2025 (10) TMI 676 - HC - Indian Laws

Petition to quash summons over cheque liability denied; director prima facie responsible, Section 482 CrPC not invoked

Nishant Mukul Versus Nischal Aggarwal

The HC dismissed the petitions seeking quashing of summoning orders under the NI Act, holding that the petitioner was a director of the accused company ... Dishonour of Cheque - Seeking quashing of the summoning orders - petitioner was never the signatory to the disputed cheques - power of Magistrate to discharge the accused in summary trial cases - petitioner ceased to be a director of the accused company at the time of presentation of the disputed cheques - vicatrious liability - HELD THAT:- It is relevant to note that the High Court is empowered to quash complaints under the NI Act at the pre-trial stage in the exercise of its inherent jurisdiction under Section 482 of the CrPC if such unimpeachable material is brought forth by the accused persons which indicates that they were not concerned with the issuance of the cheques or that no offence is made out from the admitted facts. The Hon’ble Apex Court in the case of Rathish Babu Unnikrishnan v. State (NCT of Delhi) [2022 (4) TMI 1434 - SUPREME COURT] had discussed the scope of interference by the High Court against the issuance of process under the NI Act and held that 'Situated thus, to non-suit the complainant, at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited.' In line with the dictum of the Hon’ble Apex Court in Rathish Babu Unnikrishnan v. State (NCT of Delhi), thus, while exercising the power under Section 482 of the CrPC to quash a complaint at the pre-trial stage, it is pertinent for this Court to examine whether the factual defence is of such impeachable nature that the entire allegations made in the complaint is disproved. It is well settled that under Sections 138/141 of the NI Act, the complainant is to make particular averments in the complaint, to the effect that the accused person was the director of the accused company at the relevant time and is responsible for its day-to-day affairs, and therefore is vicariously liable for the offence. Thereafter, the onus of proving that at the relevant time, the accused persons were not the directors of the accused company and were not responsible for its day-to-day affairs, lies upon the accused persons and the same is matter of trial - In the present case, it is undisputed that the petitioner was a director at the time when the disputed cheques had been issued in favour of the respondent. It is only subsequent to the issuance of the disputed cheques that the petitioner had resigned from the accused company on 01.08.2016. Undisputably, at the time of issuance of the disputed cheques, the petitioner was a director of the accused company and prima facie responsible for its day-to-day affairs, especially since the necessary averments have been made by the complainant in the respective complaints against the petitioner. Reference to the observations made in Gunmala Sales Private Ltd. Vs. Anu Mehta [2014 (12) TMI 1116 - SUPREME COURT] are crucial to conclude the issue at hand. It was observed by the Hon’ble Apex Court that once the basic averments have been made by the complainant in the complaint, alleging that the director was in charge of the company and was responsible for the day-to-day affairs of the company, the proceedings against the accused person may commence - In absence of any unimpeachable evidence to the contrary, the liability of the petitioner would remain at this stage and question in relation to the petitioner not being in-charge of the day-to-day affairs of the accused company at the relevant time becomes a factual dispute, which is not appropriate for determination under the powers conferred by Section 482 of the CrPC at this stage. It is well-established that this Court should refrain from expressing any views on disputed questions of fact in proceedings under Section 482 of the CrPC, as doing so could pre-empt the findings of the trial court. In such circumstances, at this stage, the petitioner cannot be said to have produced material of such sterling and unimpeachable quality that merits the quashing of the summoning orders and consequential proceedings thereof. It cannot be said that the petitioner is not responsible for the functioning of the accused company or that the complaint is bereft of the requisite ingredients so as to proceed against the petitioner. There are no merit in the present petitions - petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the High Court should quash summoning orders and attendant complaints under Section 138 read with Section 141 of the Negotiable Instruments Act at the pre-trial stage under its inherent jurisdiction under Section 482 CrPC where the accused contends non-involvement as a director at the time of presentation/ dishonour of cheques. 