Alibaba Nabibasha Vs Small farmers agri-busines Consortium & ORS (Delhi High Court)
The Petitioner ceased to be the director of the respondent No. 2 with effect from 27th October 2010. The resignation of the petitioner was also notified to MCA.
The cheques, totaling to INR 45 Lakhs, were issued on 31st December 2018 by respondent No. 2. The respective cheques were dishonored, due to insufficient funds, vide memo dated 11th January 2019.
Held –
Person retired as the director of the company cannot be held liable for the day-to-day acts of the company. Provisions of section 141 of the NI Act not applicable to the director who was retired before the cheques were issued and dishonored.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. The present petition has been filed by the petitioner primarily against R1 with the following prayers:
“It is most respectfully prayed that this Hon’ble Court may graciously be pleased to:
1) Allow the Petition and quash complaint case nos. 2863 of 2019, 2851 of 2019, 2856 of 2019, 2869 of 2019 and 2873 of 2019 under section 138 of the Negotiable Instruments Act, 1881 pending before the court of Ms. Alka Singh, Metropolitan Magistrate, South Delhi as against the Petitioner.
2) Pass such other order or further orders as this Hon’ble Court may deem lit and proper.
AND FOR THIS ACT OF KINDNESS THE PETITIONER AS IN DUTY BOUND SHALL EVER PRAY.”
2. It is the case of the petitioner and so contended by his counsel Mr. V.M. Kannan that the proceedings have been initiated by the respondent No.1 against the petitioner before the learned Metropolitan Magistrate (MM for short) Saket Courts, under Section 138 of the Negotiable Instruments Act, 1881 (NI Act hereinafter) purportedly on the ground that the petitioner was a Director of the respondent No.2. According to him, the cheques in question, all dated December 31, 2018 were issued by the respondent No.2 for a total amount of Rs.45 Lakhs and the same were dishonoured due to insufficient funds vide memo dated January 11, 2019. He stated that as per the complaints, the respondent No.1 had disbursed Venture Capital Funding of Rs.45 Lakhs to the respondent No.2 in terms of an agreement dated March 03, 2011. The cheques in question were purportedly issued by the respondent No.2 to discharge its liability towards the respondent No.1.
3. He submitted that the petitioner ceased to be a Director of the respondent No.2 w.e.f. October 27, 2010, at least eight years prior to the issuance of the cheques in question. The petitioner was a Non-Executive Director of the respondent No.2 for a brief period between October 07, 2009 to October 27, 2010. The resignation of the petitioner was also notified to the Registrar of Companies / Ministry of Company Affairs (MCA for short) by the respondent No.2 by filing Form 32 dated January 04, 2011, which is a public document.
4. According to Mr. Kannan, the respondent No.1 has suppressed these publicly available documents along with the complaint against the petitioner. He submitted that the Company’s Master Data available on the website of MCA also does not reflect the name of the petitioner as a Director. However, the learned MM in a mechanical manner only by considering Company Master Data of the period when the petitioner was Director has entertained the complaint under Section 138 of the NI Act and without applying any judicial mind and without recording any satisfactory reasons as to whether the offence is made out against the petitioner has issued the summons.
5. He submitted that both the events that resulted in the complaints i.e. the agreement and the issuance of the cheques are events that took place after October 27, 2010 when the petitioner ceased to be a Director of the respondent No.2. The legal notice dated January 28, 2019 allegedly sent by the respondent No.1 was never received by the petitioner. Also the tracking report filed by the respondent No.1 in that regard before the learned MM does not show that the said notice was delivered to the petitioner. Even the averments in the complaints filed by the respondent No.1 are sketchy and in no way demonstrate how the complaints are maintainable against the petitioner. The essential ingredients for maintaining a complaint under Section 138 of the NI Act are absent with respect to the petitioner. The respondent No.1 has failed to show in what manner and how the petitioner was responsible for the affairs of the respondent No.2. The issuance of summons was contrary to the settled position of law in terms of the judgments of the Supreme Court and this Court which are referred as under:
(i) Harshendra Kumar D. v. Rebatilata Koley and Others, (2011) 3 SCC 351;
(ii) Anita Malhotra v. Apparel Export Promotion Council and Another, (2012) 1 SCC 520;
(iii) Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1;
(iv) N. Bhatia & Ors. v. State & Anr., 2006 SCC Online Del 1598;
(v) Ashoke Mal Bafna v. Upper India Steel Manufacturing & Engineering Company Limited, (2018) 14 SCC 202;
(vi) Kamal Goyal v. United Phosphorous Limited, CRL. M.C. 1761/2009, decided on February 04, 2010; and
(vii) Sudeep Jain v. ECE Industries, CRL. M.C. 1821/2013 decided on May 06, 2013.
6. In support of his submissions, he has drawn my attention to various documents like the Form 32, Company Master data, cheque dated December 31, 2018, cheque return memo, the complaint and pre-summoning evidence filed before the learned MM. He states that it is a fit case where the proceedings initiated against the petitioner by the respondent No.1 needs to be set aside.
