Director liability in cheque dishonour cases requires specific material; disputed limitation and cheque validity issues must go to trial.
In a prosecution under the Negotiable Instruments Act, mere designation as a director is insufficient to fasten criminal liability unless the complaint contains specific material showing that the directors were in charge of and responsible for the company's day-to-day business. The proceedings were therefore quashed in favour of the non-executive directors. By contrast, objections based on limitation and the alleged invalidity of the cheque as a non-CTS-2010 cheque involved disputed facts and evidentiary questions, including the cheque's issuance, presentation, and supporting banking materials. Those issues were held to be triable matters, so the prosecution against the company and its managing director was permitted to continue.
Issues: (i) Whether the criminal complaint could be quashed as against the non-executive directors in the absence of material showing their involvement in the day-to-day affairs of the company; (ii) Whether the complaint could be quashed as against the company and its managing director on the grounds of limitation and alleged invalidity of the cheque as a non-CTS-2010 cheque.
Issue (i): Whether the criminal complaint could be quashed as against the non-executive directors in the absence of material showing their involvement in the day-to-day affairs of the company.
Analysis: Mere arraying of persons as directors is not enough to fasten criminal liability in a cheque dishonour prosecution. The complaint did not contain any tangible material showing that the two directors were in charge of, or responsible for, the day-to-day conduct of the company's business. There was no supporting document or specific averment establishing their active role in the transaction or in the issuance of the cheque.
Conclusion: The prosecution could not be sustained against the non-executive directors, and the proceedings were liable to be quashed in their favour.
Issue (ii): Whether the complaint could be quashed as against the company and its managing director on the grounds of limitation and alleged invalidity of the cheque as a non-CTS-2010 cheque.
Analysis: The plea of limitation depended on disputed facts, including the date on which the cheque was issued and whether it was presented as a security cheque years later, which required evidence at trial. The contention that dishonour of a non-CTS-2010 cheque was outside Section 138 was also treated as a matter requiring proof through banking records, circulars, and oral and documentary evidence. In the absence of conclusive material at the quashing stage, these objections were held to be triable issues rather than grounds for interference under inherent jurisdiction.
Conclusion: The proceedings against the company and its managing director were not liable to be quashed.
Final Conclusion: The complaint was set aside only in respect of the two directors who were not shown to be in charge of the company's affairs, while the prosecution was permitted to continue against the company and its managing director.
Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act, criminal liability of directors requires specific material showing responsibility for the company's affairs, and disputed questions concerning the nature, validity, or enforceability of the cheque are ordinarily matters for trial rather than quashing.
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