Safiya Malik

The High Court of Calcutta Single Bench of Justice Dr. Ajoy Kumar Mukherjee dismissed an appeal challenging the acquittal of a former company director in a cheque dishonour case. The Court held that the essential ingredients for invoking Sections 138 and 141 of the Negotiable Instruments Act were not satisfied and found that the complainant failed to establish the accused's liability either through pleadings or evidence. The Bench directed that the appeal stood dismissed, confirming the lower court's acquittal. The court further clarified that once a company is under liquidation and its control vests with the official liquidator, ex-directors cannot be held vicariously liable unless their specific role in the alleged offence is pleaded and proven.

The complainant-initiated proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, alleging dishonour of a cheque issued in discharge of a Rs. 50,00,000 accommodation loan. The cheque, dated October 28, 2013, was issued by one of the accused directors and subsequently dishonoured with the reason "account blocked." The company had gone into liquidation on July 29, 2013.

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The complainant alleged that accused no. 1 was the company and accused nos. 2 to 4 were directors, including the present respondent (accused no. 4). It was stated that accused no. 2, Babulal Jhawar (since deceased), had issued the cheque in question, and the complainant relied on account statements to prove receipt of the loan. Upon dishonour, the complainant claimed to have sent a demand notice dated January 16, 2014.

During trial, the complainant's witnesses (PW-1 and PW-2) testified regarding the loan, cheque issuance, and non-payment. However, they admitted that the company had gone into liquidation as per the Calcutta High Court's order dated July 29, 2013. The cheque was issued post-liquidation, and the accused respondent claimed to have ceased to be a director from the date of liquidation.

The trial court found that no valid notice under Section 138(b) had been proved and noted the lack of evidence regarding service of notice. It also concluded that the cheque was issued after the company's affairs had been taken over by the official liquidator, and hence, the accused respondent could not be held vicariously liable.

The Court recorded, "The impugned cheque which is marked exhibit 3/1 was not signed by the present respondent/accused no. 4 Amit Jhawar. It was signed by one accused No. 2 Babulal Jhawar who died during pendency of the proceeding."

It was further stated, "The present respondent Amit Jhawar adduced evidence as DW-1 and he had clearly stated in his evidence that the accused no.1 company had gone under liquidation vide order dated 29.07.2013 passed by the Hon’ble High Court Calcutta and he has no knowledge regarding the issuing of cheque in question."

Justice Mukherjee stated that the accused's testimony was unchallenged: "The aforesaid contention of the appellant in examination-in-chief that the company had gone into liquidation on 29.07.2013 and that he ceased to be the director... has not been denied or disputed during cross-examination."

In examining the complainant's obligation, the Court noted, "The complainant prima facie was under an obligation to substantiate in his evidence... that the present appellant/accused no.4 was the person in charge of and responsible for and looking after the day-to-day business affairs... at the relevant time, when the offence was committed."

Regarding the statutory requirement under Section 138, the Court observed, "The requirement of sending demand notice under section 138 of N.I. Act has not been complied in the present case."

The Bench explained the legal standard, stating, "The words 'every person who at the time of the offence was committed' occurring in section 141 of the N.I. Act is significant... criminal liability of a director must be determined on the date, the offence is alleged to have been committed."

On the issue of vicarious liability, it was stated, "Merely because the respondent herein was a director prior to 29.07.2013, he would not become in charge of the conduct of the business... which had admittedly gone into liquidation."

"Like the present case, there may be number of directors in a company but in the absence of evidence that the particular director is vicariously liable... the ingredients of section 141 of the N.I. Act cannot be said to be satisfied."

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The Court directed, "The court below is therefore, justified in holding that the ingredients to constitute offence under section 138 read with section 141 of N.I Act. against present respondent remains not proved and therefore the respondent/accused was rightly acquitted."

The Bench concluded, "There is no force in this appeal and the same is liable to be dismissed."

The Court ordered, "CRR (SB) 91 of 2024 thus stands dismissed. Send the trial court record at once to the court, wherefrom it was called for."

Advocates Representing the Parties:

For the Appellant: Mr. Sudipto Moitra, Sr. Adv., Mr. Ratanlal Joshi, Mr. Vijay Verma, Mr. Dwiapayan Biswas

For the Respondent: Mr. Anindya Halder, Mr. Sumanta Chakraborty

For the State: Mr. Bidyut Kumar Roy

Case Title: Sidhant Udyog Private Limited Vs. Modern Infra Projects India Limited & Anr.

Case Number: CRA (SB) 91 of 2024

Bench: Justice Dr. Ajoy Kumar Mukherjee

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