TMI Blog2020 (9) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... injustice or abuse of process of law. In my opinion the present petition would fall within the aforesaid parameters. The proceedings initiated by the respondent No.1 against the petitioner under Section 138 of the NI Act, pending before the learned Metropolitan Magistrate, Saket Courts, and the resultant proceedings including summons issued thereon are quashed - Petition allowed. - CRL. M.C. 1602/2020, CRL. M.A. 9935/2020 - - - Dated:- 23-9-2020 - HON'BLE MR. JUSTICE V. KAMESWAR RAO Petitioner Through: Mr. V.M. Kannan, Adv. Respondents Through: Mr. Punit Gaur, Adv. for R-1 J U D G M E N T V.KAMESWAR RAO, J (ORAL) 1. The present petition has been filed by the petitioner primarily against R1 with the following prayers: It is most respectfully prayed that this Hon ble Court may graciously be pleased to: 1) Allow the Petition and quash complaint case nos. 2863 of 2019, 2851 of 2019, 2856 of 2019, 2869 of 2019 and 2873 of 2019 under section 138 of the Negotiable Instruments Act, 1881 pending before the court of Ms. Alka Singh, Metropolitan Magistrate, South Delhi as against the Petitioner. 2) Pass such other order or further orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ques are events that took place after October 27, 2010 when the petitioner ceased to be a Director of the respondent No.2. The legal notice dated January 28, 2019 allegedly sent by the respondent No.1 was never received by the petitioner. Also the tracking report filed by the respondent No.1 in that regard before the learned MM does not show that the said notice was delivered to the petitioner. Even the averments in the complaints filed by the respondent No.1 are sketchy and in no way demonstrate how the complaints are maintainable against the petitioner. The essential ingredients for maintaining a complaint under Section 138 of the NI Act are absent with respect to the petitioner. The respondent No.1 has failed to show in what manner and how the petitioner was responsible for the affairs of the respondent No.2. The issuance of summons was contrary to the settled position of law in terms of the judgments of the Supreme Court and this Court which are referred as under: (i) Harshendra Kumar D. v. Rebatilata Koley and Others, (2011) 3 SCC 351; (ii) Anita Malhotra v. Apparel Export Promotion Council and Another, (2012) 1 SCC 520; (iii) Pooja Ravinder Devidasani v. St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the same in its account in State Bank of India, Asian Games Village Complex, Hauz Khaz, New Delhi, but all the cheques were returned with remarks funds insufficient . Thereafter, the respondent No.1 demanded payment through legal notice dated January 28, 2019 to all the accused Directors including the petitioner which were duly received by them according to the postal receipts, and after the receipt of legal notice neither the petitioner nor any of the other Directors considered giving a reply as to why the payment was not made. It is under such circumstances that the respondent No.1 was compelled to proceed under the provisions of the NI Act. 11. According to Mr. Gaur that on the complaints made by the respondent No.1, the learned MM has only issued summons to the petitioner. The petitioner is within his right to appear before the learned MM and put forth his defence that he has not committed any offence. In other words, the invocation of the jurisdiction of this Court is totally uncalled for. 12. That apart, he stated that merely showing the resignation letter of the petitioner from Directorship of the respondent No.2 does not entitle him to an acquittal from the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent No.2 with regard to the fact that the petitioner ceased to be its Director. 16. There is no dispute that the petitioner has been named as accused No.4 in the complaints. The relevant paragraph in the complaints as well as pre-summoning evidence is as follows: 4. That as per Company Master Data accused company is registered under the Companies Act and having CIN U15130TZ2009PTC015235 Roc Coimbatore, Registration No.015235 which incorporated on May 26, 2009 at present following persons are working Directors and responsible for day to day working and function of the company. S. No. 1. 01130952 Naval Pakkam Ettinathan Kumar, Managing Director 26.05.2009 2. 01036883 Ettinathan Vinayagam Director 26.05.2009 3. 02791295 Alipbaba Nabibasha, Director 07.10.2009 17. In support of his submission, the learned counsel for the petitioner has drawn my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accused was so responsible must be averred. It is the case of the respondent No.1 that the petitioner was involved in the discussion and represented the respondent No.2 before the agreement was executed on March 03, 2011 but that does not mean even after his resignation he continues to be responsible for the actions of the Company including the issuance of cheques and dishonour of the same which then attracts proceedings under Section 138 of the NI Act against him. 21. It can be argued that the learned MM had issued the summons on the basis of the documents filed by the respondent No.1 with the complaints which depicts the petitioner as the Director in the respondent No.2; but the fact remains, had the learned MM called for the latest Company Master Data, along with the complaint, the learned MM would not have issued summons as it would have revealed that the name of the petitioner does not find mention and the petitioner was not Incharge of the Company. This I also say on the basis Form 32, which has not been disputed by Mr. Gaur. Accordingly, the summons issued against the petitioner were not justified. 22. This Court is conscious of the settled position of law that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the NI Act, i.e. the accused is in charge of and responsible for the conduct of the day-to-day affairs of the company , may not be sufficient and' something more is to be alleged to show as to how he was so responsible. xxx xxx xxx 48. In this petition specific averment is made by the petitioner that he was neither a Director of the company nor at all incharge of the company nor involved in dayto-day running of the company at the time of commission of the alleged offence in February and March, 1999 when the cheques were dishonoured. What is stated is that the petitioner had resigned from the company on 4.2.1998 and copy of Form 32 was also submitted with the Registrar of Companies. Certified copy of Form 32 issued by the office of the Registrar of Companies is enclosed as per which, the petitioner resigned with effect from 4.2.1998. Cheques in question are dated 31.12.1998, which were issued much after the resignation of the petitioner as the Director and were dishonoured subsequently and notice of demand is also dated 8.2.1999 on which date the petitioner was not the Director, as certified copy of Form 32 obtained from the Registrar of Companies is fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the amount. In my view even if resignation was not given by the petitioner under intimation to the complainant, that would not make any difference, once the Court relying upon certified copy of Form 32 accepts his plea that he was not a director of the Company, on the date the offence under Section 138 of Negotiable Instruments Act was committed. He having resigned from the directorship much prior to even presentation of the cheque for encashment, he cannot be vicariously liable for the offence committed by the Company, unless it is alleged and shown that even after resigning from directorship, he continued to control the affairs of the company and therefore continued to be person in charge of and responsible to the company for the conduct of its business. 25. Similarly, the Hon ble Supreme Court in Harshendra Kumar D. (supra) has held as under: 17. In this view of the matter, in our opinion, 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 resignatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the accusations against him cannot stand, it would be travesty of justice if the 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. 26. Criminal prosecution is a serious matter; it affects the liberty of a person. No greater damage can be done to the reputation of a person than dragging him in a criminal case. In our opinion, the High Court fell into grave error in not taking into consideration the uncontroverted documents relating to the appellant's resignation from the post of Director of the Company. Had these documents been considered by the High Court, it would have been apparent that the appellant has resigned much before the cheques were issued by the Company. 27. As noticed above, the appellant resigned from the post of Director on 2-3-2004. The dishonoured cheques were issued by the Company on 30-4-2004 i.e. much after the appellant had resigned from the post of Director of the Company. The acceptance of the appellant's res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharashtra ) 10. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company. xxx xxx xxx 12. Before summoning an accused under Section 138 of the Act, the Magistrate is expected to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and then to proceed further with proper application of mind to the legal principles on the issue. Impliedly, it is necessary for the courts to ensure strict compliance with the statutory requirements as well as settled principles of law before making a person vicariously liable. 13. The superior courts should maintain purity in the administration of justice and should not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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