Circumstances
of quashing of complaint u/s 138 of Negotiable Instruments Act
The
issue of vicarious liability of Directors and circumstances when the complaint
could be quashed
The
complaints u/s 138 of Negotiable Instruments Act and the stipulations contained
therein are widely deliberated. The law has evolved gradually ever since 1988,
when the provision of cheque bouncing was made part of the statute book with
penal consequence. There has already been several amendments in the Act with a
view to amalgamate the situation arising out in the course of the litigation
and way to redress it was therefore pondered over and in order to infuse
confidence in transaction by cheque, confidence building, being necessary, thus
measures to safeguard the interest of the claimant has also been put in
perspective. In the modern world, when a mere finger touch from a mobile
handset itself transactions could be carried out, then why transaction by
cheques. Is not it an obsolete practice could be a refrain. However,
transactions by cheque is significant, for the reason that the amount is sought
to be made payable only in due course i.e after some recess. In commercial
world, goods are sold and purchased by stockist and could be sold to retailers
in due course and the trader often accord time limit, say for instance 30 days
for remittance of payment as per the market norm. In this way, with a view to
facilitate the commerce, the transaction by way of cheque has been in practice
and its significance cannot be undermined.
That
said, on the flip side, sometime complaints are filed without any tangible
cause of action and also the cheques may have landed in the hands of someone
unscrupulous or still further, in respect of the company, the Directors of the
company is roped in for the offences committed by the company and such
Directors some time may not even now about the issuance of cheques. Whether,
complaints once initiated and/or summons once issued under section 138 of
Negotiable Instruments could be quashed, and if so, when? How far the concept
of vicarious liability could be stretched and whether a director/ signatory or
a non- signatory directors could be roped in a complaint u/s 138 of Negotiable
Instruments Act? The discussion herein
shall revolve around, precisely that.
In
the context as set out, a very recent judgment of Delhi High Court shall be
worth referring. In a matter captioned
as Dinesh Kumar Pandey Vs M/s Singh Finlease Pvt Ltd & Anr
bearing no. Crl MC 8175/2025 along with bunch of other petitions.
FACTS OF THE COMPLAINT
The
facts of the complaint is in narrow compass. In order to appreciate the
context in its perspective, the facts may be set out as under:
(1)
The complaints under Sections 138 and 141 of the Negotiable Instruments Act,
1881 were instituted by a Non-Banking Financial Company(NBFC), in relation to
loan facilities extended to two private limited companies. The accused was a
director of the borrower companies at the time of sanction and execution of the
loan agreements and related documentation, has been arrayed as an accused in
each complaint.
(2)
The accused contends that, having resigned from the Board prior to dishonour of
the cheques and the alleged commission of the offence under Section 138 NI Act,
he cannot be held vicariously liable under Section 141, and that the summoning
orders and consequential proceedings against him deserve to be quashed.
(3)
The NBFC, was engaged in advancing loans and other financial facilities. The
loans were sanctioned and disbursed to the following borrower companies: (i)
South Centre of Academy Pvt. Ltd. (Criminal Complaints No. 1835/2024 and
1834/2024, impugned in CRL.M.C. 8175/2025 and 8177/2025, respectively); and
(ii) Sampoorn Academy Pvt. Ltd. (Criminal Complaints No. 1842/2024 and
1843/2024, impugned in CRL.M.C. 8176/2025 and 8178/2025, respectively).
(4)
The loan amounts were to be repaid in equated monthly instalments with
interest, in terms of the respective amortisation schedules. The complainant
alleges that the cheques issued towards discharge of liabilities were
dishonoured on presentation with the remark “funds insufficient”. Statutory
demand notices under Section 138 NI Act were issued and duly dispatched on 1st
April, 2024.
(5)
No payments were made by the borrower companies within the statutory period of Fifteen
(15) days, hence, the complainant had instituted the complaints under Section
138 NI Act against the borrower companies, and other accused.
(6)
The accused was a director of the borrower companies when the loan facilities
were sanctioned, the documents executed, and the cheques in question issued. He
was also the signatory of those cheques.
