Case Note & Summary
The applicant, Ramesh Pahulraj Makhija, was original accused No.6 in Criminal Complaint No.538 of 2003 filed by Respondent No.2 under Section 138 of the Negotiable Instruments Act, 1881. The applicant was a solicitor and had been a director of M/s. Echovox (India) Pvt. Ltd. He resigned from the board on 01/04/2003, and Form No.32 was filed with the Registrar of Companies on 16/04/2003. Subsequently, on 3rd and 4th May 2003, the company issued two cheques to Respondent No.2, which were dishonoured due to insufficient funds. Respondent No.2 issued a legal notice and filed a complaint impleading the applicant as accused No.6. The applicant filed an application for discharge/recalling of process, which was rejected by the Magistrate on 03/01/2004. The applicant then challenged this order before the High Court. The High Court examined whether the applicant could be vicariously liable under Section 141 of the Negotiable Instruments Act. The court noted that the applicant had resigned before the cheques were issued and was not in charge of or responsible for the conduct of the business at the relevant time. The court held that continuing the proceedings against the applicant would be an abuse of process. The court allowed the application, quashed the order of the Magistrate, and discharged the applicant from the complaint.
Headnote
A) Negotiable Instruments Act - Dishonour of Cheque - Vicarious Liability of Director - Section 138 read with Section 141 of Negotiable Instruments Act, 1881 - The applicant, a director who resigned prior to the issuance of cheques, cannot be held liable for the dishonour of cheques issued after his resignation - The court held that the process issued against the applicant was an abuse of process of law and liable to be quashed (Paras 1-13).
Issue of Consideration
Whether the applicant, who resigned as director before the cheques were issued, can be held vicariously liable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Final Decision
The High Court allowed the application, quashed the order dated 03/01/2004 passed by the learned Magistrate, and discharged the applicant from Criminal Complaint No.538 of 2003.
Law Points
- Liability under Section 138 of Negotiable Instruments Act
- 1881
- vicarious liability of directors
- resignation prior to cheque issuance
- discharge of accused
- Section 141 of Negotiable Instruments Act
Case Details
2019 LawText (BOM) (08) 100
Criminal Application No.317 of 2004
Mr. Subodh Desai i/by M/s. Ramesh Makhija & Co. for the Applicant, Mr. A R Patil, APP for the Respondent/State
The State of Maharashtra and M/s. Weikfield Mhenmonix Infonetworks Pvt. Ltd.
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Nature of Litigation
Criminal application challenging the rejection of discharge application in a complaint under Section 138 of the Negotiable Instruments Act.
Remedy Sought
The applicant sought quashing of the order rejecting his discharge application and discharge from the criminal complaint.
Filing Reason
The applicant was impleaded as accused No.6 in a complaint under Section 138 of the Negotiable Instruments Act despite having resigned as director before the cheques were issued.
Previous Decisions
The learned Magistrate rejected the applicant's application for discharge/recalling of process on 03/01/2004.
Issues
Whether the applicant, who resigned as director before the cheques were issued, can be held vicariously liable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
Submissions/Arguments
The applicant argued that he had resigned on 01/04/2003 and Form No.32 was filed on 16/04/2003, prior to the issuance of cheques on 3rd and 4th May 2003, and therefore he was not in charge of or responsible for the conduct of the business at the relevant time.
The respondent/State opposed the application, but the judgment does not detail their specific arguments.
Ratio Decidendi
A director who resigns prior to the issuance of cheques cannot be held vicariously liable under Section 141 of the Negotiable Instruments Act, 1881, as he is not in charge of or responsible for the conduct of the business at the time the offence is committed.
Judgment Excerpts
By this Criminal Application the Applicant challenges the order dated 3rd January, 2004 passed by the learned Magistrate... by which order the application filed by the Applicant... for discharge/recalling the process came to be rejected.
The Applicant herein is the original accused No.6 in the complaint No.538 of 2003 filed by Respondent No.2/original complainant under Section 138 of the Negotiable Instruments Act.
On 01/04/2003, the Applicant tendered his resignation from the board of directors of the said Company M/s. Echovox (India) Pvt. Ltd.
Procedural History
The applicant filed an application for discharge/recalling of process in Criminal Complaint No.538 of 2003 before the Magistrate, which was rejected on 03/01/2004. The applicant then filed Criminal Application No.317 of 2004 before the High Court challenging that order.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 141
