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IN THE HIGH COURT OF DELHI AT NEW DELHI
Amit Mahajan, J.
Rajeev Jain And Others - Appellant
Versus
Ashtech Industries Pvt. Ltd. - Respondent
Crl.M.C. 1192 of 2022 & & Crl.M.A. 5199 of 2022
Decided On : 03-07-2023
NI Act - Cheque Bounce - Section 138 - The court discussed the provisions of Section 138 and 141 of the Negotiable Instruments Act, emphasizing the conditions required to prosecute a person under Section 138 and the vicarious liability of directors in cases of cheque bounce. The court highlighted the need for specific averments to establish vicarious liability and the requirement for unimpeachable evidence to quash criminal proceedings.
Fact of the Case:
The complaint was filed under Section 138 of the NI Act against a company and its directors for dishonor of cheques issued as security for rental payments. The accused company failed to make the rental payments, leading to the complaint and legal demand notice.
Finding of the Court:
The court analyzed the roles of the accused directors and the specific allegations against them. It emphasized the need for specific averments to establish vicarious liability and the requirement for unimpeachable evidence to quash criminal proceedings. The court partially allowed the petition and quashed the proceedings against certain directors.
Issues: The issues revolved around the vicarious liability of directors in cases of cheque bounce under Section 138 of the NI Act and the sufficiency of averments to establish such liability.
Ratio Decidendi: The court held that the complaint should contain specific averments to establish vicarious liability and emphasized the need for unimpeachable evidence to quash criminal proceedings. It also highlighted the roles and responsibilities of different types of directors in the company.
Final Decision: The court partially allowed the petition and quashed the proceedings against certain directors, emphasizing the need for specific averments and unimpeachable evidence to establish vicarious liability and quash criminal proceedings.
JUDGMENT
1. The present petition is filed seeking quashing of the order dated 18.10.2019, passed by the learned MM-01 (Shahdara, Karkardooma Court Complex, New Delhi), in Complaint Case bearing number 4728/2019, titled as Ashtech Industries Pvt. Ltd v. M/s RCC Infra Ventures and others, taking cognizance for offence under Section 138 of the Negotiable Instrument Act (hereinafter referred as "NI Act").
2. The complaint was filed by the Respondent, alleging that M/s RCC Infra Ventures Ltd, (hereinafter referred to as `accused company') through Accused No. 2 to 9, approached the Respondent (hereinafter referred to as `complainant') for the deployment of One Hydraulic Piling Rig MAIT HR-180 machine on monthly rental basis at their Via-Duct Mumbai Project Site.
3. It was alleged that the accused company, through the accused placed a Work Order/Agreement dated 11.02.2019 pursuant to which the machinery was deployed on 16.02.2019 at their Mumbai Site by the Complainant company at a monthly rental value of Rs.13,75,000/- (not inclusive of all taxes and duties), for a duration of 12 months.
4. Pursuant to the signing of the Work Order/Agreement dated 11.02.2019, and in furtherance to Clause 13.2, the accused persons handed over 3 pre-filled cheques to the complainant as a security, amounting to Rs.16,22,500 (Sixteen Lacs Twenty Two Lacs Five Hundred Only) each, which also included the liability towards GST. It is submitted that it was agreed upon by the complainant as well as the accused persons that in the event of default of any payment, the cheques shall be presented by the complainant company.
5. It has been further alleged by the complainant that even though several invoices/bills were raised by them, the accused company has not made any payment towards rent since April 2019. The details provided by the complainant in regard to the invoices is given below:
| S.No | Tax Invoice | Date | Amount |
| 1. | 18191000068 | 16.03. 2019 | 16,22,500/- |
| 2. | 18191000069 | 31.03. 2019 | 8,11,250/- |
| 3. | 19201000004 | 30.04.2019 | 16,79,444/- |
| 4. | 19201000008 | 31.05.2019 | 16,74,420/- |
| 5. | 19201000012 | 30.06.2019 | 16,79,444/- |
| 6. | 19201000019 | 31.07.2019 | 16,74,420/- |
| 7. | 19201000029 | 03.09.2019 | 17,86,048/- |
6. Accused failed to pay the dues against Invoice bearing no. 19201000004, for the month of April 2019. It is stated that the complainant received categorical instructions, and specifically from Accused No. 5 (Santosh Kumar Singhal) to present the cheque bearing number 001404 dated 31.05.2019 of Rs.16,22,500/- towards discharge of partial liability towards the Invoice No. 19201000004 of Rs.16,79,444/-. However, the cheque upon presentation got dishonored for the reasons "funds insufficient" vide cheque return memo dated 03.08.2019. It is stated that the accused persons were giving excuses on several pretexts, for the dishonor of cheques. It is further stated that the accused persons requested the complainant to present cheques bearing number 001404 and 001405 dated 31.05.2019 and 01.08.2019 towards the realization of part payment of the Invoice bearing number 19201000004 of Rs. 16,79,444 and Invoice No. 19201000008 of Rs. 16,74,420 raised for the month of April and May 2019(for a sum of Rs.16,22,500). However, both cheques on presentation were dishonored vide return memo dated 03.08.2019. Several attempts were allegedly made by the complainant with the Accused to resolve the issue and the complainant was finally constrained to terminate the work order vide email dated 03.08.2019, in furtherance to which the accused company permitted the complainant to take possession of the Hydraulic Piling Rig MAIT HR 180 from the site of the accused company.
7. The complainant in furtherance of the dishonor of cheques, sent a Legal Demand Notice dated 18.09.2019 in terms of Sections 138, 141 and 142 of the NI Act, asking the accused to pay a sum of Rs. 48,67,500/- (Rupees Forty-Eight Lakhs Sixty Seven Thousand Five Hundred Only), out of a total outstanding amount of Rs. 69,03,726/- (Rupees Sixty Nine Lakhs Three Thousand Seven Hundred Twenty
The main legal point established in the judgment is the requirement for specific averments and unimpeachable evidence to establish vicarious liability of directors in cases of cheque bounce under Sec....
Point of Law : Where there is not even an averment against the Managing Director or joint Managing Director of the Company therein. [Para 11]
Dishonour of cheque – Contents of notice, reply given by noticee and contents of complaint would form an important part of arraigning accused into proceedings under Section 138 of NI Act.
Vicarious liability of Directors under Section 138 NI Act depends on their actual role in the company's affairs, and strict interpretation of the provision is necessary.
(1) Dishonour of cheque – Impleadment of all Directors of Accused Company on the basis of a statement that they are in charge of and responsible for conduct of business of company, without anything m....
Dishonour of cheque – Offence by company – It may not be proper to split while reading complaint so as to come to a conclusion that allegations as a whole are not sufficient to fulfil requirement of ....
Vicarious liability under the Negotiable Instruments Act requires proof of a director's active involvement and responsibility in the company's operations, not merely their title.
Liability under Section 141 of NI Act depends on the role in the conduct of the company's affairs, not just the designation, and the burden of proof lies on the accused to establish lack of knowledge....
Specific averments are necessary to establish the liability of a Director under Section 141 of the Negotiable Instruments Act; mere designation is insufficient.
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