(7)
The accused had pleaded that he already had resigned from the Board of
Directors prior to the dates of dishonour, with effect from 1st April, 2023 in
respect of South Centre of Academy Pvt. Ltd., and with effect from 1st January,
2024 in respect of Sampoorn Academy Pvt. Ltd.
(8)
A Form DIR-12 and the company master data on the Ministry of Corporate
Affairs portal to show that these resignations were duly recorded in the
statutory corporate records were filed.
It
was thus claimed by the accused/petitioner, that having already resigned from the Board of the accused
company prior to dishonour of the cheques and the alleged commission of the
offence under Section 138 NI Act, he cannot be held vicariously liable under
Section 141, and that the summoning orders and consequential proceedings
against him deserve to be quashed.
The
Petitioner was a director of the borrower companies when the loan facilities
were sanctioned, the documents executed, and the cheques in question issued. He
is also the signatory of those cheques. His case, however is that he resigned
from the Board of Directors prior to the dates of dishonour, with effect from
1st April, 2023 in respect of South Centre of Academy Pvt. Ltd., and with
effect from 1st January, 2024 in respect of Sampoorn Academy Pvt.
Ltd. The reliance were placed on Form DIR-12 and the company master data on the
Ministry of Corporate Affairs portal to show that these resignations were duly
recorded in the statutory corporate records.
REBUTTAL OF PRESUMPTION:
Plea
1.
The section 139 of Negotiable Instruments Act stipulates presumption in favour
of the payee of the cheque and the accused has to rebut presumption in order to
shift the onus back on the complainant. The presumption and rebuttal and
aspects related thereto shall essentially be issues of trial and only when full
dress trial is conducted such aspects could be conclusively adjudicated. In
order to seek quashing of complaint or summoning order as the case may be, the
accused before the high court has to demonstrate that even the bare perusal of
complaint, if taken in entirety does not give rise to any offence and no
culpability could be attributed to accused and if the accused is able to
demonstrate that, then, the case of quashing could be made out, else, the
process of trial cannot be circumvented.
2.
The accused/petitioner in the present petition prayed for quashing of the
complaint, on a premise that when the cause of action was arose , the
accused/petitioner was not the Director in the company and that being so, the
complaint instituted is bad in law and liable to be quashed.
3.
The dates of resignation of the petitioner/accused vis-à-vis the dates of
cheque dishonour in the present batch are broadly as under:
|
S.N |
Crl
MC |
Date
of Loan |
Loan
Amount (Rs) |
Date
of first default |
Date
of resignation |
Date
of dishonour of cheque |
|
1. |
8175/2025 |
10.06.2022 |
50,00,000/- |
10.09.2023 |
01.04.2023 |
12.03.2024
for a sum of Rs 54,90,827/- |
|
2. |
8176/2025 |
16.07.2022 |
1,50,00,000/- |
10.04.2023 |
01.01.2024 |
15.03.2024
for a sum of Rs 1,62,41,182/- |
|
3. |
8177/2025 |
29.11.2022 |
1,00,00,000/- |
10.04.2023 |
01.04.2023 |
12.03.2024 Rs
1,12,06,870/-- |
|
4. |
8178/2025 |
17.08.2021 |
1,50,00,000/- |
10.02.2023 |
01.01.2024 |
12.03.2024 Rs
1,63,95,598/- |
4.
On the basis of the above, it was contended that as the petitioner/accused had
already resigned from the Board of Directors of the accused company, and
cheques in question were dishonoured much after the resignation of
petitioner/accused and therefore, the complaint lodged was abuse of the process
of law. According to the petitioner
/accused the offence under section 138 of Negotiable Instruments Act shall
entail dishonour of cheque, issuance of statutory notice and failure of payment
within stipulated period. Therefore, it was urged that only when the offence is
deemed to have been committed i.e non- payment of sums demanded within the
statutory period of 15 days shall alone give rise to cause of action and if on
that date, the petitioner/accused was not the Director in the company, the
complaint u/s 138 of Negotiable Instruments Act shall not be maintainable. The
signature of the accused on the cheque and on the loan documents, the accused
being in command as a director on the date of disbursal of loan or his
involvement since inception shall according to the accused/petitioner not alter
the situation. It was thus contended that as on the date of arising of cause of
action, the accused/petitioner was not the director in the accused/petitioner
company, hence, he cannot be treated as person in charge or responsible for the
conduct of the company’s business, therefore, the complaint against him shall not be
sustainable.
