Court quashes summoning order against director due to lack of evidence

The court quashed the summoning order against the petitioner, a director, under Section 138 of the Negotiable Instruments Act. It found the order lacked due application of mind, as the petitioner's role in the company's affairs was not established. The court emphasized the need for specific allegations to support summoning orders, citing precedents like HMT Watches Limited v. M.A. Abida. The petitioner's non-involvement in the company's daily affairs was supported by evidence, leading to the quashing of the order due to insufficient averments under Section 141 of the Act.

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Issues Involved:
1. Validity of the summoning order under Section 138 of the Negotiable Instruments Act, 1881.
2. Whether the cheque was issued towards security or discharge of legal liability.
3. The role and liability of the petitioner as a director under Section 141 of the N.I. Act.

Detailed Analysis:

1. Validity of the Summoning Order:
The petitioner challenged the summoning order dated 05.12.2019 issued by the trial court, summoning her for the offence under Section 138 of the Negotiable Instruments Act, 1881. The petitioner argued that the order was passed without due application of mind, asserting that the cheque in question was issued as security and not towards discharge of any legal liability. Moreover, it was contended that the petitioner, though a director, was not in charge of the day-to-day affairs of the company and thus not liable under Section 141 of the N.I. Act.

2. Cheque Issued Towards Security or Legal Liability:
The court examined whether the cheque was issued towards security or discharge of legal liability. Referring to the case of M/s Chesons Enterprises v. M/s Cadiz Pharmaceuticals Pvt. Ltd., it was emphasized that this is a matter of defense to be determined during the trial. The Supreme Court in HMT Watches Limited v. M.A. Abida & Another reiterated that such factual disputes should be resolved by the trial court after recording evidence, and not in a petition under Section 482 Cr.P.C.

3. Role and Liability of the Petitioner as a Director:
The court scrutinized whether the petitioner was in charge of and responsible for the conduct of the business of the company at the time of the offence. The Supreme Court in Gunmala Sales Private Limited v. Anu Mehta and Others summarized that a complaint must contain basic averments that a director was responsible for the company’s conduct when the offence was committed. The High Court may quash the complaint if there is unimpeachable evidence proving the director’s non-involvement.

In this case, the petitioner contended that she was not involved in the company’s daily affairs, a claim supported by the reply to the legal notice. The complainant failed to provide specific details or evidence contradicting this claim. The court found that the complaint and pre-summoning evidence lacked specific allegations detailing the petitioner’s role, thus failing the averment test.

Conclusion:
The court held that the necessary ingredients to constitute the offence under Section 141 of the N.I. Act against the petitioner were not satisfied. It emphasized that summoning an accused should not be a matter of course and must show due application of mind, as held in Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others. Consequently, the summoning order against the petitioner was quashed, and the petition was allowed.

Communication:
A copy of the judgment was directed to be communicated electronically to the concerned trial court.

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