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2024 Supreme(P&H) 311
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Manjari Nehru Kaul, J.
Anil Chanana – Appellant
Versus
Mansha Devi Trading Co. (M/s) – Respondent
CRM-M No. 32461 of 2017
Decided On : 11-03-2024
Mr. Aashish Chopra Senior, Advocate, Mr. Kunal Verma, Ms. Rupa Pathania, Mr. Gaurav Agrawal, Mr. Rajesh Gaur
IMPORTANT POINT
Directors can only be held liable under Section 138 if specific allegations of responsibility for the company's actions are made; mere issuance of cheques post-resignation does not suffice.
Headnote:
Quashing - Negotiable Instruments Act - Section 138 - The court interpreted Section 138 of the Negotiable Instruments Act, emphasizing the necessity of specific averments against directors for vicarious liability, leading to the quashing of proceedings against a former director.
Fact of the Case:
The petitioner sought to quash a summoning order under Section 138 of the Negotiable Instruments Act for dishonored cheques issued by a company after the petitioner had resigned as a director, arguing lack of liability due to severed ties.
Finding of the Court:
The court found that the petitioner had resigned as a director before the cheques were issued and thus could not be held liable under Section 138, as there were no specific allegations of responsibility for the company's actions.
Issues: Whether the petitioner, having resigned as a director prior to the issuance of the cheques, could be held vicariously liable under Section 138 of the Negotiable Instruments Act.
Ratio Decidendi: The court held that for vicarious liability under Section 138, specific averments must be made against a director regarding their responsibility for the company's conduct, which were absent in this case.
Result: The petition was allowed, quashing the summoning order and all subsequent proceedings.
JUDGMENT :
Manjari Nehru Kaul, J.
The petitioner is seeking quashing of summoning order dated 10.07.2017 (Annexure P-3) passed by learned Chief Judicial Magistrate, Kaithal as well as complaint No.1100 of 2016 (Annexure P-1) instituted on 03.12.2016 by the respondent under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as, ‘the Act’).
2. Brief facts of the case may be noticed as thus:
The respondent-complainant company (hereinafter referred to as ‘complainant’) was engaged in business of commission agency, sale and purchase of food grains. The accused Company through its Directors purchased paddy on credit for a total sum of Rs. 6,74,044.85 was due towards the complainant by the accused company as per account books maintained by the complainant. In order to discharge its legal liability towards the due amount, the accused Company issued cheques bearing No.348728 dated 29.07.2016 and No. 348848 dated 30.08.2016 in the sum of Rs.6,74,043/- and Rs.41,400/- respectively drawn on Punjab National Bank, Minto Road, Delhi in favour of the complainant as part payment of dues. On presentation of the cheques, they were returned with remarks “Funds Insufficient” by the banker of the accused to the banker of complainant. Subsequently, on 18.10.2016, at the request of the accused Company the complainant again presented the cheques in question with his bank Central Bank of India which again were dishonored vide memo dated 18.10.2016 with the remarks “Account Freeze”. After serving the requisite legal notice, dated 24.10.2016, to the accused within the statutory period, the complaint in question came to be instituted on 03.12.2016. The learned Judicial Magistrate 1st Class, Kaithal upon perusal of the preliminary evidence summoned the accused company and its directors including the present petitioner vide impugned order dated 10.07.2017.
3. On the last date of hearing, it had been made clear that in case there is no representation on behalf of the respondent(s) on the adjourned date, the respondent(s) shall be proceeded against ex-parte and this Court shall proceed to decide the instant petition on merits. Mr.Rajesh Gaur, Advocate who is presented in the court today is appointed as Amicus Curiae to assist the Court on behalf of respondents today itself. Copy of the paperbook has been supplied.
4. Learned senior counsel is impugning the aforementioned summoning order on the following grounds:
(i) That a bare perusal of Form No.DIR-32 (Annexure P4) reveals that the resignation of the petitioner as Director of M/s Amira Foods India Ltd. (hereinafter referred to as ‘the Company’) had been accepted with effect from 10.02.2006 whereas it was a matter of record that the cheques in question was issued much later i.e. on 29.07.2016 and 30.08.2016. Still further, the said cheques were dishonoured on 18.10.2016. Learned senior counsel for the petitioner has thus vehemently argued that since he had resigned as a Director of the Company on 02.02.2006, more than a decade prior to the commission of the offences in question, he had severed all ties with the Company and could not be held vicariously liable for the Company’s actions thereafter, much less liable for an offence under Section 138 of the Act. It was thus, evident that the petitioner was neither incharge nor responsible for the day to day affairs of the company.
(ii) That even otherwise, a perusal of the complaint in question reveals that therein no specific averment qua the petitioner being incharge of the day to day affairs of the company has been made. In support of his submissions, reliance has been placed upon Pooja Ravinder Devidasani Vs. State of Maharashtra and another (2014) 16 Supreme Court Cases 1, wherein it was held that there must be specific averments against the Director showing as to how and in what manner he/she was responsible for the conduct of the business of the company. Thus, it has been vehemently asserted that in the absence of any such specifi
