2023 (7) TMI 760 - HC - Indian Laws

Court upholds liability of former directors for dishonored cheques, dismisses petitions seeking to quash summoning orders.

Ashok Kumar Mittal & Ors. Versus The State NCT of Delhi & Ors.

Ashok Kumar Mittal & Ors. Versus The State NCT of Delhi & Ors. - TMI Issues Involved:1. Quashing of summoning orders and proceedings under Section 138 of the Negotiable Instruments Act, 1881.2. Liability of directors under Section 141 of the NI Act.3. Validity of cheques issued as security and post-dated cheques.4. Role and responsibility of nominee directors.Summary:Issue 1: Quashing of Summoning OrdersThe petitioners sought the quashing of summoning orders dated 06.07.2018 and subsequent proceedings in Complaint Cases Nos. 7099/2018, 7100/2018, and 7101/2018. These complaints were filed under Section 138 of the Negotiable Instruments Act, 1881, alleging that the accused company had issued cheques that were dishonored due to the account being closed.Issue 2: Liability of Directors under Section 141 of the NI ActThe petitioners argued that they were former directors and were only Professional Nominee Directors of Investors, having joined the accused company after the cheques were issued. They contended that they were not responsible for the day-to-day functioning of the company. The court noted that the cheques were dated 21.09.2017, after the petitioners had joined the company, and thus, the petitioners were liable under Section 141, which implicates directors who are in charge of and responsible for the conduct of the business when the offence was committed.Issue 3: Validity of Cheques Issued as Security and Post-Dated ChequesThe petitioners claimed that the cheques were issued as blank undated security cheques in 2013 and were later filled and presented by the complainant. The court held that whether the cheques were blank or issued as security are triable issues and cannot be decided at this stage. The court referred to the Supreme Court's rulings in Sunil Todi v. State of Gujarat and Bir Singh v. Mukesh Kumar, emphasizing that such matters require evidence to be determined at trial.Issue 4: Role and Responsibility of Nominee DirectorsThe petitioners argued that they were nominee directors and not involved in the day-to-day affairs of the company. The court found no supporting documents to substantiate this claim and noted that the complainant had specifically averred that all directors were responsible for the conduct of the company's affairs. The court emphasized that the role of each petitioner could only be clarified during the trial.Conclusion:The court dismissed the petitions, finding no reason to interfere with the impugned summoning orders. It clarified that the observations made were solely for deciding the petitions and would not affect the merits of the case during the trial.