Cheque dishonour under S.138 of Negotiable Instruments Act, 1881 and Role of Directors of Company

Cheque dishonour under S.138 of Negotiable Instruments Act, 1881 and Role of Directors of Company

Section 138 - Quashing of Complaint - C [complainant] was a Company which had filed a complaint in respect of offence of cheque dishonour against accused A5 which was also a company - On filing of the complaint, Magistrate has issued summons to A [Director of Company A5] also because complaint was filed against A as well -  A filed petition under S.482 before High Court  - The entire averments made in the complaint if read in its totality, then at the most the role attributed to the applicants in commission of offence is that they were the Directors of the Company at the time of alleged transaction - It was not in dispute that the cheques in question have not been signed by A. So also A have not been described as Managing Director or persons in-charge of and responsible for the conduct of business and affairs of accused company A5 - According to C, A was Non-executive Directors and A has resigned way back in the year 2012 i.e. on 4/9/2012, 6/1/2012 and 26/3/2012, respectively, much before the cause of action arose for filing of the complaint - The fact of the resignations of A was duly intimated in a prescribed proforma i.e. Form No. 32, to the Registrar of the Company on 9/11/2012, 14/2/2012 and 15/5/2012, respectively - Act of issuance of cheque as well as dishonour of cheque has taken place much after the resignation tendered by A - Proceedings against A has to be quashed. - Vijay Khairatilal Bhatia v Mrs. Bela Kamlesh Ganeriwala [2015] GCtR 6474 (Bombay)

Section 141 - Vicarious liability - Interpretation - "Section 141 of NI Act, being a penal provision creating vicarious liability needs to be strictly construed."- Vijay Khairatilal Bhatia v Mrs. Bela Kamlesh Ganeriwala [2015] GCtR 6474 (Bombay)

Section 138 - Role of Magistrate before issuing summons-  Held, no doubt, "the detailed enquiry is not contemplated at the stage of exercise of powers under Section 204 of Code of Criminal Procedure, but, certainly the magistrate is bound to consider as to whether the facts averred in the complaint and the documents, if any, relied make out a prima facie case for issuance of process u/s 138 r/w 141 of NI Act". - Vijay Khairatilal Bhatia v Mrs. Bela Kamlesh Ganeriwala [2015] GCtR 6474 (Bombay)

Section 138 - Scope of Interference by High Court - Accused Director A of Accused Company A5 had filed petition before High Court for quashing the criminal proceedings - Held, "it is well settled that, inherent powers u/s 482 of Code of Criminal Procedure, 1973 are of wide plenitude with no statutory limitation but same has to be exercised in accordance with the guidelines engrafted in such power viz; (i) to secure the ends of justice or (ii) to prevent abuse of the process of any Court. It is further settled that no precise and inflexible guidelines can also be laid down so as to limit the exercise of such powers. The exercise of inherent powers would entirely depend on the facts and circumstances of each case. It should be exercised very sparingly and in a rarest of the rare case. Basic principle, which needs to be borne in mind while exercising such powers is: whether any case made out to invoke the powers u/s 482 of Code." Petition filed by accused A was allowed in less than 2 years of filing and criminal proceedings against accused A were quashed. - Vijay Khairatilal Bhatia v Mrs. Bela Kamlesh Ganeriwala [2015] GCtR 6474 (Bombay)