Director's Liability in Section 138 Case Despite Resignation: Court Upholds Proceedings

The court dismissed the petition to quash proceedings under section 138 of the Negotiable Instruments Act against the petitioner, emphasizing the petitioner's role as a director in the company's affairs and the timeline of the offense as the basis for liability under the Act. The court held that the petitioner's resignation as a director did not absolve him from liability, as the cause of action for the offense arises from the date of the cheque issuance, not the resignation date. The court found the petitioner's arguments lacking merit and upheld the proceedings against him.

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Issues:
1. Quashing of proceedings under section 138 of the Negotiable Instruments Act.
2. Allegations against the petitioner as a director of the company.
3. Liability of the petitioner for offenses under section 138 of the Act.
4. Cause of action for initiating a complaint under section 138 of the Act.

Analysis:
1. The petitioner sought to quash the proceedings under section 138 of the Negotiable Instruments Act. The contention was based on the lack of specific averments in the complaint regarding the petitioner's role in the company, especially since the petitioner had resigned from the directorship of the company. However, the court held that as per section 141 of the Act, if a cheque is issued on behalf of a company, every person responsible for the conduct of its business is deemed guilty. The court found that the averments in the complaint indicated the petitioner's involvement in the company's affairs, thus dismissing the quashing application.

2. The complaint alleged that the accused, including the petitioner, were directors of the company and were in charge of its affairs when the dishonored cheques were issued. The court noted that the first of the dishonored cheques was issued before the alleged resignation of the petitioner as a director. This timeline indicated the petitioner's involvement in the offense, regardless of the resignation date, as per the duties of a director towards the company's affairs.

3. The court addressed the liability of the petitioner for offenses under section 138 of the Act. It rejected the argument that the petitioner's resignation as a director absolved him from liability. The court emphasized that the cause of action for an offense under section 138 arises from the date of the cheque issuance, not the resignation date. The procedures and timelines prescribed in the Act are formalities before filing a complaint, with the dishonor of the cheque being the trigger for the cause of action. Therefore, the petitioner, being a director at the time of the cheque issuance, could not evade liability.

4. Regarding the cause of action for initiating a complaint under section 138 of the Act, the court clarified that it arises from the date of the cheque drawal. The court highlighted that the resignation date, acceptance, and intimation to the Registrar of Companies are factual matters to be determined during trial and not in a quash proceeding. The court concluded that the petitioner's arguments lacked merit, leading to the dismissal of the petition.

In summary, the court dismissed the petition to quash the proceedings under section 138 of the Negotiable Instruments Act against the petitioner, emphasizing the petitioner's role as a director in the company's affairs and the timeline of the offense as the basis for liability under the Act.

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