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REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS.2604-2610  OF 2014 ARISING OUT OF

SPECIAL LEAVE PETITION (CRL) NOs. 9133-9139 OF 2010

POOJA RAVINDER DEVIDASANI … APPELLANT

VERSUS

STATE OF MAHARASHTRA & ANR. … RESPONDENTS

JUDGMENT

N.V. RAMANA, J.

Leave granted.

2. These  appeals  by  special  leave  are  filed  by  the  appellant  

challenging  the  impugned  judgment  and  order  dated  6 th October,  

2010  passed  by  the  High  Court  of  Judicature  at  Bombay  in  Writ  

Petition Nos. 614-620 of 2010 whereby the High Court dismissed the  

writ  petitions  filed  by  the  appellant  seeking  quashing  of  the  

complaints filed by the Respondent No.2 under Section 138 read with

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Section  141  of  the  Negotiable  Instruments  Act,  1881  (hereinafter  

referred to as “the N.I. Act”).

3. The brief facts of these appeals are that Respondent No. 2, a  

finance Company, filed seven complaints under the N.I. Act against  

the  appellant  and  others  viz.,  (1)  Complaint  No.  3370/SS/2008  

claiming Rs.1,64,69,801-14 (2) Complaint No. 3641/SS/2008 claiming  

Rs.1,06,55,289-91  (3)  Complaint  No.  3368/SS/2008  claiming  Rs.  

1,41,95,806-40  (4)  3640/SS/2008  claiming  Rs.  85,21,294/-  (5)  

3369/SS/2008 claiming Rs. 1,88,12,292/- (6) 3642/SS/2008 claiming  

Rs. 1,69,95,353-50 and (7) Complaint No. 4086/SS/2009 for a claim  

of Rs. 8,08,973-25.  In all the complaints the allegation was that the  

Respondent No. 2 Company had extended trade finance facility to  

M/S Elite International Pvt. Ltd. to which the appellant was a Director  

at the relevant time and several Cheques (119 in number) issued by  

M/S Elite International Pvt. Ltd. aggregating to Rs.8,64,58,810-16, in  

discharge of its liability towards part payment, stood dishonoured with  

the  banker’s  remarks  “insufficient  funds”.   According  to  the  

complainant,  at  the  material  time,  the  accused  (appellant)  was  in  

charge and at the helm of affairs of M/S Elite International Pvt. Ltd.  

and therefore she is vicariously liable for the default of the Company

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as she is responsible for the conduct of its business.  Metropolitan  

Magistrate,  12th Court,  Bandra,  Mumbai  took  cognizance  of  the  

complaints and issued process against  the accused (appellant) for  

the offence punishable under Section 138 of the N.I. Act.

4. The aggrieved appellant filed Criminal Writ Petitions before the  

High  Court  under  Section  482,  Cr.P.C.  seeking  quashing  of  the  

criminal proceedings pending before the Metropolitan Magistrate. The  

High Court initially by an interim order dated 28th July, 2010 granted  

stay of the criminal proceedings qua the appellant and directed the  

trial  to  be  proceeded  against  the  other  accused.  Finally,  by  the  

impugned order, the High Court dismissed the writ petitions filed by  

the appellant. Challenging the said order of dismissal, the appellant  

has preferred these appeals before this Court.

5. The main contention advanced by the learned counsel for the  

appellant  is  that  the  appellant  is  merely  a  housewife  who  was  

appointed  as  a  Non-Executive  Director  of  M/s  Elite  International  

Private Ltd. and had no active role in the conduct of business of the  

Company, particularly in the issuance of the cheques in question. As  

a matter  of  fact,  the appellant  had resigned as the Director  much

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before the issuance of the cheques in question, her resignation was  

also approved by the Board of Directors in the meeting held on 17 th  

December, 2005. The resignation of the appellant as Director of M/S  

Elite International Pvt. Ltd. has also been informed to the Registrar of  

Companies by Form No. 20B under Section 159, Schedule V, Part II  

of  the  Companies  Act,  1956 when the  annual  return  for  the  year  

ending  on  31st March,  2006  was  filed.  The  trade  facility  was  

sanctioned by the Respondent No. 2 on 19th January, 2005 as per the  

Letter  of  Guarantee executed by the appellant  on the same date.  

