The Supreme Court on Tuesday held that for proceeding against a director of a company in a cheque bounce case, a mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient.
Giving this ruling, a Bench of Justices P. Sathasivam and Jasti Chelameswar said: “In case of a director, complaint should specifically spell out how and in what manner the director was in charge of or was responsible to the accused company for conduct of its business.” The Bench held that no complaint could be filed against a director who had resigned his/her post prior to the dishonour of the cheque and this fact was brought to the notice of the complainant.
Writing the judgment, Justice Sathasivam said: “Though it is not proper for the High Court to consider the defence of the accused or conduct a roving enquiry in respect of merit of the accusation, but if on the face of the document which is beyond suspicion or doubt placed by the accused and if it is considered the accusation against him/her cannot stand, in such a matter, in order to prevent injustice or abuse of process, it is incumbent on the High Court to look into those document/documents which have a bearing on the matter even at the initial stage and grant relief to the person concerned by exercising jurisdiction under Section 482 of the Code [power to quash criminal proceedings].”
HC rejects plea
In the instant case, the Apparel Export Promotion Council filed a complaint in 2005 under Section 138 of Negotiable Instruments Act against M/s Lapareil Exports (P) Ltd and cited the appellant Anita Malhotra, who was a director, as one of the accused. Ms. Malhotra's plea for quashing the complaint on the ground that she had resigned from the post of director in August 1998 and that she could not be cited as an accused was rejected by the Delhi High Court. The present appeal is directed against this judgment.
Allowing the appeal, the Bench said: “Inasmuch as the reply to the statutory notice contains specific information that she had resigned from the company in 1998, the complainant was not justified in not referring the same in the complaint and arraying her as accused No.3 in the complaint filed in 2005. The annual return dated September 30, 1999 which provides the details about the existing directors clearly shows that the appellant was not a director at the relevant time. Had the High Court considered the contents of the certified copy of the annual return, which clearly shows that the appellant has not been shown as director of the company, it could have quashed the criminal proceedings insofar as the appellant is concerned.”
The Bench said: “We hold that the appellant has validly resigned from the directorship of the company even in the year 1998 and she cannot be held responsible for the dishonour of the cheques issued in the year 2004” and quashed the complaint insofar as the appellant was concerned.
