2024 (3) TMI 840 - HC - Indian Laws

Dishonour of Cheque - petitioner has not responded to the legal notice - complaint lacks necessary averments - vicarious liability of Director - HELD THAT - In the present case, the petitioner has placed on record unimpeachable and uncontroverted material in the form of DIR-11, which is also accompanied by receipt issued by the Ministry of Corporate Affairs of issuance of the said form. The said form indicates that the petitioner who even otherwise was only a non-executive additional director, had resigned from the said post much prior to the date on which the subject cheques came to be dishonoured. The Form DIR-11 as well as the other documents placed on record have not been disputed by learned counsel for the respondent during the course of arguments. Reference in this regard may be made to the decision of SUNITA PALITA OTHERS VERSUS M/S PANCHAMI STONE QUARRY 2022 (8) TMI 55 - SUPREME COURT wherein it was observed when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs. The second issue whether a written guarantee or a letter of guarantee by an erstwhile Director would make him vicariously liable came up before the Supreme Court in POOJA RAVINDER DEVIDASANI VERSUS STATE OF MAHARASHTRA ANOTHER 2014 (12) TMI 1070 - SUPREME COURT , wherein it was held that the same may amount to a civil liability but not vicarious liability under the NI Act. The Court even otherwise, is also convinced that the complaint is bereft of appropriate pleadings alleging that the petitioner was in charge of, and responsible for the conduct of the business of the accused company - In the totality of the facts and circumstances, the petitioner cannot be made responsible for the dishonour of cheque, and the continuation of the criminal complaint against him would be nothing but an abuse of the process of law. The petition is allowed.

Summary

Issues involved:
The issues involved in this case are the quashing of the summoning order dated 31.03.2022 and the complaint case itself, filed under Section 138 read with Section 141 of the NI Act, regarding dishonored cheques issued in a business transaction.

Details of the Judgment:

Issue 1: Setting aside of the summoning order and quashing of the complaint case
The petitioner sought setting aside of the summoning order and quashing of the complaint case related to dishonored cheques issued in a business transaction. The petitioner contended that he had resigned from his position as a non-executive additional Director before the cheques were dishonored. The complaint lacked necessary averments to establish his liability.

Issue 2: Director's liability in dishonour of cheques
The complaint alleged that the petitioner, as a Director of the accused company, was jointly and severally liable for the dishonour of cheques. However, the petitioner presented uncontroverted evidence, including resignation documents and Ministry of Corporate Affairs records, showing he had resigned before the dishonour occurred. The complaint failed to establish that the petitioner was in charge of and responsible for the company's conduct at the time of the offense.

Precedents and Legal Principles:
The judgment referred to legal precedents such as Sunita Palita v. Panchami Stone Quarry and Pooja Ravinder Devidasani v. State of Maharashtra, emphasizing that a non-executive Director is not involved in day-to-day affairs and specific averments are required to establish liability. The Court also cited Ashutosh Ashok Parasrampuriya v. Gharrkul Industries Pvt. Ltd., outlining circumstances for quashing a case under Section 138 read with Section 141 NI Act.

Conclusion:
The Court found that the petitioner's resignation prior to the dishonour of cheques, coupled with the lack of specific averments in the complaint, absolved him of liability. The complaint failed to establish the petitioner's involvement in the company's affairs at the time of the offense. Therefore, the petition was allowed, and the criminal complaint against the petitioner was quashed, along with setting aside the summoning order.