The effective date of resignation of the appellant as Director of the  

Company was 17th December, 2005. With the result of approval of  

her resignation by the Board of  Directors,  the appellant  ceased to  

play  any  role  in  the  activities  of  the  Company.  The  Cheques  in  

question were issued by the Company in the year 2008 i.e. about two  

and half years after resignation of the appellant as Director. This fact  

itself emphasizes that the appellant was not involved in the affairs of  

the Company when the Cheques were issued and had no role either  

in  the  conduct  of  the  business  of  the  Company  or  in  issuing  the  

Cheques.

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6. After resignation of the appellant as a Director, Form 32 under  

the Companies Act, 1956, pursuant to Section 303(2), was filed by  

M/S Elite  International  Pvt.  Ltd.  on  20th December,  2005 with  the  

Registrar  of  Companies  indicating  the  appointments  and  changes  

among Directors. In the said Form 32, the names of two Directors  

who were newly appointed were shown with remarks “appointed as a  

Director-Operations”  and  against  the  name  of  the  appellant  the  

remarks “resigned as a Director” were shown.  Taking note of this  

Form 32, Respondent No. 2 arrayed the newly appointed Directors as  

accused  Nos.  4  &  5  in  the  complaints.  It  is  thus  clear  that  the  

Respondent No. 2 is well aware of the fact that the appellant was no  

longer a part of M/S Elite International Pvt. Ltd, yet initiated criminal  

proceedings fastening vicarious liability on the appellant.

7. Learned counsel submitted that to fasten vicarious liability it is  

necessary  under  Section 141 of  the N.I.  Act  that  the complainant  

must  aver  and prove how and in  what  manner  the appellant  was  

responsible  in  the  conduct  of  the  business  of  the  Company.  The  

complainant shall also state in the light of proviso to Section 141(1),  

in what capacity the appellant was in charge of day to day affairs of  

the default Company at the relevant time, particularly when cheques

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were  issued.  Respondent  No.  2  (complainant)  did  not  fulfill  these  

prerequisites  contemplated  by  the  Act  but  sought  to  impute  the  

appellant with vicarious liability only on account of the fact that the  

appellant had attended the Board Meeting of M/S Elite International  

Pvt.  Ltd.  held on 14th August,  2004. In that  meeting,  the Board of  

Directors  authorized  another  Director  to  execute  necessary  

documents in connection with trade finance facility from Respondent  

No. 2. The mere presence of the appellant in the Board Meeting on  

14th August, 2004 would not amount to an offence punishable under  

Section 138 of the N.I. Act. Merely arraying a Director of a Company  

as  an  accused  in  the  Complaint  and  making  a  bald  or  cursory  

statement  without  attributing  any  specific  role,  that  the  Director  is  

responsible for the conduct of the business would not make a case of  

vicarious liability against a Director of the company under Section 141  

of  the N.I.  Act.   Similarly,  simply stating that  the appellant  was in  

charge of the affairs of the Company would not be sufficient to justify  

the allegation under Section 138 of the N.I. Act. In other words, the  

complainant  must  explain  the  role  specifically  attributable  to  the  

appellant in the commission of the offence. Placing reliance on this  

Court’s  judgment  in  National  Small  Industries  Corporation Vs.

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Harmeet Singh Paintal & Anr. (2010) 3 SCC 330 learned counsel  

submitted that  the law is well  settled by this Court  in a catena of  

cases that the complainant should specifically show as to how and in  

what manner the accused was responsible.

