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Himanshu v. B. Shivamurthy

Criminal Appeal · 2019 INSC 53Decided 17 Jan 2019
Criminal Appeal No. 1465 of 2009
Dr. Justice D.Y. Chandrachud · Justice Hemant Gupta

Background

A cheque for Rs. 4,15,000 issued by the appellant, a Director of a public limited company, signing on the company's behalf, was dishonoured for insufficient funds, and the complainant filed a criminal complaint under Section 138 of the Negotiable Instruments Act against the appellant personally, without naming the company itself as an accused. The appellant's plea before the Karnataka High Court that the complaint was not maintainable without arraigning the company was rejected, and he challenged that rejection before the Supreme Court.

Decision Breakdown

Relying on the three-judge bench decision in Aneeta Hada vs. Godfather Travels, the Supreme Court held that prosecuting a signatory under Section 138 without first arraigning the company as an accused is not maintainable in law, since vicarious liability under Section 141 is conditional on the company itself being proceeded against. It also found that a notice of demand had been served only on the appellant, not the company, and the complaint was accordingly quashed. The Court separately noted that the appellant had, during the proceedings, voluntarily deposited the entire cheque amount in court, and directed that this deposited sum (with interest) be paid over to the complainant despite quashing the criminal case.

Lesson Learnt

A cheque-bounce prosecution under Section 138 of the NI Act against a company's director or signatory cannot proceed unless the company itself is also made an accused: complainants must name the company, not just the individual who signed the cheque.

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

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