Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query..!
Scanned Judgements…!
In the world of business transactions, cheques remain a staple for payments, but dishonour due to insufficient funds can lead to serious legal repercussions under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). A common query arises: Can a complaint under Section 138 be incorporated against a company? The answer is yes, but with specific conditions, especially regarding the company's role as the principal drawer and vicarious liability for its officers. This blog post breaks down the legal landscape, drawing from key judicial precedents to guide payees, business owners, and legal professionals.
Whether you're a creditor chasing bounced cheques from a corporate debtor or a director navigating potential liability, understanding these rules is crucial. Note that this is general information based on established case law and not specific legal advice—consult a lawyer for your situation.
A complaint under Section 138 NI Act is maintainable against a company as the principal drawer when a cheque issued from its account is dishonoured. The company is the primary offender, as it is company alone which would continue to be maker of these cheques and also drawer within meaning of Section 7 of NI Act. Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109 The authorized signatory is merely physical limb that signs and makes cheque on behalf of company’s incorporeal personality, not the drawer itself. Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109Gurudatta Sugars Marketing Pvt. Ltd. VS Prithviraj Sayajirao Deshmukh - 2024 5 Supreme 622
Crucially, the company must be arraigned as an accused when the cheque is drawn on its account. Failure to do so is fatal to the complaint. Preesa Foods And Spices(India) Private Limited VS State Of Kerala - 2022 0 Supreme(Ker) 786 Courts emphasize that proceedings target the account holder (company) strictly. Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109
Even against sick companies declared under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), there is no absolute embargo. There is no embargo on filing complaint under Section 138 of N.I. Act against a ‘SICK’ company. Shree Nagani Silk Mills Pvt. Ltd. VS L. D. Industries Ltd. - 2025 0 Supreme(SC) 1290 Any restraints under SICA Sections 22 or 22A are case-specific and decided post-evidence, not at the threshold.
To file a valid complaint:- Serve a proper demand notice under Section 142.- Cause of action accrues after 15 days of non-payment. Vishnoo Mittal VS Shakti Trading Company - 2025 3 Supreme 332Ashok Shewakramani VS State of Andhra Pradesh - 2023 6 Supreme 133- Jurisdiction lies at the payee's bank branch where the cheque was presented. Prakash Chimanlal Sheth VS Jagruti Keyur Rajpopat - 2025 6 Supreme 281
Non-compliance, like absent demand notice, can lead to quashing.
Liability doesn't stop at the company. Section 141 extends it to directors, partners, or persons in charge, but only as a deeming fiction after establishing the company's guilt. It is drawer Company which must be first held to be principal offender under Section 138 of NI Act before culpability can be extended... to other Directors or persons in-charge of and responsible to Company. Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109
Mandatory Requirements:- Specific averments in the complaint that the individual was in-charge of, and responsible for company concerned in the matter of conduct of its business. Ravi Dhingra VS State of NCT of Delhi - 2025 1 Supreme 737Ashok Shewakramani VS State of Andhra Pradesh - 2023 6 Supreme 133- Bald averments (e.g., 'director') may suffice initially for trial unless disproved by unimpeachable and incontrovertible evidence. S. P. Mani and Mohan Dairy VS Snehalatha Elangovan - 2022 7 Supreme 1126
Absence of these averments leads to quashing: Averments in terms of Section 141(1) of NI Act are not found at all in entire complaint or are conspicuously absent. Ashok Shewakramani VS State of Andhra Pradesh - 2023 6 Supreme 133Ravi Dhingra VS State of NCT of Delhi - 2025 1 Supreme 737
In partnership firms, even without prosecuting the firm, a managing partner in fact concerned with affairs and management of company can individually be prosecuted. The trial court may convict one partner alone if evidence supports it, acquitting others. Recon Agrotech Ltd. VS Tadikonda Trading CorporationRecon Agrotech Ltd. VS Tadikonda Trading Corporation
Liability attaches to those in charge during the offence sequence (dishonour to non-payment). S. P. Mani and Mohan Dairy VS Snehalatha Elangovan - 2022 7 Supreme 1126
