TaxTMI 
TaxTMI 
2016 (5) TMI 494
X X X X Extracts X X X X
X X X X Extracts X X X X
....nter Corporate Deposit for the Accused No.1 i.e. M/s. Swajay Finance Private Limited to the extent of Rs. 1,50,00,000/-. Against the said Inter Corporate Deposit availed by Accused No.1, Accused No.2 pledged 2,25,000 Shares of M/s. Usher Agro Limited with Respondent No.1. Accordingly, a Loan Agreement was executed by and between Respondent No.1 and Accused No.1 on 13th August 2010. The period stipulated in the said Loan Agreement was, on the request of Accused No.2, extended from time to time and finally it was renewed for 180 days from 27th August 2012 to 26th February 2013 by virtue of a Loan Agreement executed on 5th September 2012. As per the terms of the Loan Agreement, Accused No.1 issued seven post dated cheques in favour of Respondent No.1 as follows :- Sr. No. Cheque No. Dated Amount (in Rs.) Drawn on Bank and Branch 1 952596 27.09.2012 2,70,000/- Indian Bank, Vasai Branch, Thane, Maharashtra. 2 952597 27.10.2012 2,70,000/- -- do -- 3 952598 27.11.2012 2,70,000/- -- do -- 4 952599 27.12.2012 2,70,000/- -- do -- 5 952600 27.01.2013 2,70,000/- -- do -- 6 952601 27.02.2013 2,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inue with Accused No.1 - Company and once her letter of resignation is also duly accepted and acted upon and also found reflected in "Form-32" and Annual Return of Accused No.1 - Company, she can no more be held liable for any of the acts committed by Accused No.1 - Company or its Directors and, therefore, issuance of process against her for dishonour of the cheque, which took place subsequent to her resignation, is clearly an abuse of the process of law. Learned counsel for the Petitioner, therefore, by relying upon the various authorities of the Apex Court and this Court, has strenuously urged for quashing of process issued against the Petitioner by the Trial Court. 9. Per contra, learned counsel for Respondent No.1 has fully supported the impugned order of the Trial Court by contending, inter alia, that the complaint filed before the Trial Court contains sufficient averments, as required under Section 141 of Negotiable Instruments Act. The contents of the complaint clearly show that the Petitioner herein, along with the other Directors, actively participated in negotiation and in execution of the documents in respect of the loan transaction. Moreover, at the relevant time, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le for the conduct and day-to-day business of the Company, is sufficient or not is debated time and again. These days the Courts have also to deal with one more aspect as to the loop-hole found out by the Directors of resigning from the directorship, in order to avoid this liability. Therefore, the second question which has engaged the attention of the Courts is, as to whether the Director, who has resigned, can be prosecuted after his resignation has been accepted by the Board of the Directors of the Company? Deciding this question, at the stage when the process issued against such Director is requested to be quashed, has however become more complex as it involves factual aspects as to whether the fact of resignation is undisputed or challenged on the count that the resignation is not given on the date on which it is alleged to be tendered. The High Court, therefore, in the writ jurisdiction, is also called upon to enter into the questions, whether the resignation is ante-dated?; whether the letter of resignation simplicitor can constitute an uncontrovertible or unimpeachable evidence so as to quash the process issued against the concerned Director? The Court is, therefore, also r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relating to a firm, means a partner in the firm. 14. The Apex Court has occasion to deal with Section 141 of the Negotiable Instruments Act on any number of occasions, its landmark decision being in the case of SMS Pharmaceuticals Limited Vs. Neeta Bhalla & Anr., (2005) 8 SCC 89, which still holds the ground. As per the law laid down in this decision, there has to be specific averments in the complaint that the person, who is sought to be made liable, was in-charge of and responsible to the Company for the conduct of the business of the Company. It was held therein that, there has to be specific averments to that effect, as a matter of fact, as there is no deemed liability of Director in such cases. At the same time, it is not incumbent on the Complainant to elaborate in the complaint the role played by each of the Directors in the transaction forming the subject matter of the complaint, as the individual role of the Director is exclusively within the realm of internal management of the Company. At the initial stage of the complaint, therefore, it would be unrea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y quash the proceedings. It bears repetition to state that to establish such case, unimpeachable, uncontrovertible evidence, which is beyond suspicion or doubt or some totally acceptable circumstances, will have to be brought to the notice of the High Court. Such cases may be few and far between, but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed; (d) No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent, inter alia, the abuse of the process of the Court. There are no fixed formula to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director." 16. In this legal back-drop, if one considers the averments in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....espite presence of the basic averments, quash the complaint, if it comes across some unimpeachable and uncontrovertible evidence, which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Petitioner could not have been concerned with the issuance of cheques and asking her to stand the trial would be abuse of the process of the Court. Like, for instance, a case of a Director suffering from a terminal illness, who was bed-ridden at the relevant time or a Director who had resigned long before issuance of cheques. However, as emphasized by the Apex Court, such circumstance must be established on the basis of unimpeachable and uncontrovertible evidence, which is beyond suspicion or doubt. Thus, according to Apex Court, though there is no restriction on the High Court's powers under Section 482 of Cr.P.C., those powers are always required to be used sparingly and with great circumspection to prevent, inter alia, the abuse of the process of the Court. 19. Here in the case, the Petitioner is asking this Court to quash the process issued against her on the ground that, on the date when the cheque in question was presented to the Bank a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatutory demand notice bringing this fact on record. However, none of them have done so, which makes it necessary to draw an inference that, even till April, 2013, when the statutory demand notice was issued, there was no such resignation of Petitioner on record, nor it was acted upon. 22. Further it is pertinent to note that the summons of the complaint was issued to the Petitioner on the address of Accused No.1, being the Director of the Company, and it is not her case that she has not received it on the said address. Therefore, on the date of filing of the complaint and issuance of process against her also, the fact of her alleged resignation w.e.f. 1st January 2013 was not at all acted upon; the apparent reason being her resignation letter is ante-dated. 23. Moreover, the own document produced on record by the Petitioner herself, which is the Receipt G.A.R.7 issued by Ministry of Corporate Affairs, proves that Form No.32, along with Annual Return, was submitted to the Registrar of Companies on 22nd August 2013 and not immediately on the receipt of her alleged resignation in January 2013. In this respect it is material to note that, though the copy of the Annual Return is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the statutory demand notice. However, it consists of various acts and constituents that give rise to the commission of offence. Some of those acts are the disputed transaction, the issuance of the cheque, the dishonour of the cheque by the Bank and, lastly, the issuance of notice. The dates of all these acts are relevant, as these acts cannot be separated from one another. They together constitute the offence under Section 138 of Negotiable Instruments Act. It is the combination of all these acts, which gives rise to the commission of the offence under the said Section. Therefore, if the relevant date for attracting vicarious liability of the Director under Section 141 of the Negotiable Instruments Act is, "at the time the offence was committed", then, as the offence of Section 138 of Negotiable Instruments Act comprises of all these essential acts, majority of these acts in the present case, like the transaction in question and issuance of cheques took place when the Petitioner was very much Director of the Company. Hence, she cannot escape of the liability from this angle also. In this view of the matter, it cannot be said that the Petitioner was not the Director when the offence....