5.
It was urged that the petitioner’s resignation is borne out from unimpeachable,
public records: the resignation letter tendered to the Board, Form DIR-12 filed
with the MCA, and the certified MCA portal extracts reflecting cessation of his
directorship with effect from that date. Receipts issued by the MCA
acknowledging the filing of Form DIR-12 and the certified copy of the master
data are relied upon to show that the fact of resignation is a matter of record
and not in dispute.
Reliance
is placed on the following judgments:
In
Rajesh Viren Shah v. Redington (India) Limited, 2024 INSC 111, When
the Supreme Court, on broadly similar facts, quashed proceedings against a
former director whose resignation had preceded the date of the alleged Section
138 offence, holding that the sine qua non for vicarious liability under
Section 141 of Negotiable Instruments Act is that the accused must be in charge
of and responsible for the conduct of the business at the time the offence is
committed.
Respondent’s contentions
(1)
The respondent/complainant relied on the chronology emerging from the record.
It is pointed out that the loan facilities were sanctioned between August, 2021
and November, 2022, when the Petitioner was admittedly a director of the
borrowing companies and had executed the loan documentation on their behalf.
(2)
The first defaults occurred in early 2023. The resignations now relied upon, as
reflected in Form DIR 12, took effect only with effect from 1st April, 2023 or
1st January, 2024, whereas the cheques towards repayment, bearing dates in
March, 2024, were subsequently presented and dishonoured.
(3)
The timing of the resignations, on the onset of default but preceding dishonour
of the cheques, is not coincidental. The Petitioner has been a key director of
group companies with common directors, who negotiated the facilities, signed
the loan documents, and is one of the signatories to the cheques issued towards
discharge of liability. There is no genuine disengagement from the affairs of
the companies and asserts that, notwithstanding the ROC filings, the Petitioner
continued to control the borrower entities “from behind the curtain” and
remained effectively in charge when the cheques were issued and dishonoured.
These facts, taken with the statutory presumptions under Sections 118 and 139
of the NI Act, are sufficient to justify his arraignment and prosecution.
(4)
It is also urged that the genuineness, timing, and legal effect of the alleged
resignations are themselves disputed questions of fact. The Petitioner
continued to be actively associated with the management of the borrower
companies even thereafter. It is emphasised that the presumptions of issuance
in discharge of a legally enforceable debt under Sections 118(a) and 139 NI Act
cannot be displaced at the threshold merely by producing Form DIR-12 or
resignation letters. If the Petitioner wishes to rely on his claimed cessation
from the Board to escape vicarious liability, he must rebut the presumptions by
leading evidence and demonstrate that he was not in charge of and responsible
for the conduct of the business of the accused companies when the offence was
committed.
Reliance
(i)
Vishal Arora v. Yes Bank Limited 2022 SCC OnLine Del 3964
Where
a similar plea of resignation was rejected by the Delhi High Court and it was
held that disputes regarding the authenticity and effect of resignation, in the
face of statutory presumptions, ought to be left to be tested at trial. It is
pointed out that the said decision has not been interfered with by the Supreme
Court in SLP (Crl.) No. 2302/2023, which was dismissed on 27th February,
2023.
(ii)
Kalamani Tex & Anr. v. P. Balasubramanian (2021) 5 SCC 283.
It
was to emphasize that the presumptions under Sections 118 and 139 NI Act are
robust; once the issuance of the cheque is admitted or established, the burden
squarely shifts to the accused, and self-serving material, without substantive
evidence, is insufficient to rebut the presumption. In these circumstances, it
is contended that the Petitioner’s plea of resignation and lack of
responsibility cannot be accepted on affidavit at the Section 528 BNSS stage,
and that the alleged resignations must be tested in evidence before the Trial
Court.