8. Despite Respondent No. 2 has knowledge of the resignation of  

the appellant as Director of the Company and she has no role in the  

issuance of cheques in question, yet as an arm twisting measure, the  

complainant arrayed the appellant in the complaint as a defaulter and  

initiated criminal proceedings against her. Knowing fully well  about  

the change of Directors, Respondent No. 2 unnecessarily dragged  

the  name  of  appellant  into  the  litigation  in  a  casual  and  callous  

manner and initiated criminal proceedings against her along with the  

existing Directors of the Company which is untenable under the law.  

The Metropolitan Magistrate without proper application of mind issued  

process  and  the  High  Court  also  erred  in  construing  the  penal  

provision enunciated under the N.I. Act, and wrongfully dismissed the  

Criminal  Writ  Petitions  filed  by  the  appellant  under  Section  482,  

Cr.P.C.

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9. In support of his contention that the appellant was no more a  

Director  of  the  Company  and  responsible  for  the  conduct  of  its  

business  at  the  relevant  time,  learned  counsel  relied  upon  the  

following:

(i) Agenda item 4 of the Minutes of the Board meeting dated 17 th  

December, 2005 which reads as under:

“4. RESIGNATION OF DIRECTOR

Chairman  placed  before  the  Members  of  the  Board  a  letter received from Ms. Pooja Devidasani tendering her  resignation as a Director of the Company.

Members  of  the  Board  noted  the  same and  then  they  unanimously resolved as under:

RESOLVED  THAT  resignation  tendered  by  Ms.  Pooja  Devidasani  be  and  is  hereby  accepted  from  the  conclusion of this Board Meeting”.

(ii) Form 32 submitted to the Registrar of Companies in pursuance  

of requirements of provisions of the Companies Act, 1956 in which  

against  the  name  of  appellant,  it  was  shown  as  “resigned  as  a  

Director”. Whereas against the names of Mr. Hitesh Haria and Mr.  

Parag Tejani, the words “appointed as a Director-Operations” were  

shown.  Against  the  column  “Date  of  appointment  or  change”  the  

dates  against  all  the  above  three  persons  were  shown  as  17 th  

December, 2005.  Taking note of these changes, Respondent No. 2

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arrayed the newly added Directors as defaulters, but not omitted the  

appellant who has resigned as a Director which is specified in the  

very Form 32.

(iii) The Annual Return filed by the Company for the year ending  

31st March, 2006 which also showed that the appellant was no longer  

a  Director  of  the  Company.   In  Column IV  of  the  Annual  Return  

against the name of appellant, it was clearly mentioned as “Date of  

ceasing : 17-12-2005”.

(iv) A  letter  dated  5th February,  2009  issued  by  the  default  

Company in  favour  of  Respondent  No.  2.  In  the said  letter,  while  

forwarding  certain  details/information,  a  list  of  Directors  was  also  

sent. The said list did not contain name of the appellant.  

Learned counsel for the appellant submitted that in the light of  

the above  Respondent  No.  2 was fully  aware that  appellant  was  

ceased to be a Director of the Company (a) prior to the issuance of  

cheques (b) prior to the dishonor of cheques (c) prior to the date of  

issuance of legal notice (d) prior to the expiry of 15 days period after  

issuance of legal notice after which cause of action to file criminal  

complaints arose and (e) prior to the filing of the criminal complaints.

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10. Learned counsel finally submitted that the allegations set out in  

the complaint do not constitute any offence against the appellant and  

the High Court committed a manifest error in interpreting Section 141  

of  the  N.I.  Act  in  its  proper  perspective,  which  led  to  travesty  of  

justice. He therefore urged for setting aside the impugned judgment  

and quash the criminal proceedings against the appellant.

