Status of directorship of retired director who issued fraudulent cheque have to be tested at trial

The Delhi High Court has ruled that a trial is necessary to determine the liability of a former company director concerning post-dated cheques that were returned unpaid. The court found that questions regarding the director's resignation date, the company's financial standing, and potential re-appointment liabilities are complex issues that can only be properly addressed during a full trial. Consequently, the magistrate's decision to reject the director's plea for discharge and proceed to trial was upheld.

In Maj. Surendra Kumar Hooda (retd.) V. Kapil Gupta the Hon'ble Delhi High Court held that, the correctness of the allegations against the Director who has already resigned on the date of presentation of postdated cheques issued by the Director of the Company for exercising Buy Back Option which were returned unpaid have to be tested at trial.

Facts

Major Surendra Kumar Hooda ('the Petitioner') is the Director of M/s A N Buildwell (P) Ltd. ('ANBPL' or 'accused company'). Kapil Gupta ('the Respondents') has alleged that, the Petitioner had induced him to invest in a residential real estate project. The Agreement to Sell in question provided the Respondent the "Buy Back Option', by depositing the postdated cheques amounting to Rs. 1,14,74,703/- issued by the accused company.

The Respondent came to know that the accused company was on the verge of liquidation and found that the residential project was nowhere near completion, then, the Respondent exercised the Buy Back Option and presented the aforementioned postdated cheques issued by the accused company in bank for payment, which were returned unpaid due to insufficiency of funds.

The Respondent alleged that, after dishonoring of cheques, his verbal requests for cancellation of unit and repayment were not answered by the accused persons and he came to know that the accused Directors had already resigned from the Board of Directors of ANBPL, he was left with no option but to send Demand Notices under Section 138 of Negotiable Instrument Act, 1881 ('the NI Act').

Thereafter, Metropolitan Magistrate in complaints under Section 138 of NI Act passed orders dated March 16, 2017, June 25, 2018 vide which the Petitioner was summoned to face trial  and order dated June 25, 2020 vide which  Metropolitan Magistrate has framed Notices under the Section 251 Criminal Procedure Code, 1973 ('the Cr.P.C.') and dismissed the Petitioner's plea seeking discharge in the complaints in question and observed that the points raised by the parties are triable issues which can be agitated during trial.

The Petitioner has filed present petition seeking quashing of above-mentioned orders.

Issues

• Whether the Petitioner is required to be tested at trial.
• WhetherMetropolitan Magistrate rightly passed order dated June 25, 2020 rejecting the Petitioner's prayer for discharge the complaints.

Held

The Hon'ble Delhi High Court vide in CRL.M.C. 1779/2020 & CRL.M.A.12423/2020, CRL.M.C. 1782/2020 & CRL.M.A.12458/2020, CRL.M.C. 1783/2020 & CRL.M.A. 12460/2020, CRL.M.C. 1784/2020 & CRL.M.A. 12462/2020 decided on February 08, 2021 held as under:

1. Whether the Petitioner who had issued the postdated cheques in the capacity of Director of the accused company, had already resigned on the date of presentation of cheque or whether there was sufficient balance in the account to honour the legally enforceable debt or what shall be the Petitioner's liabilities after being re-appointed as the Director of the accused company, are the questions which cannot be gone into at this stage - the correctness of allegations levelled by the parties, have to be tested at trial .
2. Therefore, Metropolitan Magistrate while framing notices under Section 251 of the Cr.P.C. has rightly rejected petitioner's prayer for discharge while observing that the points raised by the parties are triable issues which can be agitated during trial.
3. Disposed of the petitions.