Case Note & Summary
The case arose out of two criminal applications filed under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash the process issued under Section 138 of the Negotiable Instruments Act, 1881, by the Judicial Magistrate First Class, Bhusawal. The applicant, a former Chairman of Vyankat Urban Co‑operative Credit Society Limited, had issued two advance cheques in March 2006 in his capacity as Chairman to the respondent credit societies in respect of fixed deposits totaling Rs.1,55,00,000 along with accrued interest. The cheques were dishonoured with the endorsement 'Refer to drawer, funds insufficient' upon presentation. After statutory notice was returned unclaimed, the respondent societies filed complaints under Section 138 of the NI Act, naming the applicant as the drawer and authorized signatory, and the Vyankat society as the accused. The Magistrate took cognizance and issued process against the applicant and the society's Manager. Before the High Court, the applicant contended that he had resigned as Chairman on 4 April 2006 and as Director on 25 May 2006, and a public notice of the newly elected body was published in a local newspaper on 12 June 2006. He argued that at the time of verification on 17 October 2007, he was no longer an office‑bearer and thus could not be held liable. Additionally, he claimed that the drawer society had not been arrayed as an accused, relying on the Supreme Court's decision in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd. which mandates that the company must be made an accused for a director to be prosecuted. He also relied on other judgments and the definition of 'officer' under the Maharashtra Cooperative Societies Act, 1960, to assert that no vicarious liability attached to him. The Court observed that the complaint explicitly named the Vyankat society as an accused, and the applicant was its Chairman and the drawer of the cheques. The requirement under Section 141 NI Act was thus satisfied. The applicant's resignation after issuance of the cheques was held not to dilute his primary liability as the drawer; the public notice in a newspaper had no legal sanctity and there was no communication to the complainant about the change. The Court referred to Harshendra Kumar D. v. Rebatilata Koley (2011) 3 SCC 351, which permits the High Court to consider documents beyond suspicion at the quashing stage, but found that the resignation documents did not irretrievably disprove the accusation. Relying on the principles in State of Karnataka v. L. Muniswamy (1977) regarding inherent powers under Section 482 CrPC, the Court held that there was no abuse of process. The definition of 'officer' under Section 2(20) of the Maharashtra Cooperative Societies Act further reinforced the applicant's vicarious liability. Consequently, the Court dismissed both criminal applications, holding that no interference was called for in the order issuing process. The observations were made prima facie, and the proceedings were allowed to continue.
Headnote
A) Negotiable Instruments Act, 1881 - Section 138 - Liability of Drawer - Resignation After Issuance of Cheque - The drawer of a cheque does not escape liability under Section 138 merely by resigning from the post of Chairman subsequent to the issuance of the cheque, when no communication of such change of status was made to the complainant and the public notice of resignation in a newspaper carries no legal sanctity. Held, the primary liability as a drawer attached to the applicant and was not diluted by his resignation. (Paras 11, 15). B) Negotiable Instruments Act, 1881 - Section 141 - Offences by Companies - Requirement of Arraying Company as Accused - For prosecution of a director or officer under Section 141 of the NI Act, the company itself must be made an accused; where the complaint expressly named the drawer cooperative society as an accused, and the applicant was identified as its Chairman and authorized signatory, the requirement laid down in Aneeta Hada (2012) 5 SCC 661 was satisfied. Held, the contention that the society was not arrayed as an accused was factually incorrect and the complaint was maintainable. (Paras 9-10). C) Criminal Procedure Code, 1973 - Section 482 - Inherent Powers - Quashing of Proceedings at Threshold - While exercising jurisdiction under Section 482 CrPC, the High Court may look into materials that are beyond suspicion if the accusations cannot stand; however, the defence of the accused cannot be evaluated unless it is irrefutable. The resignation and newspaper notice did not conclusively prove that the applicant had no connection with the society or that the complainant had knowledge of his resignation. Held, no abuse of process was made out to quash the proceedings. (Paras 12-14). D) Maharashtra Cooperative Societies Act, 1960 - Section 2(20) - Definition of 'Officer' - Vicarious Liability - The definition of 'officer' under Section 2(20) includes a chairman, and the applicant, being the Chairman at the time of issuance of the cheque, fell within this definition; the provisions of Sections 73(1) and 73(3) of the Act did not negate his liability. Held, the applicant was vicariously liable for the affairs of the society as its Chairman and drawer of the cheque. (Paras 15-17).
Issue of Consideration
Whether the process issued under Section 138 of the Negotiable Instruments Act should be quashed when the accused had resigned as Chairman of the drawer society after issuing the cheques but before the verification date, and whether the complaint is maintainable when the society is arrayed as accused through the erstwhile Chairman.
Final Decision
Both Criminal Applications were dismissed. The order of issuance of process under Section 138 of the Negotiable Instruments Act was upheld. The Court held that the applicant, being the drawer of the cheques and former Chairman, could not escape liability merely by subsequent resignation, and the drawer society had been properly arrayed as an accused. The observations were prima facie in nature.
Law Points
- liability of drawer under Section 138 survives post-issuance resignation
- public notice of resignation lacks legal sanctity
- company must be arrayed as accused under Section 141
- High Court under Section 482 CrPC can examine irrefutable documents to prevent abuse of process
- definition of officer under Section 2(20) of the Maharashtra Cooperative Societies Act includes chairman
