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Standard Chartered Bank v. State of Maharashtra and Others Etc.

Criminal Appeal · Neutral citation not assigned (Criminal Appeal Nos. 271-273 of 2016)Decided 6 Apr 2016
Criminal Appeal Nos. 271-273 of 2016
Justice Dipak Misra · Justice Shiva Kirti Singh

Background

ABG Shipyard Ltd. took a short-term loan of Rs. 200 crores from Standard Chartered Bank and issued three cheques towards repayment, all of which bounced for "insufficient funds"/"account blocked." The Bank filed criminal complaints under Section 138 of the Negotiable Instruments Act against the company and its directors/signatories. The Bombay High Court quashed the summons issued against two of the whole-time/executive directors (respondent Nos. 2 and 3), holding the complaint lacked specific allegations against them, while upholding summons against another director. The Bank appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the complaint did contain sufficient specific averments that the respondents, as whole-time Director and Executive Director, were in charge of and responsible for the day-to-day affairs of the company and had knowingly/mischievously issued the dishonoured cheques. Applying the test laid down in Gunmala Sales Pvt. Ltd. v. Anu Mehta, the Court found the High Court had committed a "grave error" in concluding the complaint lacked specific averments. The appeals were allowed, the High Court's order quashing the summons was set aside, and the Magistrate was directed to proceed with the complaint cases according to law.

Lesson Learnt

In cheque-bounce prosecutions against a company, a complaint that specifically alleges a director's day-to-day role and personal involvement in issuing the cheque will not be thrown out merely because the director denies personal responsibility: courts will let such cases proceed to trial rather than quash them at the threshold.

Official source (sci.gov.in)View Judgment (PDF)

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