9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (12) TMI 1570 - SC - Indian LawsDishonour of cheque - vicarious liability of director of the company - appellant resigned as director of the company prior to the issuance of the cheques - Section 141 of the Negotiable Instruments Act - HELD THAT - Tn the present case on the date of issuance of the cheques the appellant had already resigned. The fact regarding resignation is not in dispute. It is also not in dispute that the cheques issued by the Company were signed by another competent person on behalf of the Company. Once the facts are plain and clear that when the cheques were issued by the Company the appellant had already resigned and was not a director in the Company and was not connected with the company he cannot be held responsible for the affairs of the Company in view of the provisions as contained in Section 141 of the NI Act. The judgment of Malwa Cotton and Spinning Mills 2008 (8) TMI 877 - SUPREME COURT is factually distinguishable from the present case. The resignation of the director accused therein was submitted with the Registrar of Companies on 05.07.2001 after the issuance of the cheques therein which were issued on various dates in December 2000 and February 2001 while the accused director maintained that he had intimated his resignation to the Company on 02.04.1999 i.e. before the issuance of cheques. In the light of such disputed facts quashing of complaint was not allowed. On the contrary as discussed in the present case the appellant s resignation dated 21.06.2019 was submitted before the Registrar of Companies on 26.06.2019. Whereas the cheques in question were issued on 12.07.2019 i.e. after his resignation. The impugned order passed by the High Court is set aside - Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Liability of a Director Who Has Resigned Prior to Issuance of Cheques Relevant Legal Framework and Precedents: Section 138 of the Negotiable Instruments Act penalizes the drawer of a cheque if it is dishonoured for insufficiency of funds or other reasons. Section 141 of the Act extends liability to certain officers of a company, including directors, if the offence is committed with their consent or connivance or due to their neglect. The precedent in Malwa Cotton and Spinning Mills Limited v. Virsa Singh Sidhu clarified that the timing of resignation and its acceptance by the Registrar of Companies is critical in determining liability. Court's Interpretation and Reasoning: The Court observed that the appellant had submitted his resignation as director on 21.06.2019, which was formally acknowledged by the Registrar of Companies on 26.06.2019. The cheques in question were issued on 12.07.2019, after the resignation was accepted and recorded. Therefore, the appellant was not a director on the date of issuance of the cheques. The Court emphasized that since the appellant was neither a director nor connected with the company at the time of issuance, he could not be held liable under Section 138 or Section 141 of the Act. Key Evidence and Findings: The undisputed facts were that the appellant's resignation was tendered and accepted prior to the issuance of cheques. Additionally, the cheques were signed by another competent person on behalf of the company, not by the appellant. Application of Law to Facts: Applying Section 141, which requires the accused to be a director or officer at the time of the offence, the Court found no basis to hold the appellant liable. The resignation being effective before the issuance of cheques absolved him of responsibility. Treatment of Competing Arguments: The respondents argued that since the debt arose when the appellant was a director, liability should attach. However, the Court distinguished this from the facts in Malwa Cotton where resignation was disputed and not accepted before issuance of cheques. Here, resignation was undisputed and effective before issuance, thus the appellant's liability could not be sustained. Conclusions: The Court concluded that the appellant cannot be held liable under Section 138 or Section 141 of the Negotiable Instruments Act for cheques issued after his resignation. Issue 2: Quashing of Complaint under Section 482 Cr.P.C. on Grounds of Misuse of Process Relevant Legal Framework and Precedents: Section 482 Cr.P.C. empowers the High Court to quash criminal proceedings to prevent abuse of the process of law or to secure the ends of justice. The Court referred to the principle that a complaint should not be allowed to proceed where the accused is clearly not liable as a matter of law and facts. Court's Interpretation and Reasoning: The Court found that since the appellant was not a director at the time of issuance of the cheque and did not sign the cheque, continuing proceedings against him would amount to misuse of the process of law. The complaint was therefore liable to be quashed. Key Evidence and Findings: The resignation letter dated 21.06.2019 and its acceptance by the Registrar of Companies on 26.06.2019 were undisputed. The issuance of cheques on 12.07.2019 after resignation was established. No material was presented to contradict these facts. Application of Law to Facts: The Court applied the principles under Section 482 Cr.P.C. and found that the complaint lacked merit against the appellant and its continuation would be oppressive and unjust. Treatment of Competing Arguments: The respondents' reliance on Malwa Cotton was rejected as factually distinguishable. The Court emphasized the importance of the timing and acceptance of resignation. Conclusions: The Court set aside the High Court's rejection of the quashing petition and allowed the quashing of the complaint against the appellant. 3. SIGNIFICANT HOLDINGS The Court held:
Core principles established include:
Final determinations:
|
