2011 (11) TMI 532 - SC - Companies Law

Director's Resignation in 1998 Clears Appellant of 2004 Cheque Dishonor Charges

Mrs. Anita Malhotra Versus Apparel Export Promotion Council (Apparel Export Promotion Council)

The Supreme Court found that the appellant had validly resigned from the directorship in 1998, as evidenced by public documents, and therefore could not ... Section 138 of the Negotiable Instruments Act, 1881 - Dishonour of cheques – Held that:- Non-executive Director had resigned from the Company as a Director in 1998, well before the relevant date, namely, in the year 2004, when the cheques were issued. Such director cannot be responsible for the dishonor of alleged Cheque. Issues Involved:1. Whether the appellant has made out a case for quashing the criminal complaint filed under Section 138 of the Negotiable Instruments Act, 1881.2. Admissibility and relevance of the appellant's resignation from the directorship of the company.3. Consideration of public documents, specifically Form-32 and the Annual Return, as evidence of resignation.4. The role of the appellant in the company at the time the cheques were issued and dishonored.5. The adequacy of the complaint's allegations regarding the appellant's responsibility for the company's conduct.Issue-wise Detailed Analysis:1. Quashing the Criminal Complaint:The Supreme Court examined whether the appellant had established sufficient grounds for quashing the criminal complaint filed under Section 138 of the Negotiable Instruments Act, 1881. The appellant argued that she had resigned from the directorship of the company well before the issuance of the disputed cheques. The Court found that the appellant had indeed resigned in 1998, evidenced by Form-32 and the Annual Return, and thus could not be held responsible for the dishonor of cheques issued in 2004.2. Appellant's Resignation from Directorship:The appellant resigned from the directorship effective 31.08.1998, and this was recorded by the company in Form-32 filed with the Registrar of Companies on 20.11.1998. The Court noted that the respondents were informed of this resignation through a letter dated 15.12.2004. The respondents, however, did not acknowledge this in their complaint, which was a significant omission.3. Public Documents as Evidence:The appellant presented a certified copy of the Annual Return dated 30.09.1999, which was filed with the Registrar of Companies, as evidence of her resignation. The Court held that the Annual Return is a public document under Section 74(2) of the Indian Evidence Act, 1872, and should have been considered by the High Court. The High Court erred in dismissing the Annual Return as not being a public document and ignoring the certified copy of Form-32.4. Appellant's Role in the Company:The complaint alleged that the appellant was responsible for the conduct of the company's business and its day-to-day affairs at the time the cheques were issued. The Court found this assertion unsustainable in light of the appellant's resignation in 1998, as evidenced by the certified documents. The Court emphasized that the appellant could not be held accountable for the company's actions in 2004.5. Adequacy of Complaint's Allegations:The Court scrutinized the complaint and found that it contained only bald and cursory statements regarding the appellant's role in the company's affairs. The complaint failed to specify how and in what manner the appellant was responsible for the company's conduct. The Court reiterated that mere reproduction of statutory requirements is insufficient, and specific allegations are necessary to hold a director liable.Conclusion:The Supreme Court concluded that the appellant had validly resigned from the directorship in 1998 and could not be held responsible for the dishonor of cheques issued in 2004. The Court held that the High Court should have exercised its jurisdiction under Section 482 of the Code of Criminal Procedure to quash the criminal proceedings against the appellant based on the public documents provided. Consequently, the criminal complaint No. 993/1 of 2005 on the file of ACMM, New Delhi, insofar as the appellant is concerned, was quashed, and the appeal was allowed.