Case Note & Summary
The dispute arose from a cheque dishonour case under Sections 138 and 142 of the Negotiable Instruments Act, 1881, where the appellant, a director of Projtech Engineering Private Limited, was summoned by the Metropolitan Magistrate. The company had issued three cheques in April 2021 for payment of iron and steel supplies, which were returned unpaid due to signature discrepancies and alterations. Legal notices were sent in May 2021, and proceedings were initiated in June 2021, with summons issued in September 2021. The appellant challenged the summoning order through revision and subsequently under Section 482 of the Code of Criminal Procedure, 1973, but both were dismissed by the lower courts and the High Court, which held that her directorship and signing of a board resolution indicated involvement in day-to-day management. The core legal issue was whether the appellant's role as a director and her signing of a board resolution sufficed to establish liability under Section 141 of the NI Act, which requires that the accused be in charge of and responsible for the company's business conduct. The appellant argued that mere directorship does not imply such responsibility, while the respondents relied on the board resolution as evidence of management involvement. The Supreme Court analyzed precedents, including S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Gunmala Sales (P) Ltd. v. Anu Mehta, which emphasize that specific averments in the complaint are essential under Section 141 and that mere directorship is insufficient. The Court reasoned that signing a board resolution relates to major directional decisions, not day-to-day management, and thus does not ipso facto prove the appellant's involvement in the company's business conduct. It held that the complaint lacked the necessary averments, and the High Court should have exercised its inherent powers under Section 482 CrPC to quash the proceedings. Consequently, the Supreme Court allowed the appeal, quashed the summoning order against the appellant, and set aside the impugned orders of the lower courts.
Headnote
A) Criminal Law - Cheque Dishonour - Liability of Directors - Negotiable Instruments Act, 1881, Sections 138, 141 - The appellant, a director of the accused company, challenged summoning order in cheque dishonour case under Sections 138 and 142 NI Act - The Supreme Court held that mere directorship and signing of board resolution does not establish day-to-day management involvement required under Section 141 NI Act - The Court quashed the summoning order as the complaint lacked specific averments of the appellant's responsibility for company's business conduct (Paras 6-8). B) Criminal Procedure - Inherent Powers - Quashing of Proceedings - Code of Criminal Procedure, 1973, Section 482 - The High Court refused to exercise inherent powers under Section 482 CrPC to quash summoning order, citing narrow jurisdiction after revision dismissal - The Supreme Court clarified that High Court can use Section 482 powers sparingly to prevent abuse of process, considering unimpeachable evidence or circumstances - Held that the High Court erred in not quashing proceedings where no case was made out against the director (Paras 5, 7).
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Issue of Consideration: Whether the appellant, as a director of the accused company, is conversant with the day-to-day management of the company, thereby justifying the issuance of summons to her under Section 141 of the Negotiable Instruments Act, 1881
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Final Decision
Supreme Court allowed the appeal, quashed the summoning order against the appellant, and set aside the impugned orders of the lower courts