Analysis
(I)
In respect of complaints under
Sections 138 and 141 NI Act, the power to interdict proceedings at the
threshold is narrowly confined. It may be exercised, where, even if the
averments in the complaint are accepted in full, the basic ingredients of the
offence are not disclosed against the accused, or where unimpeachable,
incontrovertible material placed on record completely dislodges the factual
foundation of the accusation. It is not a stage at which competing versions are
weighed on probabilities or evidence is examined as in a trial.
(ii) The
provision as contained in the Section 138 creates a specific offence where a
cheque drawn by a person on an account maintained by him is returned unpaid for
insufficiency of funds or because it exceeds the arrangement, and the drawer
fails to pay within the stipulated period after statutory notice. The offence
comprises five components:
(i) drawing of the cheque;
(ii) presentation of the cheque to the
bank;
(iii) return of the cheque unpaid;
(iv)
issuing a notice in writing demanding payment within the prescribed time; and
(v)
failure of the drawer to make payment within fifteen days of receipt of such
notice.
(III)
The provisions related to vicarious liability may also be perused.
Section
141 - vicarious liability of directors and signatories:
Section 141 NI Act deals with offences by companies.
Sub-section
(1) fastens liability on “every person who, at the time the offence was
committed, was in charge of, and responsible to, the company for the conduct of
its business”, in addition to the company itself.
Sub-section
(2) further provides that where the offence is committed with the consent or
connivance of, or due to negligence by, any director, manager, secretary or
other officer of the company, such person is deemed to be guilty. The provision
thus embodies two distinct though overlapping routes to liability:
(a)
persons who, at the time the offence was committed, were in charge of and
responsible for the conduct of the company’s business; and
(b)
persons whose personal culpability is alleged on the basis of consent,
connivance, or neglect in relation to the commission of the offence,
irrespective of their role in the day-to-day management of the company.
(IV) In
SMS Pharmaceuticals Ltd. v. Neeta Bhalla and Anr (2005)8 SCC 89.
a three Judge Bench held that a bare assertion in the complaint that a person
is a director is insufficient to fasten liability under Section 141(1) NI Act.
The complaint must contain basic averments that, at the time of commission of
the offence, such person was in charge of and responsible for the conduct of
the company’s business. At the same time, the Court clarified that no elaborate
particulars are needed where the accused is a managing director or joint
managing director, since their very office carries a presumption of
responsibility. It was further observed that the signatory of the cheque “is
clearly responsible for the incriminating act” and can be prosecuted even
without detailed averments as to day-to-day control. In such cases, the
statutory presumptions under Sections 118 and 139 NI Act operate in favour of
the complainant, leaving it to the accused to rebut them at trial.
(V) In
National Small Industries Corporation Ltd. v. Harmeet Singh Paintal
(2010) 3 SCC 330, the Supreme Court reiterated that Section 141, being a
provision on vicarious liability, must be strictly construed. Mere designation
as a director, in the absence of specific allegations about role and
responsibility, is not enough. Directors who are neither managing directors nor
signatories, and against whom no role in day-to-day affairs is pleaded, cannot
be impleaded on the strength of omnibus assertions. By contrast, a person who
signs the cheque on behalf of the company occupies a distinct position. Such a
signatory is directly involved in the act that leads to dishonour, and his
role, in principle, falls within the sweep of Section 141, subject to any
defence he may establish at trial.
Quashing of complaints under Section 141:
“unimpeachable evidence” required
Against
this statutory backdrop, the contours of when quashing is permissible have been
clarified in a line of decisions of the Supreme Court.
(A)
In Gunmala Sales (P) Ltd. v. Anu Mehta,2024 SCC OnLine SC 5558,
the Supreme Court held that where the complaint contains the basic averment
that an accused director was in charge of and responsible for the conduct of
the company’s business, the proceedings ought not to be quashed at the
threshold. An exception was recognised where the director places on record
unimpeachable and incontrovertible material showing that he could not have had
any role in the conduct of the company’s business at the relevant time. Even
then, such power is to be exercised with caution and in a narrow category of
cases.
