Allowed¶¶32

Mr. Jagadishchandra Shetty v. Samyuktha Electro Controles Pvt. Ltd.

Negotiable Instruments Act, 1881 – Sections 138 and 141 – Quashing of prosecution of former director

Karnataka HC25 Mar 2025CRL.P/2326/2025

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Case brief

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What is this about?

Section 138 NI Act quashing; Section 141 vicarious liability of directors; mere designation as director insufficient; Form DIR-11 cessation of directorship before cheque issuance; cheques dated 31.05.2022 to 15.06.2022; C.C.No.34000/2022 XXXVIII A.C.J.M Bengaluru; abuse of process of law; CRL.P No. 2326 of 2025 under S.482 Cr.PC / S.528 BNSS; High Court of Karnataka; Justice Hemant Chandangoudar; NC: 2025:KHC:12776.

What did the court decide?

Petition allowed; proceedings in C.C.No.34000/2022 on the file of XXXVIII A.C.J.M Bengaluru quashed insofar as they relate to Accused No.5 (petitioner); trial to proceed against the other accused in accordance with law, uninfluenced by observations in the order. ¶¶32

Mr. Jagadishchandra Shetty Vs Samyuktha Electro Controles… — Cheque Dishonour | Karnataka HC (2025)

What the court decided

AI extract

Outcome

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Issue for consideration

Whether the entire proceedings in C.C.No.34000/2022 under Section 138 NI Act against the petitioner (Accused No.5) should be quashed. +1 more

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Court's answer

Form No. DIR-11 issued by the Registrar of Companies shows the petitioner ceased to be a director of the company effective 31.03.2022; therefore, at the time the cheques were issued, the petitioner was no longer serving as a director of the company.

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Ratio / Principle

The complaint lacks specific averments that the petitioner was responsible for the conduct of the company's business or involved in its day-to-day affairs; mere designation as a director, without evidence of active participation in the company's operations, is insufficient to attract vicarious liability under Section 141 of the NI Act.

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Key takeaways

Continuing the criminal proceedings against the petitioner would constitute an abuse of the process of law.ratio¶¶30

Detailed headnote1 paragraphs

Negotiable Instruments Act, 1881 — Sections 138 and 141 — Quashing of prosecution of former director — Petitioner, arraigned as Accused No.5 in C.C.No.34000/2022 (XXXVIII A.C.J.M Bengaluru), produced Form No. DIR-11 issued by the Registrar of Companies showing he ceased to be a director of the complainant company effective 31.03.2022, whereas the dishonoured cheques were issued between 31.05.2022 and 15.06.2022; the complaint contained no specific averments that he was responsible for the conduct of the company's business or involved in its day-to-day affairs. Held: mere designation as a director, without evidence of active participation in the company's operations, is insufficient to attract vicarious liability under Section 141 NI Act; continuance of proceedings against him would be an abuse of the process of law. Proceedings quashed qua Accused No.5; trial against the other accused to proceed in accordance with law, unaffected by the observations.

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NC: 2025:KHC:12776 CRL.P No. 2326 of 2025

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25^TH DAY OF MARCH, 2025

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR CRIMINAL PETITION NO. 2326 OF 2025 (482(Cr.PC) /

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528(BNSS))

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BETWEEN:

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MR. JAGADISHCHANDRA SHETTY AGED ABOUT 59 YEARS, S/O M VITTAl SHETTY, R/AT FLAT NO.32122, PRESTIGE JINDAL CITY, TUMKURU ROAD, CHIKKABIDARAKALLU NAGASANDRA POST, BANGALORE - 560 073.

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…PETITIONER

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(BY SRI. RAJASHEKHARA SEERI., ADVOCATE)

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AND:

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Digitally signed by R HEMALATHA Location: High Court of Karnataka

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SAMYUKTHA ELECTRO CONTROLES PVT LTD., NO. 518-B 1ST MAIN SECOND CROSS SYNDICATE BANK LAYOUT, HEROHALLI BANGALORE -560 091, REP BY ITS DIRECTOR SRI CHANDRASHEKARAIAH R, S/O RAMANNA K.

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(BY SRI. JEEVAN K., ADVOCATE)

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…RESPONDENT

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THIS CRL.P IS FILED U/S 482 CR.PC (FILED U/S 528 BNSS) BY THE ADVOCATE FOR THE PETITIONER PRAYING THAT THIS HONOURABLE COURT MAY BE PLEASED TO QUASH THE ENTIRE PROCEEDINGS IN C.C.NO.34000/2022, PENDING ON THE FILE OF XXXVIII A.C.J.M BENGALURU P/U/S138 OF N.I ACT AGAINST THE PETITION WHO HAS BEEN ARRAYED AS ACCUSED NO.5 IN COURT BELOW I.A.NO.1/2025 FOR STAY.

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THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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NC: 2025:KHC:12776 CRL.P No. 2326 of 2025

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CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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ORAL ORDER

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In this case, the petitioner, Accused No. 5, challenges the cognizance taken of the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

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The respondent-complainant filed a private complaint under Section 200 of the Code of Criminal Procedure (Cr.P.C.), alleging that a cheque issued by Accused No. 1— a company towards the discharge of a legally enforceable debt was dishonoured upon presentation due to insufficient funds.

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The petitioner has been arraigned as Accused No. 5, purportedly in the capacity of a director of the company alleged to have issued the dishonoured cheque.

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Upon examination of the case, it is noted that the subject cheques were issued on 31.05.2022, 05.06.2022, 10.06.2022, and 15.06.2022, respectively. The petitioner has submitted Form No. DIR-11 issued by the Registrar of Companies, which indicates that the petitioner ceased to be a director of the company effective 31.03.2022. Therefore, at the time the cheques were issued, the petitioner was no longer serving as a director of the company.

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Furthermore, the complaint lacks specific averments demonstrating that the petitioner, in any capacity, was responsible for the conduct of the company’s business or involved in its day-to-day affairs at the time the offence was committed. Mere designation as a director, without evidence of

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NC: 2025:KHC:12776 CRL.P No. 2326 of 2025

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active participation in the company’s operations, is insufficient to attract vicarious liability under Section 141 of the NI Act.

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In light of the foregoing, continuing criminal proceedings against the petitioner would constitute an abuse of the process of law.

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ORDER

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i. Accordingly, petition is allowed. The impugned proceedings in C.C.No.34000/2022 on the file XXXVIII A.C.J.M Bengaluru, insofar it relates to accused No.5, is hereby quashed.

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ii. The trial to proceed against the other accused in accordance with law, without being influenced by any observations made in this order. Any observations contained herein are made solely for the purpose of adjudicating the present petition and shall not affect proceedings against other accused persons.

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Sd/- (HEMANT CHANDANGOUDAR) JUDGE

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TIN

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List No.: 1 Sl No.: 17

Mr. Jagadishchandra Shetty v. Samyuktha Electro Controles Pvt. Ltd.

Case brief

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Mr. Jagadishchandra Shetty v. Samyuktha Electro Controles Pvt. Ltd.

Case brief

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