Case: Ashoke Mal Bafna Vs. M/s. Upper India Steel Mfg. &amp; Engg. Co. Ltd

3. The brief history of the case as per the complaint is that the accused/appellant issued nine cheques on6 in favour of the complainant Company for Rs.8,00,000/each, and one other cheque for Rs.9,40,780.05 in discharge of legal liability of M/s. Coventry Spring and Engineering Company Ltd. (for short the defaulter Company) of which the appellant was a Director. When the cheques were presented for clearance, they were dishonoured by the bank with remarks insufficient funds ont thereafter, served legal notice dated6 demanding payment but thed did not make payment. Ld. Judicial Magistrate took cognizance of the complaint and summoned the. On his failure to turn up before the Court, learned Magistrate proceeded under Section 299 of Criminal Procedure Code (for short the Code). Thed thereafter filed a petition before the High Court under Section 482 of the Code for quashing the complaint, summoning order and subsequent criminal proceedings, which came to be dismissed by the order impugned in the present appeal.

Court's reasoning:
11. 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 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 Company12. Turning to the case on hand, admittedly the cheques dated4 were issued while the appellant was Director of the Company with validity for a period of six months but during that period they were not presented for realization at the bank. The appellant has resigned as Director w.e.f.6 and the fact of his resignation has been furnished by Form 32 to the Registrar of Companies on6 in conformity with the rules. Thereafter, the appellant had played no role in the activities of the default Company. This fact remains substantiated with the Statement filed by the default Company on6 with the Registrar of Companies that in an advertisement of the Company seeking deposits (Annexure P3), only the names of three Directors of the Company were shown as involved in the working of the Company and the name of appellant was not therein. Indisputably, therefore, the cheques bounced on6 due to insufficient funds were neither issued by the appellant nor the appellant was involved in the day to day affairs of the Company13. Before summoning an accused under Section 138 of the Act, the Magistrate is expected to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and then to proceed further with proper application of mind to the legal principles on the issue. Impliedly, it is necessary for Courts to ensure strict compliance of the statutory requirements as well as settled principles of law before making a person vicariously liable14. The Superior Courts should maintain purity in the administration of Justice and should not allow abuse of the process of Court. Looking at the facts of the present case in the light of settled principles of law, we are of the view that this is a fit case for quashing the complaint. The High Court ought to have allowed the criminal miscellaneous application of the appellant because of the absence of clear particulars about role of the appellant at the relevant time in the day to day affairs of the Company.