Quashing of cheque bounce case if director was resigned much before issuance of cheque. I was a director in the company to which some dispute arose. Then I resigned from the directorship and started a new company. After five years a criminal case has been initiated against me under Section 138 of the NI Act. I was astonished to see that the date mentioned on the cheque is just four months before. How does it possible that I have committed an offence when there is no relation between me and that company? Sir, please help me to settle this criminal case?
Asked from: Bihar
The directors of a company can be vicariously liable if they were responsible for the day-to-day business or affairs of the company. If, in their capacity as a director, they issued a cheque to discharge a financial liability of the company, they can be held responsible for the bounce of the cheque.
However, it is crucial for the complainant to establish this vicarious liability in the complaint. Without demonstrating how the director is accountable for the dishonour of the cheque, a complaint filed under Section 138 of the Negotiable Instruments Act may be subject to being quashed.
In the case of Monaben Ketanbhai Shah v. State of Gujarat (2004) 7 SCC 15, the Supreme Court observed that it is the complainant’s responsibility to include essential allegations in the complaint to establish vicarious liability against the accused. The Court also noted that there is no presumption that every partner is aware of the transaction for criminal liability.
The accused has to establish the fact in his complaint that director (accused) was responsible for the firm’s business at the time of the commission of offence. If the complainant makes and supports these necessary allegations in the complaint, then it is maintainable under the ambit of Section 141 NI Act.
Therefore, in the absence of specific allegations in the criminal complaint under Section 138 of the Negotiable Instruments Act (NI Act) regarding the accused’s involvement in the issuance of the bounced cheque and their liability for the same within the scope of the company’s operations, the High Court may quash such a complaint under Section 482 of the Code of Criminal Procedure.
Section 141 of the Negotiable Instruments Act (N.I. Act) specifies that individuals who were in charge of overseeing the affairs or operations of a company at the time of the offence shall be held accountable and prosecuted under Section 138 of the N.I. Act. However, an exception is provided: if the offence occurred without their knowledge or despite taking all necessary precautions, they would not be held liable.
Based on the facts of the case, it seems that on the date mentioned on the cheque, you had already resigned from the position of director and had no association with the company for a significant period preceding the issuance of the cheque.
This fact itself proves that you cannot be held responsible for the issuance of that cheque. In the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. (2005) 8 SCC 89, the Supreme Court highlighted the importance of including necessary averments in a complaint before subjecting a person to criminal proceedings.
The Court emphasised that a clear case must be outlined in the complaint against the individual sought to be held liable. Specifically, Section 141 of the Act sets forth the requirements for establishing liability under the provision. It is imperative to clearly demonstrate that the respondent meets the criteria outlined in Section 141.
Based on the judgment of the Supreme Court in S.M.S. Pharmaceuticals (supra), it is indeed mandatory for the complainant to establish that you were responsible for issuing the cheque. Given that you had resigned from the company well before the date of issuance of the cheque, you cannot be held liable under Section 138 of the Negotiable Instruments Act. Furthermore, since you had disassociated yourself from the company’s functions for the past five years, you are not vicariously liable for the offense committed.
In light of these circumstances, it is advisable to file a petition in the High Court under Section 482 of the Criminal Procedure Code (CrPC) for the quashing of this false and baseless criminal case. Your dissociation from the company for the past five years serves as solid evidence to prove your innocence. The criminal complaint fails to meet the essential ingredients of Section 141 of the Negotiable Instruments Act. Therefore, the High Court is likely to quash this case. For more legal help please visit Kanoon India.
Also read:
