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of <h1>Director's liability & cheque presumption clarified in dismissal of petition under section 138</h1> <h3>Krishna Bhoopal Versus Sanam Jhansi Devi</h3> Krishna Bhoopal Versus Sanam Jhansi Devi - [2003] 43 SCL 610 (AP) Issues:Petition to quash complaint under section 138 of the Negotiable Instruments Act, 1881 - Liability of director for dishonored cheque issued on behalf of the company - Company not made an accused in the proceedings - Cheque issued as security, not in discharge of a legally enforceable debt.Analysis:1. Liability of Director for Dishonored Cheque: The petitioner argued that since he resigned as the director of the company before the offense of dishonoring the cheque was completed, the proceedings against him should be quashed. However, the court held that a director cannot escape liability under section 138 by resigning after receiving the notice of dishonor and demand for payment. The resignation must be accepted by the board of directors, and the liability remains until the payment is made, even if the resignation is backdated.2. Company Not Made an Accused: The petitioner contended that since the company was not made an accused in the proceedings, the complaint against him was not maintainable. However, the court relied on section 141 of the Act, which holds both the person who drew the cheque and the company liable for the offense under section 138. Therefore, the absence of the company as an accused does not render the complaint against the petitioner invalid.3. Cheque Issued as Security: The petitioner argued that since the cheque was issued as security and not in discharge of a legally enforceable debt, the proceedings under section 138 were not maintainable. The court noted that under section 139 of the Act, there is a presumption that the cheque was issued in discharge of a legally enforceable liability. The burden of proof lies on the petitioner to establish otherwise, and this determination should be made during the trial based on evidence presented.In conclusion, the court found no merit in the petition and dismissed it. The learned Magistrate was directed to expedite the case's disposal, emphasizing that the observations made in the order should not influence the proceedings. The judgment clarified the director's liability for dishonored cheques, the company's inclusion in the complaint, and the presumption regarding the purpose of the issued cheque, providing a comprehensive analysis of the legal issues involved in the case.
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