11. Learned senior counsel appearing for the respondents, on the  

other hand, supported the impugned judgment of the High Court and  

submitted that  by dismissing the writ  petitions of  the appellant  the  

High Court had neither committed any illegality nor misinterpreted the  

provisions of the N.I. Act. Vehemently contending that the resignation  

of the appellant itself is a disputed fact, he submitted that no certified  

copy of Form 32 was produced by the appellant and only a certified  

copy  of  Annual  Return  has  been  filed  before  this  Court.  Under  

Section  79  of  the  Evidence  Act,  1872,  a  Court  can  presume  

genuineness of a document only when a certified copy is filed. Even if  

certified copy of Form 32 is produced by the appellant to contend that  

at the time of issuance of cheques, she had already resigned, when  

such Form 32 is disputed by the complainant, it shall be the bounden  

duty of the appellant to prove such Form 32 by leading evidence in

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the  trial.  Only  supplying  a  copy  of  Form  32,  without  proving  its  

contents, would not be sufficient to quash a complaint under Section  

138 read with Section 141 of the N.I. Act.

12. In support of his contention that when the Form 32 furnished by  

the appellant was disputed by the Respondent No. 2 the High Court  

cannot draw an inference on the basis of such disputed document,  

learned counsel relied on decisions of this Court in Chand Dhawan  

Vs.  Jawahar Lal (1992) 3 SCC 317,  Malwa Cotton and Spinning  

Mills Ltd. Vs. Virsa Singh Sidhu (2008) 17 SCC 147. Therefore, the  

High Court was right in dismissing the writ petitions preferred by the  

appellant. Hence the appellant cannot take the plea of her resignation  

to escape from legal liability that too when the resignation itself is a  

disputed fact. Unless and until trial takes place, it cannot be held that  

the appellant is no more a Director and not liable. At the material time  

relating to the financial transaction between Respondent No. 2 and  

the accused Company, the appellant was a Director and looking after  

the day to day affairs of the Company as  a Director and hence she is  

liable to be prosecuted since she had connived in the commission of  

offence.

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13. Learned  counsel  further  submitted  that  apart  from  the  

averments made in the complaint, the appellant has also executed an  

irrevocable Letter of Guarantee on 19th January, 2005 in favour of  

Respondent No. 2—Complainant, for availing trade finance facility. In  

the said Letter  of  Guarantee, the appellant categorically undertook  

that in the event of the Company failing or neglecting or refusing to  

pay the amount remaining unpaid, the same would be payable by  

her.  She  further  agreed  that  her  liability  and  obligation  under  the  

Guarantee  shall  be  continuing,  absolute,  unconditional  and  

irrevocable until  the borrower is fully discharged from all  liabilities,  

irrespective of any disputes or differences between the parties. The  

binding clause of the guarantee reads:

“I,  the  Guarantor,  expressly,  irrevocably  and  unconditionally agree that your Company shall be entitled  to enforce this Guarantee without making any demand on  or taking any proceedings against  the Client  for  all  the  amounts due and payable by the Client to your Company  under and in relation to the Agreement”.

The  cheques  in  question  were  issued  on  the  basis  of  the  said  

Guarantee  given  by  the  appellant  and  on  the  simple  ground  of  

resignation  she  cannot  deviate  from  vicarious  liability  as  per  the  

assurance given by her in the Letter of Guarantee.

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14. Learned counsel for the respondents made a reference to the  

Judgment  of  this  Court  in  Gunmala  Sales  Private  Ltd. Vs.  Anu  

Mehta  &  Ors. (Criminal  Appeal  No.  2228  of  2014)  decided  on  

October 17, 2014 and submitted that once in a complaint filed under  

Section 138 read with Section 141 of the N.I. Act, the basic averment  

is made that the Director was in charge of and responsible for the  

conduct of the business of the Company at the relevant time when  

the offence was committed, the Magistrate can issue process against  

such Director and the basic averment is sufficient to make out a case  

against the Director. Hence, learned senior counsel concluded that  

there is no illegality in issuing process against the appellant.

