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2024 Supreme(Online)(GUJ) 409
HIGH COURT OF GUJARAT
HDS
RITABEN HARENDRABHAI MEHTA – Appellant
Versus
STATE OF GUJARAT – Respondent
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE FIR/ORDER) NO. 14313 of 2022
A person who is not the drawer of the cheque, nor maintains any account of the firm, and has no involvement in issuing the cheque, cannot be held liable under Section 138 of the Negotiable Instruments Act.
Headnote:
Negotiable Instruments Act - Section 138 - Quashing of Proceedings
Fact of the Case:
The complainant filed a complaint under Section 138 of the Negotiable Instruments Act, alleging that the complainant advanced an amount of Rs. 2 Lacs to Mehta Developers (a partnership firm) by way of cash as a hand loan on 8.01.2021. The complaint further alleged that a cheque dated 27.12.2021, issued on behalf of Mehta Developers and signed by the accused number 2-Harendra Chamanlal Mehta as its authorized signatory, was dishonored due to insufficient funds. The present applicant was a partner of the firm, but had retired effective 30.05.2021.
Finding of the Court:
The court found that the present applicant was not the drawer of the cheque, nor did she maintain any account of the firm, and had no involvement in issuing the cheque. The court held that the process issued against the petitioner under Section 141 of the NI Act appears to be bad in law, as the director of a company cannot be held liable for the dishonor of a cheque unless the ingredients of Section 141(1) are satisfied.
Issues: Whether the proceedings against the applicant under Section 138 of the Negotiable Instruments Act should be quashed?
Ratio Decidendi: The court relied on the judgments of the Supreme Court in Susela Padmavathy Amma v. M/s. Bharti Airtel Ltd. and Siby Thomas v. Somany Ceramics Ltd., which held that the director of a company cannot be held liable for the dishonor of a cheque unless the ingredients of Section 141(1) are satisfied, and that merely being in charge of the affairs of the company does not make one responsible for the conduct of its business.
Final Decision: The court quashed the impugned complaint and all consequential proceedings against the applicant.
ORDER
1. By way of this application under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “Cr.P.C.”), the applicant has prayed to quash and set aside the proceedings of Criminal Case No.2221 of 2022, pending in the Court of 10th Additional Chief Judicial Magistrate (Special Negotiable Court), Jamnagar and all the consequential proceedings arising therefrom.
2. None appears for the respondent No.2, though duly served.
3. The complainant has filed a complaint under the provisions of Section 138 of the Negotiable Instruments Act, alleges that the complainant advanced an amount of Rs. 2 Lacs to Mehta Developers (a partnership firm) by way of cash as a hand loan on 8.01.2021. The complaint further alleges that a cheque dated 27.12.2021, issued on behalf of Mehta Developers and signed by the accused number 2-Harendra Chamanlal Mehta as its authorized signatory, was dishonored due to insufficient funds, which led to the present complaint.
4. Learned advocate for the applicant submits that the petitioner was the erstwhile partner of the partnership firm 'Mehta Developers,' from which she retired effective 30.05.2021. Pursuant to this, the entry was recorded on 10.06.2020. It is submitted that, having retired, the applicant is not connected with the business and is not even an authorized signatory, as evidenced by documentation issued by the drawee bank.
According to Section 138 of the Negotiable Instruments Act, only the person who has drawn the cheque on an account maintained by him can be prosecuted.
5. Learned APP appearing for the state has opposed the application and submits that the applicant has directly involved in the offence and therefore, the application be dismissed.
6. Having heard learned advocates on both the sides and considering the documents on record, it appears that respondent No. 2 has filed a complaint against three accused persons, wherein the present applicant is arraigned as accused No. 3. In the complaint it is alleged that the complainant advanced an amount of Rs. 2 Lacs to Mehta Developers (a partnership firm) as a hand loan in cash on 08.01.2021. The complaint further alleges that a cheque dated 27.12.2021, issued on behalf of Mehta Developers and signed by accused No. 2, Harendra Chamanlal Mehta, as its authorized signatory, was dishonored due to insufficient funds. The present applicant is a partner of the firm and engaged in its day-to-day affairs; however, no other allegations are leveled against the present applicant. Accused No. 2 signed the cheque as the authorized signatory, whereas the present applicant was not the drawer of the cheque. A notice was issued wherein it is accepted that respondent No. 3 was a partner of the firm, but no other role of the present applicant is revealed from the notice.
7. After perusing the documents at Annexure-B, it appears from Form G issued by the Registrar of Firms, Deputy Commissioner of State Tax, that the applicant was a partner of the firm. The present applicant joined as a partner in the firm on 3rd July, 2011, and retired effective 31st May, 2020. The impugned cheque was issued on 27th December, 2021, which obviously happened after the retirement of the applicant. The retirement date of the present applicant has also been produced on record.
8. In view of the above, it appears that on the date issuing cheque, the petitioner had retired and thus she was neither a signatory nor a drawer, nor did she maintain any account of the firm, and had no involvement in issuing the cheque. In the add of Section 141 of the NI Act, process issued against the petitioner appears to be bad in law. In this regard, this Court deems it proper to refer to the judgment passed by the Hon’ble Apex Court in the case of Susela Padmavathy Amma v. M/s. Bharti Airtel Ltd., reported in 2024 OnLine (SC) 311, wherein the Court held that the director of a company cannot be held liable for the dishonor of a cheque. Additionally, in the case of Siby Thomas v. Somany Ceram
