Directors' Liability: Quashed proceedings for lack of specific allegations, but proceedings against Company and MD continue.

The court quashed the proceedings against Directors A-3 to A-5 as the complaint lacked specific allegations regarding their roles and they were not signatories to the cheque. However, the court allowed the proceedings against Company A-1 and Managing Director A-2 to continue, holding them liable under Section 138 of the Negotiable Instruments Act due to the absence of a rebuttal to the presumption of a legally enforceable debt. The court emphasized the necessity of specific averments in complaints for directors' liability under Section 141 of the Act.

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Issues Involved:
1. Liability of directors (A-3 to A-5) under Section 138 of the Negotiable Instruments Act.
2. Liability of the company (A-1) and its Managing Director (A-2) under Section 138 of the Negotiable Instruments Act.
3. Legally enforceable debt or liability concerning the dishonoured cheque.
4. Adequacy of the complaint's averments regarding the roles of the accused.

Detailed Analysis:

1. Liability of Directors (A-3 to A-5) Under Section 138 of the Negotiable Instruments Act:
The petitioners A-3 to A-5 argued that they are mere directors and not responsible for the day-to-day affairs of the company, which is a statutory requirement under Section 141 of the N.I. Act. The complaint lacks specific allegations regarding their roles, making the cognizance taken by the Magistrate unsustainable. The court noted that the complaint contains only a bald statement without material averments on how A-3 to A-5 are liable, and none of them are signatories to the cheque. The mere serving of notice and their silence does not make them liable. The court referred to various legal precedents, including Standard Chartered Bank V. Directorate of Enforcement, Iridium India Telecom Ltd. V. Motorola Inc., and Sunil Bharti Mittal V. C.B.I., emphasizing that vicarious liability under Section 141 requires specific averments in the complaint. The court concluded that the cognizance taken against A-3 to A-5 is unsustainable and quashed the proceedings against them.

2. Liability of the Company (A-1) and its Managing Director (A-2) Under Section 138 of the Negotiable Instruments Act:
The petitioners A-1 and A-2 contended that they were falsely implicated and that there was no legally enforceable debt. They argued that the products supplied were returned as per the sale-cum-purchase agreement, and the court did not apply its mind in taking cognizance. The court noted that A-2, being the Managing Director and signatory to the cheque, is liable along with A-1. The burden is on the accused to rebut the presumption of a legally enforceable debt under the reverse onus clause. The court found that there was no reply to the statutory notice, which raises an adverse inference against A-1 and A-2. Therefore, the court held that the proceedings against A-1 and A-2 should continue, and the petition to quash the proceedings was dismissed.

3. Legally Enforceable Debt or Liability Concerning the Dishonoured Cheque:
The complainant argued that the cheque was issued for a legally enforceable debt and that the stock was not received back by the complainant. The court observed that the accused must rebut the presumption of a legally enforceable debt. The contention that the stock was returned does not absolve the liability unless it extends to the total liability. The court held that the accused must face the trial to establish their defense regarding the quality and return of the stock.

4. Adequacy of the Complaint's Averments Regarding the Roles of the Accused:
The court emphasized the necessity of specific averments in the complaint regarding the roles of the accused, particularly for directors under Section 141 of the N.I. Act. The complaint must disclose necessary facts showing that the accused were in charge of and responsible for the conduct of the company's business at the time of the offence. The court found that the complaint lacked such specific averments for A-3 to A-5, making the cognizance taken against them unsustainable.

Conclusion:
- Crl.P. No. 11336 of 2014: The court allowed the petition and quashed the proceedings against A-3 to A-5.
- Crl.P. No. 13561 of 2014: The court dismissed the petition, allowing the proceedings against A-1 and A-2 to continue.

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