2007 (3) TMI 825 - HC - Indian Laws

Court quashes criminal cases, clarifies liability under section 138 of NI Act

Dr. Rajan Sanatkumar Joshi Versus Rajnikant Govindlal Shah & 1

The court allowed the petitions filed under section 482 of the Code of Criminal Procedure, quashing Criminal Cases No. 400, 401, 402, and 403 of 2006 and ... - Issues Involved:1. Quashing of Criminal Cases u/s 482 of the Code of Criminal Procedure, 1973.2. Allegations under section 138 of the Negotiable Instruments Act.3. Responsibility and liability of the petitioner as Additional Director.Issue 1: Quashing of Criminal Cases u/s 482 of the Code of Criminal Procedure, 1973By way of these petitions u/s 482 of the Code of Criminal Procedure, 1973, the petitioner has prayed to quash Criminal Cases No. 400 of 2006, 401 of 2006, 402 of 2006, and 403 of 2006 and the proceedings thereof, pending before the learned Metropolitan Magistrate, Court No.21, Ahmedabad.Issue 2: Allegations under section 138 of the Negotiable Instruments ActRespondent no.1 filed complaints against Dairy Den Limited and others, including the petitioner, stating that the complainant had business relations with the Company and during the course of the transaction, the Company issued three different cheques, which were dishonoured. Therefore, after issuance of notice, he filed the said complaints u/s 138 of the Negotiable Instruments Act.Issue 3: Responsibility and liability of the petitioner as Additional DirectorThe petitioner was appointed as Additional Director on 31st March 2003 and resigned on 15th December 2003. The cheques were dishonoured in 2005, long after the petitioner ceased to be an Additional Director. There is no allegation that the petitioner signed the instruments in question. The court referred to section 138 and sub-section (1) of Section 141 of the Negotiable Instruments Act, emphasizing that liability arises on account of conduct, act, or omission, not merely on account of holding an office.In the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & anr., it was held that it is necessary to aver that at the time the offence was committed, the person accused was in charge of and responsible for the conduct of the business of the company. Similar principles were laid down in Sabitha Ramamurthy & Anr. v. R.B.S. Channabasavaradhya and Saroj Kumar Poddar Vs State (NCT of Delhi).In the present case, the undisputed facts are that the petitioner had resigned as Additional Director with effect from 15th December 2003; he has not signed the instruments in question; the instruments were dishonoured in 2005, and there are no averments in the complaint as to how and in what manner the petitioner was responsible for the conduct of the business of the Company. Therefore, the complaints become bad qua the petitioner, which deserve to be quashed.These petitions are allowed. Criminal Cases No.400 of 2006, 401 of 2006, 402 of 2006, and 403 of 2006 and the proceedings thereof pending before Metropolitan Magistrate, Court No.21, Ahmedabad are quashed and set aside. Rule is made absolute accordingly.The trial Court shall carry out proper verification before issuing summons in a criminal case u/s 138 of the Negotiable Instruments Act. The verification of a complaint on oath by the complainant is the first important step in the process of taking cognizance by the Court upon the complaint. If the complaint is by a Company, the Court should verify whether the person representing the Company has been duly authorized. The Court should also verify the statement of the complainant that all the accused persons named in the complaint are Directors/Partners of the firm/Company in question as on the date of the offence and/or the complaint and whether they are liable under the Negotiable Instruments Act.Registry is directed to circulate a copy of this order to all the Courts below.