Alibaba Nabibasha (Petitioner) vs.

Small Farmers Agri-Business Consortium & Ors

FACTS: Mr. Alibaba (Petitioner) was a director of a company. The company has issued certain
cheques to the Respondents, and the cheques have been dishonored and hence the respondent
company has filed case against Mr. Alibaba.
• Mr. Alibaba (Petitioner) has filed this petition against the cases filed contended that he was not the
Director when the underlying contract was executed, nor when the cheques were issued and when
they were presented and that he has resigned 8 years prior to the issuance of cheques, and the
resignation has been duly filed with ROC as well.
• According to the Respondent company, the Petitioner was involved in the discussion before an
agreement was executed. Further, the Petitioner had participated in meetings and assisted the
officials of the Respondent
• who had visited for verification of its financial and physical status.( Plagiarized)

the petitioner being a responsible Director of accused respondent No.2 participated in meetings and
assisted the officials of the respondent No.1 who had visited the respondent No.2 for verification of
its financial and physical status

G. Alibaba (plaintiff) was a director of the company. The company issued certain checks to the
Defendants and the checks were disbursed and therefore the defendant company filed suit against
Mr. Alibaba.

• Sir. Alibaba (the petitioner) filed this petition against the filed lawsuits, claiming that it was not a
trustee when the underlying contract was entered into, nor when the checks were issued and
presented, and that it resigned 8 years before the checks were issued, and the resignation is duly
submitted to the ROC.

• According to the defendant company, the petitioner was involved in the discussion before signing
the contract. In addition, the Petitioner attended meetings and assisted the Respondent's employees
• who visited you to check your financial and physical condition.(Not Plagiarized)

The petition was filed seeking quashing of five complaint cases initiated against the petitioner. These
complaint cases are primarily grounded on the return of five cheques which were issued on behalf of the
respondent No.2 for a total amount of Rs. 45 Lakhs. Petitioner submitted that he ceased to be the
Director of the respondent No. 2 w.e.f. October 27, 2010, at least eight years prior to the issuance of the
cheques in question and the resignation of the petitioner was also notified to the Registrar of
Companies by the respondent No.2 by filing Form 32 dated January 04, 2011, which is a public
document.

ISSUE: Whether the Director Alibaba was liable for the dishonor of cheque?

LAW: Section 141 of NI Act state the offences by companies. It deals with dishonouring of cheques
drawn by the company. This section extends the liability to every individual who when the offence was
committed was responsible for the conduct of business which also extends towards the key managerial
personnel like that of the Director.
To attract the provision contained in section 141 of NI Act the offence of Section 138 shall have been
committed as the principal offence. But it is also provided that no individual or person shall be held
liable if that individual is able to prove the fact that the offence was committed without his knowledge
on his part and all the reasonable and necessary steps were taken by him that a prudent man would
have taken to prevent the happening of the offence.(Plagiarized)

Section 168 of Companies Act 2013 provides the director who has resigned shall be liable even after his
resignation for the offences which occurred during his tenure.

ANALYSIS:

Delhi High Court held that, in cases where the accused has resigned from the Company and it has also
been filed with the Registrar of Companies then in such cases if the cheques are subsequently issued
and dishonored, it cannot be said that such an accused is in-charge of and responsible for the conduct of
the day-to-day affairs of the Company, as contemplated in Section 141 of the NI Act.

Thus, Petitioner after his resignation cannot continue to be held responsible for the actions of the
Company including the issuance of cheques and dishonor of the same. Hence, complaint cases filed
under Section 138 of the NI Act, against the petitioner are quashed.

Contention of Respondent: The learned counsel of the Respondent 1 has averted that the petitioner was
the director of the company and the cheque which has been dishonored due to insufficient funds was
under his Directorship though he has resigned from the company. The counsel for respondent has
suppressed the publicly available documents against the petitioner.

It is also accepted law that the mere repetition of the phraseology of Article 141 of the UN Law that the
accused is responsible and responsible for the conduct of the day-to-day affairs of the Company may not
be sufficient and the facts that indicate how the accused was so responsible must be rejected. The case
of Defendant No. 1 is that the petitioner was involved in the discussion and represented Defendant no.
of the Company, including the issuance of checks and their release, which then initiates the proceedings
provided for in Article 138 of the NU Law against him.

in the judgement of Kamal Goyal (supra) on which reliance has been placed, this Court has held as
under:

In the case before the Hon'ble Supreme Court, the respondent No.1 had resigned from the Directorship
of the Company under intimation to the complainant and, in these circumstances, the Hon'ble Supreme
Court was of the view that a person who had resigned with the knowledge of the complainant in the
year 1996, could not be a person in charge of the Company in the year 1999 when the cheque was
dishonoured as he had no say in the matter that the cheque is honoured and he could not have asked
the Company to pay the amount. In my view even if resignation was not given by the petitioner under
intimation to the complainant, that would not make any difference, once the Court relying upon
certified copy of Form 32 accepts his plea that he was not a director of the Company, on the date the
offence under Section 138 of Negotiable Instruments Act was committed. He having resigned from the
directorship much prior to even presentation of the cheque for encashment, he cannot be vicariously
liable for the offence committed by the Company, unless it is alleged and shown that even after
resigning from directorship, he continued to control the affairs of the company and therefore continued
to be person in charge of and responsible to the company for the conduct of its business."
imilarly, the Hon'ble Supreme Court in Harshendra Kumar D. (supra) has held as under:

"17. In this view of the matter, in our opinion, it must be held that a Director, whose resignation has
been accepted by the company and that has been duly notified to the Registrar of Companies, cannot be
made accountable and fastened with liability for anything done by the company after the acceptance of
his resignation. The words "every person who, at the time the offence was committed", occurring in
Section 141(1) of the NI Act are not without significance and these words indicate that criminal liability
of a Director must be determined on the date the offence is alleged to have been committed.

The court held that, in cases where the accused has resigned from the Company and Form 32 has also
been submitted with the Registrar of Companies then in such cases if the cheques are subsequently
issued and dishonoured, it cannot be said that such an accused is in-charge of and responsible for the
conduct of the day-to-day affairs of the Company, as contemplated in Section 141 of the Negotiable
Instruments Act, 1881. Thus, petitioner after his resignation cannot continue to be held responsible for
the actions of the Company including the issuance of cheques and dishonour of the same. Hence,
complaint cases filed under Section 138 of the Negotiable Instruments Act, 1881, against the petitioner
are quashed.