Dear All,
This was reported in "Times of India, dated 16 February'2010, Mumbai edition, page 16".
(read article, as reproduced below)
MY PERCEPTIONS :
1. The important point in this judgement is that the SC has "LAID DOWN THE CODES", which means that all courts will have to mandatorily follow the SC Codes pertaining to cheque bouncing cases. The CODES have "NOW" become the statutory law, WHICH CANNOT INVITE INTERPRETATIONS BY DIFFERENT JUDICIARY.
2. SC has specifically stressed that (u/s 141), Directors who were responsible for the conduct of the business "at the relevant time" ONLY WILL BE held liable under the N.I.Act.
WHAT IS RELEVANT TIME (example) :
If a director resigns on 01 January 2010, after signing of a cheque which is presented on say 30 March 2010, THEN the signatory (resigned director) is not responsible since he no longer is responsible for the conduct of the business (as on 30 March) AND the new other director who has taken over from the resigned director (from date 02 January) has NOW become automatically vicariously liable under the N.I.Act, " EVEN IF " the new director has not signed the cheque.
WHAT IS - RESPONSIBLE FOR CONDUCT OF BUSINESS :
3. The defination of "responsible for conduct of business" means RESPONSIBLE ON THE BANK MEMO DATE OF DISHONOUR OF CHEQUE ....AND.... NOT ON DATE WRITTEN on CHEQUE ....AND.... NOT ON DATE OF TRANSACTION ....OR.... WHATEVER..
Since cheques can be post dated even for five long years, by the drawer
(Subject to cheque belongs to a Corporate / Company, as defined u/s 141)
4. AS FAR AS A COMPANY CHEQUE IS CONCERNED, There is NOW a "FICTIONAL" Lacune (self contradiction) in the Act. u/s 138 the wordings are "drawer of cheque" and u/s 141 the wordings are "responsible (in-charge) for the conduct of business"
a) If the drawer of the cheque has resigned / died, THEN drawer cannot be a Drawer and further cannot be "responsible (in-charge) for the conduct of business"
b) on date written on cheque, there is no offence under N.I.Act, since the CHIEF AND THE ONLY offence criteria that attracts S.138 is "Dishonour of Cheque", that too only after mandatory notice period is over.
c) Resigned director (drawer) is not "responsible (in-charge) for the conduct of business", hence he does not remain "drawer of cheque", under the condition u/s 141.
SO TECHNICALLY u/s 138, WHO REMAINS the DRAWER :
d) Since the Company is a defined as a Person, the DRAWER (u/s 141) " IS " the Company and not the Director (since the directors keep changing / resigning). The director signs the cheque due to the power delegated on him by the Company. Such delegated power is over after resign / death / transfer from that particular responsible post.
e) Hence it would be improper to say that Director (as a person) is the "DRAWER". Wherein u/s 141 the drawer IS THE Company, and since the company cannot be punished / jailed, the latest New Director (to whom the power is delegated) who NOW is in-charge for conduct of that particular bank account will be held vicariouly liable because he is now "responsible (in-charge) for the conduct of business" i.e. on cheque dishonour date.
f) The director is not punished for being the "DRAWER" of the cheque,
The "DRAWER" component is ONLY a legal condition u/s 138.
The Director is punished for his negligence, BECAUSE u/s 141 he is termed as "IN-CHARGE & RESPONSIBLE FOR THE CONDUCT OF THE COMPANY AT THE RELEVANT TIME".
g) conclusively u/s 138 "Drawer" of cheque is another person AND u/s 141 "incharge & responsible for conduct of business" is another person.
Keep Smiling .... Hemant Agarwal
Cheque bouncing: SC limits director’s liability
("Times of India, dated 16 February'2010, Mumbai edition, page 16")
New Delhi: The Supreme Court on Monday significantly narrowed down the liability of directors, who have been hounded under the Negotiable Instruments Act for dishonour of a cheque issued by the company.
Upholding the quashing of summons and case against a director initiated by National Small Industries Corporation, a Bench comprising Justices P Sathasivam and Justice H L Dattu said not all directors were liable under Section 141 of the NI Act. “Only those persons who were in-charge of and responsible for the conduct of the business of the company at the time of commission of an offence will be liable for criminal action,” said the Bench. “It follows from the fact that if a director of a company who was not in-charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions,” said Justice Sathasivam writing the judgment for the bench. After discussing the vicarious liability of the MD and other directors in cheque bouncing cases, the bench laid down codes that include:
It is a complainant’s responsibility to explain how a director was vicariously liable. There is no presumption that every director knows about the issuance of the cheque that bounced.
Under Section 141, criminal liability can be fastened only on those directors who, at the time of the commission of the offence, were in charge of and responsible for the conduct of the business of the company.
