2021 (12) TMI 275 - HC - Indian Laws

Court holds signatories liable for dishonored cheque, Chairman and MD not liable without specific allegations

The court dismissed the application to quash proceedings against applicant nos. 1 and 2, as they were signatories of the dishonored cheque, holding them ... Liability of signatories to a dishonoured cheque under Section 138 of the Negotiable Instruments Act - exemption under the second proviso to Section 141 of the Negotiable Instruments Act - necessity of impleading the juridical person (the Corporation) as distinct from its officers - quashing of criminal proceedings under Section 482 Cr.P.C.Liability of signatories to a dishonoured cheque under Section 138 of the Negotiable Instruments Act - Proceedings against the signatories who signed the dishonoured cheque (applicant nos. 1 and 2) were not liable to be quashed at the stage of this petition. - HELD THAT: - The record shows applicant nos. 1 and 2 admitted signing the cheque on behalf of the Corporation and there is a prima facie case against them. At this pre-trial stage the court declined to draw a final factual conclusion in their favour and observed that defences available to them can be raised at trial. The application insofar as applicant nos. 1 and 2 sought quashment of proceedings was therefore dismissed. [Paras 6, 14]Application dismissed as regards applicant nos. 1 and 2; prima facie case remains and prosecution may proceed.Exemption under the second proviso to Section 141 of the Negotiable Instruments Act - The second proviso to Section 141 did not apply on the facts pleaded and no exemption thereunder was established by the applicants. - HELD THAT: - The second proviso exempts from prosecution a person nominated as a Director by virtue of holding specified Government or controlled financial-corporation office. The applicants bore the burden of proving that they were officers of the Central/State Government or of a Government-controlled financial corporation and that their directorship arose by virtue of such office. The record does not show those conditions were satisfied; instead it indicates the applicants were officers of the Corporation itself. As the requisite foundation for the proviso was not discharged, the court declined to grant relief under that proviso while leaving open the applicants' right to raise such objections before the trial court. [Paras 9, 10, 11, 12, 13]Applicability of the second proviso to Section 141 not established; no interference granted on that ground at this stage.Necessity of impleading the juridical person (the Corporation) as distinct from its officers - quashing of criminal proceedings under Section 482 Cr.P.C. - Proceedings against applicant no. 3 (Bhikari Singh) and against Yogesh Shukla in his individual capacity were quashed for want of specific allegations and unnecessary impleading respectively. - HELD THAT: - The complaint contained no specific allegation against Bhikari Singh beyond his status as Chairman; consequently prosecution against him could not be sustained. Yogesh Shukla, the Managing Director, was needlessly impleaded when the Corporation, a separate juridical person, sufficed for prosecution against the signatories. There was no occasion in law to treat the Managing Director as personally liable in the absence of specific allegations creating an offence against him. On these grounds the Court granted quashment of the complaint insofar as it proceeded against Bhikari Singh and Yogesh Shukla individually. [Paras 8, 15, 16, 17, 18]Proceedings quashed against applicant no. 3 (Bhikari Singh) and against Yogesh Shukla in his individual capacity; complaint must no longer be prosecuted against them.Final Conclusion: The petition under Section 482 Cr.P.C. is partly allowed: proceedings are quashed as against Bhikari Singh and Yogesh Shukla individually, while the application seeking quashment as to the signatory-applicants is dismissed and prosecution against them may proceed; the question of exemption under the second proviso to Section 141 was not established and remains open for consideration at trial. Issues involved:Application to quash proceedings of Complaint Case under Section-138 Negotiable Instruments Act, 1881 based on the second proviso to Section 141 of the Act and lack of specific allegations against certain accused persons.Analysis:The judgment pertains to a 482 Cr.P.C. application seeking to quash proceedings of a Complaint Case under Section-138 Negotiable Instruments Act, 1881. The complaint arose from a dishonored cheque issued by the Corporation, naming specific individuals as accused persons. The applicants argued for quashing the proceedings citing the second proviso to Section 141 of the Act and lack of specific allegations against certain accused persons. The court examined the roles of the accused individuals in relation to the defaulted cheque. It found that applicant nos. 1 and 2, as signatories of the cheque, could not evade liability. However, applicant no. 3, being the Chairman, lacked specific allegations against him, leading to the quashing of proceedings against him. Similarly, Yogesh Shukla, the Managing Director, was unnecessarily impleaded, and since no specific allegations were made against him, the proceedings against him were also quashed.The court delved into the second proviso to Section 141 of the Act, emphasizing the conditions for its application. It highlighted that the exemption under this proviso applies to individuals nominated as Directors by virtue of holding specific government or financial corporation offices, which was not the case for the accused in question. The burden to establish the exemption's applicability rested on the applicants, which they failed to discharge. Consequently, the court found no grounds to interfere based on this aspect. However, it clarified that the issue remains open for the applicants to raise before the trial court.In conclusion, the court dismissed the application concerning applicant nos. 1 and 2, allowed the application for quashing proceedings against applicant no. 3 and Yogesh Shukla, and highlighted the necessity to implead the Corporation alone for legal purposes without attributing liability to its Managing Director. The judgment provided a nuanced analysis of the accused individuals' roles, the application of legal provisions, and the considerations for quashing proceedings based on specific allegations and statutory requirements.