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CHEQUE BOUNS CASE

Cheque bounce case – quashed by apex court = whether the director is liable even after resignation for cheque s issued after the resignation-inasmuch as the certified copy of the annual return dated 30.09.1999 is a public document, more particularly, in view of the provisions of the Companies Act, 1956 read with Section 74(2) of the Indian Evidence Act, 1872, we hold that the appellant has validly resigned from the Directorship of the Company even in the year 1998 and she cannot be held 14 = whether a complaint can be quashed on the probable defense of the accused-however, in an appropriate case, if on the face of the documents — which are beyond suspicion or doubt — placed by the accused, the accusations against him cannot stand, it would be travesty of justice if the accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter, for 13 = whether a certified copy of annual return of a company is a public document ?=Sub-section (1) of Section 74 refers to public documents and sub-section (2) provides that public documents include “public records kept in any State of private documents”. A conjoint reading of Sections 159, 163 and 610(3) of the Companies Act, 1956 read with sub-section (2) of Section 74 of the Indian Evidence Act, 1872 make it clear that a certified copy of annual return is a public document

REPORTABLE
Cheque sample for a fictional bank in Canada. ...

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 IN THE SUPREME COURT OF INDIA

 CRIMINAL APPELLATE JURISDICTION

 CRIMINAL APPEAL NO. 2033 OF 2011

 (Arising out of SLP (Crl.) No. 85 of 2011

Mrs. Anita Malhotra .... Appellant(s)

 Versus

Apparel Export Promotion Council & Anr. .... Respondent(s)

 J U D G M E N T 

P. Sathasivam, J.

1) Leave granted.

2) This appeal is filed against the final judgment and order 

dated 16.12.2009 passed by the High Court of Delhi at New 

Delhi in Crl. Misc. Petition No. 1238 of 2007 wherein the 

learned single Judge of the High Court dismissed the petition 

filed by the appellant herein for quashing of Criminal 

Complaint being No. 993/1 of 2005 filed against her under 

Section 138 of the Negotiable Instruments Act, 1881 

 1

(hereinafter referred to as "the Act") in the Court of ACMM, 

New Delhi.

3) Brief facts:

(a) The appellant, who was a non-executive Director on the 

Board of M/s Lapareil Exports (P) Ltd. (hereinafter referred to 

as "the Company"), resigned from the Directorship w.e.f. 

31.08.1998. On 20.11.1998, recording the resignation of the 

appellant, the Company filed statutory Form 32 with the 

Registrar of Companies. A notice dated 10.12.2004 was 

issued to the appellant regarding dishonour of alleged cheques 

under Section 138 of the Act by the respondents. The 

appellant, vide letter dated 15.12.2004, replied to the said 

notice informing the respondents that she had resigned from 

the Directorship of the Company long back in 1998. By letter 

dated 17.12.2004, the respondents sought for certain 

information/documents from the appellant relating to the 

Company. On 18.12.2004, the appellant replied to the 

aforesaid letter reiterating that after her resignation she had 

nothing to do with the Company and as such she was not in a 

position to give the information sought for. 

 2

(b) The Respondents filed a complaint under Section 138 of 

the Act being Complaint No. 993/1 of 2005 in the Court of 

ACMM, New Delhi against the Company arraying the appellant 

herein as accused No.3. The appellant herein also filed a 

petition being Criminal Misc. (Main) Petition No. 1238 of 2007 

before the High Court of Delhi for quashing of the complaint 

pending in the Court of ACMM, New Delhi. The High Court, by 

impugned judgment dated 16.12.2009, dismissed her petition.

(c) Aggrieved by the said judgment, the appellant has filed 

this appeal by way of special leave before this Court.

4) Heard Mr. Akhil Sibal, learned counsel for the appellant 

and Mr. G.L. Rawal, learned senior counsel for the respondent 

No.1.

