Court Denies Quashing of Complaints Under Negotiable Instruments Act, Citing Disputed Resignation and Vicarious Liability
In a significant ruling, the Delhi High Court has declined to quash criminal complaints against Dinesh Kumar Pandey, a former director of two borrower companies, in relation to dishonoured cheques under Sections 138 and 141 of the Negotiable Instruments Act, 1881. The court, presided over by Justice Sanjeev Narula, emphasized the need for trial to resolve disputed facts regarding Pandey's resignation and his alleged continuing involvement in the companies' affairs.
The complaints were filed by M/s Singh Finlease Pvt. Ltd., a non-banking financial company, which had extended loan facilities to South Centre of Academy Pvt. Ltd. and Sampoorn Academy Pvt. Ltd. The cheques issued towards repayment of these loans were dishonoured due to insufficient funds, prompting the financial company to initiate legal proceedings under the Negotiable Instruments Act.
Pandey, represented by advocates Sumit Chauhan and Sushant Kumar, contended that he had resigned from the board of directors before the cheques were dishonoured and thus could not be held vicariously liable. He relied on corporate filings and Form DIR-12 to substantiate his claim of resignation. However, the court found that these documents alone were insufficient to quash the proceedings at the threshold.
The court observed that Pandey's role in negotiating loans, executing documents, and signing the cheques necessitated examination at trial. It highlighted that the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, which favor the complainant, could not be displaced merely by corporate filings. The court further noted that the genuineness and timing of Pandey's resignation were contested and that these issues must be determined through evidence during the trial.
Justice Narula also referenced the Bharatiya Nagarik Suraksha Sanhita, 2023, underscoring that the High Court's jurisdiction to quash complaints under Section 528 of this statute is confined to cases involving unimpeachable and incontrovertible evidence. The court concluded that the material presented by Pandey did not meet this high threshold.
The ruling aligns with precedents set by the Supreme Court and other high courts, which have held that vicarious liability under Section 141 of the Negotiable Instruments Act requires a detailed factual assessment, typically unsuitable for resolution at the quashing stage.
The decision underscores the judiciary's cautious approach in cheque dishonour cases, particularly when directors or signatories claim to have resigned before the commission of the offence. The court's emphasis on trial-based adjudication reflects its commitment to a comprehensive examination of all relevant facts and evidence.
Bottom Line:
Section 141 of the Negotiable Instruments Act, 1881 - Vicarious liability of directors - Resignation from the company prior to dishonor of cheques - Mere reliance on Form DIR-12 and corporate filings is insufficient to quash complaints at the threshold - Disputed facts regarding resignation and alleged continuing involvement in the company's affairs must be tested at trial.
Statutory provision(s): Negotiable Instruments Act, 1881 Sections 138, 141, Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528
Dinesh Kumar Pandey v. M/s Singh Finlease Pvt. Ltd., (Delhi) : Law Finder Doc Id # 2827823