While SICA doesn't bar proceedings generally, specific Section 22A orders restraining payments may halt them post-evidence. Shree Nagani Silk Mills Pvt. Ltd. VS L. D. Industries Ltd. - 2025 0 Supreme(SC) 1290 Under the Insolvency and Bankruptcy Code (IBC), directors suspended after Interim Resolution Professional (IRP) appointment aren't liable if unable to act or repay under Sections 14/17. Vishnoo Mittal VS Shakti Trading Company - 2025 3 Supreme 332
Section 446(1) of the Companies Act, 1956, covering suit or other proceedings, does not include Section 138 NI Act complaints. These are criminal proceedings for penal and personal liability, not affecting winding-up or company assets directly. No leave from court is needed. Expression 'suit or other proceedings' in Section 446(1)... does not include criminal complaints filed under Section 138. Indorama Synthetics (I) Limited VS State of Maharashtra through the Public Prosecutor, High Court of Mumbai - 2016 Supreme(Bom) 501Indorama Synthetics (I) Limited VS State of Maharashtra
NCLT orders in appeals like CA No. 138/252/ND/2021 highlight ongoing proceedings against companies despite insolvency challenges. M/s S S Swami Developers & Infrastructure Pvt. Ltd. VS ROC Delhi - 2025 Supreme(Online)(NCLT) 7934M/s S S Swami Developers & Infrastructure Pvt. Ltd. VS ROC Delhi - 2025 Supreme(Online)(NCLT) 7892
Signatories aren't personally liable as drawers. Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109Gurudatta Sugars Marketing Pvt. Ltd. VS Prithviraj Sayajirao Deshmukh - 2024 5 Supreme 622 For compounding under Section 147 NI Act, complainant consent is sine qua non. High Courts can't use Section 482 CrPC inherent powers to compound without it, even if amounts are deposited. Consent of complainant is sine qua non for exercise of power to compound offence(s) under N.I. Act. A. S. Pharma Pvt. Ltd. VS Nayati Medical Pvt. Ltd. - 2024 7 Supreme 86A. S. Pharma Pvt. Ltd. VS Nayati Medical Pvt. Ltd. - 2024 Supreme(SC) 694
This framework, backed by precedents like those in references Shree Nagani Silk Mills Pvt. Ltd. VS L. D. Industries Ltd. - 2025 0 Supreme(SC) 1290, Bijoy Kumar Moni VS Paresh Manna - 2025 2 Supreme 109, etc., empowers informed action. Stay compliant to safeguard transactions—cheque dishonour isn't just a glitch; it's a punishable offence.
Disclaimer: This post summarizes general legal principles from cited cases. Laws evolve, and outcomes depend on facts. Seek professional advice.
#Section138 #ChequeBounce #NIAct
The section provides that every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of business of the Company, as well as the Company shall be deemed to be guilty of the offence under Section 138 of the NI Act. ... The grievance of the applicant/Ex-Management is that certain complaints have been instituted under Section 138 of the NI Act against the company as well as directors, which cannot be allowed to continue in vi....
supra are that if proceedings under Section 138 of the NI Act had already commenced and the Magistrate has taken cognizance and the Company gets dissolved, the signatory Directors of the Company cannot escape from the very penal liability under Section 138 of the NI Act by citing its dissolution. ... Hence, the proceedings under section 138 of N.I. ... proceedings like for the offence under Section 138 of the NI Act, which has got no bearing on the winding-up proceedings of the #HL_STA....
The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall ... The issue which fell for consideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instrument....
to orders of NCLT in CA No. 138/252/ND/2021.” ... The Company Appeal No. 138/252/ND/2021 is allowed 15. The Registry is directed to send e-mail copies of the order forthwith to all the parties inclusive of the Counsel. ... IN THE NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI COURT III Item No. 301 Appeal 138 ... Chaitanaya (Company Prosecutor). ORDER Appeal 138/252/ND/2021 IN THE MATTER OF: M/S. S.S Swami Developers & Infrastructure Pvt. Vs. ... of the Company....
to orders of NCLT in CA No. 138/252/ND/2021.” ... The Company Appeal No. 138/252/ND/2021 is allowed 15. The Registry is directed to send e-mail copies of the order forthwith to all the parties inclusive of the Counsel. ... IN THE NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI COURT III Item No. 301 Appeal 138 ... Chaitanaya (Company Prosecutor). ORDER Appeal 138/252/ND/2021 IN THE MATTER OF: M/S. S.S Swami Developers & Infrastructure Pvt. Vs. ... of the Company....