5) The only point for consideration in this appeal is whether 

the appellant has made out a case for quashing the criminal 

complaint filed by the respondents under Section 138 of the 

Act. 

6) In the complaint filed by the respondents before the 

ACMM, New Delhi, the appellant herein was shown as A3. 

Apparel Export Promotion Council-Complainant No.1 therein 

 3

is a Company duly registered under Section 25 of the 

Companies Act, 1956 and has been sponsored by the 

Government of India through Ministry of Textiles and has been 

looking after all the matters relating to export of readymade 

garments from India to various parts of the world and also 

administer Garments Export Policy (GEP) issued by the 

Government of India from time to time. Complainant No.2 is 

the Joint Director and is otherwise a Principal Officer in the 

Apparel Export Promotion Council. Accused No.1 is a 

Company incorporated under the Companies Act, 1956 and in 

the complaint it was stated that accused Nos. 2 and 3 are its 

Directors. Insofar as the role of A2 and A3 are concerned, it 

was stated in the complaint that they are the Directors of the 

Company and are responsible for the conduct of the business 

and also responsible for day to day affairs of the Company. It 

was further stated that all the accused persons, who were in 

charge of and were responsible to the Company for the 

conduct of its business at the time the offence was committed 

shall be deemed to be guilty of the offence. It is further seen 

from the complaint that on 01.06.2004, the Company had 

 4

issued certain cheques in favour of the complainant for the 

purpose of allocation of quota and revalidation and utilization 

thereof. All the cheques mentioned in para 5 of the complaint 

were sent for encashment but the same were 

bounced/dishonoured by the drawee Bank, namely, the 

Punjab & Sind Bank for the reason "funds insufficient". The 

complaint further shows that the said fact was informed to the 

accused. Thereafter, the complainant intended to take action 

under Section 138 of the Act and the complainant got issued a 

statutory notice dated 10.12.2004. It was specifically stated in 

the complaint that the notices were sent by Regd. AD post on 

15.12.2004 and through courier on 13.12.2004 which were 

duly served on the accused. 

7) Mr. Akhil Sibal, learned counsel for the appellant, by 

drawing our attention to the reply sent by the appellant to the 

aforesaid notice vide her letter dated 15.12.2004 informing the 

complainant that she had resigned from the Directorship of 

the Company long back in 1998, submitted that the 

complainant having received such reply dated 15.12.2004 

suppressed the same both in the complaint as well as before 

 5

the courts below. In the said reply dated 15.12.2004, the 

appellant has highlighted that she had resigned from the 

Directorship of the Company long back in 1998. It is the 

grievance of the appellant that in spite of specific assertion 

that she ceased to be a Director from 1998 she was arrayed as 

accused No.3 purportedly in her capacity as a Director of the 

Company and her reply to the statutory notice was willfully 

suppressed. When this aspect was confronted to Mr. G.L. 

Rawal, learned senior counsel for the respondent, he fairly 

admitted that the complaint does not refer to the reply dated 

15.12.2004. He further stated that the said omission at the 

instance of an undertaking of the Government of India has to 

be ignored. We are unable to accept the said contention. 

Inasmuch as the reply to the statutory notice contains specific 

information that she had resigned from the Company in 1998, 

the complainant was not justified in not referring the same in 

the complaint and arrayed her as accused No.3 in the 

complaint filed in the year 2005. No doubt, whether the 

appellant has furnished the required documents in support of 

her claim for resignation from the Company in 1998 is a 

 6

different aspect which we are going to discuss in the 

subsequent paras. The reading of the complaint proceeds that 

on the date of issuance of cheques, that is, on 01.06.2004, the 

appellant was a Director of the Company and in charge of all 

the acts and deeds of the Company and also responsible for 

the day to day affairs, funding monies etc. This assertion 

cannot be sustained in the light of her reply dated 15.12.2004 

intimating that she had resigned from the Company in 1998. 

