Non-executive directors cannot be held liable under the Negotiable Instrument Act for dishonored cheques if not proven responsible for company operations.

ORAL ORDER

1. Heard, learned advocate Mr. Deep D. Vyas appearing for petitioner, learned advocate Mr. Saurabh M. Patel appearing for respondent No.2 and learned Addl. Public Prosecutor Mr.

Chintan Dave for State.

2. Following relief is prayed in the petition.

“A. Be pleased to quash and set aside the proceedings of Criminal Case No.6267 of 2002, pending in the Court of Chief Judicial Magistrate, Surat, as also the order dated

03.08.2022, so far as the petitioner is concerned.

B. Pending admission hearing and final disposal of this petition, be pleased to stay further proceedings of Criminal Case No.6267 of 2002, so far as the petitioner is concerned, pending in the Court of Chief Judicial Magistrate, Surat.”

3. Brief facts of the case are that, Surat Nagrik Sahakari Bank Limited and Nainesh Arvindbhai Chitaniya filed private complaint under Sections 138 and 141 of the Negotiable Instrument Act, against Home Trade Limited company and its executive directors for dishonor of cheque No.984290 and cheque No.984291 for unpaid amount to tune of Rs.16,84,40,658-33. Learned trial court after recording verification of Mr. Nainesh Arvindbhai Chitaniya, issued process against all the accused in the offence punishable under Section 138 and 141 of the Negotiable Instrument Act. The petitioner herein is accused No.13. The petitioner has approached this Court by way of this petition to claim aforesaid relief on the ground that he was not active director of the accused No.1 company and not responsible for day-to-day business of accused No.1 company.

4. Having heard learned advocate for both the sides and considering the fact, taking notice that, in identical group of matter between the parties, coordinate bench in Criminal Misc. Application (for Quashing & Set Aside FIR/Order) No.9445 of

2019, observed as under.

“10. I have heard the rival submissions and perused the material on record. On bare perusal of the complaint, except that the applicants are the directors of the accused no.1-company, nothing is stated specifically against the applicants; there are no averment made in the complaints to the effect that the applicants are in- charge and responsible for day-to-day management of the Company; that the applicants have retired as non- executive directors from the accused no.1-company much prior to issuance of the cheques in question.

11. It is also required to be noted at this stage that the petitioners were non-executive Directors of the original accused No.1 Company, as observed by the SEBI in its report/order dtd.16/2/2006 wherein it is specifically observed as under :-

“5.4. In this context, it is relevant to note that the following directors were Non-Executive Directors:-

a) Russell Boekenkroeger.

b) Dilip Jain.

c) Vijendra Kumar Surana d) Manoj (Mike) Shah.

Similarly, Shri Vijay H. Modi, Salil Dinkarlal Gandhi and Shashank G. Ranade were appointed as additional Directors under Section 260 of the Companies Act, 1956. It is seen that none among these directors were involved in the decision making process or the day-to-day administration of the company. It is also noted that none of the said directors had attended any of the meetings of the Board of Directors of HTL and received any remuneration from HTL. Further, it is found that none of these directors except Mr. Manoj Shah had shares of HTL. It was claimed by the Shri Ranade that he had ceased to be a Director in HTL subsequent to the Annual General Meeting dated September 29, 2001 by the operation of law since he had not consented for regularizing the appointment in the aforesaid AGM. Rest of the Additional Directors had also claimed that they ceased to be Directors due to the operation of law as per Section 283(g) of the Companies Act, 1956, though, they have not disputed their directorship in HTL during the second phase o