Lokesh Kasat vs Sabsons Fastners P. Ltd.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(P&H) 3257

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
SANDEEP MOUDGIL, J.
Lokesh Kasat & Ors. – Petitioners
Versus
Sabsons Fastners P.Ltd. – Respondent
CRM-M-28353 of 2022
Decided On : 09-02-2023

Advocates Appeared:
Mr. Gaurav Sethi, Advocate; For the Petitioners

Headnote:(A) Negotiable Instruments Act, 1881 - Section 138 and 141 - Criminal Procedure Code, 1973 - Section 202 - Quashing of complaint for dishonour of cheques - Petitioners, as directors, were held liable under Section 141 for the company's offence despite not being signatories to the cheques - Reliance on past precedents distinguished as the petitioners remained responsible for day-to-day operations - No detailed reasons required for summoning under Section 204; sufficiency of evidence necessitated continuation of proceedings. (Paras 6, 8, 10, 16)

Facts of the case:
The petitioners, directors of a company, faced multiple complaints for dishonoured cheques issued while having a credit balance with the company, claiming non-involvement in financial matters.

Findings of Court:
The court concluded the petitioners were responsible for the company's conduct and unable to prove lack of knowledge or diligence to prevent the offence, affirming the trial court's decision to summon them.

Issues: Whether non-signatory directors can be held liable under Section 138 of the NI Act and the sufficiency of grounds for summoning the petitioners.

Ratio Decidendi: The court determined that under Section 141 of the NI Act, directors responsible for company management could be held liable for a company's dishonour of cheques, regardless of direct signatory status, and no need for detailed orders at the summoning stage.

Result: Petitions dismissed.

Table of Content
1. petitioners seek quashing of complaints under ni act. (Para 1 , 2)
2. petitioners claim lack of connection to cheques. (Para 3 , 4 , 5)
3. cited cases emphasize liability depends on cheque signatory. (Para 6 , 10)
4. court supports trial court's summoning based on responsibility. (Para 7 , 8 , 9 , 11)
5. court clarifies no need for detailed reasons in summons. (Para 12 , 14 , 15)
6. directors responsible under ni act for cheque dishonour. (Para 16)
7. petitions dismissed; trial court's order upheld. (Para 17 , 18)

JUDGMENT

Sandeep Moudgil, J.

This order shall dispose of CRM-M-28353-2022, CRM-M- 28802-2022, CRM-M-28808-2022, CRM-M-28876-2022, CRM-M-28900- 2022, CRM-M-28916-2022, CRM-M-28931-2022 as common issues are involved. For the purpose of order, CRM-M-28353-2022 is treated as the lead case.

2. The petitioners seek quashing of the criminal complaint No.NACT/642 of 2020 dated 17.08.2020 pending in the Court of JMIC, Panchkula as well as for quashing of the summoning order dated 18.03.2021 (Annexure P2) whereby the petitioners have been summoned to face trial for offence under section 138 of Negotiable Instruments Act, along with all subsequent proceedings.

3. Learned counsel for the petitioners submits that in total 7 complaints under section 138 of the Negotiable Instruments Act (in short, 'the NI Act') were filed by the respondent-company against the petitioner with similar allegations relating to different cheques which were allegedly dishonoured.

4. It is further averred that the petitioner is in the business of manufacturing of auto industry parts including lighting, headlamps etc. The petitioners were appointed as independent directors and were not related to monetary affairs of the company. Allegedly, the respondent-company had a credit balance towards the directors and petitioners of Rs.40,19,484 on the date of sending legal notice and as on date as per ledger maintained, Rs.3631809.40 is lying as credit.

5. Learned counsel further urged that the petitioners were neither the signatories/drawer of the cheques in question nor are connected with the day-to-day affairs of the alleged company at any point of time. The complaint is silent as nothing has been specified as to the role of the directors and in what manner the petitioners are in charge of the affairs of the company in the conduct of its business.

6. Reliance has been placed on National Small Industries Corp. Ltd. v. Harmeet Singh Painthal and Anr. (2010) 3 SCC 330; Mrs. Aparna A Shah v. M/s Sheth Developers P.Ltd. and Anr. 2013 (3) RCR (Criminal) 686; and Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (2015) 3 SCC (Civil) 384 to contend that it is only the drawer of the cheque who can be fastened the criminal liability and not the one who is not the signatory of the cheque and as such no vicarious liability can be fastened on a non-executive director.

7. Heard learned counsel for the petitioners and gone through the record.

8. The trial court vide impugned order has specifically observed that though petitioners are resident of Jaipur, however, in an enquiry held as per amended Section 202 (1) CrPC, the complainant was examined and after going through the evidence and documents placed on record before the court below, the trial court held that there are enough grounds for proceedings against the petitioners.

9. It is specifically averred in the complaint that the petitioners are the directors of the company Autolite India Ltd. and are responsible for the management, conduct and day to day financial affairs and decisions of the company as such the petitioners are jointly and severely liable for the dishonour of the cheques in question. In this context, it is imperative to note that where an offence under the Negotiable Instruments Act has been committed by a company, every person who was in charge of and was responsible to the company for the conduct of its business is also equally guilty of the offence by the statutory creation. Any Direc