Court sets aside criminal complaint against former director due to lack of personal liability for company debts.

The court set aside the criminal complaint and summoning order against the petitioner/former director, emphasizing the lack of personal liability established for the company's debts. Insolvency proceedings against the company resulted in the suspension of directors, shifting primary liability for the bounced cheques to the company. The court clarified the legal principles governing director liability in such cases, highlighting the necessity of specific averments to establish individual responsibility. Proceedings were allowed to continue against the company/accused No.1 based on these findings.

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Issues:
Quashing of criminal complaint under Section 138 of Negotiable Instruments Act against a former director of a company.

Analysis:
The petitioner sought the quashing of a criminal complaint filed by a bank under Section 138 of the Negotiable Instruments Act, relating to the dishonor of two collateral security cheques issued by the company. The complaint alleged that the accused company's director was responsible for the debt, leading to the summoning of the accused. The petitioner argued that the liability was that of the company, not the individual director. The complaint lacked specific allegations against the director's personal liability for the company's debts.

The court examined the legal position based on a previous case and an Apex Court judgment, emphasizing that necessary averments must be made to fasten criminal liability on an individual connected with a company. The court agreed that the petitioner, as a director, was wrongly held criminally liable for the company's actions, especially after the appointment of an Interim Resolution Professional and suspension of directors under the Insolvency and Bankruptcy Code.

Furthermore, it was noted that insolvency proceedings had been initiated against the company, resulting in the suspension of the directors and the takeover of company operations by the Interim Resolution Professional. The primary liability for the cheque bouncing rested with the company, not the suspended director. The court highlighted the legal implications of insolvency proceedings on the liability of directors in such cases.

Considering the circumstances, the court set aside the complaint and summoning order only concerning the petitioner/director, allowing the proceedings to continue against the company/accused No.1. The court's decision was based on the lack of personal liability established against the director and the impact of insolvency proceedings on the company's liabilities and management.

In conclusion, the court's judgment focused on the legal principles governing the liability of directors in cases of cheque bouncing, emphasizing the need for specific averments to establish individual responsibility. The court's decision provided clarity on the director's liability in the context of insolvency proceedings and the primary liability of the company in cheque bounce cases.

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