15. We have given our thoughtful consideration to the arguments  

advanced by the counsel on either side at length. The questions that  

arise  for  determination  are  (i)  whether  the  appellant  is  liable  for  

prosecution under Section 138 read with Section 141 of the N.I. Act  

for  the  alleged  offence  of  dishonor  of  cheques  committed  by  the  

default Company?; (ii) whether the High Court was right in dismissing  

the  writ  petitions  filed  by  the  appellant  seeking  quashing  of  the  

criminal proceedings initiated against her by the Respondent No. 2?

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16. Before delving into the merits of the case, it would be apt to  

take note of relevant portions of the complaints filed by Respondent  

No. 2 which read thus:

“I say that the accused No. 2 to 5 on behalf of accused  No. 1 have approached us with request for trade finance  facility and accordingly the said facility has been granted  by  us  to  the  accused  as  per  their  request  and  requirement.

I  say that accused No. 1 is private limited Company of  which accused No. 2, 3 & 5 are Directors and accused  No. 4 is the Director & authorized signatory of accused  No.  1  M/S  Elite  International  Pvt.  Ltd.—Imprest.  At  all  material  time  relevant  and  relating  to  the  complaint,  accused  No.  2  to  5  were  and  are  in  charge  of  and  responsible for the conduct of business of accused No. 1  and are also looking after day to day affairs of accused  No. 1. It is further submitted that accused No. 2 to 5 with  accused  No.  1  are  liable  to  be  prosecuted  and  /  or  connived  in  the  commission  of  the  present  offence,  in  their capacity as a Director/signatory of the said private  limited Company.

I say that as narrated in para 4 accused No. 2 to 5 being  responsible for  the affairs of  accused No. 1 i.e.  private  limited Company are liable to be prosecuted for  having  committed a  criminal  offence in  the event  of  failure  on  their part to comply with the requisitions contained in the  statutory notice dated 03-11-08, which was sent to them  both  under  R.P.A.D.  &  U.P.C.  on  06/11/08.  I  say  that  notice  was  received  by  all  the  accused  on  or  about  08/11/08 and notice sent through U.P.C. are deemed to  have  been  served.  However,  accused  have  failed  and  neglected  to  make  our  payment  under  the  above  said  dishonored cheques”.

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17. There is  no dispute  that  the appellant,  who was wife  of  the  

Managing Director, was appointed as a Director of the Company—

M/S  Elite  International  Pvt.  Ltd.  on  1st July,  2004  and  had  also  

executed a Letter of Guarantee on 19 th January, 2005. The cheques  

in question were issued during April, 2008 to September, 2008. So far  

as the dishonor of  Cheques is concerned, admittedly the cheques  

were not signed by the appellant. There is also no dispute that the  

appellant  was not the Managing Director  but  only a non-executive  

Director  of  the  Company.  Non-executive  Director  is  no  doubt  a  

custodian of the governance of the Company but does not involve in  

the day-to-day affairs of the running of its business and only monitors  

the executive activity. To fasten vicarious liability under Section 141  

of the Act on a person, at the material time that person shall have  

been at the helm of affairs of the Company, one who actively looks  

after  the  day-to-day  activities  of  the  Company  and  particularly  

responsible for the conduct of its business. Simply because a person  

is a Director of a Company, does not make him liable under the N.I.  

Act. Every person connected with the Company will not fall into the  

ambit of the provision. Time and again, it has been asserted by this  

Court that only those persons who were in charge of and responsible

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for  the  conduct  of  the  business  of  the  Company  at  the  time  of  

commission of an offence will be liable for criminal action. A Director,  

who was not in charge of and was not responsible for the conduct of  

the business of the Company at the relevant time, will not be liable for  

an  offence  under  Section  141  of  the  N.I.  Act.  In  National  Small   

Industries Corporation (supra) this Court observed:

“Section  141  is  a  penal  provision  creating  vicarious  liability,  and which,  as  per  settled law,  must  be strictly  construed.  It  is  therefore,  not  sufficient  to  make a bald  cursory  statement  in  a  complaint  that  the  Director  (arrayed as an accused) is in charge of and responsible  to the company for  the conduct  of  the business of  the  company  without  anything  more  as  to  the  role  of  the   Director. But the complaint should spell out as to how and  in what manner Respondent 1 was in charge of or was  responsible to the accused Company for the conduct of  its  business.  This  is  in  consonance  with  strict  interpretation  of  penal  statutes,  especially,  where  such  statutes create vicarious liability.

