Dishonour of Cheque - Liability of non-executive directors - Summoning upheld, can establish innocence during trial
Uttarakhand High Court Upholds Summoning of Non-Executive Directors in Cheque Dishonour Case. Court dismisses second plea under Section 482 CrPC, reaffirms liability of non-executive directors under Negotiable Instruments Act.
In a significant ruling, the Uttarakhand High Court, presided over by Justice Ashish Naithani, dismissed a second application under Section 482 of the Code of Criminal Procedure (CrPC) filed by Mr. Ashwini Kumar Singh and Ms. Sunita Palta, non-executive directors of M/s MBL Infrastructures Ltd. The application sought quashing of proceedings in a cheque dishonour case initiated by M/s RPG Infratech.
The case, registered as Criminal Case No. 109 of 2017, revolves around the dishonour of a cheque amounting to Rs. 1,35,84,099 issued by M/s MBL Infrastructures Ltd. The cheque was dishonoured due to insufficient funds, prompting RPG Infratech to file a complaint under Sections 138 and 141 of the Negotiable Instruments Act, 1881. The complaint led to the summoning of all accused, including the non-executive directors, asserting their involvement in the company's affairs.
The Applicants contended that as non-executive, independent directors, they were not responsible for the day-to-day management of the company. They argued that the summoning order was based on generalized assertions without specific allegations of their involvement. This plea was supported by a recent Supreme Court judgment in 'Chintalapati Srinivasa Raju v. SEBI', which clarified the liabilities of non-executive directors.
However, the Court maintained that the complaint contained specific averments that all directors were responsible for the conduct of the company's business. Justice Naithani reiterated that such averments meet the statutory threshold under Section 141 of the Negotiable Instruments Act, and the matter should proceed to trial. The Court emphasized that the Applicants could assert their lack of involvement during the trial.
The High Court further held that the second application lacked new foundational facts or subsequent legal developments that could alter the basis of the earlier rejection. The principle of finality and constructive res judicata barred re-litigation of the issues settled by the prior dismissal of a similar application and subsequent affirmation by the Supreme Court.
This ruling underscores the legal obligations of non-executive directors in cheque dishonour cases and sets a precedent for interpreting their role under the Negotiable Instruments Act. The Applicants' defenses, including their status as independent directors, remain open for consideration during the trial process.
Bottom Line:
Negotiable Instruments Act - Liability of non-executive directors - Specific averments about involvement in day-to-day affairs of the company are essential for summoning under Section 141 of the Act.
Statutory provision(s): Negotiable Instruments Act, 1881 Section 138, Negotiable Instruments Act, 1881 Section 141, Code of Criminal Procedure, 1973 Section 482
Mr. Ashwini Kumar Singh v. M/s RPG Infratech, (Uttarakhand) : Law Finder Doc Id # 2782922
