The Allahabad High Court has held that a Director cannot be prosecuted for the offence under Section 138 NI Act if he/ she is not involved in the day to day affairs of a company.
The single-judge bench of Justice Syed Aftab Husain Rizvi while dealing with an application filed by the Director under Section 482 CrPC, seeking to quash the summoning order passed by Magistrate under section 138 r/w 142 of the NI Act noted that no vicarious liability arises if the Official is away from day-to-day operation of the firm.
The Respondent-company had filed a complaint against applicant-Director and his firm following dishonour of two cheques worth₹1,00,00,000 each issued pursuant to an agreement for sale of certain goods.
To this, a Legal Notice was issued by the complainant to the applicant demanding payment of the amount due. Resultant of failure of payment, complainant was filed complaint, consequentially to which summons were issued to the applicant to appear for trials. The applicant filed a criminal revision against the summoning order by the Magistrate which was later dismissed.
The Learned Counsel for the applicant are that the impugned order of summoning is a non speaking order as the Learned Magistrate has not taken notice of the fact that there was no specific averment in the complaint against the applicant. He contended that applicant was only a nominee Director and had resigned from the Board of Directors.
The applicant is not involved in day to day affairs of the company, so he can not be held reliable for dishonour of any cheque issued by other Managing Directors. The applicant has not signed the dishonoured cheques on behalf of company nor he is authorized signatoree of the company, he stated.
Further, he averred that merely implicated the applicant without assigning any specific role to the applicant in the execution of dishonour of the cheques with intention of harassing the applicant. He said there has not been any specific averment made against the applicant as to the part played by him in the whole transaction. It was further contended that merely being a Director in a company it is not sufficient to make the applicant liable under section 141 of the N.I. Act and for that t incontrovertible material on record to show that the applicant is incharge of and responsible for the conduct of affairs of the company should have been brought.
Learned Counsel also submitted that proceedings under section 138 N.I. Act can not be proceeded against non Executive Directors while relying on Pooja Ravinder Devidasani Vs. State of Maharashtra & ANR, 2014 Latest Caselaw 796 SC
Learned Counsel for the Complainant opposed the application and submitted that there is no illegality in the summoning order.. He contended that the matter is still lingering before the trial court since 2014.
The Court noted that there is no specific averment that applicant is involved in day-to-day affairs of the company and only general allegation that applicant is a Director of the company.
It noted that considering the facts and the law propounded on the point it is clear that in absence of specific allegations about the applicant, he can not be prosecuted for any offence under section 138 N.I. Act. The order of summoning regarding applicant is unjust and illegal and can not be sustained, the Court observed.
The application was thus allowed.
Read Order Here:
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