8) Mr. Akhil Sibal, learned counsel for the appellant, by 

drawing our attention to a certified copy of Annual Return of 

the Company dated 30.09.1999 filed with the Registrar of 

Companies, which was placed on record before the High 

Court, contended that it is a public document in terms of 

Section 74(2) of the Indian Evidence Act, 1872 and the High 

Court ought to have accepted the same as a valid document 

and quashed the criminal proceedings insofar as the appellant 

is concerned. The High Court, in the impugned order, after 

recording the statement of counsel for the petitioner therein 

(appellant herein) that Form-32 is not available in the record 

of the Registrar of Companies and finding that Form-32 is the 

 7

only authentic document and annual return dated 30.09.1999 

filed by the accused-Company is not a public document 

rejected the claim of the appellant and dismissed the petition 

filed for quashing the complaint. 

9) As regards the reference made by the High Court as to 

the statement said to have been made by the counsel for the 

petitioner therein that Form-32 is not available in the record of 

the Registrar of Companies, learned counsel for the appellant 

submitted that no such statement was ever made by the 

counsel before the High Court and he placed on record copy of 

Form-32 as Annexure-P2. A perusal of the document makes it 

clear that with effect from 31.08.1998, the appellant Smt. 

Anita Malhotra ceased to be a Director since she resigned from 

the Directorship of the Company, i.e., Lapareil Exports (P) Ltd. 

The High Court proceeded that Form-32 is the only authentic 

document and in the absence of the same, reliance on Annual 

Return is not permissible. The High Court has further held 

that annual return is not a public document. It is the 

assertion of the appellant that no such statement was ever 

made or could have been made as the petition itself enclosed 

 8

copies of Form 32 and the receipt of filing of the same. 

Though the appellant (petitioner before the High Court) was 

unable to produce certified copy of the said Form 32 as it was 

not available with the ROC, copy of Form 32 was placed before 

the High Court. In that event, we are of the view that the High 

Court has ignored the fact that the appellant has placed on 

record copy of Form 32 filed by the Company reporting the 

cessation of Directorship of the appellant along with the 

receipt of filing with the Registrar of Companies. 

10) Mr. Akhil Sibal by taking us through the relevant 

provisions of the Companies Act, 1956, particularly, Sections 

159, 163 and 610(3) contended that the Annual Return dated 

30.09.1999 is a public document and the same is reliable and 

legally acceptable insofar as the contents of the same are 

concerned. The said Sections are reproduced hereunder:

 159. Annual return to be made by company having a 

 share capital.-- (1) Every company having a share capital 

 shall within sixty days from the day on which each of the 

 annual general meetings referred to in section 166 is held, 

 prepare and file with the Registrar a return containing the 

 particulars specified in Part I of Schedule V, as they stood on 

 that day, regarding--

 (a) its registered office,

 9

 (b) the register of its members,

 (c) the register of its debenture-holders,

 (d) its shares and debentures,

 (e) its indebtedness,

 (f) its members and debenture-holders, past and present, 

and 

(g) its directors, managing directors, managers and 

secretaries, past and present:

Provided that any of the five immediately preceding returns 

has given as at the date of the annual general meeting with 

reference to which it was submitted, the full particulars 

required as to past and present members and the shares 

held and transferred by them, the return in question may 

contain only such of the particulars as relate to persons 

ceasing to be or becoming members since that date and to 

shares transferred since that date or to changes as 

compared with that date in the number of shares held by a 

member.

Xxx xxxx"

163. Place of keeping and inspection of, registers and 

returns.--

(1) The register of members commencing from the date of the 

registration of the company, the index of members, the 

register and index of debenture-holders, and copies of all 

annual returns prepared under sections 159 and 160, 

together with the copies of certificates and documents 

required to be annexed thereto under sections 160 and 161, 

shall be kept at the registered office of the company:

Xxx xxxx"

610. Inspection, production and evidence of documents 

kept by Registrar.