A company may have a number of Directors and to make  any or all the Directors as accused in a complaint merely  on the basis of a statement that they are in charge of and  responsible  for  the  conduct  of  the  business  of  the  company  without  anything  more  is  not  a  sufficient  or  adequate  fulfillment  of  the  requirements  under  Section  141.

18. In  Girdhari Lal Gupta Vs.  D.H. Mehta & Anr. (1971) 3 SCC  

189,  this  Court  observed  that  a  person  ‘in  charge  of  a  business’

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means that the person should be in overall control of the day to day  

business of the Company.

19. A Director of a Company is liable to be convicted for an offence  

committed  by  the  Company  if  he/she  was  in  charge  of  and  was  

responsible to the Company for the conduct of its business or if it is  

proved  that  the  offence  was  committed  with  the  consent  or  

connivance of, or was attributable to any negligence on the part of the  

Director concerned [See:  State of Karnataka Vs.  Pratap Chand &  

Ors. (1981) 2 SCC 335].  

20. In  other  words,  the  law  laid  down  by  this  Court  is  that  for  

making a Director of a Company liable for the offences committed by  

the  Company  under  Section  141  of  the  N.I.  Act,  there  must  be  

specific averments against the Director showing as to how and  

in what manner the Director was responsible for the conduct of  

the business of the Company.

21. In  Sabitha  Ramamurthy  &  Anr. Vs.  R.B.S.  

Channbasavaradhya (2006) 10 SCC 581, it was held by this Court  

that it is not necessary for the complainant to specifically reproduce  

the wordings of the section but what is required is a clear statement

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of fact so as to enable the court to arrive at a prima facie opinion that  

the accused is vicariously liable. Section 141 raises a legal fiction.  

By  reason  of  the  said  provision,  a  person  although  is  not  

personally liable for commission of such an offence would be  

vicariously  liable  therefor.  Such  vicarious  liability  can  be  

inferred so far as a company registered or incorporated under  

the  Companies  Act,  1956  is  concerned  only  if  the  requisite  

statements, which are required to be averred in the complaint  

petition, are made so as to make the accused therein vicariously  

liable  for  the offence committed by the company.  By verbatim  

reproducing the wording of the Section without a clear statement of  

fact  supported  by  proper  evidence,  so  as  to  make  the  accused  

vicariously  liable,  is  a  ground  for  quashing  proceedings  initiated  

against such person under Section 141 of the N.I. Act.

22. As held by this Court in Pepsi Foods Ltd.  & Anr. Vs. Special  

Judicial  Magistrate & Ors.  (1998) 5 SCC 343, summoning of  an  

accused in a criminal case is a serious matter. Criminal law cannot be  

set into motion as a matter of course. The order of the Magistrate  

summoning the accused must reflect that he has applied his mind to  

the  facts  of  the  case  and  the  law  applicable  thereto.  He  has  to

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examine  the  nature  of  allegations  made in  the  complaint  and  the  

evidence both oral  and documentary in support  thereof and would  

that be sufficient for the complainant to succeed in bringing charge  

home to the accused. It is not that the Magistrate is a silent spectator  

at the time of recording of preliminary evidence before summoning of  

the accused. The Magistrate has to carefully scrutinise the evidence  

brought  on  record  and  may  even  himself  put  questions  to  the  

complainant  and  his  witnesses  to  elicit  answers  to  find  out  the  

truthfulness of the allegations or otherwise and then examine if any  

offence is prima facie committed by all or any of the accused.

