Dishonour of Cheque: Delhi HC Quashes Criminal Proceedings against Former CEO of A Company

Dishonour of Cheque: Delhi HC Quashes Criminal Proceedings against Former CEO of A Company

The Delhi High Court quashed criminal proceedings against the former CEO of a company in a cheque dishonour case, holding that no specific allegations or averments against the individual were made out regarding her alleged role either in the transaction or in the conduct of business of the company.

The background of the case is that a complaint was filed by a company – Aryan Infratech Pvt Ltd against one M/s. Ringing Bells Pvt. Ltd. and five other accused persons including the Petitioner under Sections 138/141/142 of the Negotiable Instruments Act (NI Act).

The complaint alleged that, Ringing Bells had issued a cheque bearing for an amount of Rs. 2 crores, signed by Another accused, with the consent and knowledge of the other co-accused including the Petitioner.

Further it was alleged that the cheque was dishonoured on presentation and despite a legal notice of demand the accused persons had failed to remit the alleged outstanding amount.

Justice Jyoti Singh observed that it was settled law that the mere designation of an officer in a company was not enough to make the officer vicariously liable in a case under Section 138 of the Negotiable Instrument Act (NI Act). "The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant," she stated.

The Court also stated that the Petitioner in question had already resigned from the company before the cheque in question was even issued. Also, it was not alleged anywhere that even after resigning from the company the Petitioner had continued to be associated with it in some form, or was occupying any such position which made her responsible for the conduct of its business, or for issuing instructions for the encashment of the cheque.

Thus the court observed that vicarious liability had been imputed to the Petitioner solely on account of her being the CEO of the company, and that hence the complaint against her was liable to be quashed.