Home Case Index All Cases Indian Laws Indian Laws + HC Indian Laws - 2019 (2) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (2) TMI 1930 - HC - Indian LawsDishonor of cheque - petitioners herein were the nominee Directors - in-charge of the affairs of the company or not - HELD THAT - Undisputedly, the cheques in question were issued by accused No. 1-Company in discharge of the debt alleged to have been due by the company and said cheques have been dishonoured, which has given rise to initiation of the action for the offence under Section 138 of the Act. In the complaint filed under Section 200 of Cr.P.C., the respondent/complainant has specifically averred that the cheques in question were issued by accused No. 1-Company and the same was signed by accused No. 5, who was Deputy General Manager and the authorized signatory of accused No. 1-Company. The issue no more res-integra in view of the specific provisions contained in Section 141 of the Act and the law laid down in catena of judgments of the Apex Court including the decision referred to by the learned counsel for the petitioners. Section 141 of the Act provides that, when an offence is committed by the company, the officer in-charge, who was responsible to the company for conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. In the instant case, the petitioners herein are sought to be prosecuted solely in their capacity as the Directors of the Company. There is absolutely nothing in the entire complaint to indicate that the petitioners herein were in the management of the affairs of the company either at the time of issuance of cheques or at the time of its dishonour - the prosecution of the petitioners for the alleged offence is contrary to provisions of Section 141 of the Act and is liable to be quashed. Petition allowed.
Issues:
1. Liability of nominee Directors in a case under Section 138 of the Negotiable Instruments Act. 2. Interpretation of Section 141 of the Act regarding liability of officers in charge of a company. 3. Prosecution of Directors solely based on their position without evidence of involvement in company affairs. Issue 1: Liability of Nominee Directors: The case involved proceedings under Section 138 of the Negotiable Instruments Act against the petitioners, who were nominee Directors of a company accused of dishonoring cheques. The petitioners argued that they had resigned before the dishonor of cheques and, therefore, should not be held liable. The court referred to Section 141 of the Act, which holds officers in charge responsible for company offenses. The court analyzed previous judgments, including one from the Supreme Court, emphasizing that mere directorship does not establish liability without involvement in the company's affairs. The court concluded that the petitioners, being prosecuted solely as Directors without evidence of management involvement, should not be held liable under Section 138. Issue 2: Interpretation of Section 141 of the Act: The court examined Section 141 of the Act, which deems officers in charge responsible for company offenses. It noted that the petitioners were sought to be prosecuted based on their roles as Directors of the company. However, the court found no evidence in the complaint indicating that the petitioners were managing the company's affairs during the issuance or dishonor of the cheques. Citing the provision of Section 141 and relevant case law, the court concluded that prosecuting the petitioners solely based on their directorship was contrary to the Act and ordered the proceedings against them to be quashed. Issue 3: Prosecution of Directors without Evidence of Involvement: The court considered the arguments presented by the petitioners, emphasizing that they had resigned from their positions before the alleged offense. Despite the petitioners' contentions, the court focused on the lack of evidence showing their involvement in the company's affairs at the relevant times. It reiterated the requirement under Section 141 for officers in charge to be responsible for company conduct. As the complaint failed to establish the petitioners' active role in managing the company, the court ruled in favor of the petitioners and quashed the proceedings initiated against them under Section 138 of the Act. This judgment clarifies the liability of nominee Directors under the Negotiable Instruments Act, particularly in cases of dishonored cheques. It underscores the importance of active involvement in company affairs for establishing liability, as outlined in Section 141 of the Act. The court's analysis provides guidance on the interpretation of legal provisions and the necessity of evidence linking individuals to the alleged offenses when prosecuting company officials.
|