IN THE HIGH COURT OF ALLAHABAD
Prashant Kumar, J.
Dinesh Hariram Valecha – Applicant
Versus
State of U.P. and Another - Opposite Party
Application U/S 482 No. - 13290 of 2023
Decided On : 13-02-2024
N.I. Act - Quashing of Summoning Order - Section 138 of Negotiable Instruments Act, 1881 - 138, 141, 143 - The court discussed the legal provisions of Section 138, 141, and 143 of the Negotiable Instruments Act, 1881, and their interpretations. The court emphasized the liability of directors under Section 138 and the requirement for expeditious trial under Section 143. The court also highlighted the impact of insolvency on criminal liabilities under Section 32A of the Insolvency & Bankruptcy Code.
Fact of the Case:
The complaint was filed under Section 138 of the Negotiable Instruments Act, 1881, against the applicant and other directors of a company for dishonour of a cheque. The applicant sought to quash the summoning order and the entire proceedings, arguing lack of specific role assignment and non-fulfilment of conditions under Section 138.
Finding of the Court:
The court found that the complaint sufficiently alleged the applicant's responsibility for the conduct of the company's business, and the disputed questions of fact could only be determined during trial. The court criticized the trial court's leniency and directed expeditious trial, dismissing the application under Section 482 CrPC.
Issues: The issues involved the liability of directors under Section 138, the sufficiency of the complaint, and the trial court's conduct.
Ratio Decidendi: The court held that the complaint sufficiently alleged the applicant's responsibility for the company's conduct, and disputed questions of fact could only be determined during trial. The court also emphasized the need for expeditious trial under Section 143 and the impact of insolvency on criminal liabilities under Section 32A of the Insolvency & Bankruptcy Code.
Final Decision: The application under Section 482 CrPC was dismissed, and the trial court was directed to proceed with the trial expeditiously, completing it within three months.
JUDGMENT :
1. Heard Shri Vinay Khare, learned Senior Advocate assisted by Ms. Aarushi Khare, learned counsel for the applicant, Shri Shashidhar Pandey, learned AGA for the State and perused the record.
2. The instant application under Section 482 CrPC has been filed by the applicant praying to quash the summoning order dated 23.10.2019 and the entire proceeding of the Complaint Case No. 06 of 2018 (M/s Joshi Construction v. Valecha Engineering Limited & others), under Section 138 of Negotiable Instruments Act, 1881, Police Station- Kotwali, District-Etawah pending before the Court of Additional Chief Judicial Magistrate, Court No.1, Etawah.
Facts of the Case
3. The opposite party no. 2 had a business relation with the applicant, it was in between December, 2014 to July, 2015, where several work orders were placed by Valecha Engineerings Limited (for short “VEL”) for KERB laying and PCC laying. During the course of the business, VEL paid certain amount to opposite party no. 2, however, there was a balance of Rs. 7,18,65,987/- which was to be paid by VEL to opposite party no. 2. In pursuance of this payment, VEL issued a cheque bearing No. 063388 dated 11.10.2017 drawn on SBI, Shashtri Chauraha, Etawah for an amount of Rs.6,50,00,000/- (six crores and fifty lakhs) crores in favour of opposite party no. 2. When the said cheque was presented it was dishonoured on 22.11.2017 with a remark “insufficient funds” and was sent to the opposite party no. 2 vide return memo dated 23.11.2017. After bouncing of the cheque, opposite party no.2 requested VEL to pay the bounced cheque amount when, VEL did not make the said payment, the opposite party no. 2 was constrained to issue a legal notice on 16.12.2017 through its lawyer which was delivered to VEL on 18.12.2017. Even after getting the notice, VEL did not make the payment and hence, the opposite party no.2 was left with no other option but to file a complaint on 08.01.2018 under Section 138 of the Negotiable Instruments Act in the Court of Second Judicial Magistrate, Etawah. The Court after being satisfied that the court had jurisdiction and the complaint was within time, fixed 10.04.2018 for statement under Section 200 CrPC. After 20 hearings and after a gap of one and a half years, notices were issued on 23.10.2019 against Valecha Engineerings Limited, and other directors, and also against Mr. Shyam M. Bulbule who was the authorised signatory of the cheque (the applicant herein is one of the whole-time Director of the Company). The matter was next listed on 30.11.2019, thereafter, the accused did not appear in the court and the bailable warrant were issued.
4. Since, the accused were not appearing, so the trial was not proceeding. The opposite party no. 2 was left with no other option but to approach this Court by filing an application u/s 482 CrPC bearing No. 13490 of 2020 for expeditious disposal, in which, this Court on 09.09.2020 was pleased to pass the following order :-
This application under Section 482 Cr.P.C. filed by the applicants with a prayer to direct the court below 1st Additional Chief Judicial Magistrate, Etawah to expeditiously decide the complaint case No. 6 of 2018, under Section 138 Negotiable Instruments Act, Joshi construction Vs. Valecha Engineering Ltd and others, P.S. Kotwali, District Etawah.
Learned counsel for the applicants submitted that the complaint was filed on 8.1.2018 and applicant was summoned on 23.10.2019, considerable time has already lapsed but the case is still pending for trial.
The only prayer made by learned counsel for the applicants to expeditious disposal of this case pending in the trial court as per provision of sub section 3 of Section 143 of the Negotiable Instruments Act, 1881 which is quoted below:-
"(3) Every trial under this section shall be conducted as expeditiously as possible and an endeavour shall be made to conclude the trial within six months from the date
M/s Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra
M/s. Bilakchand Gyanchand Co. Vs. A. Chinnaswami
Manish Kumar v. Union of India and Another
R.P. Kapur Vs. State of Punjab
The company must be summoned as an accused in Section 138 N.I. Act cases for proceedings against its Directors to be valid.
Directors can only be held vicariously liable under Section 141 of the Negotiable Instruments Act if specific averments are made in the complaint regarding their responsibility for the company's cond....
For maintaining a prosecution under Section 138 of the Negotiable Instruments Act, arraigning of the company as an accused is imperative. The person in charge of the company cannot be held liable if ....
The moratorium provision under Section 14 of the Insolvency and Bankruptcy Code, 2016 does not apply to the natural persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act.
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....
The main legal point established in the judgment is that a complaint filed by a company under Section 138 of the Negotiable Instruments Act must be in the name of the company and can be represented b....
The imposition of moratorium under Sec. 14 of the I.B. Code applies to the corporate debtor, while the natural persons mentioned in Sec. 141 of the N.I. Act continue to be statutorily liable.
(1) Dishonour of cheque – A post-dated cheque issued after debt has been incurred would be covered by definition of ‘debt’ – However, if sum payable depends on a contingent event, then it takes colou....
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