NI Act | Complainant Can't Seek To Prosecute Company's Former Directors For Cheque Issued To Repay Amount Invested When They Held Office: Karnataka HC

The Karnataka High Court has quashed the proceedings initiated against two former directors of a company under Section 138 of the Negotiable Instruments Act by the complainant claiming that when he invested the money in the company they were directors. A single judge bench of Justice Hemant Chandangoudar allowed the petition filed by Sunita and Vidya and quashed the proceedings pending against them. A private complaint was filed under Section 200 of the Code of Criminal Procedure, 1973 for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, 'the Act'), alleging that the cheque, which was issued by the Company in favour of the complainant, when presented for realisation was dishonoured for want of funds. The Magistrate, after recording the sworn statement of the complainant, took cognizance of the offence punishable under Section 138 of the Act and issued summons to the accused. The petitioners contended that petitioners ceased to be the Directors of the Company with effect from 22.03.2017, which is evident from Form No.DIR-12. Hence, he submitted that the registration of the complaint against the petitioners-accused Nos.5 and 6 is not sustainable in law. However, the complainant contended that petitioner/accused were directors on the date when the complainant invested the money with the petitioner/accused company and cheque which was issued by the company was for repaying of amount invested by the respondent/complaint and hence Magistrate has rightly taken cognizance and same does not warrant any interference. Findings: The bench said, "The cheque in question was issued on 01.08.2019. The petitioners, who were the Directors of the Company, ceased to be the Directors of the Company with effect from 22.03.2017 which is evident from the Form No.DIR-12 issued by Registrar of the Companies and the same has remained uncontroverted." It then held, "Hence, it implies that the petitioners ceased to be the Directors of the Companies as on the date of issuance of the cheque. Hence, registration of the complaint against the petitioners for the offence punishable under Section 138 of the Act is not sustainable." Case Title: SUNITA W/O BHARATKUMAR AITAWADE & ANR v. MALIKJAN S/O BHASKAR SANNAKKI Case No: CRIMINAL PETITION NO. 100639 OF 2022 Citation: 2022 LiveLaw (Kar) 464 Date of Order: 4TH DAY OF NOVEMBER, 2022 Appearance: CHETAN MUNNOLI, ADVOCATE for petitioners SHRIHARSH NEELOPANT, ADVOCATE for respondent. Click Here To Read/Download Order

NI Act | Complainant Can't Seek To Prosecute Company's Former Directors For Cheque Issued To Repay Amount Invested When They Held Office: Karnataka HC

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