(B) In
Adhiraj Singh v. Yograj Singh & Others, (2015) 1 SCC 103,
where the Court was dealing with a director who had admittedly resigned prior
to the issuance of the cheques in question. The factum and timing of his
resignation were not in dispute, and the cheques were signed by another
authorised signatory on behalf of the company. On those admitted facts, the
Supreme Court held that, at the time the offence under Section 138 NI Act was
committed, the appellant was no longer connected with the company’s affairs and
could not, therefore, be treated as a person in charge of and responsible for
the conduct of its business so as to attract Section 141. The quashing of
proceedings in that case thus turned on a clear and undisputed record of
complete disengagement before the very inception of the cheque transactions.
(C) In
Rajesh Viren Shah v. Redington (India) Ltd (Supra) ,the same
principle was applied in favour of former directors who had resigned long
before issuance of the cheques. Their resignations stood recorded in Form 32,
the statutory records of the company had been duly updated, and, significantly,
the complainant did not dispute either the genuineness of the resignations or
allege continued control. On those facts, the Court held that the basis for
fastening vicarious liability was seriously undermined and quashed the
proceedings.
(D) DCM
Financial Services Ltd. v. J.N. Sareen, (2008) 8 SCC 1, also
falls in this limited category. The factual and legal matrix was materially
different there from the pre3sent case. The respondent therein had resigned
from the directorship of the company long prior to the presentation and
dishonour of the post-dated cheque, and the complainant had been repeatedly
informed in writing of such resignation. Crucially, the complaint did not
contain specific averments that the respondent continued to be in charge of or
responsible for the conduct of the company’s business at the relevant time, nor
was the prosecution founded on his role as a signatory so as to attract
liability under Section 141(2) of the NI Act. The plea that he was an
authorised signatory was raised for the first time before the Supreme Court and
was expressly rejected. On those admitted facts, fastening criminal liability
was held to be a misuse of the provision. In the present case, by contrast, the
Respondent disputes both the genuineness and effect of the Petitioner’s alleged
resignations and specifically attributes to him the role of signing the subject
cheques. The ratio of DCM Financial Services cannot, therefore, be transposed
onto the facts at hand.
Disputed resignation and role: limited scope for
quashing
There
is an equally clear line of authorities holding that, where the timing or
genuineness of resignation is itself in dispute, and the accused is alleged to
have been responsible for the company’s affairs at a legally relevant stage of
the transaction, the High Court should be slow to exercise its inherent
jurisdiction to quash proceedings.
(i)
In Kalamani Tex v. P. Balasubramanian, the Supreme Court
reiterated that once execution of the cheque is admitted or proved, the
statutory presumption that it was issued for discharge of a legally enforceable
debt or liability must be drawn, and the burden shifts to the accused to rebut
that presumption on the touchstone of preponderance of probability. A merely
plausible or speculative defence will not suffice.
(ii)
In Nishant Mukul v. Nischal Aggarwal, 2025 SCC OnLine De l6432,
the Delhi High Court declined to quash complaints under Sections 138 and 141 of
the NI Act where the petitioner–director relied on subsequent resignation and
corporate filings, but the record disclosed that he was a director at the time
of issuance of cheques and the material regarding resignation was not
unimpeachable. The Court held that questions concerning the effect of
resignation, petitioner’s responsibility for the conduct of the company’s
affairs, and applicability of Section 141 involved disputed questions of fact
which ought to be examined at trial and not adjudicated in proceedings under
Section 482 CrPC.
(iii)
In N. Rangachari v. Bharat Sanchar Nigam Ltd. (2007) 5 SCC 108, the Supreme Court clarified that while
vicarious liability under Section 141 NI Act must be strictly construed, the
provision is not to be read so narrowly as to defeat its object. Where the
complaint contains the requisite averments that the accused was in charge of
and responsible for the conduct of the company’s business, and the accused is
shown to have been a director who participated in the transaction in question,
the Court may legitimately proceed at the summoning stage without embarking
upon a detailed enquiry. The correctness of such averments, and the accused’s
plea of non-involvement, are matters to be tested in the course of trial.
(iv)
In Malwa Cotton & Spg. Mills Ltd. v. Virsa Singh Sidhu (2008) 17 SCC
147, the Supreme Court set aside the order of the High Court quashing
proceedings against a director on the ground of an alleged prior resignation,
holding that where such resignation itself was disputed and involved questions
of fact, particularly in relation to statutory filings, the matter ought not to
have been short-circuited at the threshold and was required to be tested at
trial.
