Principles of Quashing of Complaint for Cheque Dishonour under S.138 of Negotiable Instruments Act, 1881
In an interesting Judgment, factors to be seen while quashing complaint under S.138 of NI Act, 1881 was discussed.
It was held that while a Director of a company indeed holds a special/unique position in the company, having authority to take decisions, however, the mere nomenclature or mention of an individual as a Director of a company cannot itself be the basis for bringing him/her into the fold of Section 138 by assistance of Section 141 NI Act.
Section 141 being a penal provision, has to be strictly construed. Resultantly, not every Director can be brought into the fold of the said provision merely due to the aforesaid reason. It is only those Directors who were in-charge of the day-to-day affairs and responsible for the conduct of the business of the company can be held liable for the offence under Section 138 NI Act. The word ‘in-charge of a business’ has been interpreted to mean a person having overall control of the day-to-day business of the company. Thus, for a Director to be vicariously liable, the complainant has to show that the said Director was indeed associated with the day-to-day affairs and management of the business. A Director cannot be arrayed as an accused on the basis of a cursory statement or vague averment. What would be appropriate pleadings/averments would be determined on a case-to-case basis.
If any Director seeks quashing of a complaint under Section 138 NI Act or any process issued therein, then he would have to show that the complaint is bereft of the appropriate pleadings/averments which would bring him into the fold of the rigours of Section 141 NI Act and in this regard, he would have to bring on record certain sterling and incontrovertible evidence showing that he is not concerned with issuance of cheque.
Case reference is Ankush Arora v. Rachna Sarees [2024] GCtR 3465 (Delhi).
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