Director liability under negotiable instruments Act: one director summoned for active involvement; another discharged after proved resignation.

Liability under the Negotiable Instruments Act was assessed by reference to company records and conduct. One director was held properly summoned because Form 32, cheque signatures and cosigning of balance sheets show active participation in company affairs; her defence of being a sleeping director may be tested at trial but did not negate the summoning order. Another director's resignation, recorded in Form 32 and corroborated by board minutes predating the cause of action, established noninvolvement and led to discharge by quashing the summoning order. The decision therefore distinguishes liability by documentary proof of involvement versus effective prior resignation.

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Issues: (i) Whether the summoning order vis-à-vis Ms. Sandhya Gupta (alleged sleeping director/authorised signatory) is sustainable and she is liable to be prosecuted under Section 138 of the Negotiable Instruments Act; (ii) Whether Mr. Abhishek Gupta, who claims to have resigned prior to issuance of the cheques, is entitled to discharge and setting aside of the summoning order dated 03.05.2017.

Issue (i): Whether the summoning order against Ms. Sandhya Gupta should be quashed on the ground that she was a sleeping director and not involved in day-to-day affairs.

Analysis: The Court examined documentary material on record including Form-32 entries, cheque signatory details and co-signature on balance sheets. The documents indicate that Ms. Sandhya Gupta was a director, an authorised signatory to the impugned cheque and co-signatory to company financials, which prima facie link her to company affairs and to the transaction giving rise to the complaint under Section 138 NI Act. The Court found that these materials justify her being proceeded against at trial and that her defence of being a sleeping director is a matter to be decided at trial.

Conclusion: The summoning order as regards Ms. Sandhya Gupta is upheld and the decision is against the Appellant (not in favour of the Appellant).

Issue (ii): Whether Mr. Abhishek Gupta, who asserts resignation effective 01.10.2013, is entitled to discharge from proceedings relating to cheques issued in 2014.

Analysis: The Court considered Form-32 and the board minutes accepting the resignation. Reference was made to the statutory scheme governing resignation of directors (Section 168 Companies Act, 2013) and to the timing of the resignation relative to the cause of action. The resignation recorded in Form-32 and corroborated by board minutes was found to pre-date the issuance of the cheques and the dishonour, providing cogent independent evidence that Mr. Abhishek Gupta was not a director at the relevant time.

Conclusion: Mr. Abhishek Gupta is discharged from the complaints under Section 138 NI Act and the summoning order dated 03.05.2017 is set aside in his respect; this conclusion is in favour of the Appellant.

Final Conclusion: The Court upholds the summons issued to Ms. Sandhya Gupta but sets aside the summoning order and discharges Mr. Abhishek Gupta; the petitions are disposed of accordingly.

Ratio Decidendi: Where a director's resignation is supported by contemporaneous company records (Form-32 and board minutes) and predates the cause of action, the director is not liable for offences arising thereafter; conversely, documentary evidence showing a director as an authorised signatory and participant in company affairs suffices to sustain a summoning order for trial under Section 138 NI Act.

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