(v)
In Vishal Arora v. Yes Bank Ltd. (Supra), the Delhi High Court
declined to quash proceedings under Sections 138 and 141 of the NI Act where
the petitioners, though not directors, were authorised signatories who had
admittedly signed the cheques and related declarations at the time of availing
credit facilities. The defence of subsequent resignation and the plea that
blank or undated cheques were misused were held to raise disputed questions of
fact. Noting that statutory presumptions under Sections 118 and 139 stood
attracted, the Court held that issues relating to the effect of resignation and
the circumstances of issuance and presentation of cheques could not be
adjudicated at the quashing stage and would have to await trial.
(vi)
In S.P. Mani & Mohan Dairy v. Snehalatha Elangovan, (2023) 10
SCC 685 the Supreme Court clarified that
the offence under Section 138 is not a single or instantaneous act, but
consists of a series of acts and omissions, namely, the drawing of the cheque,
its presentation, dishonour, issuance of statutory notice and failure to make
payment within the prescribed period. For the purposes of Section 141,
responsibility cannot be confined to a single point in time, and persons in
charge at different legally relevant stages may be proceeded against. Any
narrower interpretation would defeat the object of the provision. In the facts
of the present case 30. The complaints specifically aver that the Petitioner
was in charge of and responsible for the conduct of the business of the
borrower companies at the relevant time. They refer to his role in negotiating
the loan facilities, executing the loan documents, and signing the cheques
issued towards repayment. On this basis, vicarious liability is sought to be
fastened under Section 141 NI Act. These pleadings meet the basic requirement
identified in SMS Pharmaceuticals and National Small Industries
Corporation (Supra) , and the Petitioner does not contend that the
complaints are defective on this score or that the companies have not been
arraigned as accused.
FINDING OF DELHI HIGH
COURT
(1)
The Petitioner’s defence in Dinesh Kumar Pandey (Supra) rests
essentially on his claimed resignations and the corresponding filings in Form
DIR-12 and MCA extracts. It was contended that by the time the cheques were dishonoured
and the cause of action under Section 138 crystallised, he had demitted office
and ceased to be responsible for the affairs of the borrower companies. Reliance
was placed on Rajesh Viren Shah (Supra) and Adhiraj Singh
(Supra) to argue that such documentary material amounts to unimpeachable
evidence warranting quashing at the threshold.
(2)
The Delhi High court on the basis of the aforesaid discussion held in Dinesh
Kumar Pandey (Supra) that present record does not, however, place the
case in the narrow category where such relief is ordinarily granted. The
chronology is important. In two of the loan accounts, the first defaults are
reflected in February and April 2023. The Petitioner’s resignations from the
related borrower entities are then shown as effective from 1st April, 2023 and
1st January, 2024. In one matter, the first default is on 10th April, 2023,
while resignation is recorded as 1st April, 2023, only nine days earlier. In
another, the first default is in February 2023 in one facility, with
resignation recorded in April 2023, while the Petitioner allegedly continued to
be involved with allied group entities. Against this background, the Respondent
disputes the genuineness and bona fides of the resignations and describes them
as a device set in motion after the accounts slipped into default. Whether
these resignations reflect a genuine and complete disengagement or a
self-serving attempt to insulate the Petitioner from looming liability is
itself a live factual issue.
(3)
There is also no dispute that the Petitioner signed the cheques in question. He
does not allege that the cheques were issued by any other officer or that his
signatures were forged. A director who is a signatory to the cheque occupies a
distinct position and the extent of his continuing association with the
company’s business when the underlying transactions were carried out is a
matter of evidence. Those issues cannot be adjudicated in proceedings invoking
the Court’s quashing jurisdiction.
(4)
The reliance on Form DIR-12 and MCA portal extracts and filings of it may be genuine
as corporate records, but the Respondent contests their timing and legal
effect, and maintains that the Petitioner continued to control or influence the
borrower companies “from behind the curtain”. That dispute goes to the heart of
whether he remained “in charge of, and responsible to, the company for the
conduct of its business” during the period when the cheques were issued,
presented and dishonoured, and when payment was not made after notice. In view
of Gunmala Sales and the later decisions, such contested facts
and material cannot be treated as unimpeachable exculpatory evidence at the
threshold so as to justify quashing.
