has been given towards security or otherwise or whether there was an outstanding liability is a question of fact which has to be determined at the trial on the basis of evidence. The rationale for this is that a disputed question of this nature cannot be resolved in proceedings under Section 482 CrPC, absent evidence to be recorded at the trial. As apparent from the records of the case, the complainant in the complaint under Section 138 of NI Act has specifically averred that the accused company had issued the cheques in question and accused no. 2 to 10 were its directors and accused no. 11 was the company secretary, all of whom were in charge of and responsible for the conduct and affairs of accused company and the cheques in question had been issued with the consent, knowledge and connivance of all the accused, as all of them had been taking part in day-to-day activities of accused company - the cheques in question are all dated 21.09.2017, i.e. when the petitioners were undisputedly the directors in the accused company. The petitioners have failed to bring on record any unimpeachable material or material of sterling quality to show that they were not responsible for day-to-day affairs of the company when the cheque was issued or dishonored or that the dishonoring of cheque in question was not attributable to any negligence or connivance or consent on their part. The role of each petitioner in commission of offence, if any, can become clear only during the course of trial, and cannot be examined in detail by this Court while exercising jurisdiction under Section 482 Cr.P.C. Having found no reasons to interfere with the impugned summoning order, the present petitions stand dismissed.

Issues Involved:
1. Quashing of summoning orders and proceedings under Section 138 of the Negotiable Instruments Act, 1881.
2. Liability of directors under Section 141 of the NI Act.
3. Validity of cheques issued as security and post-dated cheques.
4. Role and responsibility of nominee directors.

Summary:

Issue 1: Quashing of Summoning Orders
The petitioners sought the quashing of summoning orders dated 06.07.2018 and subsequent proceedings in Complaint Cases Nos. 7099/2018, 7100/2018, and 7101/2018. These complaints were filed under Section 138 of the Negotiable Instruments Act, 1881, alleging that the accused company had issued cheques that were dishonored due to the account being closed.

Issue 2: Liability of Directors under Section 141 of the NI Act
The petitioners argued that they were former directors and were only Professional Nominee Directors of Investors, having joined the accused company after the cheques were issued. They contended that they were not responsible for the day-to-day functioning of the company. The court noted that the cheques were dated 21.09.2017, after the petitioners had joined the company, and thus, the petitioners were liable under Section 141, which implicates directors who are in charge of and responsible for the conduct of the business when the offence was committed.

Issue 3: Validity of Cheques Issued as Security and Post-Dated Cheques
The petitioners claimed that the cheques were issued as blank undated security cheques in 2013 and were later filled and presented by the complainant. The court held that whether the cheques were blank or issued as security are triable issues and cannot be decided at this stage. The court referred to the Supreme Court's rulings in Sunil Todi v. State of Gujarat and Bir Singh v. Mukesh Kumar, emphasizing that such matters require evidence to be determined at trial.

Issue 4: Role and Responsibility of Nominee Directors
The petitioners argued that they were nominee directors and not involved in the day-to-day affairs of the company. The court found no supporting documents to substantiate this claim and noted that the complainant had specifically averred that all directors were responsible for the conduct of the company's affairs. The court emphasized that the role of each petitioner could only be clarified during the trial.

Conclusion:
The court dismissed the petitions, finding no reason to interfere with the impugned summoning orders. It clarified that the observations made were solely for deciding the petitions and would not affect the merits of the case during the trial.

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