23. In  Gunmala  Sales  Private  Ltd. (supra)  on  which  learned  

counsel  for  the respondents has heavily  relied,  this  Court  at  Para  

33(c) held :

“In the facts of a given case, on an overall reading of the  complaint,  the High Court may, despite the presence  of the basic  averment,  quash  the complaint because  of the absence of  more  particulars  about  role  of  the Director   in   the  complaint.    It   may  do  so  having   come   across    some  unimpeachable,  uncontrovertible evidence which is beyond suspicion  or  doubt or totally acceptable circumstances which  may  clearly  indicate  that   the Director could not  have been concerned with  the  issuance  of  cheques  and asking him to stand the trial would be abuse of

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the process  of  the  court. Despite the presence of  basic averment, it may come to a conclusion that no  case is  made out  against  the  Director.    Take  for  instance  a  case  of  a Director suffering  from  a  terminal  illness  who  was  bedridden  at  the relevant  time or a  Director  who  had  resigned  long  before  issuance   of  cheques.   In  such  cases,  if  the  High  Court is convinced that  prosecuting such a Director  is merely an arm-twisting tactics, the High Court may  quash the proceedings.  It bears repetition to state that  to establish  such  case unimpeachable, uncontrovertible  evidence which is beyond suspicion or   doubt or some  totally acceptable circumstances will have  to  be  brought  to  the notice of the High Court.  Such cases may be few  and  far  between  but  the possibility of such a case being  there cannot be ruled out”.

24. In the light of the law laid down by this Court, the present case  

be examined.  It is not in dispute that two persons, namely, Parag  

Tejani and Hitesh Haria, were inducted as Director-Operations of the  

Company w.e.f. 17th December, 2005 by virtue of a resolution passed  

by  the  Company  on  the  same  date.  It  is  on  the  same  date  the  

appellant had ceased to be a Director as per the Annual Report which  

is not disputed by the Respondent No. 2. A perusal of the Complaint  

shows  that  Respondent  No.  2  has  made  the  newly  appointed  

Directors-Operations Parag Tejani and Hitesh Haria also as accused  

stating that all the accused approached him with a request for trade

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finance facility and accordingly the said facility was granted as per  

their request. It thus gives an impression that Respondent No. 2 is  

well aware of the change of Directors in the accused Company. In  

spite of knowing the developments taken place in the Company that  

the appellant was no longer a Director of the Company and two new  

Directors were inducted, the Respondent No. 2 has chosen to array  

all of them as accused in the Complaints. Moreover, Respondent No.  

2 had not disputed this fact emphatically in the proceedings before  

the High Court.   We have gone though the reply affidavit  filed by  

Respondent No. 2 before the High Court of Bombay.  

25. A bare reading of the averment of Respondent No. 2 before the  

High Court, suggests that his case appears to be that the appellant  

has  not  proved  her  resignation  in  unequivocal  terms  and  it  is  a  

disputed question of fact. It is noteworthy that the respondent No. 2  

except  making  a  bald  statement  and  throwing  the  burden  on  the  

appellant  to  prove  authenticity  of  documents,  has  not  pleaded  

anywhere that the public documents Form 32 and Annual Return are  

forged and fabricated documents.  Curiously, respondent No. 2 on  

the one hand raises a doubt about the genuineness of Form 32, a  

public  document,  through  which  the  default  Company  had

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communicated  the  change  of  Directors  to  the  Registrar  of  the  

Companies  with  the  effect  of  resignation  of  the  appellant  and  

induction of two Directors-Operations and on the other hand,  he has  

arrayed the two newly  appointed Directors-Operations as accused  

whose names were communicated to the Registrar of Companies by  

the  very  same  Form  32.  The  respondent/complainant  cannot  be  

permitted to blow hot and cold at the same time.  When he denies the  

genuineness of the document, he cannot act upon it and array the  

newly appointed Directors as accused.

