Case BriefsHigh Courts

Delhi High Court: Manoj Kumar Ohri, J., while allowed the present petition and quashed the impugned order summoning the petitioners under Section 138 Negotiable Instruments Act, 1881.

Petitioners in the present case were summoned for the offence punishable under Section 138 NI Act.

Respondent filed a complaint stating that the accused were regular purchasers of goods from the complainant on a credit basis and made regular payment towards sale consideration from time to time in the past. There was an outstanding balance payable by the accused against which 4 account payee cheques were issued. However, the same were returned unpaid to the complainant vide bank’s return with remarks “Funds Insufficient”.

Complainant issued a legal notice of demand calling upon the accused to make payment within 15 days from the date of receipt. Since no payment was made within the statutory period of 15 days, a complaint under Section 138 read with Sections 141/142 of NI Act was filed.

Counsel for the petitioner contended that, petitioners were the independent non-executive Additional Directors and were never involved in the day to day affairs of the company at any point of time. Further, he referred to the complaint where the present petitioners were wrongly described as Directors.

It is an admitted case of the respondent that the petitioners were neither the Managing Directors nor the signatories to the cheques in question.

Further, the Counsel for the respondent submitted that the petitioners were named as Directors in the complaint on the basis of the information which was downloaded from the official website of ROC.


While concluding its decision, Court stated that, Vicarious liability of a person arises in terms of Section 141 of NI Act, and referred to S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89.

Another Supreme Court’s decision that the bench referred was a recent one,

Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018) 7 SCC 443, wherein it was held that

Non-Executive Directors are, therefore, persons who are not involved in the day-to-day affairs of the running of the company and are not in charge of and not responsible for the conduct of the business of the company.

Thus, in view of the above, Court stated that the petitioners were neither the Managing Directors nor the authorized signatories of the accused company.

Further, the Court noted that, a perusal of the complaint filed by the respondent shows that except for general allegation stating that petitioners were responsible for control and management and day to day affairs of the accused company, no specific role had been attributed to petitioners.

To fasten the criminal liability under The Negotiable Instruments Act, 1881, the above generalised averment without any specific details as to how and in what manner, the petitioners were responsible for the control and management of affairs of the company, is not enough.

Hence the impugned order summoning the petitioners under Section 138 NI Act is quashed. [Sunita Palta v. Kit Marketing (P) Ltd., Crl. MC No. 1410 of 2018, decided on 03-03-2020]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Valmiki Mehta, J. dismissed a regular first appeal filed under Section 96 CPC against the judgment of the trial court whereby the appellant’s application for leave to defend was dismissed.

Brief facts of the case are that the appellant-defendant took a loan of Rs 20 lakhs from the plaintiff and issued two cheques for the part-payment thereof. However, on presentation, the said cheques were dishonoured with remarks funds insufficient. After serving the legal notice, the petitioner filed a suit. The defendant filed an application for leave to defend. His basic defence was that the cheques in question were stolen from his car while he was driving from Rohtak to Delhi. However, the trial court dismissed the defendant’s application for leave to defend. Aggrieved thus, the defendant filed the instant appeal.

The High Court was of the view that judgment of the trial court did not warrant any interference. It was noted that indeed an FIR was filed by the defendant in regard to the said robbery. However, there was no mention of the said cheques being stolen. The defendant was using such fact to create a completely false defence to the suit. Referring to the Supreme Court decision in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, the High Court observed that once the defence is clearly frivolous and vexatious and there is no triable issue, leave to defend should not be granted. In the present case too, the Court completely disbelieved the story put forth by the defendant, and concluded that the defence was frivolous and vexatious. Thus, the trial court was right in dismissing the defendant’s application for leave to defend. The appeal was dismissed sans merit. [Mange Ram v. Raj Kumar Yadav,2018 SCC OnLine Del 10316, dated 03-08-2018]

Case BriefsHigh Courts

Himachal Pradesh High Court: A Single Judge Bench comprising of Chander Bhushan Barowalia, J. allowed a criminal appeal filed under Section 378 CrPC against the order of the trial court whereby complaint filed by the appellant was dismissed for non-appearance of the complainant-appellant.

The appellant filed a complaint under Section 138 of Negotiable Instruments Act 1881, alleging that the respondent had to pay a legally liable debt to the appellant. The respondent issued a cheque in favour of the appellant for the same. The appellant presented the said cheque before the respondent’s bank for payment. However, the cheque was returned with the endorsement ‘Funds Insufficient’. The appellant issued a demand notice to the respondent in compliance with the provisions of NI Act, but even then the respondent did not discharge his debt. Consequently, the appellant filed a complaint under Section 138 of the Act. The trial court issued notice for the service on the accused-respondent on 23-12-2015. On that date, the appellant did not appear before the court as he was under the impression that it was a formal hearing and it would be attended to by his counsel. However, appellant’s counsel was busy in conducting a criminal trial before the first Appellate Court and even he could not appear before the trial court on the given date. Resultantly, the trial court, under Section 256 CrPC, dismissed the complaint and acquitted the respondent. Aggrieved by the same, the appellant was in appeal before the High Court.

The High Court perused the record and was of the view that the trial court was not right in dismissing appellant’s complaint. The Court noted that non-appearance of the appellant, as well as his counsel, was not due to inadvertence. The appellant was relying on his counsel to appear before the trial court as it was a formal hearing, and the counsel was busy in conducting the criminal trial as stated hereinabove. The Court was of the opinion that such non-appearance was due to unavoidable circumstances. The Court concluded that the non-appearance of the appellant as well his counsel was neither intentional nor willful, but was beyond their control. Therefore, the High Court allowed the appeal and set aside the impugned judgment of the trial court dismissing the complaint of the appellant herein. [Padam Singh Saini v. Megh Singh,2018 SCC OnLine HP 784, dated 18-6-2018]