7. On the other hand, Mr. Punit Gaur, learned counsel In support of his submissions, he has drawn my attention to various documents like the Form 32, Company Master data, cheque dated December 31, 2018, cheque return memo, the complaint and pre-summoning evidence filed before the learned MM. He states that it is a fit case where the proceedings initiated against the petitioner by the respondent No.1 needs to be set aside. appearing for the respondent No.1 contended that the respondent No.1 is a society registered under the Societies Registration Act, 1860 established by the Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India, with the objective to facilitate agribusiness ventures in collaboration with private investment in close association with financial institutions. That as the respondent No.2 and its Directors needed Venture Capital Assistance (VCA for short) for setting up a mango pulp processing unit, they requested the respondent No.1 for VCA and accordingly, the accused respondent No. 2 provided the bio data of all the Directors including that of the petitioner.
8. According to him, the petitioner being a responsible Director of accused respondent No.2 participated in meetings and assisted the officials of the respondent No.1 who had visited the respondent No.2 for verification of its financial and physical status. He has drawn my attention to the photographs annexed at Annexure-F&G of the counter affidavit.
9. He stated that the respondent No.1 duly considered their request for VCA and sanctioned an amount of Rs.45,00,000/- vide order dated February 23, 2011 after which an agreement was executed between the respondent No.2 and the respondent No.1 dated March 03, 2011. Thereafter, the above-mentioned amount was disbursed vide demand draft dated January 04, 2011 bearing No.235630 drawn on State Bank of India.
10. He stated that when cheques became due, the respondent No.1 presented the same in its account in State Bank of India, Asian Games Village Complex, Hauz Khaz, New Delhi, but all the cheques were returned with remarks ‘funds insufficient’. Thereafter, the respondent No.1 demanded payment through legal notice dated January 28, 2019 to all the accused Directors including the petitioner which were duly received by them according to the postal receipts, and after the receipt of legal notice neither the petitioner nor any of the other Directors considered giving a reply as to why the payment was not made. It is under such circumstances that the respondent No.1 was compelled to proceed under the provisions of the NI Act.
11. According to Mr. Gaur that on the complaints made by the respondent No.1, the learned MM has only issued summons to the petitioner. The petitioner is within his right to appear before the learned MM and put forth his defence that he has not committed any offence. In other words, the invocation of the jurisdiction of this Court is totally uncalled for.
12. That apart, the respondent No.2 had furnished the detailedThat apart, he stated that merely showing the resignation
letter of the petitioner from Directorship of the respondent No.2 does not entitle him to an acquittal from the alleged offence committed under section 138 of NI Act because it is a triable issue and would be decided by the trial court after affording full opportunity of being heard to both the parties. He stressed on the fact that it was the respondent No.2 and its Directors including the petitioner, who had sent a proposal for loan to the lending Bank and for VCA to respondent No.1, which was duly considered. In fact, according to him, the petitioner had participated in the deliberations that had taken place between the Officers of the respondent No.1 with the Directors of the respondent No.2.
13. That apart, the respondent No.2 had furnished the detailed project report which included bio data of the petitioner and a sale deed in favour of the respondent No.2 which was executed by the petitioner. In substance, it is his submission that the petitioner played a very important role on behalf of the respondent No.2 resulting in the sanction of the VCA. Moreover, neither the petitioner nor the respondent No.2 ever informed the respondent No.1 about the resignation of the petitioner. He stated that it is not a case where this Court in exercise of its power under Section 482 of the Code of Criminal Procedure, 1973 (CrPC hereinafter) should quash the proceedings initiated by the respondent No.1 under Section 138 of the NI Act and dismiss the present petition.
14. Having heard the learned counsel for the parties and perused the record, it is evident that this petition has been filed seeking quashing of five complaint cases initiated by the respondent No.1 against the petitioner herein. These complaint cases are primarily grounded on the return of five cheques which were issued on behalf of the respondent No.2 for a total amount of Rs. 45 Lakhs.
15. It is a conceded case, that summons have been issued to the petitioner on those complaint cases by the learned MM. The primary ground of challenge as contended by the learned counsel for the petitioner is that the petitioner was not the Director when the underlying contract was executed between the respondent No.1 and respondent No.2, nor when the cheques were issued and when they were presented, inasmuch as the petitioner had resigned from the respondent No.2 much before, on October 27, 2010 In support of his submission, the petitioner and his counsel had relied upon Form 32 submitted to the Registrar of Companies / MCA by the respondent No.2 with regard to the fact that the petitioner ceased to be its Director.
16. There is no dispute that the petitioner has been named as accused No.4 in the complaints. The relevant paragraph in the complaints as well as pre-summoning evidence is as follows:
“4. That as per Company Master Data accused company is registered under the Companies Act and having CIN U15130TZ2009PTC015235 Roc Coimbatore, Registration No.015235 which incorporated on May 26, 2009 at present following persons are working Directors and responsible for day to day working and function of the company.
