Delhi High Court Quashes Summons Against Lawyer in Cheque Dishonour Case, Says Mere Designation as Director Not Enough

Delhi High Court Quashes Summons Against Lawyer in Cheque Dishonour Case, Says Mere Designation as Director Not Enough

The Delhi High Court recently dismissed the summons orders issued against a practicing lawyer in a case under Section 138 of the Negotiable Instruments Act (NI Act). The petitioner, an Additional/Non-Executive Director of the accused company, was summoned as a director.

These petitions were filed to quash the complaint cases and summoning orders issued against the petitioner, a legal professional practicing before the Delhi Courts, for the alleged offence under Section 138 of the NI Act.

Local brokers and associates of Today Homes and Infrastructure Pvt Ltd (the accused company) approached the complainants/respondents to invest in an upcoming residential project. The complainants were induced to sign agreements with the company, under which the company was obligated to deliver possession of flats within 36 months. Each complainant was allotted one residential flat and made the corresponding payments. However, the company failed to deliver possession of the flats within the specified timeframe.

Subsequently, the complainants filed a complaint with the National Consumer Disputes Redressal Commission (NCDRC), which, on January 31, 2017, directed the company to refund the entire amount received from the complainants, inclusive of service tax, VAT, and simple interest, within three months from the order date. To fulfil this liability, Naveen Thakur and Rajesh Kumar (accused Nos. 4 and 5 in the complaints), acting on behalf of the accused company, issued six 'At Par' cheques in favour of each complainant.

The complainants successfully presented the first two cheques, which were honoured. However, when they attempted to deposit the subsequent two cheques, each valued at ₹10,00,000 and drawn on IndusInd Bank, these cheques were dishonoured. As the requisite payment was not made within the stipulated time frame, multiple complaint cases were filed under Section 138. In these cases, the petitioner was included as accused No. 3 and was summoned in his capacity as a director of the accused company.

The Delhi High Court bench of Justice Dinesh Kumar Sharma held that simply stating the accused person's designation within the company or repeating the language of Section 141 of the Negotiable Instruments Act (NI Act) is not enough to establish guilt under Section 141 of the NI Act. The court underlined that there must be specific allegations and assertions explaining how and in what capacity the accused, who was alleged to have committed an offence under Section 138 of the NI Act, was involved in or responsible for conducting the company's business at the time of the offence.

The Bench explained that the legal precedent on this matter is clear. To establish vicarious liability under Section 141 of the NI Act, the accused individual must be specifically linked to a role or involvement in the offence.

The Bench referenced the case of Sunita Palita & Others vs. M/s Panchami Stone Quarry [LQ/SC/2022/934]. In this case, the Supreme Court granted the appeal, highlighting that the appellant was neither the Managing Director nor the Joint Managing Director of the accused company, and they did not sign the relevant cheques.

The Court emphasised that these accused individuals served as independent, non-executive directors and were not actively engaged in the day-to-day activities of the accused company.

The High Court bench noted that in the current case, the petitioner had assumed the role of an Additional Director/Non-Executive in the accused company starting from October 25, 2019. Upon scrutinising the complaint, it became apparent that the cheques under consideration had been issued on September 24, 2019. This date precedes the petitioner's appointment as an Additional/Non-Executive Director in the accused company.

The Court also noted that the Magistrate had taken cognisance of the offence under Section 138 and had issued the summons to the petitioner in his capacity as a Director of the accused company without exercising proper judicial discretion or consideration. In other words, the Magistrate had simply summoned the petitioner based on his designation, without considering whether there was any specific evidence to implicate him in the offence.

Based on the information provided, the Bench concluded that there was no evidence to suggest that the petitioner was responsible for or involved in the day-to-day affairs of the company or its business conduct at the time when the cheques were issued. Additionally, the petitioner was not a signatory to the cheques in question. Therefore, it would be a miscarriage of justice and an abuse of the court's process to keep the complaints pending against the petitioner, especially in the absence of any evidence to support the allegations against him.

The Court ruled that the summoning orders against the petitioner were to be set aside because there was no evidence to support the allegations against him. Consequently, the petitioner was acquitted of the offences alleged under Section 138 of the NI Act.