Allowed

Vimala Radha Krishnan v. State of Ap.

Andhra Pradesh HC1 Sept 2022CRLP/893/2018

Case brief

AI extract

What is this about?

This single judge allowed a criminal petition to quash proceedings under Section 138 NI Act. The court quashed the case against directors who had resigned prior to the cheque issuance, citing uncontroverted statutory forms as evidence of their non-involvement.

What did the court decide?

The Criminal Petition is allowed; proceedings against petitioners in C.C.No.327 of 2017 are quashed.

Vimala Radha Krishnan Vs State of Ap. — Cheque Dishonour | Andhra Pradesh HC (2022)

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THE HONOURABLE SRI JUSTICE K. SREENIVASA REDDY CRIMINAL PETITION NO.893 OF 2018

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ORDER:-

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This Criminal Petition, under Section 482 of the Code of Criminal Procedure 1973, is filed by A2 to A4/the petitioners herein to quash the proceedings in C.C.No.327 of 2017 on the file of the IV Additional Munsif Magistrate, Guntur.

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Brief facts of the case are as follows;

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The Accused No.1 is a company, doing business in manufacturing of yarn and A2 to A6 are its Directors. At request of A1 to A6 and one late Radhakrishnan Venkataswamy Naidu, the complainant in the Court below who is R2 herein supplied cotton to A1 company. The A1 company issued cheque bearing No.169746 for an amount of Rs.10,82,428/- towards part payment for the supplied goods. When the said cheque was presented for collection, the same was dishonoured with an endorsement of “funds insufficient”. On that the complainant issued legal notice on 13.11.2015. Though the notice was served on A2, A4 and A5 they failed to pay the dishonoured cheque amount. A1, A3 and A6 did not receive the notice. After complying with the essential conditions of Section 138 of Negotiable Instruments, Act, the complainant filed the complaint against the petitioners and others for the offence

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punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short „N.I. Act‟) and the same was taken on file by the learned Magistrate Court.

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Heard the learned counsel for the petitioners. Though notice is served on the 2^nd respondent, there is no representation on behalf of the 2^nd respondent. Perused the material on record.

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Learned counsel for the petitioners has argued on the sole ground that the petitioners have resigned to the posts of Directors of A1 company on 09.4.2014, 13.12.2013 and 06.11.2013 and the present cheque has been issued on 15.7.2015, and also placed reliance on Forms 32.

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Per contra, learned Assistant Public Prosecutor, argued that these are all questions of fact and have to be decided in the course of trial and it is premature stage to come to a conclusion that the petitioners have resigned to the posts of Directors of company and further argued that these are all the defences, which can be raised during the course of trial.

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On perusal of Forms-32, they reveal that the petitioners who are A2 to A4 have resigned to the said posts of Directors on 09.4.2014, 13.12.2013 and 06.11.2013 respectively.

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In fact in the following judgments the Hon‟ble Apex Court has discussed law in detail and held as follows;

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Harshendra Kumar D vs Rebatilata Koley Etc¹

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“As noticed above, the appellant resigned from the post of Director on March 2, 2004. The dishonoured cheques were issued by the Company on April 30, 2004, i.e., much after the appellant had resigned from the post of Director of the Company. The acceptance of appellant's resignation is duly reflected in the resolution dated March 2, 2004. Then in the prescribed form (Form No. 32), the Company informed to the Registrar of Companies on March 4, 2004 about appellant's resignation. It is not even the case of the complainants that the dishonoured cheques were issued by the appellant. These facts leave no manner of doubt that on the date the offence was committed by the Company, the appellant was not the Director; he had nothing to do with the affairs of the Company. In this view of the matter, if the criminal complaints are allowed to proceed against the appellant, it would result in gross injustice to the appellant and tantamount to an abuse of process of the court.”

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In D.B. Negandhi Vs Registrar Of Companies² , the

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Hon‟ble Apex Court on similar lines has reiterated that if Director of the company has resigned to the post of Director and the Registrar of Companies was informed of the same in terms of Section 303(2) of the Companies Act, it is suffice to show that he/she ceases to be a director of the company.

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Basing on the said principle, the Hon‟ble Apex Court

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1 (2011) 3 Supreme Court Cases 351

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2 (2016) 15 Supreme Court Cases 661

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quashed the complaint therein for not complying with Section 210 (1) and (3) of Companies Act.

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In Smt.A.L.Uday Shankar Harshitha vs The State

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Of A.P.,³ the Hon‟ble Supreme Court held as follows;

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“In GUNMALA SALES PRIVATE LTD. (supra) the Supreme Court referred to its earlier decision in HARSHENDRA KUMAR D v. REBATILATA KOLEY [(2011) 3 SCC 351] in which also a similar issue came up for consideration. There was an averment in the complaint therein that the appellant was responsible for the day-to-day affairs of the company, despite the said averment the Court quashed the complaint taking into consideration the resolution passed by the company wherein it was reflected that the appellant therein had resigned from the post of Director much prior to the issuance of cheque. The decision in AWADH KISHORE GUPTA [Appeal (crl.) 292 of 1997 dated 18.11.2003] was also referred to, wherein it was held that when the investigation was not completed, it was impermissible for the High Court to look into the materials, the acceptability of which is essentially a matter for trial and while exercising jurisdiction under Section 482 of the Code it is not permissible for the Court to act as if it was a trial Judge. The Supreme Court, however, at paragraph 25 opined that the said observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstances, can be looked into by the High Court in exercise of its

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3 2018 SCC Online Hyd. 404

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jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. It is also observed that it is fairly settled by then that while exercising inherent jurisdiction under Section 482 or revisional jurisdiction under Section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusation. But it, further, observed that, however, in an appropriate case, if on the face of the documents which are beyond suspicion or doubt placed by the accused, the accusations against him cannot stand, it would be travesty of justice if the accused is relegated to trial and he is asked to prove his defence before the trial Court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the material which has significant bearing on the matter at prima facie stage. It also observed that criminal prosecution is a serious matter which affects the liberty of a person and no greater damage can be done to the reputation of a person than dragging him in a criminal case. It held that the High Court therein fell into grave error in not taking into consideration the uncontroverted documents relating to the appellants resignation from the post of Director of the company and had these documents been considered by the High court, it would have been apparent that the appellant has resigned much before the cheques were issued by the company.”

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This Court, on perusal of catena of decisions, is of the view that the petitioners who were the Directors of Company, but have resigned much prior to the issuance of the cheque, the question of facing criminal trial after lapse

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of 1½ years would be travesty of justice. It is essential that once cheque was issued for discharge of legally enforceable debt, the company as well as the persons incharge of day to day affairs of the company can be prosecuted for the dishonour of such cheque. But the same cannot be alleged as against quondam Directors, who before the issuance of cheque have resigned to the posts of Directors. The petitioners are not signatories to the cheque. Hence, directing the petitioners herein to face trial would be nothing but abuse of process of Court and same would be a futile exercise.

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Therefore, the Criminal Petition is allowed and the proceedings against the petitioners in C.C.No.327 of 2017 on the file of the IV Additional Munsif Magistrate, Guntur are hereby quashed.

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Miscellaneous petitions pending, if any, in the Criminal Petition shall stand closed.

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___________________________________ JUSTICE K. SREENIVASA REDDY

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Date:01.09.2022 GR

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THE HONOURABLE SRI JUSTICE K. SREENIVASA REDDY

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CRIMINAL PETITION NO.893 OF 2018

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