Case Note & Summary
Background: Two criminal applications under Section 482 CrPC were filed by nine directors of M/s. Amtek Auto Ltd. seeking quashing of process orders in complaints under Section 138 NI Act filed by R.L. Steel & Energy Ltd. before the Judicial Magistrate, Aurangabad. The complaints alleged that the accused company and its directors were liable for dishonour of two cheques. The applicants challenged the proceedings on grounds that the cheques were presented after a moratorium under the IBC, and the complaint lacked specific allegations against each director as required under Section 141 NI Act.
Facts: The complainant, a steel manufacturer, supplied rolled steel products to accused no.1 company on credit. Two cheques were issued by accused no.1 towards payment, but upon presentation, they were dishonoured for insufficient funds. Statutory notices were sent but not complied with, leading to the complaints. The Judicial Magistrate issued process. Meanwhile, a petition under the Insolvency and Bankruptcy Code was admitted against accused no.1 by the NCLT, and an Interim Resolution Professional was appointed with a moratorium prohibiting continuation of proceedings against the corporate debtor. The complainant also filed its claim with the IRP.
Legal Issues: The main issues were whether the moratorium barred the Section 138 proceedings, and whether the complaint sufficiently pleaded vicarious liability of the directors.
Arguments: The applicants argued that the cheques were presented post-moratorium, making the proceedings an abuse of process, and that the complaint only contained omnibus allegations against directors without specifying their roles. They relied on Supreme Court decisions requiring specific averments.
Court's Analysis: Not mentioned in the provided text.
Decision: Not mentioned.
Issue of Consideration
Whether the proceedings under Section 138 of the Negotiable Instruments Act, 1881 should be quashed due to the moratorium under the Insolvency and Bankruptcy Code, 2016 and for want of specific allegations against directors under Section 141.
Law Points
- Moratorium under IBC prohibits proceedings under Section 138 NI Act
- directors' liability under Section 141 requires specific averments
- drawer of cheque alone liable.
Case Details
2018 LawText (BOM) (08) 35
Criminal Application No. 02052 of 2018 and Criminal Application No. 02055 of 2018
Smt. Vibha Kankanwadi, J.
Mr. R.N. Dhorde (Senior Advocate) with Mr. S.V. Natu for applicants; Mr. K.D. Munde, Additional Public Prosecutor and Mr. A.A. Jagatkar, Additional Public Prosecutor for respondent no.1; Mr. R.R. Totla for respondent no.2
Rajeev Raj Kumar, Madhu Vij, Arvind Dham, Bahushurat Lugani, Gautam Malhotra, Vinod Kumar Uppal, Rajeev Kumar Thakur, Sanjiv Bhasin, Sanjay Chhabra
The State of Maharashtra, R.L. Steel & Energy Ltd.
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Criminal applications under Section 482 CrPC seeking quashing of process orders in complaints under Section 138 Negotiable Instruments Act.
Remedy Sought
The applicants sought quashing of the order of issuance of process and the entire proceedings in Summary Criminal Case No. 7882/2017 and 7504/2017.
Filing Reason
The applicants contended that presenting the cheques after the moratorium under IBC was not justified, and the complaint lacked specific allegations against each director as required under Section 141 NI Act.
Previous Decisions
The Judicial Magistrate (First Class), Court No.07, Aurangabad, issued process on 16.11.2017 in SCC No. 7882/2017 and on 02.11.2017 in SCC No. 7504/2017.
Issues
Whether the complaint under Section 138 NI Act can proceed against the accused when a moratorium under the Insolvency and Bankruptcy Code, 2016 is in operation?
Whether the complaint contains sufficient averments to fasten vicarious liability on the directors under Section 141 NI Act?
Whether the process issuance orders should be quashed under Section 482 CrPC due to the above defects?
Submissions/Arguments
Applicants argued that cheques were presented after the IBC moratorium order, making the presentation unjustified, and the complainant had already submitted a claim to the IRP, so the proceedings were an abuse of process.
Applicants argued that the complaint only made an omnibus statement that all accused were in charge of and responsible for the company, without specifying the role of each director, which is insufficient under Section 141 NI Act.
Applicants relied on N.K. Wahi v. Shekhar Singh, AIR 2007 SC 1454, for the requirement of specific allegations; on Mrs. Aparna A. Shah v. M/s. Sheth Developers Pvt. Ltd., AIR 2013 SC 3210, to argue that only the drawer of the cheque can be prosecuted; and on M.L. Gupta v. Ceat Financial Services Ltd., (2008) 145 CompCas 837 (Delhi).
Judgment Excerpts
Only omnibus statement has been made that all the accused were incharge and responsible for the conduct of the affairs of accused no.01. It is not a sufficient compliance of Section 141 of the N.I. Act.
Under such circumstance, the complainant company was not justified in presenting the cheque for encashment.
Procedural History
The complainant filed complaints under Section 138 NI Act before the Judicial Magistrate First Class, Aurangabad, based on dishonoured cheques. The Magistrate issued process on 16.11.2017 and 02.11.2017 in SCC No. 7882/2017 and 7504/2017 respectively. The applicants, being directors of the accused company, filed the present criminal applications under Section 482 CrPC seeking quashing of the process orders and proceedings.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 141
- Code of Criminal Procedure, 1973: 200, 482
- Insolvency and Bankruptcy Code, 2016: 13(1)(b), 15
