HC Quashes Sec. 138 Complaint Against CS as Complainant Failed to Prove Her Involvement in Cheque Dishonoring

Case Details: Rashmi Goyal v. Mahalaxmi Fabrics - [2024] 163 taxmann.com 647 (HC-Delhi)

Judiciary and Counsel Details

• • Manoj Kumar Ohri, J.
  • Ms Shilpa Sharma, Adv. for the Petitioner.
  • Vishwendra Verma & Ms Shivali for the Respondent.

Facts of the Case

In the instant case, the Respondent company/complainant, engaged in the business of manufacturing Men’s jeans, supplied the said goods to the accused from time to time and raised bills, which were duly received and acknowledged by the accused.

Subsequently, the accused issued certain cheques of varied amounts (subject cheques) to discharge their liability under the bills raised. Upon presentation, the subject cheques were dishonoured, and consequently, criminal complaints under section 138 were filed.

In the said complaints, the petitioner (i.e., the Company Secretary) of the accused company sought to be made vicariously liable for the offence owing to assurances advanced by her regarding the payment of bills raised and the encashment of the subject cheques.

It was noted that nowhere in the complaint, the complainant averred that the petitioner was in charge of, and responsible for the conduct of the business of the accused company.

Further, the phrase ‘in charge of a business’ had been interpreted to mean a person having overall control of the day-to-day business of the company. In the ordinary course of business, it could not be said that the petitioner, who was acting as a Company Secretary, would be in charge of the day-to-day affairs of the accused company, as required in terms of Section 141(1) of the Negotiable Instruments Act, 1881. Thus, the petitioner cannot be vicariously liable under Section 141(1) of the Act.

High Court Held

The High Court held that neither was there any averment that the offence had been committed with consent or connivance of or was attributable to any neglect on the part of the petitioner, which could potentially make her liable under section 141(2) of the Act.

Therefore, the continuation of proceedings against the petitioner would be nothing but an abuse of the process of law. Consequently, the criminal complaint under section 138 of the Act was to be quashed qua the petitioner.