COMPANY LAW ASSIGNMENT

Submitted By:
Gurdev Singh Tung
R450220245
50085198
BA LLB (Hons.) (B2)
Criminal Law (Sem-6)

Submitted To:
Mr. Hartej Kochher
ALIBABA NABIBASHA V. SMALL FARMERS AGRI-BUSINESS
CONSORTIUM & ORS.

The Delhi HC in ALIBABA NABIBASHA v. SMALL FARMERS AGRI-BUSINES

CONSORTIUM & ORS. stated that a person who has retired as the director of the company
can’t be held liable for the day-to-day acts of company and cheques issued and dishonored post-
retirement.

PROVISIONS INVOLVED:
 Section 141 of the Negotiable Act lists the violations committed by companies. It deals
with the subject of business cheques that are not being paid.
 Section 138 of the Negotiable Instruments Act says that no individual or person may be
held liable if they can demonstrate that the offence was committed without their
knowledge and that they took all reasonable and necessary precautions that a prudent
man would have taken to stop it from happening.
 Section 168 of the Companies Act of 2013 states that a director who resigns is still
responsible for any offences committed while he was in office.

FACTS OF THE CASE:

Mr. Alibaba (Petitioner) served as a Company's Director (Respondent 1). The Respondent
Company has filed a lawsuit against Mr. Alibaba because it issued some cheques to the Small-
Farmer Agribusiness Consortium (Respondent 2), which were dishonoured. Mr. Alibaba
(Petitioner) filed this petition in opposition to the cases brought, claiming that he was not the
Director at the time that the underlying contract was signed, the cheques were issued, or that they
were presented. He also claimed that he resigned 8 years prior to the cheques being issued and
that his resignation was properly filed with the ROC.
The petition was submitted in an effort to have five complaint cases brought against the
petitioner dismissed. The return of five is the main argument in these complaint cases. The return
of five cheques amounting Rs. 45 lakhs that were written on behalf of the Respondent company
is the main basis for these complaint cases.
In a Delhi Court, the Small-Farmer Agribusiness Consortium (Respondent 2) filed a claim under
Section 138 of the Negotiable Instruments Act. He claimed that the cheques in question were
dishonoured because there weren't enough funds. The cheques in question were issued by the
company where the petitioner was a director for 45 lakh rupees. The petitioner went to the High
Court after becoming agitated over the summons
ISSUE RAISED:
Is the Director of the Company still held accountable for the day-to-day operations of the
company, including cheques issued and dishonoured, after resigning?

ARGUMENTS ON BEHALF OF PETITIONER:

 According to the petitioner, he stopped serving as a director of the company on October
27, 2010, at least eight years before the disputed cheques were issued.
 During his one-year tenure as director, the petitioner informed the Ministry of Corporate
Affairs of his resignation.
 The Petitioner claims that the company suppressed the data and that the Delhi Court
failed to apply the judicial mindset to the case.
 The aforementioned agreement and issuance occurred after the director had retired, and
the petitioner also didn't receive any legal notice.
 It was contested that the petitioner had not been found guilty despite all the requirements
of Section 138 of the Negotiable Instruments Act not having been met.

ARGUMENTS ON BEHALF OF RESPONDENT:

 The respondents argued that the company gave the petitioner's biodata when the
petitioner requested venture capital assistance, and that the petitioner also took part in the
negotiations that led to the agreement. When cheques were due, he allegedly presented
them in their State Bank of India account, but all of the checks were rejected with the
notation “funds insufficient”.
 All the accused directors received a notice, but none of them responded. The petitioner
had received a summons from the Metropolitan Magistrate, and he is entitled to present a
defence.
 He claimed that simply producing the petitioner's resignation letter from his position as
director would not be sufficient to secure an acquittal. Respondent claimed that Petitioner
was crucial to the deal in its submission.

JUDGEMENT:
The High Court ruled that even after he has retired, the accused cannot be held accountable for
the day-to-day operations of the corporation.
According to the court, "It is the case of the respondent No. 1 that the petitioner was involved in
the conversation and represented the respondent No. 2 prior to the agreement being executed on
March 3, 2011, but that does not mean even after his resignation he continues to be accountable
for the actions of the Company, including the issuance of cheques and dishonour of the same
which then attracts proceedings under Section 138 of the Negotiable Instrument Act against
him."
From Section 141's requirements, the retired directors were excluded. Furthermore, it was
claimed that the summons that was delivered to the petitioner was not appropriate. The Court
went on to say that although it is forbidden for them to take the merits of the accusation into
account when weighing an accused person's defence, they must look into any documents that
cast doubt on the validity of the accusations made against them in order to prevent abuse of
authority. Thus, the summons and allegations were dismissed.

CONCLUSION:
The situation underscores how crucial it is to abide by a contract's terms and fulfil the agreed-
upon quality standards. The case highlights the requirement to safeguard small farmers' interests
and advance ethical business practises.
According to the High Court, a director who has resigned is no longer liable for the day-to-day
operations of the company, including checks issued and returned. When checks are issued and
later dishonoured, the petitioner has resigned from the company and the petition has also been
filed with the Registrar of Companies.
The Petitioner is no longer responsible for the Company's actions, such as the issuance of checks
and their dishonour, as a result of his retirement. As a result, the petitioner is not subject to the
allegations made against him or her under Section 138 of the NI Act.