2025 (7) TMI 274 - HC - Indian Laws

Dishonour of cheque - funds insufficient - vicarious liability of director - discharge under Section 239 Cr.P.C. sought on the ground that he had resigned as Director on 18.12.2015 before the date of issue of Cheques on 11.03.2016 - Form 32 can be considered at this stage of framing of Notice or it is the defense which can be considered only during the evidence - HELD THAT - Every Company is required to maintain at its registered office a register of its Directors Managing Director Manager and Secretary containing the particulars with respect to each of them as set out in clauses (a) to (e) of sub-section (1) of Section 303 of the Companies Act 1956. Sub-section (2) of Section 303 mandates every Company to send to the Registrar a return in duplicate containing the particulars specified in the Register. Any change in its Directors Managing Directors Managers or Secretaries such information specifying the date of change is required to be furnished to the Registrar of Companies in the prescribed Form within 30 days of such change in Form 32. The aspect of consideration of documents relied by the accused to seek discharge was considered by the Apex Court in the case of Mohd. Akram Siddiqui v. State of Bihar 2018 (10) TMI 2030 - SUPREME COURT wherein Apex Court made a reference to the case of Yin Cheng Hsiung v. Essem Chemical Industries 2011 (1) TMI 1603 - SUPREME COURT and State of Haryana v. Bhajan Lal 1990 (11) TMI 386 - SUPREME COURT and observed that ordinarily and in the normal course the High Court when approached for quashing of a criminal proceeding will not appreciate the defence of the accused; neither would it consider the veracity of the document(s) on which the accused relies. However in an appropriate case where the document relied upon is a public document or where veracity thereof is not disputed by the complainant an exception has been carved out and the same can be considered. In the case of Harshendra Kumar D. v. Rebatilata Koley 2011 (2) TMI 1278 - SUPREME COURT similar facts as in hand came up for consideration. Therein as well in a Complaint under S.138 NI Act the Petitioner took the plea of having resigned from the Directorship prior to the presentation of the Cheque and sought a discharge. It was observed that while it is fairly settled now that while exercising inherent jurisdiction under Section 482 or Revisional Jurisdiction under Section 397 of the CrPC in a case where complaint is sought to be quashed it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations - Further in an appropriate case if on the face of the documents placed by accused which are beyond suspicion or doubt the accusations against him cannot stand it would be travesty of justice if accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter for promotion of justice or to prevent injustice or abuse of process the High Court may look into the materials which have significant bearing on the matter at prima facie stage. It must be held that a Director whose resignation has been accepted by the Company and that has been duly notified to the Registrar of Companies cannot be made accountable and fastened with liability for anything done by the Company after the acceptance of his resignation. The Petitioner is entitled to be discharged on this ground as well. Thus no prima facie case was disclosed against the Petitioner Sh. Manoj Rungta who had resigned from the Company even prior to the date of issue of cheque. The impugned Order against the Petitioner is therefore set aside and he is discharged for the offence under Section 138 NI Act - The Petition is accordingly allowed.

Summary

The core legal questions considered in this judgment include:

1. Whether the Petitioner, having resigned as Director of the accused Company prior to the date of issuance of the dishonored cheques, can be held liable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

2. Whether the Petitioner is entitled to discharge under Section 239 of the Code of Criminal Procedure, 1973 (Cr.P.C.) at the stage of issuance of summons, based on his resignation and the documents submitted to the Registrar of Companies (ROC).

3. The scope of vicarious liability under Section 141(1) of the NI Act and the requirement of specific averments regarding the role and responsibility of a Director at the time the offence was committed.

4. The extent to which public documents such as Form 32 (DIR-12) evidencing resignation can be considered at the stage of discharge under Section 239 Cr.P.C.

Issue-wise Detailed Analysis

Issue 1: Liability of a Director who has resigned prior to the date of issuance of dishonored cheques under Section 138 NI Act

The legal framework under Section 138 of the NI Act penalizes the drawer of a cheque which is dishonored for insufficiency of funds. Section 141(1) of the NI Act creates a statutory exception to the general rule against vicarious liability by deeming every person who was in charge of and responsible for the conduct of the business of the Company at the time the offence was committed to be guilty.

