Dispute of cheque bounce by non-executive directors is a matter of trial, couldn’t be adjudicated by HC u/s 482 of CrPC: SC

Case Details: Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P.) Ltd. - [2021] 132 taxmann.com 189 (SC)

Judiciary and Counsel Details

• • Ajay Rastogi and Abhay S. Oka, JJ.
  • Mrs. Arundhati Katju, Ms. Priya Puri, Sharad Puri, Mrs. Rashmi Sachdeva, Ranjay Dubey, Ms. Srishti Borthakur, Advs., Siddhartha Dave, Sr. Adv., Amit Bhandari, Adv., Purushottam Sharma Tripathi, AOR, Mukesh Kumar Singh, and Abhishek Tripathi, Advs. for the Petitioner. 
  • Pallav Shishodia, Sr., Adv., Shyamal J. Kadu, Adv., Satyajit A. Desai, Advs., Mrs. Anagha S. Desai, AOR, Siddharth Gautam, Himanshu Sharma, Yati Sharma, Advs., Ms. Supriya Juneja, AOR., Ms. Cheshta Jetly, Adv., Sachin Patil, AOR, Rahul Chitnis, Aaditya A. Pande and Geo Joseph, Advs. for the Respondent.

Facts of the Case

In the present case, appeals are directed against Private Limited Company engaged in the business of production and sale of spices named M/s Gharkul Industries Pvt Ltd and its directors (Respondents). The Applicants approached the respondents for financial assistance. Respondent considering the relations and need of the appellants provided financial assistance.

On negotiations, a Memorandum of Understanding was executed which was signed by parties with the consent of all the appellants in the presence of two attesting witnesses and it was decided that the amount that was received would be returned within 1 or 2 years.

Appellant issued a cheque in favor of respondent towards part payment of the amount valued. However, the same was dishonored due to “funds insufficient”. After dishonor of cheque, notice was issued to the appellants demanding the said amount of cheque, which was refused to be accepted by the appellants in spite of intimation given by the Postal Authorities and, thus, the notice was returned with the remark “not claimed”.

The Respondents filed a complaint against the applicants under Section 138 of the Negotiable Instrument Act. The Applicants submitted that they were non-executive directors of the Company and were not responsible for the conduct of business which was a mandatory requirement for initiation of proceedings under Section 138 of the NI Act.

Therefore, filed a criminal application before the High Court praying for quashing and setting aside the criminal complaint filed by the respondent as well as the summons issued by the learned Trial Court in pursuance of the complaint. The High Court affirmed the decision of the Trial Court. The Respondent approached the Supreme Court.

Supreme Court Held

The Supreme Court rejected the arguments of the appellants and ruled that the High Court did not have any error in declining to interfere with the summons and also held that a person who has issued a bounced cheque does not sufficiently become liable.

Dismissing the appeal, the Apex Court held that the directors of a company were not signatories to the company’s cheques. However, it is clear that the allegations are that at the time of the cheques being issued and dishonored, the Directors were responsible for the company’s business.

List of Cases Referred to

• • S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [2005] 148 Taxman 128 (SC) (para 15)
  • Pooja Ravinder Devidasani v. State of Maharashtra [2015] 53 taxmann.com 434/129 SCL 393 (SC) (para 15)
  • A.K. Singhania v. Gujarat State Fertilizer Co. Ltd. [2013] 40 taxmann.com 471/123 SCL 189 (SC) (para 18)
  • Gunmala Sales (P.) Ltd. v. Anu Mehta [2015] 1 SCC 103 (para 18)
  • S.K. Alagh v. State of U.P. [2008] 5 SCC 662 (para 22)
  • Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd. [2010] 10 SCC 479 (para 22)
  • GHCL Employees Stock Option Trust v. India Infoline Ltd. [2013] 36 taxmann.com 434/121 SCL 79 (SC).