(supra) were also in the context of a complaint filed by the company under Section 138 of the 1881 Act. 20. In Dale & Carringtone Invt. (P) Ltd. ... In that view, the position that would emerge is that when a company the payee of the cheque based on which a complaint is filed under Section 138 of the NI Act, the complainant necessarily should be the company which would be represented by an employee who is authorised. ... Ltd. filed a complaint under Section 138 of the Negotiable Instru....
A complaint as contemplated for offence under Section 138 needs to necessarily contain all allegations constituting offence. ... It is true that with regard to any offence punishable under Section 138 of the Negotiable Instruments Act with respect to offences by companies, a complaint in writing has to be filed as required by Section 142 of the Negotiable Instruments Act. ... the company. ... In my view, therefore, the learned Trial Court has clearly erred in framing the charge against the Company through the petitioner.....
The issue which fell for consideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused. ... The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business ....
But then, it is to be noted that later a five-Judge Constitution Bench in Expeditious Trial of Cases Under Section 138, N.I. ... Act, to compound the offence under Section 138 of the N.I. Act qua the respondent- accused. Hence, the impugned judgment to the extent it compounded the offence under Section 138, N.I. Act invoking the inherent power under Section 482, Cr.P.C. and the power under Section 147, N.I. ... In this context, this is to be noted that the fact that this Court quashed the proceedings under Section 138, N....
But then, it is to be noted that later a five-Judge Constitution Bench in Expeditious Trial of Cases Under Section 138, N.I. ... Act, to compound the offence under Section 138 of the N.I. Act qua the respondent-accused. Hence, the impugned judgment to the extent it compounded the offence under Section 138, N.I. Act invoking the inherent power under Section 482, Cr.P.C. and the power under Section 147, N.I. ... In this context, this is to be noted that the fact that this Court quashed the proceedings under Section 138, N.....
2 and 3 was allowed and the Petitioner was directed to secure leave from the Hon'ble Gujarat High Court, which had passed the winding-up order of Respondent No. 2-Company, to continue with this proceeding under Section 138 of the N.I. As to applicability of Section 446(1) of Companies Act to Section 138 of N.I. Act, it would be useful to reproduce Section 446, which appears in Chapter II of Part VII of the Companies Act, in its entirety.
2-Company, to continue with this proceeding under Section 138 of the N.I. Act, it would be useful to reproduce Section 446, which appears in Chapter II of Part VII of the Companies Act, in its entirety. As to applicability of Section 446(1) of Companies Act to Section 138 of N.I. 2 and 3 was allowed and the Petitioner was directed to secure leave from the Hon’ble Gujarat High Court, which had passed the winding-up order of Respondent No.
At the conclusion of the trial, the learned Magistrate convicted A2, the Managing Partner of the accused firm alone and acquitted A1 firm and all the remaining partners who were figured as A3 to A5. 2. The appellant company filed a complaint under Section 138 of Negotiable Instruments Act against the first respondent/A1 firm, Chintala Siva Krishna Prasad (A2), the Managing Partner representing the firm, A3 and A4, the respondents 2 to 4 herein who are the partners of the firm under Section 138 of Negotiable Instruments Act.
2. The appellant company filed a complaint under Section 138 of Negotiable Instruments At the conclusion of the trial, the learned Magistrate convicted A2, the Managing Partner of the accused firm alone and acquitted A1 firm and all the remaining partners who were figured as A3 to A5. Act against the first respondent/A1 firm, Chintala Siva Krishna Prasad (A2), the Managing Partner representing the firm, A3 and A4, the respondents 2 to 4 herein who are the partners of the firm under Section 138 of Negotiable Instruments Act.
At the conclusion of the trial, the learned Magistrate convicted A-2, the Managing partner of the accused firm alone and acquitted A-1 firm and all the remaining partners who were figured as A-3 to A- 5. Act against the first respondent/A-1 firm, Chintala Siva Krishna Prasad (A-2), the Managing Partner representing the firm, A-3 and A-4, the respondents 2 to 4 herein who are the partners of the firm under Section 138 of Negotiable Instruments Act. 2. The appellant company filed a complaint under Section 138 of Negotiable Instruments
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