The Supreme Court has reiterated that, a 'cheque bounce' complaint against a Company and its Director, must contain a specific averment that the Director was in charge of, and responsible for, the conduct of the company's business at the time when the offence under Section 138/141 of Negotiable Instruments Act was committed.
A three judge bench comprising of Justice NV Ramana, Justice Mohan M. Shantanagoudar and Justice Indira Banerjee were considering an appeal against an order of the High Court of Telangana and the State of Andhra Pradesh which quashed a cheque complaint against directors of the Company, accused of dishonouring the cheque. It observed that High court could quash the complaint only if some unimpeachable evidence has been brought on record which leads to the conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time.
The High Court had quashed a complaint filed by one AR Radha Krishna against the directors of the company. The complaint was filed after six cheques for Rs.25,00,000 each and one cheque for Rs.30,00,000 were drawn on different dates by the authorised signatory, i.e., M.D. of M/s Dhruti Infra Projects Limited, were returned dishonored.
In the appeal filed by the complainant, the Apex court bench observed that the High Court was not justified in allowing the quashing petitions by invoking its power under S.482, Cr.P.C.
"In a case pertaining to an offence under S. 138 and S. 141 of the Act, the law requires that the complaint must contain a specific averment that the Director was in charge of, and responsible for, the conduct of the company's business at the time when the offence was committed. The High Court, in deciding a quashing petition under S. 482, Cr.P.C., must consider whether the averment made in the complaint is sufficient or if some unimpeachable evidence has been brought on record which leads to the conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time. "
The court further observed that, while the role of a Director in a company is ultimately a question of fact, and no fixed formula can be fixed for the same, the High Court must exercise its power under S. 482, Cr.P.C. only when it is convinced, from the material on record, that allowing the proceedings to continue would be an abuse of process of the Court. Allowing the appeal, the court said:
"A perusal of the record in the present case indicates that the appellant has specifically averred in his complaint that the respondent nos. 1 and 2 were actively participating in the day-today affairs of the accused no.1 – company. Further, the accused nos. 2 to 4 (including the respondent nos. 1 and 2 herein) are alleged to be from the same family and running the accused no.1 – company together. The complaint also specificies that all the accused, in active connivance, mischievously and intentionally issued the cheques in favor of the appellant and later issued instructions to the Bank to "Stop Payment". No evidence of unimpeachable quality has been brought on record by the respondent nos. 1 and 2 to indicate that allowing the proceedings to continue would be an abuse of process of the court."