Supreme Court bench comprising Justice J.K. Maheshwari and Justice Rajesh Bindal in Criminal Appeal arising out of S.L.P. (Crl.) No(s). 16051-16052 of 2023 (Adhiraj Singh versus Yograj Singh and others) delivered a significant judgment , holding that a director cannot be held liable under Section 141 of the Negotiable Instruments Act, 1881, for cheques issued by a company after their resignation.
The appellant was the director of (Respondent No. 2) Company from 28.09.2016 to 21.06.2019. He had submitted resignation letter dated 21.06.2019 with the Registrar of Companies on statutory form DIR-11 on 26.06.2019. The Company had also submitted statutory form DIR – 12 with the Registrar of Company acknowledging resignation of the petitioner w.e.f. 21.06.2019.
Three postdated cheques dated 17.07.2019, 17.09.2019 and 23.09.2019 were issued by (Respondent No. 2) Company on 12.07.2019. The cheques were dishonored upon presentation, and appellant was named in the complaint. He filed petitions to quash the complaint, arguing that he was no longer associated with the company and could not be held liable the dishonor of the cheques.
The contentions of the appellant were that on the date of issuance of the cheques, the appellant was not the director of the Company and he had not signed the cheques. Therefore, he cannot be held responsible for the affairs of the Company. In case any debt existed and the Company, had issued any cheque, the appellant cannot be held liable for offence under Section 138 of the Negotiable Instruments Act and saddling him to face trial would amount to misuse of process of law.
The contentions of the respondents (mainly of R1) were that on the date of debt, the appellant was a director in the Company and therefore, the factual aspect of submission of the resignation prior to the issuance of cheque and dishonouring is required to be examined during trial in view of the judgment of this Court in the case of Malva Cotton and Spinning Mills Limited Vs. Virsa Singh Sidhu and Others” reported in (2008) 17 SCC 147.
Having considered the submissions made by learned counsel for the parties, the court found that in the present
case on the date of issuance of the cheques, the appellant had already resigned. The fact regarding resignation was not in dispute. It was also not in dispute that the cheques issued by the Company were signed by another competent person on behalf of the Company. Once the facts are plain and clear that when the cheques were issued by the Company, the appellant had already resigned and was not a director in the Company and was not connected with the company, he cannot be held responsible for the affairs of the Company in view of the provisions as contained in Section 141 of the NI Act.
The judgment of Malwa Cotton and Spinning Mills (supra) is factually distinguishable from the present case. The resignation of the director accused therein, was submitted with the Registrar of Companies on 05.07.2001, after the issuance of the cheques therein, which were issued on various dates in December 2000 and February 2001, while the accused director maintained that he had intimated his resignation to the Company on 02.04.1999, i.e., before the issuance of cheques. In the light of such disputed facts, quashing of complaint was not allowed. On the contrary, as discussed, in the present case, the appellant’s resignation dated 21.06.2019 was submitted before the Registrar of Companies on 26.06.2019. Whereas the cheques in question, were issued on 12.07.2019, i.e., after his resignation.
Accordingly a resigned director not liable for Cheque issued by a company after his Resignation even though on the date of debt, he was a director in the Company.