Where a Managing Director,
acting on behalf of the company issued a blank signed cheque as a security, he
wasn’t liable for the dishonor of the cheque if he held no position whatsoever
of the company when the cause of action in fact accrued.
Whenever a blank cheque or
postdated cheque is issued, a trust is reposed that the cheque will be filled
in or used according to the understanding or agreement between the parties. If
there was a prima facie reason to believe that the said trust was
not honoured, then the continuation of prosecution under Section 138 of the
N.I. Act would be the abuse of the process of law. It was in the interest of
justice that the parties in such cases are le to the civil remedy.
Facts:
a) A blank cheque was drawn by
the Managing Director and Vice President of the company in favour of the
complainant firm as a security in decade of 90s. Therea er, he ceased to be MD
of the company with e ect from 13th April 2005.
b) The cheque was deposited a
er filling up other details by the complainant on 25th March 2013. Meanwhile
the entire management of the accused company got changed with e ect from 30th
May 2005 and was taken over by the A.P. Moller Group upon purchase of the
shares and execution of the Transfer Agreement.
c) The complainant, therea er,
proceeded to file a complaint in the Court of the learned Chief Judicial
Magistrate at Mahuva and, accordingly, a criminal case was registered against
accused.
d) The Company and the
Directors filed an application for quashing of the criminal proceedings
initiated for the o ence punishable under Section 138 of the Negotiable
Instruments Act.
The High Court of
Gujarat held as under:
