2014 (12) TMI 1116 - SUPREME COURT

Dishonor of cheque - Directors at the time of commission of offence were in-charge or not – Complaint u/s 138 r.w. 141 of NI Act – Validity of assertions made - Whether the High Court was justified in quashing the proceedings initiated by the Magistrate on the ground that there was merely a bald assertion in the complaint filed under Section 138 r.w. Section 141 of the Negotiable Instruments Act, 1881 that the Directors were at the time when the offence was committed in charge of and responsible for the conduct and day-to-day business of the accused-company – Held that:- The decision delivered in SMS Pharmaceuticals Ltd. Versus Neeta Bhalla [2005 (9) TMI 304 - SUPREME COURT OF INDIA] holds good wherein it has been held that it is necessary to specifically aver in a complaint u/s 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company.

The Court quashed the complaint filed under Section 138 read with Section 141 of the NI Act relying on the certified copy of the annual return which was a public document as per the Companies Act read with Section 74(2) of the Evidence Act, which established that the appellant/Director therein had resigned from the Directorship much prior to the issuance of cheques.

High Court did not go into the second question raised before it as to whether the Director, who has resigned can be prosecuted after his resignation has been accepted by the Board of Directors of the company. Pertinently, in the application filed by the respondents, no clear case was made out that at the material time, the Directors were not in charge of and were not responsible for the conduct of the business of the company by referring to or producing any uncontrovertible or unimpeachable evidence which is beyond suspicion or doubt or any totally acceptable circumstances. It is merely stated that Sidharth Mehta had resigned from the Directorship of the company on 30/9/2010 but no uncontrovertible or unimpeachable evidence was produced before the High Court as was done in Anita Malhotra to show that he had, in fact, resigned long before the cheques in question were issued.

Similar is the case with Kanhaiya Lal Mehta and Anu Mehta. Nothing was produced to substantiate the contention that they were not in charge of and not responsible for the conduct of the business of the company at the relevant time. In the circumstances, we are of the opinion that the matter deserves to be remitted to the High Court for fresh hearing.

It is however, necessary for the High Court to consider the cases of other Directors in light of the decisions considered by us and the conclusions drawn by us in this judgment.

However, the order passed by the High Court quashing the process as against Shobha Mehta is upheld - Shobha Mehta is stated to be an old lady who is over 70 years of age - Considering this fact and on an overall reading of the complaint in the peculiar facts and circumstances of the case, making her stand the trial would be an abuse of process of the court – the order to the extent it quashes the process issued against Shobha Mehta is confirmed – Decided partly in favour of appellant.