(5)
It also emerges from the record that the Petitioner has not taken a consistent
stand regarding the issuance of the cheques, while at the same time relying on
his resignation and corporate filings to avoid liability. The circumstances in
which the cheques were issued, the nature of his role when the credit
facilities were availed and when the cheques were drawn, and the degree of his
continuing involvement in the companies’ affairs are all fact-intensive
questions that must be tested in evidence. Moreover, once execution of the
cheques is shown, the presumptions under Sections 118 and 139 NI Act operate in
favour of the complainant. As explained in Kalamani Tex (Supra) ,
these presumptions extend not only to consideration but also to the existence
of a legally enforceable debt or liability. Whether the Petitioner succeeds in
rebutting those presumptions on the standard of preponderance of probability is
a matter for the trial court after both sides have led evidence. It is not
possible, in a petition under Section 528 BNSS, to pre-judge that contest.
(6)
As clarified in S.P. Mani & Mohan Dairy (Supra) , the offence
under Section 138 is a composite one, consisting of several steps from drawing
of the cheque up to the failure to pay after notice. For the purposes of
Section 141, responsibility is not frozen to the precise date of dishonour
alone. Persons who were in charge of and responsible for the conduct of the
company’s business at different legally relevant stages of the transaction may
be proceeded against. In the present case, the Petitioner’s admitted role in
negotiating the loans, executing the documentation and signing the cheques,
coupled with the disputed nature and timing of his resignations, takes the
matter outside the narrow class of cases where quashing has been permitted on
the strength of unimpeachable exculpatory material.
(7)
In this backdrop, accepting the Petitioner’s plea at this stage would require
the Court to enter into a factual adjudication on controverted issues and to
treat contested material as conclusive in his favour. That is not the remit of
the Court while exercising jurisdiction under Section 528 BNSS in matters
arising under Sections 138 and 141 NI Act. The appropriate course is to leave
these issues to be tested at trial, where the Petitioner will be at liberty to
lead evidence in support of his defence.
Conclusion
It
was therefore held in Dinesh Kumar Pandey (Supra) that the impugned complaints and summoning
orders disclosed the basic ingredients of an offence under Section 138 read
with Section 141 NI Act against the Petitioner, both as a signatory to the
cheques and prima facie as a person alleged to have been in charge of the
companies’ affairs at the relevant time. It was also observed that the material
relied upon by the Petitioner does not meet the face value requirement as exacting
threshold required to invoke the extraordinary jurisdiction under Section 528
BNSS to scuttle the prosecution at its very inception is necessary and the same
was not met in the petition. The Petitioner was accorded liberty before the
Court of Magistrate to demonstrate that he had genuinely stepped out of the
management, that his signatures were obtained in circumstances disentitling the
complainant from invoking Section 141 against him, or that he otherwise
discharges the burden cast upon him by the statutory presumptions. It was held
that the trial court shall consider such material, if proved, in accordance
with law.
Law
as regards quashing of complaint on the aspect of vicarious liability is self-contained.
It is well settled now that section 138 -142 of Negotiable Instruments Act 1881
( as amended and up to date) contains the principles of vicarious liability,
which is, though, contrary to the
criminal jurisprudence. It is so, as, because of quasi criminal nature of the
complaints under the NI Act, the implication by vicarious liability is
permitted in such complaints. The law has evolved in this regard and unless,
the accused is able to demonstrate that the matter shall not entail trial as prima
facie quashing of the complaint or summoning order as the case may be, is
made out, the accused shall otherwise to face trial to rebut presumption
against him. The law and the circumstances when the complaint or a summoning
could be quashed and when the trial process could not be circumvented has been duly
dealt with in Dinesh Kumar Pandey vs M/s Singh Finlease Pvt Ltd (Supra)
and the premise of quashing is reiterated and reaffirmed.
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Anil K Khaware
Founder & Senior Associates
Societylawandjustice.com
