Supreme Court Quashes Cheque Dishonor Cases Against Company Director Due to Lack of Essential Averments

The Supreme Court of India, overturned the Delhi High Court's decision and quashed five complaint cases against Ravi Dhingra, the authorized signatory of M/s Silverstar Fashions Private Limited. The Court found that the complaints lacked essential averments required to establish an offense under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), which deals with dishonor of cheques.

Dhingra was accused of issuing cheques that were dishonored due to insufficient funds. The complainant, M/s Pinnacle Capital Solution Pvt. Ltd., a Non-Banking Financial Company (NBFC), had provided loans to Silverstar Fashions Private Limited. The High Court had dismissed Dhingra's pleas to quash the summoning orders and discharge applications in these cases.

The Supreme Court, however, found that the complaints lacked the mandatory averment stating that Dhingra was "in charge of and responsible" for the company's business conduct. The Court relied on its previous ruling in Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr (Click to Download)., which established this requirement for prosecuting individuals under Section 138 of the NI Act. The Court held that "7. The law enunciated in the decision in Ashok Shewakramani’s case (supra) is that to maintain a complaint and to frame a charge under Section 138 of the NI Act, there must be a specific averment against the person concerned that he was in-charge of, and responsible for the company concerned in the matter of conduct of its business. This position is now well settled and is being followed with alacrity."

The Court held that without this specific averment, the complaints were deficient and could not be sustained. Forcing Dhingra to face trial based on these flawed complaints would amount to an abuse of the court's process.

The Supreme Court, thus, allowed Dhingra's appeals, quashed the High Court's order, and set aside the complaint cases against him.

Coram: Justice C.T. Ravikumar and Justice Sanjay Karol.
Between: Ravi Dhingra vs State of NCT of Delhi & Anr
Date of Judgement: 19-12-2024