Section 138 NI Act | Director Seeking Quashing On Plea Of Resignation Must Furnish 'Sterling Incontrovertible' Evidence: Punjab & Haryana HC

"If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention." Punjab and Haryana High Court, in a decisive ruling dated July 14, 2026, held that a criminal complaint under Section 138 of the Negotiable Instruments Act cannot be quashed merely on a bald assertion of resignation from a company if the statutory compliance for such resignation was performed after the issuance of the cheques.

A bench of Justice Jasjit Singh Bedi observed that the burden lies on the directors to establish through trial that they were not in charge of the company’s affairs at the time of the offence.

The petitioners, Ms. Shailja Khanna and another, were directors of Knightrider Apparels Private Ltd, which had purchased hosiery goods on credit from Lakra Industries Limited (the respondent). To discharge their liability, cheques were issued in June 2019, which were subsequently dishonoured. The petitioners sought the quashing of the complaint and summoning order, claiming they had resigned on June 26, 2019, prior to the issuance of the cheques.

The primary question before the court was whether the complaint against the petitioners should be quashed under Section 482 CrPC on the grounds that they had resigned as directors before the cheques were issued. The court was also called upon to determine if the averments in the complaint were sufficient to establish vicarious liability under Section 141 of the NI Act.

Vicarious Liability Of Directors Under Section 141 NI Act

The Court noted that for fastening criminal liability under Section 141(1) of the NI Act, the complainant is only expected to make specific averments that the accused were in charge of and responsible for the conduct of the business. It was observed that the complainant is not required to know every internal administrative detail of the company, as such matters fall within the special knowledge of the directors themselves.

The bench emphasized that once necessary averments regarding the role of individuals are made in the statutory notice and reiterated in the complaint, the process must ordinarily be issued. The Court held that unless the director can establish "beyond doubt" that they had no role or had resigned through incontrovertible evidence, the matter must proceed to trial.

"The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction."

Belated Uploading Of Form DIR-12

The Court scrutinized the petitioners' claim of resignation dated June 26, 2019. It found that while the date of cessation was mentioned as such in Form No. DIR-12, the form itself was only uploaded to the portal on October 21, 2020. This was significantly after the cheques were issued and dishonoured in 2019.

Justice Bedi noted that statutory compliance regarding the resignation was made much after the cause of action arose. Relying on the precedent in Shivappa Reddy versus S. Srinivasan, the Court held that the findings regarding a director no longer being part of the firm/company on the date of issuance cannot be sustained if it contradicts the mandate of the statute and prima facie factual aspects.

"Meaning thereby that the statutory compliance of the cessation/resignation in terms of Shivappa Reddy (supra) was made much after the issuance of the cheques."

Necessity Of Replying To Statutory Notice

The Bench highlighted the significance of the statutory notice issued under Section 138 of the NI Act. It observed that if a person to whom such a notice is issued has a valid defence, such as resignation or lack of role in the company, they are expected to file an appropriate reply at the very outset to clarify their stance.

The Court noted that the object of the notice is not just to give the drawer a chance to pay, but to allow them to make their stance clear regarding liability. Silence in response to a statutory notice, followed by a plea for quashing under Section 482 CrPC based on bald assertions, was deemed insufficient to abort a trial.

"If the partner keeps quiet and does not say anything in reply to the same, then the complainant has all the reasons to believe that what he has stated in the notice has been accepted by the noticee. In such circumstances what more is expected of the complainant to say in the complaint."

Quashing Under Section 482 CrPC As An Extraordinary Power

The Court reiterated that quashing a complaint is a serious matter and cannot be done for the asking. It held that disputed questions of fact, such as the actual date of resignation and the specific role of a director, are mixed questions of fact and law that require the parties to lead evidence during a trial.

Justice Bedi concluded that the petitioners had attempted to mislead the Court by arguing they had resigned, while suppressing the fact that the statutory filing was delayed. Finding no merit in the petition, the Court dismissed the plea for quashing the complaint and summoning order.

The High Court dismissed the petition, affirming that specific averments in the complaint are sufficient to put directors to trial. It ruled that the plea of resignation cannot be a ground for quashing at the threshold if the statutory filings (Form DIR-12) were made post-facto, as these issues must be adjudicated through evidence during trial.

Date of Decision: 14 July 2026