Question of law
2. Whether a Director who has resigned from such position and which fact stands recorded in the books as per the relevant rules and statutory provisions, can be held liable for certain negotiable instruments, failing realization, is the sole short and common question that this Court must consider in these appeals arising out of the judgment and order dated 6th April, 2022 in CRLOP No.34923 of 2019; and 8 th April, 2022 in CRLOP No.34248 of 2019.
Who are liable for the company in respect of cheque dishonour case?
4. The position of law as to the liability that can be fastened upon a Director for non-realisation of a cheque is no longer res integra. Before adverting to the judicial position, we must also take note of the statutory provision – Section 141 of the N.I. Act, which states that every person who at the time of the offence was responsible for the affairs/conduct of the business of the company, shall be held liable and proceeded against under Section 138 of the N.I. Act, with exception thereto being that such an act, if done without his knowledge or after him having taken all necessary precautions, would not be held liable. However, if it is proved that any act of a company is proved to have been done with the connivance or consent or may be attributable to (i) a director; (ii) a manager; (iii) a secretary; or (iv) any other officer – they shall be deemed to be guilty of that offence and shall be proceeded against accordingly.
Previous Apex court judgments on the position
5. Coming to the judicial position, we notice a judgment of this Court in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC 15] wherein it was observed that:-
“…The primary responsibility is on the complainant to make necessary averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every partner knows about the transaction. The obligation of the appellants to prove that at the time the offence was committed they were not in charge of and were not responsible to the firm for the conduct of the business of the firm, would arise only when the complainant makes necessary averments in the complaint and establishes that fact…”
6. A Bench of three learned Judges in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr [6 (2005) 8 SCC 89 ] observed:-
“18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. …A clear case should be spelled out in the complaint made against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out…”
Complainant did not place any material to prove to connect crime with the present accused
8. We find the High Court, in the impugned order to have elaborately discussed the principles of law in regard to the quashing of such proceedings but, however, not dealt with the factual matrix. Ex facie, we find that the complainant has not placed any materials on record indicating complicity of the present appellant(s) in the alleged crime. Particularly, when the appellant(s) had no role in the issuance of the instrument, which is evident from Form 32 (Exh.P.59) issued much prior to the date on which the cheque was drawn and presented for realisation.
Cheques were issued after the resignation of the appellant
10. The record reveals the resignations to have taken place on 9 th December 2013 and 12th March 2014. Equally, we find the cheques regarding which the dispute has travelled up the courts to have been issued on 22nd March 2014. The latter is clearly, after the appellant(s) have severed their ties with the Respondent-Company and, therefore, can in no way be responsible for the conduct of business at the relevant time. Therefore, we have no hesitation in holding that they ought to be then entitled to be discharged from prosecution.
11. In this view of the matter, the judgments captioned above of the High Court of Judicature at Madras, deserve to be set aside. Accordingly, all criminal proceedings pertaining to the instant appellant(s) arising out of the complaints filed by the respondent herein are quashed.
Party
RAJESH VIREN SHAH … APPELLANT(S) VERSUS REDINGTON (INDIA) LIMITED … RESPONDENT(S)- CRIMINAL APPEAL NO…………….2024 (Arising out of Special Leave Petition(Crl.) No.6905 of 2022) – February 14, 2024 – 2024 INSC 111
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Rajesh-Viren-Shah-vs.-Redington-India-Limited-138-director-resigned