2. Whether mere resignation prior to some presentations or absence of signature on cheque(s) constitutes unimpeachable evidence to displace the statutory presumption and disentitle issuance of process against a person named as a director for vicarious liability under Section 141 NI Act. 3. The standard and nature of material required to justify quashing a complaint under Section 138/141 NI Act at the pre-trial stage - i.e., what constitutes 'unimpeachable evidence' for summary disposal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to quash at pre-trial and standard of interference Legal framework: High Court's inherent jurisdiction under Section 482 CrPC permits quashing of criminal proceedings where unimpeachable material demonstrates no offence is made out; however, courts must be slow to quash at pre-trial stage, particularly in NI Act cases where statutory presumption operates. Precedent Treatment: The Court follows controlling precedents which hold that quashing should not be granted on mere factual disputes and that the accused must place unimpeachable, uncontroverted evidence to displace the complaint; the Court refers to authority requiring caution against scuttling criminal process at nascent stages. Interpretation and reasoning: The Court emphasizes that factual defences may be in the realm of possibility but must be of such quality as to altogether disprove allegations. Because the cheque and signature presumptions favour the complainant, the balance of convenience ordinarily lies with allowing trial to proceed unless the accused furnishes conclusive proof negating the offence. Ratio vs. Obiter: Ratio - Quashing at pre-trial in NI Act matters is appropriate only where unimpeachable evidence negates essential allegations; Obiter - cautionary observations regarding potential consequences of premature quashing. Conclusion: Absent unimpeachable material, the High Court should decline to quash summoning orders and allow trial to adjudicate disputed factual contentions. Issue 2 - Application of Section 141 NI Act to a director who resigned Legal framework: Section 141 creates vicarious liability where the offender is a company and every person who, at the time the offence was committed, was in charge of and responsible for conduct of business shall be deemed guilty, subject to proof that the offence was committed without his knowledge or due diligence was exercised; subsection (2) extends liability for consent, connivance or neglect. Precedent Treatment: The Court relies on precedents establishing that a commercial transactor may presume directors are in charge, and that once the basic averment in the complaint alleges a director's responsibility for day-to-day affairs, process may issue; further precedents permit quashing only in exceptional cases where evidence (e.g., resignation long before issuance or incapacity) is unimpeachable. Interpretation and reasoning: The Court finds it undisputed petitioner was a director at the time the cheques were issued, though resignation occurred subsequently (01.08.2016). The complaint contains averments that the director was in charge of business. Records (Form DIR-11, DIR-12, Registrar master data) present discrepancies but are matters for trial; such material casts doubt but is not of unimpeachable quality warranting quashing. Ratio vs. Obiter: Ratio - When basic averments allege a director's responsibility at relevant time, the Magistrate may issue process and the High Court should not ordinarily quash absent unimpeachable contrary evidence; Obiter - examples of exceptional circumstances (bedridden director, resignation long before issuance) where quashing might be appropriate. Conclusion: Mere resignation after issuance or absence of signature does not ipso facto absolve a director; the petitioner's resignation post-issuance and available records do not amount to unimpeachable evidence to quash the complaint under Section 482 CrPC. Issue 3 - Particularity of averments against directors and role of disputed facts Legal framework: Complaint under Sections 138/141 must make particular averments that the accused was a director at the relevant time and responsible for day-to-day affairs; burden thereafter lies on accused to prove contrary at trial. Precedent Treatment: The Court follows decisions that a mere allegation of directorship and responsibility in complaint suffices to commence proceedings; High Court may quash where complaint lacks particulars about director's role or where unimpeachable evidence shows non-involvement. Interpretation and reasoning: The complaints contain requisite averments that the petitioner was a director responsible for the company's affairs when the cheques were issued. The petitioner's contentions that no specific averments were made or that he did not sign cheques are factual defenses better suited for trial; absence of specific averments is not established on the record here. Ratio vs. Obiter: Ratio - Basic averments of directorship and responsibility in complaint are sufficient to proceed; Obiter - High Court retains discretion to quash where more particulars are absent or exceptional unimpeachable circumstances exist. Conclusion: The complaint's averments are adequate to sustain issuance of summons; disputed factual defenses do not warrant quashing at pre-trial stage. Final Conclusion on Relief Sought Given the legal framework, authoritative precedents, and the nature of material placed on record, the petitioner has not produced unimpeachable, uncontroverted evidence to disprove the allegations or to show that prosecution is wholly unwarranted. The Court declines to quash the summoning orders and leaves the issues to be determined at trial; the petitioner remains entitled to raise the asserted defenses during trial proceedings.