2021 (11) TMI 755 - HC - Indian Laws

Court dismisses criminal petitions, finds petitioners involved in company affairs. Liability to be determined at trial.

The court dismissed the criminal original petitions and closed the connected miscellaneous petitions, finding that the complaint, statutory notice, and ... Dishonor of Cheque - specific allegations made against these petitioners about their role in issuing the cheques in question and its subsequent dishonour or not - vicarious liability under Section 141 of NI Act - HELD THAT:- The responsibility of the directors and day to day activities of the directors in the company would be disclosed in the Trial - Further, the reliance of the Judgment in the case of 'Pooja Ravinder Devidasani Vs. State of Maharashtra and another' [2014 (12) TMI 1070 - SUPREME COURT] placed by the learned counsel for the petitioners wherein it is held that 'the appellant was neither a Director f the accused company nor in charge of or involved in the day to day affairs of the company at the time of commission of the alleged offence. There is not even a whisper or shred of evidence on record to show that the appellant could be vicariously held liable for the offence with which she is charged'. However, in the present case, it is admitted fact that the cheques were issued by the Directors with seal of the company and signature of the petitioners who were the directors in the company in favour of the respondent/complainant for the supply of the material.ie. waste and scrap of iron and steel to M/s. Mehala Castings and Components Pvt. Ltd. These cheques have been given for the business transaction held between the petitioner's company and the complainant's company. In such circumstances, the petitioners/Directors of the company have issued the said cheques in question in favour of the respondent/complainant. Whether the company is not functioning from January 2014 and the petitioner were not directors in the company at that point of time could be tried and decided only in the Trial. Further the averments made by the petitioner is not acceptable while the petitioners have not produced any substantial material to prove that the directors have not involved in the affairs of the company and they were not responsible in the day to day activities of the company - All these averments are factual in nature and the same has to be established only at the time of Trial. The petitioners cannot seek to quash the C.C.Nos.367 and 368 of 2015 on the file of the Judicial Magistrate Court No.1, Tiruppur as they have failed to produce the substantial evidence to prove their averments before this Court. Hence, this Court is not inclined to accept the contentions of the petitioners - Petition dismissed. Issues Involved:1. Vicarious liability of directors under Section 141 of the Negotiable Instruments Act.2. Validity of the statutory notice under Section 138 of the Negotiable Instruments Act.3. Role and responsibility of directors in the day-to-day affairs of the company.4. Grounds for quashing the criminal complaints.Issue-wise Detailed Analysis:1. Vicarious Liability of Directors under Section 141 of the Negotiable Instruments Act:The petitioners argued that they should not be held vicariously liable under Section 141 of the Act as they were not involved in the day-to-day affairs of the company. They relied on the Supreme Court judgment in 'Pooja Ravinder Vs. State of Maharashtra' which stated that to fasten vicarious liability, the person must be responsible for the conduct of the company's business. The petitioners contended that the complaint did not disclose their specific role in issuing the cheques and their subsequent dishonor. However, the respondent countered that the petitioners were directors and actively participated in the company's affairs, and the cheques were issued with their consent. The court held that the complaint, statutory notice, and rejoinder collectively established that the petitioners were in charge of and responsible for the company's affairs, thus prima facie constituting an offense under Section 141.2. Validity of the Statutory Notice under Section 138 of the Negotiable Instruments Act:The petitioners questioned the validity of the statutory notice, arguing that the complainant did not provide a copy of the cheques as requested. The respondent maintained that the statutory notice and subsequent rejoinder clearly indicated the petitioners' involvement and responsibility. The court emphasized that the statutory notice, rejoinder, and complaint should be read together, and the notice's validity was upheld as it complied with the prerequisites of Section 141.3. Role and Responsibility of Directors in the Day-to-Day Affairs of the Company:The petitioners claimed that the company was not functioning from January 2014 and that the cheques were issued by the Managing Director without their involvement. The respondent provided evidence that the petitioners were directors and actively participated in the company's affairs. The court noted that the complaint explicitly stated the directors' active participation and issuance of cheques with their consent. It held that the petitioners' role and responsibility were factual matters to be established during the trial.4. Grounds for Quashing the Criminal Complaints:The petitioners sought to quash the criminal complaints, arguing that there were no specific allegations against them. The court referred to the Supreme Court judgment in 'N. Rangachari Vs. Bharat Sanchar Nigam Ltd.' which stated that the burden of proving non-liability lies with the directors. The court concluded that the petitioners failed to produce substantial evidence to prove their non-involvement in the company's affairs. It held that the contentions raised by the petitioners could only be addressed after the trial's conclusion.Conclusion:The court found that the complaint, statutory notice, and rejoinder collectively established the petitioners' involvement and responsibility in the company's affairs. It held that the petitioners' claims of non-liability and non-involvement were factual matters to be determined during the trial. Consequently, the court dismissed the criminal original petitions and closed the connected miscellaneous petitions.