1. Complaint under Section 138, NI Act — Cheque dishonour — Accused as managing director — Conviction upheld by appellate court — Revision. (Para 1 , 2 )
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2026 Supreme(HP) 878
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Rakesh Kainthla, J.
Subhash Chander - Petitioner
Versus
Veena Devi - Respondent
Cr. Revision No. 630 of 2024
Decided On : 06-07-2026
Advocates Appeared:
For the Petitioner:Mr Mukul Sood, Advocate.
For the Respondent:Mr Goldy Kumar, Advocate.
For the Petitioner:Mr Mukul Sood, Advocate.
For the Respondent:Mr Goldy Kumar, Advocate.
Under Section 141 of the Negotiable Instruments Act, arraigning the company as a principal accused is a mandatory condition precedent for prosecuting its directors or officers vicariously. Prosecution of a director without impleading the company is not maintainable.
Headnote:(A) Negotiable Instruments Act, 1881 - Sections 138 and 141 - Code of Criminal Procedure, 1973 - Section 397 - Dishonour of cheque - Vicarious liability of company directors - Arraigning the company as an accused is a condition precedent for prosecuting officers in charge of the company's conduct - Prosecution of a director without impleading the company is not maintainable. (Paras 21-25)
(B) Criminal Revision - Scope and ambit - Revisional court's jurisdiction is limited to correcting patent defects, errors of jurisdiction, or errors of law - It is not intended to act as an appellate court or re-appreciate evidence in the absence of perversity. (Paras 13-17)
(C) Liability of Managing Director - A Managing Director is generally deemed to be in charge of and responsible for the conduct of the business of the company. (Para 19)
Facts of the case:
A complaint was filed against the Managing Director of a company under Section 138 of the Negotiable Instruments Act after a cheque issued by the company was dishonoured due to insufficient funds. The Trial Court convicted the Managing Director, sentencing him to imprisonment and ordering the payment of compensation. This conviction was upheld by the Appellate Court. The petitioner challenged these findings through a revision petition, asserting that the prosecution was not maintainable as the company itself was not arrayed as an accused.
Findings of Court:
The company was not impleaded as an accused in the proceedings. As the company is the primary offender, its office bearers are only vicariously liable. It is therefore legally impermissible to prosecute office bearers vicariously without prosecuting the company as the principal accused.
Issues: Whether a Managing Director can be held vicariously liable under Section 141 of the Negotiable Instruments Act for the dishonour of a company's cheque without the company being arrayed as an accused.
Ratio Decidendi: For maintaining a prosecution under Section 141 of the Negotiable Instruments Act, the arraigning of the company as an accused is imperative. Vicarious liability of directors is a deeming fiction that presupposes the commission of the offence by the company as the primary offender.
Result: Revision allowed, judgment of conviction and order of sentence set aside, and the accused acquitted.
Legal Category Hierarchy
- crime and sentencing
- practice and procedure
- company law
Table of Contents
2. Petitioner argued complaint lacked averments of being in charge and company not impleaded; respondent argued liability by position of managing director. (Para 8 , 10 , 11 )
3. Revisional court can only correct patent defect, error of jurisdiction or law; not reappreciate evidence. Managing director liable by office, but company must be impleaded. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 )
4. For prosecution under Section 141, NI Act, arraigning company as accused is imperative; vicarious liability only if company is primary offender. (Para 22 , 24 , 25 , 26 )
5. Revision allowed — Conviction and sentence set aside — Accused acquitted. (Para 29 , 30 , 31 )
6. Is prosecution under Section 138 read with Section 141 NI Act maintainable against a director without impleading the company?
No, maintaining prosecution under Section 141 requires arraigning the company as an accused; vicarious liability arises only when the company commits the offence. (Para 22 , 24 , 25 , 26 )
7. What is the scope of revisional jurisdiction under Section 397 CrPC?
The revisional court can only correct patent defects, errors of jurisdiction or law, and cannot reappreciate evidence or act as an appellate court. (Para 13 , 14 , 15 , 16 , 17 , 18 )
8. Does the position of managing director automatically satisfy the requirement of being in charge and responsible for the company's affairs under Section 141?
Yes, a managing director is by virtue of office in charge and responsible, but the company must still be impleaded for vicarious liability to apply. (Para 19 , 20 )
9. Does the exception for trusts (Shankar Padam Thapa) apply to companies regarding impleadment under Section 141?
No, a trust is not a company; for companies, the imperative requirement to implead the company as accused under Section 141 remains. (Para 27 )
JUDGMENT :
Rakesh Kainthla, J.
The present revision is directed against the judgment dated 01.07.2024 passed by the learned Sessions Judge, Kangra, at Dharamshala, H.P. (learned Appellate Court) vide which the judgment of conviction and order of sentence dated 29.12.2022, passed by the learned Chief Judicial Magistrate, Kangra, at Dharamshala, H.P. (learned Trial Court) were upheld. (The parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.)
2. Briefly stated, the facts giving rise to the present revision are that the complainant filed a complaint before the learned trial Court against the accused for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). It was asserted that the accused is running a business of insurance/finance in the name and style of “SM Krishi Housing and Agricultural Ltd”. He opened a new branch at Slate Godam, Yol Cantt, Tehsil Dharamshala, District Kangra, H.P. He appointed one Pinky Devi as Advisor. PinkiDevi convinced the poor people of the locality to take the insurance plans of the accused and issued 60-70 policies in the locality. The accused closed the branch from Slate Godam, Yol Cant, Tehsil Dharamshala, District Kangra, H.P. The complainant, other policy holders and Pinky Devi visited the registered office of the accused, and the accused assured to return the amount. A compromise was effected between the parties. The accused issued a cheque of Rs.19,650/- in favour of the complainant to repay the amount. The complainant presented the cheque at the bank, but it was dishonoured. The accused failed to repay the money despite the receipt of a valid notice of demand. Hence, the complaint was filed to take action against the accused as per the law.
3. Learned Trial Court found sufficient reasons to summon the accused. When the accused appeared, a notice of acquisition was put to him for the commission of an offence punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried.
4. The complainant examined herself (CW-1) to prove her complaint.
5. The accused, in his statement recorded under Section 313 of the Code of Criminal Procedure (CrPC), admitted that he was running a business of insurance /finance and had opened a branch office at Slate Godam, Yol Cantt, Tehsil Dharamshala, District Kangra, H.P. He admitted that a notice was issued to him and he had not repaid the money. He claimed that he was innocent. He did not produce any evidence in his defence.
6. Learned Trial Court held that the complainant had succeeded in proving her case that the cheque was issued in discharge of a legally enforceable debt and the accused had failed to rebut the presumption attached to the cheque. The cheque was dishonoured with the endorsement, ‘insufficient funds’. The notice was served upon the accused, but he failed to pay the money. All the ingredients of the commission of an offence punishable under Section 138 of the NI Act were duly satisfied. Hence, the learned Trial Court convicted the accused of the commission of an offence punishable under Section 138 of the NI Act and sentenced him to undergo simple imprisonment for 3 months, and pay a compensation of Rs.29,650/- to the complainant.
7. Being aggrieved by the judgment and order passed by the learned trial Court, the accused filed an appeal, which was decided by the learned Sessions Judge, Kangra at Dharamshala, District Kangra, H.P. (learned Appellate Court). The Appellate Court concurred with the findings recorded by the learned Trial Court that there is a presumption that a cheque was issued for consideration to discharge the debt/liability. The complainant failed to produce any evidence to rebut the presumption. The complainant was the Managing Director of the company and was liable for the acts of the company. All the ingredients of the commission of an offence punishable under Section 138 of the NI Ac
