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2023 Supreme(Kar) 618
IN THE HIGH COURT OF KARNATAKA
R. Nataraj, J.
Kamal Sagar – Appellant
Versus
Starworth Infrastructure – Respondent
Criminal Petition No. 6872 of 2017
Decided On : 20-04-2023
Sandesh J. Chouta, Advocate, Shirish Krishna, Advocate, Sridhar G., Advocate
Sec. 141 of N.I.Act imposes liability on any person in charge of and responsible for the conduct of the company's business at the time of the offence, regardless of their directorship status.
Headnote:
N.I.Act - Prosecution for Offence under Sec. 138 - Sec. 138 of N.I.Act - Sec. 141 of N.I.Act
Fact of the Case:
The petitioner challenged the prosecution initiated against him for the offence punishable under Sec. 138 of Negotiable Instrument Act, 1881. The petitioner claimed that he had resigned from the directorship of the accused-company before the issuance of the cheque in question.
Finding of the Court:
The court found that the petitioner's claim of retirement from the company and being insulated from prosecution could not be accepted at this stage. The court dismissed the petition and directed the petitioner to appear before the trial Court to establish his defense.
Issues: The main issue was whether the petitioner, who claimed to have resigned from the directorship of the company, could be prosecuted for the offence under Sec. 138 of N.I.Act.
Ratio Decidendi: The court relied on Sec. 141 of N.I.Act, which delineates that every person who, at the time of the offence, was in charge of and responsible to the company for the conduct of its business, shall be deemed guilty and liable to be proceeded and punished. The court emphasized that the petitioner's claim of retirement and insulation from prosecution should be established before the trial Court.
Final Decision: The petition was dismissed, and the petitioner was directed to appear before the trial Court to establish his defense.
JUDGMENT/ORDER
1. The petitioner has challenged the prosecution initiated against him in C.C.No.54737/2017 pending trial before the LVII Additional Chief Metropolitan Magistrate, Mayohall, at bengaluru, (henceforth to be referred to as 'trial Court') for the offence punishable under Sec. 138 of Negotiable Instrument Act, 1881 (henceforth referred to be as N.I.Act, ) and the order dtd. 19/9/2017 issuance of process against him.
2. A private complaint was filed by the respondent herein in PCR No.53798/2017 alleging the commission of an offence punishable under Sec. 138 of N.I.Act. The respondent had arrayed all the directors of the drawer- Company and alleged that all of them were responsible for the business and day to day activities of the Company.
3. Respondent further alleged that the Company and its directors had furnished corporate guarantee for a sum of Rs.2, 00, 00, 000.00 on 12/3/2015 and passed on a cheque for sum of Rs.2, 00, 00, 000.00 dtd. 27/7/2016 towards repayment. The said cheque when presented was dishonored due to insufficient funds which prompted the respondent to issue a notice of demand on 5/8/2016, which was served on the petitioner herein, who was purportedly one of the directors of the Company. On the failure of the drawer-Company to re-pay the amount, proceedings to prosecute Company and its directors for the offence punishable under Sec. 138 of N.I.Act was initiated.
4. The trial Court after recording the pre summons evidence of the respondent, took cognizance of the offence and issued process in terms of the order dtd. 19/9/2017. Being aggrieved by the order issuing process, the petitioner is before this Court primarily contending that he resigned from the directorship of the accused-company on 22/6/2015 and corresponding DIR-12 was filed before the Registrar of Companies. He further claimed that the cheque in question was issued long after he had retired from the Company and therefore, he was neither responsible for the conduct of the business of the Company nor was he incharge and responsible to the company in any manner whatsoever.
5. Learned counsel for petitioner relied upon the judgment of the Apex Court in the case of "Harshendra Kumar D Vs. Rebatilata Koley and Others" reported in (2011) 3 SCC 351 and invited the attention of this Court to paragraph No.17, he contended that the instant prosecution is only to strong arm the petitioner and force him to pay the amount covered under the cheque in question.
6. Per contra, learned Senior counsel representing the respondent submitted that there were specific assertions made in the complaint that the petitioner along with other directors were responsible for the business of the drawer-Company and that the petitioner was one of the persons who had executed the corporate guarantee. He submits that there were e-mail correspondence by the petitioner even after he allegedly retired from the company and therefore, the claim of the petitioner that he was not a director of the company was a smoke screen created by the petitioner to escape being prosecuted.
7. Learned Senior counsel relied upon the judgment of the Apex Court in the case of "Standard Chartered Bank Vs. State of Maharashtra and Ors." reported in (2016) 6 SCC 62. He further contended that the petitioner who was served with the statutory notice under Sec. 138 of N.I.Act failed to respond and claim that he was no longer a director of the Company and therefore was not responsible for the affairs of the Company. He therefore submits that it is for the petitioner to appear before the trial Court and establish his defence before the trial Court.
8. I have considered the submissions made by the learned counsel for the petitioner as well as learned Senior counsel representing the respondent.
9. Sec. 141 of the N.I.Act, deals with the person who has to be prosecuted in the event of commission of an offence under Sec. 138 of Negotiable Instruments Act, 1881 committed by a Company and reads as follows:
"141.
