A Director can be personally liable under the Negotiable Instruments Act for dishonored cheques issued in their individual capacity, irrespective of the company's liability.

CAV ORDER

In this petition filed under Section 397 r/w 401 of the Code of Criminal Procedure , petitioner who is accused before the trial Court has challenged his conviction and sentence for the offence punishable under Section 138 of Negotiable Instruments Act (for short 'N.I. Act'), which came to be confirmed by the Sessions Court by dismissing the appeal filed by him.

2. For the sake of convenience, parties are referred to by their ranks before the trial Court.

3. Complainant filed the complaint against accused Nos.1 and 2 alleging that accused No.2 is the Director of accused No.1 - company. Accused No.2 issued cheque dated 15.03.2012 for ₹21 lakhs in favour of complainant. However, when presented it was dishonoured for want of sufficient funds. Complainant got issued legal notice to accused No.2. Despite service, she has not chosen to pay the amount due. She has also not sent any reply.

4. In response to the summons, accused appeared through counsel and contested the case by pleading not guilty.

5. In order to prove the allegations against accused, complainant examined herself as PW-1 and got marked Exs.P1 to 21.

6. During the course her statement under Section 313 Cr.P.C, the accused has denied the incriminating evidence led by the complainant.

7. She has also given evidence by examining herself as DW-1. Accused has relied upon Exs.D1 to 11.

8. The trial Court acquitted accused No.1, on the ground that the cheque in question was issued by accused No.2 in her individual capacity and it has nothing to do with accused No.1 - company.

9. However, the trial Court convicted accused No.2 and sentenced her pay twice the cheque amount as fine with default sentence of imprisonment.

10. Aggrieved by the same accused No.2 filed Crl.A.No.58/2016. The Sessions Court not only confirmed the conviction and sentence passed by the trial Court, but also imposed default sentence in the event of failure of accused No.2 to pay the fine amount.

11. Aggrieved by the concurrent findings of the trial Court as well as the Sessions Court, the accused has filed this petition contending that the same is illegal, arbitrary and unsustainable in law. The Courts below have failed to properly appreciate the provisions of Section 138 and 141 of N.I Act. They have failed to appreciate that Ex.P1 cheque was drawn on the account of accused No.1 and she has nothing to do with the transaction between complainant and accused No.2. Rightly the trial Court has dismissed the complaint against accused No.1. Since the cheque does not belong to accused No.2, the Courts below have erred in convicting her. When the complaint is dismissed as against accused No.1, the Courts below have committed error in convicting accused No.2. Under Section 141 of N.I Act, a Director is liable only when the company is liable. Both Courts have failed to appreciate that there are no pleadings in the complaint with regard to the transaction between complainant and accused No.2 and no evidence is produced to establish the same. Ex.P12 is between complainant and accused No.2. Both of them have not complied with its terms. Ex.P12 clearly indicate that ₹21 lakhs paid by complainant was an investment, for starting the business and it was non-refundable. A civil suit is pending between the parties in O.S.No.25278/2015, which indicates that the dispute between the parties are civil in nature. Viewed from any angle the complaint is not sustainable and hence the petition.

12. In support of his arguments, learned counsel for accused has relied upon the following decisions:

(i) Aneeta Hada Vs. Godfather Travels and Tour