Precedents such as N.K. Wahi v. Shekhar Singh and Anita Malhotra v. Apparel Export Promotion Council emphasize that mere holding of a directorship or designation is insufficient; there must be specific and clear averments about the accused's role and responsibility in the company's business at the time of the offence. The Court referred to the principle that the liability under Section 141(1) is attracted only if the accused was in charge of and responsible for the conduct of the company's business at the relevant time.

Further, in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal and more recent decisions such as Ashok Shewakramani v. State of A.P. and Ravi Dhingra v. State (NCT of Delhi), the Supreme Court reiterated that the phrase "at the time the offence was committed" is significant and that the prosecution must establish that the accused was responsible for the company's business on that date.

In the present case, the Petitioner resigned as Director on 18.12.2015, accepted by ROC on 19.12.2015, whereas the cheques were issued on 11.03.2016. The cheques were signed by another Director, not by the Petitioner. The Complaint lacked specific averments about the Petitioner's role or responsibility at the time of issuance of the cheques. The Court found that the Petitioner was not in charge or responsible for the company's conduct at the relevant time and thus could not be held liable under Section 138 NI Act.

Issue 2: Entitlement to discharge under Section 239 Cr.P.C. based on resignation and public documents

Section 239 Cr.P.C. allows for discharge of an accused if the Court finds no sufficient ground for proceeding with the charge. Ordinarily, at this stage, the Court does not delve into the merits or evidence but examines whether the complaint discloses a prima facie case.

However, the Petitioner relied on Form 32 (DIR-12) submitted to the ROC, a public document evidencing his resignation as Director, which was accepted and not disputed by the complainant. The Court referred to precedents including Mohd. Akram Siddiqui v. State of Bihar and Harshendra Kumar D. v. Rebatilata Koley where the Supreme Court held that in appropriate cases, public documents or undisputed materials may be considered at the discharge stage to prevent abuse of process or injustice.

The Court held that since the resignation was duly accepted and notified to the ROC well before the date of issuance of the cheques, and the Petitioner was not a signatory or responsible for the company's business at the relevant time, the public documents relied upon could be considered at this stage. Hence, the Petitioner was entitled to discharge.

Issue 3: Requirement of specific averments regarding the role of Directors in complaints under Section 138 NI Act

The Court noted that the Complaints contained only omnibus averments that the accused Company was operating through its Directors without specifying the role or responsibility of the Petitioner. The Court relied on the principle laid down in N.K. Wahi and Anita Malhotra that a complaint must contain clear and unambiguous allegations about the accused's role in the company's affairs at the time of the offence.

The absence of such specific averments in the Complaint was a ground for discharge. The Court emphasized that mere designation as Director does not ipso facto attract liability under Section 138 NI Act.

Issue 4: Consideration of Form 32 (DIR-12) at the discharge stage

The Court examined whether Form 32 evidencing the Petitioner's resignation could be considered at the stage of discharge. It noted that while normally the Court does not consider evidence at this stage, an exception exists for public documents whose authenticity is not disputed.

In line with the Supreme Court's rulings in Mohd. Akram Siddiqui and Harshendra Kumar D., the Court held that such documents can be considered to prevent injustice and abuse of process. Since the Petitioner's resignation was formally accepted and notified to the ROC before the cheques were issued, the Court could rely on this document to hold that the Petitioner was not liable under Section 138 NI Act.

Significant Holdings

"The words 'every person who, at the time the offence was committed' occurring in Section 141(1) of the NI Act are not without significance and these words indicate that criminal liability of a Director must be determined on the date the offence is alleged to have been committed."

"Only an omnibus averment that the accused Company was working through its Directors without specific averments regarding the role of the Petitioner in the company's affairs at the time of the offence is insufficient to attract liability under Section 138 NI Act."

"A Director whose resignation has been accepted by the Company and notified to the Registrar of Companies cannot be made accountable and fastened with liability for anything done by the Company after the acceptance of his resignation."

"Public documents, such as Form 32 evidencing resignation, whose authenticity is not disputed, can be considered at the discharge stage under Section 239 Cr.P.C. to prevent abuse of process and injustice."

"The Petitioner is entitled to be discharged as no prima facie case was made out against him under Section 138 NI Act since he had ceased to be Director of the Company prior to the date of issuance of the dishonored cheques."