26. We have also perused the copy of Annual Return filed by M/S  

Elite International Pvt.  Ltd. for the year 2006, on 31st March, 2006  

furnished in Form 20B as per  Section 159 of  the Companies Act,  

1956.  Column  IV  of  Schedule  V  –  Part  II  of  the  Annual  Return,  

requires  information  regarding  Directors/Manager/Secretary  (Past  

and  Present)  in  which  against  the  name  of  Devidasani  Ravinder  

Pooja—appellant it was mentioned “Date of ceasing : 17-12-2005”.  

Admittedly,  a  certified  copy  of  the  Annual  Return  became part  of  

record. Hence, we are of the considered opinion that the factum of  

appellant resigning from the Board of Directors is established.

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27. Unfortunately, the High Court did not deal the issue in a proper  

perspective and committed error in dismissing the writ  petitions by  

holding that in the Complaints filed by the Respondent No. 2, specific  

averments  were  made against  the appellant.  But  on the contrary,  

taking the complaint as a whole, it can be inferred that in the entire  

complaint,  no  specific  role  is  attributed  to  the  appellant  in  the  

commission of offence. It is settled law that to attract a case under  

Section 141 of the N.I. Act a specific role must have been played by a  

Director of the Company for fastening vicarious liability.  But in this  

case, the appellant was neither a Director of the accused Company  

nor in charge of or involved in the day to day affairs of the Company  

at the time of commission of the alleged offence. There is not even a  

whisper or shred of evidence on record to show that there is any act  

committed by the appellant from which a reasonable inference can be  

drawn  that  the  appellant  could  be  vicariously  held  liable  for  the  

offence with which she is charged.  

28. In the entire complaint, neither the role of the appellant in the  

affairs  of  the  Company  was  explained  nor  in  what  manner  the  

appellant is responsible for the conduct of business of the Company,  

was  explained.  From the  record  it  appears  that  the  trade  finance

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facility  was  extended  by  the  Respondent  No.  2  to  the  default  

Company during  the  period  from 13th April,  2008 to  14th October,  

2008, against which the Cheques were issued by the Company which  

stood  dishonored.  Much  before  that  on  17 th December,  2005  the  

appellant resigned from the Board of Directors. Hence, we have no  

hesitation  to  hold  that  continuation  of  the  criminal  proceedings  

against the appellant under Section 138 read with Section 141 of the  

N.I. Act is a pure abuse of process of law and it has to be interdicted  

at the threshold.  

29. So far as the Letter of Guarantee is concerned, it gives way for  

a civil liability which the respondent No. 2—complainant can always  

pursue the remedy before the appropriate Court. So, the contention  

that the cheques in question were issued by virtue of such Letter of  

Guarantee and hence the appellant is liable under Section 138 read  

with Section 141 of the N.I. Act, cannot also be accepted in these  

proceedings.   

30. Putting the criminal law into motion is not a matter of course.  

To settle the scores between the parties which are more in the nature  

of a civil dispute, the parties cannot be permitted to put the criminal

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law into motion and Courts cannot be a mere spectator to it.  Before a  

Magistrate taking cognizance of an offence under Section 138/141 of  

the N.I. Act, making a person vicariously liable has to ensure strict  

compliance of the statutory requirements. The Superior Courts should  

maintain purity in the administration of Justice and should not allow  

abuse of the process of the Court.  The High Court ought to have  

quashed the complaint against the appellant which is nothing but a  

pure abuse of process of law.

31. For all the foregoing reasons, we are of the view that this is a fit  

case for quashing the complaint, and accordingly allow these appeals  

by setting aside the impugned judgment passed by the High Court  

and quash the criminal  proceedings pending against  the appellant  

before the Trial Court.

.….…………………………………………...J.                               (SUDHANSU JYOTI MUKHOPADHAYA)

…………….....………………………………J. (N.V. RAMANA)  

NEW DELHI DECEMBER  17,  2014