Xxxx xxx 

Xxxx xxx 

(3) A copy of, or extract from, any document kept and 

registered at any of the officers for the registration of 

 10

 companies under this Act, certified to be a true copy under 

 the hand of the Registrar (whose official position it shall not 

 be necessary to prove), shall, in all legal proceedings, be 

 admissible in evidence as of equal validity with the original 

 document." 

11) A reading of the above provisions make it clear that there 

is a statutory requirement under Section 159 of the 

Companies Act that every Company having a share capital 

shall have to file with the Registrar of Companies an annual 

return which include details of the existing Directors. The 

provisions of the Companies Act require annual return to be 

made available by a company for inspection (S. 163) as well as 

Section 610 which entitles any person to inspect documents 

kept by the Registrar of Companies. The High Court 

committed an error in ignoring Section 74 of the Indian 

Evidence Act, 1872. Sub-section (1) of Section 74 refers to 

public documents and sub-section (2) provides that public 

documents include "public records kept in any State of private 

documents". A conjoint reading of Sections 159, 163 and 

610(3) of the Companies Act, 1956 read with sub-section (2) of 

Section 74 of the Indian Evidence Act, 1872 make it clear that 

a certified copy of annual return is a public document and the 

 11

contrary conclusion arrived at by the High Court cannot be 

sustained. Annual Return dated 30.09.1999 which provides 

the details about the existing Directors clearly show that the 

appellant was not a Director at the relevant time. Had the 

High Court considered the contents of the certified copy of the 

annual return dated 30.09.1999 filed by the Company which 

clearly shows that the appellant herein (A3) has not been 

shown as Director of the Company, it could have quashed the 

criminal proceedings insofar as A3 is concerned. 

12) In DCM Financial Services Limited vs. J.N. Sareen 

and Another, (2008) 8 SCC 1, this Court, while considering 

Sections 138 and 141 of the Act came to the following 

conclusion which is relevant for our purpose:

 "21. The cheque in question was admittedly a post-dated 

 one. It was signed on 3-4-1995. It was presented only 

 sometime in June 1998. In the meantime the first 

 respondent had resigned from the directorship of the 

 Company. The complaint petition was filed on or about 20-8-

 1998. Intimation about his resignation was given to the 

 complainant in writing by the first respondent on several 

 occasions. The appellant was, therefore, aware thereof. 

 Despite having the knowledge, the first respondent was 

 impleaded as one of the accused in the complaint as a 

 Director in charge of the affairs of the Company on the date 

 of commission of the offence, which he was not. If he was 

 proceeded against as a signatory to the cheques, it should 

 have been disclosed before the learned Judge as also the 

 High Court so as to enable him to apply his mind in that 

 behalf. It was not done. Although, therefore, it may be that 

 12

 as an authorised signatory he will be deemed to be person 

 in-charge, in the facts and circumstances of the case, we are 

 of the opinion that the said contention should not be 

 permitted to be raised for the first time before us. A person 

 who had resigned with the knowledge of the complainant in 

 1996 could not be a person in charge of the Company in 

 1998 when the cheque was dishonoured. He had no say in 

 the matter of seeing that the cheque is honoured. He could 

 not ask the Company to pay the amount. He as a Director or 

 otherwise could not have been made responsible for payment 

 of the cheque on behalf of the Company or otherwise. [See 

 also Saroj Kumar Poddar v. State (NCT of Delhi), Everest 

 Advertising (P) Ltd. v. State, Govt. of NCT of Delhi and Raghu 

 Lakshminarayanan v. Fine Tubes."

