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2025 (1) TMI 1250 - HC - Indian LawsChallenge to summoning order - Dishonour of Cheque - determination of criminal liability of a Director on the date on which the offence is alleged to have been committed - HELD THAT - From the entire averments made in the Petition what emerges is that the Petitioner herein was admittedly the Director in the year 1998 at the time when the parties started negotiating initially - There is not an iota of averment made against the Petitioner that he continued to be the Director or was responsible for day-to-day conduct of business at the time in 2017 when the impugned Cheque was issued. Section 141 of the N.I. Act mandates that those Directors/Officials who are responsible for the day-to-day affairs of the Company are responsible for any dishonour of the Cheque issued for and on behalf of the Company. In the present case there is not a single averment to show that the Petitioner was in any way responsible for the day-to-day affairs of the Company on the date of issuance of Cheque and cannot be summoned in a Complaint under Section 138 of N.I. Act on the basis of his personal liability. Moreover the Legal Notice dated 06.09.2017 is addressed only to the Respondent No. 2/Company/M/s Selco International Ltd. and Respondent No. 3/Dr. Venkata Rama Krishna Govindraju a.k.a. Dr. G.V. Rama Krishna; it is not addressed to the Petitioner - He is neither a signatory to the Cheque nor is a Director in the accused-Company and there is no Legal Notice served upon him; therefore he is entitled to be discharged. Conclusion - i) Only directors responsible for the company s day-to-day affairs at the time of the offense can be held liable under Section 141 of the N.I. Act. ii) A guarantor s liability is civil and does not extend to criminal proceedings under Section 138 of the N.I. Act. iii) The absence of a legal notice to the petitioner and lack of evidence of his involvement warranted setting aside the summoning order. The impugned Order dated 18.05.2018 summoning the Petitioner Sh. N. Vijaya Kumar is hereby set aside - Petition disposed off.
The judgment involves a petition filed under Sections 482 and 483 of the Criminal Procedure Code, 1973, challenging a summoning order related to a complaint under Section 138, read with Sections 141 and 142 of the Negotiable Instruments Act (N.I. Act), concerning the dishonor of a cheque. The petitioner contested the summoning order, arguing that he was not a director or responsible for the company's affairs at the time of the cheque's dishonor.
1. ISSUES PRESENTED and CONSIDERED The core legal issues considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 138 of the N.I. Act pertains to the dishonor of cheques, while Section 141 extends liability to individuals responsible for the company's conduct at the time of the offense. The court referred to the precedent set in Krishna Texport & Capital Markets Ltd. vs. Ila A. Agrawal & Ors, which clarified that separate notices to directors under Section 138 are not mandatory if they are responsible for the company's affairs. Court's Interpretation and Reasoning The court examined whether the petitioner was a director or responsible for the company's affairs when the cheque was dishonored. It was noted that the petitioner was a director in 1998 but resigned in 2003. The court emphasized that Section 141 requires directors to be responsible for daily affairs at the time of the offense. The absence of any averments against the petitioner in the legal notice and complaint supported the petitioner's claim of non-involvement. Key Evidence and Findings The court found no evidence indicating the petitioner's involvement in the company's affairs during the cheque's dishonor. The legal notice and complaint only mentioned the company and its managing director, with no reference to the petitioner. Application of Law to Facts The court applied Section 141 of the N.I. Act, determining that the petitioner was not responsible for the company's affairs at the relevant time. The petitioner's role as a guarantor was deemed a civil liability, not a criminal one under Section 138. Treatment of Competing Arguments The respondent argued that the petitioner, as a guarantor, was liable for the dishonored cheque. However, the court distinguished between civil and criminal liability, concluding that the petitioner's guarantor status did not subject him to criminal proceedings under the N.I. Act. Conclusions The court concluded that the petitioner was not responsible for the company's affairs at the time of the offense and was not served with a legal notice. Thus, the summoning order against him was unjustified. 3. SIGNIFICANT HOLDINGS The court held that:
Final Determinations on Each Issue The court set aside the summoning order dated 18.05.2018, discharging the petitioner from the complaint case under Section 138 of the N.I. Act. The petition and any pending applications were disposed of accordingly.
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