Negotiable Instruments Act: All India High Courts Digest 2022

LiveLaw reported almost 7,000 orders and judgments in 2022 from various High Courts across the country. Here are some important decisions relating to the Negotiable Instruments Act, 1881:1. Director Can't Be Prosecuted U/S 138 NI Act When He Is Not Involved In Day To Day Affairs Of The Company: Allahabad High Court Case Title : Jatinder Pal Singh vs M/S Statcon Power Controls Ltd Citation:2022 LiveLaw (AB) 107 The High Court has held that a director, who is not involved in the day to day affairs of a company, cannot be prosecuted for the offence under section 138 (Dishonour of cheque for insufficiency, etc., of funds in the account) of the Negotiable Instruments Act, 1881. 'It is clear from the perusal of the complaint that there is no specific averment that applicant is involved in day-to-day affairs of the company. There is only general allegation that applicant is a Director of the company. The documents filed by the applicant establishes that the applicant was a nominee Director and who has now resigned. Considering the aforesaid facts and the law propounded on the point it is clear that in absence of specific allegations about the applicant he can not be prosecuted for any offence under section 138 N.I. Act," Justice Syed Aftab Husain Rizvi held. 2. S.138 NI Act | Non-Executive Directors Not Liable For Company's Actions/ Omissions Unless Involved In Day-To-Day Affairs: Bombay High Court Case Title: Satvinder Jeet Singh Sodhi and Anr. v. State of Maharashtra Citation: 2022 LiveLaw (Bom) 257 The Bombay High Court quashed criminal proceedings against independent non-executive directors of Tecpro Systems Ltd observing they were not responsible for day-to-day functioning of the company. The court was dealing with an application requesting quashing of criminal proceedings before the trial court in a cheque bounce case under the Negotiable Instruments Act. "Non-executive director not being a promoter of or key managerial persons shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently", the court stated. 3. S.143A NI Act | Court Not Obliged To Direct Payment Of Interim Compensation In Cheque Bounce Cases: Bombay High Court Case Title- Mr. Ashwin Ashokrao Karokar v. Mr. Laxmikant Govind Joshi Citation - 2022 LiveLaw (Bom) 277 The Bombay High Court has said that courts don't have a duty to grant interim compensation to the complainant in a cheque bounce case. If interim compensation is granted, the judge has to record reasons for determining the amount of interim compensation. The court said that the provisions of section 143-A of the Negotiable Instruments Act, 1881 are directory rather than mandatory. 4. Company In Liquidation Cannot Always Avoid Proceedings U/S 138 NI Act, Its Conduct Can Be Weighed In: Bombay High Court Case Title: Nizar Noorali Rangara and Anr. v. State of Maharashtra and Ors. Citation: 2022 LiveLaw (Bom) 310 Bombay High Court held that to determine whether a complaint under section 138 can be entertained when the company is in the process of winding up, the fact and circumstance of each case have to be considered. The question cannot be considered without the facts especially to "insulate a company and its ex-directors from the rigors of law where it appears that they profess to take advantage of their own wrong". Justice N. J. Jamadar further observed that a winding up order due to settlement terms is not on the same pedestal as winding up order passed on merits 5. Offence U/S138 NI Act Not Attracted If The Cheque Is Given As Security for a Loan From Unlicensed Money Lender: Bombay High Court Case Title: Monic Sunit Ujjain v. Sanchu M. Menon and Ors. Citation: 2022 LiveLaw (Bom) 464 The Bombay High Court rejected a criminal revision application in a complaint under the Negotiable Instruments Act observing that section 138 cannot be attracted if the cheque is given as security for a loan from a unlicensed money lender. "In cases of money lending business without license, the provisions under Section 138 of Negotiable Instruments Act are not attracted", Justice Prakash Naik observed in his order. 6. [NI Act] Complainant Putting Date On Cheque Without Drawer's Consent Renders Instrument Void: Bombay High Court Case title: M/s. Pinak Bharat and Company v. Anil Ramrao Naik Citation: 2022 LiveLaw (Bom) 505 The Bombay High Court held that subsequently adding dates for payment without the payer's consent renders the negotiable instrument void, while refusing relief in a cheque bouncing case. "No doubt cheque is negotiable instrument which is transferable and negotiable, presumption under Section 138 of the Negotiable Instrument Act can be drawn only when the pre-conditions...

Negotiable Instruments Act: All India High Courts Digest 2022

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