13) In Harshendra Kumar D. vs. Rebatilata Koley and 

Others, (2011) 3 SCC 351, while considering the very same 

provisions coupled with the power of the High Court under 

Section 482 of the Code of Criminal Procedure, 1973 (in short 

`the Code') for quashing of the criminal proceedings, this Court 

held: 

 "25. In our judgment, the above observations cannot be read 

 to mean that in a criminal case where trial is yet to take 

 place and the matter is at the stage of issuance of summons 

 or taking cognizance, materials relied upon by the accused 

 which are in the nature of public documents or the materials 

 which are beyond suspicion or doubt, in no circumstance, 

 can be looked into by the High Court in exercise of its 

 jurisdiction under Section 482 or for that matter in exercise 

 of revisional jurisdiction under Section 397 of the Code. It is 

 fairly settled now that while exercising inherent jurisdiction 

 under Section 482 or revisional jurisdiction under Section 

 397 of the Code in a case where complaint is sought to be 

 quashed, it is not proper for the High Court to consider the 

 defence of the accused or embark upon an enquiry in respect 

 of merits of the accusations. However, in an appropriate 

 case, if on the face of the documents -- which are beyond 

 suspicion or doubt -- placed by the accused, the accusations 

 against him cannot stand, it would be travesty of justice if 

 the accused is relegated to trial and he is asked to prove his 

 defence before the trial court. In such a matter, for 

 13

 promotion of justice or to prevent injustice or abuse of 

 process, the High Court may look into the materials which 

 have significant bearing on the matter at prima facie stage."

As rightly stated so, though it is not proper for the High Court 

to consider the defence of the accused or conduct a roving 

enquiry in respect of merit of the accusation, but if on the face 

of the document which is beyond suspicion or doubt placed by 

the accused and if it is considered the accusation against her 

cannot stand, in such a matter, in order to prevent injustice or 

abuse of process, it is incumbent on the High Court to look 

into those document/documents which have a bearing on the 

matter even at the initial stage and grant relief to the person 

concerned by exercising jurisdiction under Section 482 of the 

Code.

14) Inasmuch as the certified copy of the annual return 

dated 30.09.1999 is a public document, more particularly, in 

view of the provisions of the Companies Act, 1956 read with 

Section 74(2) of the Indian Evidence Act, 1872, we hold that 

the appellant has validly resigned from the Directorship of the 

Company even in the year 1998 and she cannot be held 

 14

responsible for the dishonour of the cheques issued in the 

year 2004. 

15) This Court has repeatedly held that in case of a Director, 

complaint should specifically spell out how and in what 

manner the Director was in charge of or was responsible to the 

accused Company for conduct of its business and mere bald 

statement that he or she was in charge of and was responsible 

to the company for conduct of its business is not sufficient. 

[Vide National Small Industries Corporation Limited vs. 

Harmeet Singh Paintal and Another, (2010) 3 SCC 330]. In 

the case on hand, particularly, in para 4 of the complaint, 

except the mere bald and cursory statement with regard to the 

appellant, the complainant has not specified her role in the 

day to day affairs of the Company. We have verified the 

averments as regard to the same and we agree with the 

contention of Mr. Akhil Sibal that except reproduction of the 

statutory requirements the complainant has not specified or 

elaborated the role of the appellant in the day to day affairs of 

the Company. On this ground also, the appellant is entitled to 

succeed. 

 15

16) In the light of the above discussion and of the fact that 

the appellant has established that she had resigned from the 

Company as a Director in 1998, well before the relevant date, 

namely, in the year 2004, when the cheques were issued, the 

High Court, in the light of the acceptable materials such as 

certified copy of annual return dated 30.09.1999 and Form 32 

ought to have exercised its jurisdiction under Section 482 and 

quashed the criminal proceedings. We are unable to accept 

the reasoning of the High Court and we are satisfied that the 

appellant has made out a case for quashing the criminal 

proceedings. Consequently, the criminal complaint No. 993/1 

of 2005 on the file of ACMM, New Delhi, insofar as the 

appellant herein (A3) is quashed and the appeal is allowed. 

 ...........................................

 ......J. 

 (P. SATHASIVAM) 

 ..................................................J. 

 (JASTI CHELAMESWAR) 

NEW DELHI;

NOVEMBER 8, 2011. 16
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