2024 (2) TMI 1295 - HC - Indian Laws

Dishonour of Cheque - Liability of a Director - principles of vicarious liability - petitioner had already resigned on 15.03.2014 as Director of the Company and was neither signatory of the cheques nor Managing Director of the Company - Section 141 of NI Act - HELD THAT - This Court is of the considered view that present petitions under Section 482 Cr.P.C. are not maintainable since the earlier petitions were withdrawn with liberty to urge all the pleas before the learned Trial Court at an appropriate stage and there has been no change of circumstances thereafter. However in the interest of justice present petitions have also been considered on merits since the clarificatory certificate issued by Chartered Accountant dated 07.08.2018 that petitioner was a Non-Executive Director is stated to have been filed with the concerned office on the date of withdrawal of earlier CRL.M.Cs. (i.e. 07.08.2018). The scope of proceedings under Section 141 of NI Act has been considered by the Hon ble Apex Court in SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA 2005 (9) TMI 304 - SUPREME COURT wherein it was observed that persons who are sought to be made criminally liable under Section 141 of NI Act should at the time of commission of offence be incharge of and responsible to the Company for the conduct of the business of the Company. Consequently a Director merely by holding a designation or office in a Company would not be liable unless he was in-charge of and responsible for the conduct of the business of the Company. Thus the liability depends upon role in the conduct of the affairs of the Company and not merely by the designation or status except in the case of Managing Director and Joint Managing Director. The existence of special circumstances or change of circumstances which is specific to the knowledge of accused needs to be established during the course of trial if the same is not apparent from the record. Since the object of enactment of Section 138 and 141 of NI Act is to prevent bouncing of cheques and sustain credibility of commercial transactions the proceedings can be quashed only if the ingredients of the offence are altogether lacking despite the foundational facts laid by the complainant. The principle of law as referred in Siby Thomas v. Somany Ceramics Ltd. 2023 (10) TMI 487 - SUPREME COURT is not disputed but it may be noticed that in the aforesaid case the appellant submitted that he had retired from the partnership firm on 28.05.2013 while the cheque in question was issued on 21.08.2015. It was further noticed that the complaint was devoid of mandatory averments required to be made in terms of sub-Section 1 of Section 141 of NI Act. All the petitions are dismissed with composite cost of Rs. 25, 000/- to be paid to respondent No. 1. Pending applications in respective petitions if any also stand dismissed.

Summary

Issues Involved:
1. Quashing of proceedings under Section 138/141 NI Act.
2. Petitioner's resignation and role in the company.
3. Maintainability of petitions under Section 482 Cr.P.C.
4. Vicarious liability under Section 141 NI Act.

Summary:

Issue 1: Quashing of proceedings under Section 138/141 NI Act

Five separate petitions under Section 482 of the Code of Criminal Procedure, 1973 were filed by the petitioner, who was impleaded as accused No. 3 in complaint cases under Section 138/141 NI Act by the respondent. The petitioner sought quashing of proceedings emanating from Complaint Case Nos. 9996/2014, 9995/2014, 9994/2014, 9997/2014, and 9993/2014, pending before the learned MM (NI Act), Rohini Courts, Delhi.

Issue 2: Petitioner's resignation and role in the company

The petitioner contended that she was summoned without considering that she had resigned on 15.03.2014 as Director of the Company and was neither signatory of the cheques nor Managing Director. She claimed to be a non-working Director inadvertently marked as 'Executive Director' in Form-32, which was later clarified by the Chartered Accountant. The cheques were presented after her resignation and were not signed by her. The respondent argued that the petitioner was an 'Executive Director' and 'Promoter' at the relevant time and a part payment was made through NEFT in December 2013.

Issue 3: Maintainability of petitions under Section 482 Cr.P.C.

The Court observed that the present petitions under Section 482 Cr.P.C. were not maintainable since the earlier petitions were withdrawn with liberty to urge all the pleas before the learned Trial Court. However, in the interest of justice, the petitions were considered on merits. The Court held that the present petitions could not be maintained as there was no change of circumstances after the withdrawal of the earlier petitions.

Issue 4: Vicarious liability under Section 141 NI Act

The Court referred to the principles of vicarious liability under Section 141 NI Act, emphasizing that a Director, merely by holding a designation, would not be liable unless in charge of and responsible for the conduct of the business of the Company. The Court cited various judgments, including S.M.S. Pharmaceuticals v. Neeta Bhalla and Another, and K. K. Ahuja v. V. K. Vora & Anr., to elucidate the conditions under which a Director can be held liable. The Court concluded that the petitioner, being an 'Executive Director' and 'Promoter,' had a direct or indirect role in the affairs of the Company, and the issue could only be resolved in light of evidence led before the learned Trial Court.

Conclusion:

The petitions were dismissed with a composite cost of Rs. 25,000/- to be paid to respondent No. 1. Pending applications in respective petitions were also dismissed. A copy of the judgment was directed to be forwarded to the learned Trial Court for information.