{"id":226908,"date":"2020-03-12T16:30:45","date_gmt":"2020-03-12T11:00:45","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=226908"},"modified":"2020-03-15T19:24:07","modified_gmt":"2020-03-15T13:54:07","slug":"del-hc-proceedings-under-s-138-ni-act-quashed-against-independent-non-executive-directors-not-involved-in-day-to-day-affairs-of-company","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/03\/12\/del-hc-proceedings-under-s-138-ni-act-quashed-against-independent-non-executive-directors-not-involved-in-day-to-day-affairs-of-company\/","title":{"rendered":"Del HC | Proceedings under S. 138 NI Act quashed against Independent Non-executive Directors not involved in day-to-day affairs of Company"},"content":{"rendered":"

Delhi High Court:<\/strong>\u00a0Manoj Kumar Ohri, J., while allowed the present petition and quashed the impugned order summoning the petitioners under Section 138 Negotiable Instruments Act, 1881.<\/p>\n

Petitioners in the present case were summoned for the offence\u00a0punishable under Section 138 NI Act.<\/p>\n

Respondent filed a complaint stating that the accused were regular purchasers\u00a0of 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\u00a0unpaid to the complainant vide bank’s return with remarks “Funds Insufficient”.<\/p>\n

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.<\/p>\n

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.<\/p>\n

It is an admitted case of the respondent that the petitioners were neither the Managing Directors nor the signatories to the cheques in question.<\/p>\n

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.<\/p>\n

Decision<\/strong><\/span><\/p>\n

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<\/em>, (2005) 8 SCC 89<\/a>.<\/p>\n

Another Supreme Court’s decision that the bench referred was a recent one,<\/p>\n

\n
\n
\n

Chintalapati Srinivasa Raju v. Securities and Exchange Board of India,\u00a0<\/em>(2018) 7 SCC 443,<\/a> wherein it was held that<\/p>\n

\n
\n
\n

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.<\/em><\/span><\/p>\n

Thus, in view of the above, Court stated that the petitioners were neither the Managing Directors nor the authorized signatories of the accused company.<\/p>\n

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.<\/p>\n

\n
\n
\n

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.<\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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]<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Delhi High Court:\u00a0Manoj Kumar Ohri, J., while allowed the present petition and quashed the impugned order summoning the petitioners under Section 138 <\/p>\n","protected":false},"author":8808,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[30607,39963,39964,23584],"class_list":["post-226908","post","type-post","status-publish","format-standard","hentry","category-casebriefs","category-highcourts","tag-funds-insufficient","tag-managing-directors","tag-roc","tag-section-138-ni-act"],"yoast_head":"\nDel HC | Proceedings under S. 138 NI Act quashed against Independent Non-executive Directors not involved in day-to-day affairs of Company | SCC Times<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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