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Complainant U/S 138 NI Act May Not Know Exact Role Of Company Directors, Basic Averment About Vicarious Liability Sufficient: Karnataka High Court

Raashi Saxena ,
  14 November 2022       Share Bookmark

Court :
Hon’ble High Court of Karnataka
Brief :

Citation :
2022 LiveLaw (Kar) 455

CASE TITLE
Heena Thirumali Sateesh & Anr v. M/S Minimelt Engineers India

DATE OF ORDER
2nd November 2022

BENCH
Justice M Nagaprasanna

PARTIES
Petitioner :
HEENA THIRUMALI SATEESH and HANUMANTH INAMDAR
Respondent : M/S MINIMELT ENGINEERS INDIA

SUBJECT

According to the Karnataka High Court, in proceedings brought against company directors pursuant to Section 138 of the Negotiable Instruments Act, the complainant is only required to make the necessary averments regarding the directors' vicarious liability; the onus then shifts to the directors to establish their innocence.

IMPORTANT PROVISIONS

Section 138 of the Negotiable Instruments Act

  • Dishonour of cheques is addressed in Section 138 of the Act. It is not concerned about other negotiable instruments being dishonoured.
  • The check has to be written to pay off an existing obligation or debt.
  • The cheque must be presented either within validity period or within 3 months, whichever is earlier.
  • If there are insufficient funds, the check must be returned unpaid.
  • The drawer must receive notice of the dishonourable fact within 30 days.
  • Cheque drawer must refuse to pay within 15 days after receiving the notice.

BRIEF FACTS

  • Directors of Hoysala Projects Private Limited (the Company) requested that the charges against them be dropped.

ISSUES RAISED

The main issue raised here was that should the petitioner's request to have the proceedings before the XX Additional S.C.J. and the Additional Chief Metropolitan Magistrate dismissed or accepted?

ARGUMENTS ADVANCED BY THE PETITIONER

  • The petitioners' knowledgeable counsel attempted to show the court through the documents that they have no part to play in the transaction, which is between the Company and the complainant.
  • They were unaware of the company's daily operations because they were simply the directors of the company.
  • The Company is Accused No. 1, the Chairman and Managing Director is Accused No. 2, and the Director, who signed the cheques, is Accused No. 5.
  • The Company is Accused No. 1, the Chairman and Managing Director is Accused No. 2, and the Director, who signed the cheques, is Accused No. 5. As a result, rather than the petitioners, the accused Nos. 1, 2, and 5 are the ones who must respond to the charge.
  • The petitioners asked for the cancellation of the entire case against them in C.C.No. 8836/2021, arguing that they had no part to play in the entire proceeding.

ARGUMENTS ADVANCED BY THE RESPONDENT

  • According to the respondent's knowledgeable counsel, the complaint does, however, describe the petitioners' status as the Company's Directors.
  • In order to prove that the petitioners are not only Directors but also full-time Directors and Promoters of the Company, he has included various documents into the record.
  • He would therefore request that the petition be denied, arguing that the petitioners must be found innocent in the aforementioned case.

ANALYSIS BY THE COURT

  • The bench cited the case of S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan [SPECIAL LEAVE APPEAL (CRIMINAL) NO. 9811 OF 2021], in which the Apex Court determined that once the complainant made the necessary averments in the statutory notice he had sent regarding the partners' vicarious liability, and upon receiving that notice, if the partner remained silent and made no response to it, the complainant had every reason to believe that what he had written therein had been accepted by the noticee
  • According to the High Court, it is now up to the petitioners to prove themselves innocent because, in this Court's opinion and according to S.P.MANI (supra), the complaint clearly outlines the essential elements of an allegation that would constitute an offence under Sections 138 and 141 of the NI Act.

CONCLUSION

  • After thorough analysis of all the facts of the case and hearing of the arguments of both sides, the petition was dismissed by the bench.

Click here to download the original copy of the judgement

 
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