Case title:
Satvinder Jeet Singh Sodhi v. State of Maharashtra
Date of Order:
1st July, 2022
Bench:
Honourable Mr. Prakash Deu Naik
Parties:
Petitioner:
Satvinder Jeet Singh Sodhi
Respondent: State of Maharashtra
SUBJECT:
The accused cannot be prosecuted for the offenses punishable under Section 138 of the NI Act by invoking Section 141 of the same Act in light of the allegations presented in the complaint.
IMPORTANT PROVISIONS:
Section 138 of the NI Act- Dishonour of cheque
Section 141 of the NI Act- Offences by companies
OVERVIEW:
- A variety of material handling equipment are sold by the complaint company.
- On behalf of the company, directors of the accused company made an order with the complaint for an electromagnetic oil-cooled overband magnetic separator. The complainant company delivered the goods to the consignee at their request in accordance with the demands of the accused company. Regarding the items' quality and quantity, the accused made no protests.
- The complainant company issued a cheque to settle the debt. The cheque's value was Rs. 29,31,849.30. The complainant submitted the cheque to their banker. It was disregarded for "Funds insufficient" reasons.
ISSUES RAISED:
- Whether the Non-executive directors of a company be made liable for the offence under section 138 of the Ni act?
ARGUMENTS ADVANCED BY THE APPELLANT:
- As non-executive independent Directors of the accused company, the applicants are not in charge of the day-to-day operations of that company.
- The applicants are unaware of any of the events surrounding this case. According to Section 149(12) of the Companies Act, an independent director or non-executive director may only be held accountable for corporate acts of omission or commission that occurred with his knowledge, were attributable to Board procedures, were carried out with his consent or connivance, or occurred in cases in which he failed to act diligently.
- The applicant company did not get the legal notice requiring the amount of the cheque.
- The defendant must be in charge of daily operations and accountable for the company's business behavior in order to be prosecuted under Section 141 of the Act.
- A member of the board of directors who (i) does not have a material connection to the firm, (ii) is not a member of the executive team, and (iii) is not involved in the day-to-day management of the company is referred to as an independent director.
- Independent Directors of the Board must meet certain standards before they can list on a certain exchange.
- A material relationship is one that would prevent a director from using their independent judgment.
ARGUMENTS ADVANCED BY THE RESPONDENT:
- Learned counsel for respondent claims that there are enough allegations in the complaint to describe the applicants' roles. The applicant's arguments that they are independent non-executive directors or that there are no averments to satisfy Section 141 of the NI Act's requirements must be taken into consideration throughout the trial.
JUDGEMENT ANALYSIS:
- The court held that the applicants are independent non-executive directors, according to the records.
- The petitioners cannot be prosecuted for the offenses punishable under Section 138 of the NI Act by invoking Section 141 of the same Act in light of the allegations presented in the complaint and the materials on file.
- The applicants were non-executive independent directors for the accused company. In exercise of inherent powers of the Court under Section 482 of Cr.P.C., the proceedings against them were quashed.
CONCLUSION:
- The term non-executive director refers to a member of a company's board of directors. This board member isn't a company employee, which means they don't engage in the day-to-day management of the organization.
- Section 141 of the NI Act is a provision that deals with the vicarious liability of a company and its officers for the offence of dishonour of cheque. It states that when a company commits an offence, the person who was in charge of and responsible for the conduct of the business at the time of the offence, as well as the company itself, shall be deemed to be guilty of the offence. It also states that if the offence was committed with the consent or connivance of, or due to the neglect of, any director, manager, secretary or other officer of the company, such person shall also be liable.
