Important Point
A person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are in charge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at the trial.

Judgment

Dr. Arijit Pasayat, J. —

SLP (Crl.) 6049/2005

1.Leave granted.

2.Challenge in this appeal is to the Order passed by a learned Single Judge of the Punjab and Haryana High Court accepting the prayer of respondent No.1 for quashing the proceedings pending before the Judicial Magistrate, First Class, Ludhiana. The proceedings related to the complaint filed by the appellant alleging commission of offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (in short the ‘Act’). In all, 8 petitions were filed which were disposed of by the common Judgment.

3.The present appeals relate to Criminal Miscellaneous No. 52153 of 2002 and connected cases. The High Court quashed the proceedings primarily on the ground that respondent No.1-Virsa Singh Sidhu in the first case had resigned from the Directorship before the cheques were issued. The other petitions were allowed on the ground that there were some general allegations that all Directors were responsible.

4.Learned counsel for the appellant submitted that the High Court’s Judgment is clearly unsustainable. So far as respondent No.1 is concerned he claims to have resigned on 2.4.1999 whereas cheques were issued on various dates vis in December 2000 and February 2001. It is pointed out that the Form No.32 which was required to be filed with the Registrar of Companies was filed on 5.7.2001 i.e. much after the cheques were issued. Whether in fact the respondent No.1’s claim to have resigned was factually correct would have been established in trial and the High Court could not have passed the impugned Judgment while dealing with the application under Section 482 of the Code of Criminal Procedure, 1973 (in short the ‘Code’)? It is further pointed out that the High Court was not justified in holding that there was no specific allegation against other accused persons. With reference to the complaint it was pointed out that specific allegation is to the effect that the accused persons were in charge of day to day management work. In any event, this is not a question which could have been gone into in a proceeding under Section 482 of Code. It is a matter of trial.

5.Learned counsel for respondent No.1 on the other hand submitted that the High Court was justified in its view that respondent No.1 had intimated the company about his desire to resign. If the company delayed in submitting the requisite form before the Registrar of Companies, he cannot be made to suffer.

6.As rightly contended by learned counsel for the appellant factual disputes are involved. What was the effect of delayed presentation before the Registrar of Companies is essentially a matter of trial. Whether respondent No.1 had intimated the company and whether there was any resolution accepting his resolution are matters in respect of which evidence has to be led. Therefore, the High Court was not justified in its view.

7.So far as allegations against the Directors are concerned about their position in the company the complaint specifically contained the averments regarding the position of the accused Directors in the company.

8.At this juncture, it would be relevant to take note of certain observations made by this Court in various cases.

9.In S.V. Muzumdar v. Gujarat State Fertilizer Co. Ltd. and Anr.,1 (2005 (4) SCC 173), it was inter-alia observed as follows :

“3.The facts as projected by the respondents in the complaint were to the effect that the respondent no.1 (hereinafter referred to as the ‘complainant’) supplied goods on credit to M/s Garware Nylons Ltd. (hereinafter referred to as the ‘Company’) (accused no.14). Cheques issued by the company were not honoured by the drawee bank on the ground of insufficient funds. Payments were not made even after legal notices. There were 14 accused persons including the company named in the complaint. Some of the accused persons were Directors and while others were employees. Learned Chief Judicial Magistrate, Vadodara after recording statement of marketing manager w