The Jharkhand High Court dismissed a petition by the Director of a company to quash criminal proceedings under Section 138 of the NI Act while observing that a company issuing the cheque does not have to be made a separate accused.

The Court explained that although the company which issued the cheque, in this case, was not made an accused, the person in charge of and responsible for the company was made an accused for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

A Single Bench of Justice Sanjay Kumar Dwivedi stated, “Since the cheque in question has been signed by the Directors of the company and company name has also been mentioned in the complaint petition just below the name of the Director and Directors have been made named accused and that fact is admitted in the writ petition itself, and for not making company as a separate accused in the complaint petition is not fatal for the prosecution.

Advocate Kaushik Sarkhel appeared for the petitioner, while Advocate Binit Chandra represented the respondents.

A writ petition was filed for quashing criminal proceedings and an order of summons issued against the accused under Section 138 of the NI Act.

The complainant and the company entered into a sale agreement for land. When the company’s cheque bounced due to insufficient funds, the complainant issued a notice to both the company and the accused director, but no payment was made. Consequently, the complainant filed a complaint under Section 138 of the NI Act.

The High Court had to whether in the absence of the company as a separate accused, the entire criminal proceedings could be quashed or not.

The Court noted that the accused issued a cheque in the capacity of the Director of the company.

The Court found that “although the company has not been made accused separately, but complainant has made the Director as accused who has signed the cheque as an accused and mentioned the company name i.e. M/s Morias Infrastructure Private Limited in the complaint petition in the name of the accused persons column, just below the name of the Director which clearly reveals that company name is there and involvement of the company is also there.

The Bench pointed out that the essential element for implicating a person under Section 141(1) of the NI Act was his or her being in charge of and responsible to the company in the conduct of its business at the time of commission of the offence, while the emphasis under Section 141(2) was upon the holding of an office and consent, connivance or negligence of such officer irrespective of his or her being or not being actually in charge of and responsible to the company in the conduct of its business.

Thus, the important and distinguishing feature in Section 141(1) is the control of a responsible person over the affairs of the company rather than his holding of an office or his person over the affairs of the company rather than his holding of an office or his designation, while the liability under Section 141(2) arises out of holding an office and consent, connivance or neglect,” the Bench remarked.

Consequently, the Court remarked, “The reason for creating vicarious liability is plainly that a juristic entity i.e. company would run by living person who was charge of its affairs but the case in hand, Directors are running the company and taking part actively in the affairs of the company and sign the cheque as a authority of the Director further received the notice under Section 138 of the Negotiable Instruments Act further they have not denied that they are not the Directors of the company and cheque has not been issued by them, hence present case is not helping the petitioner.

Accordingly, the High Court dismissed the petition.

Cause Title: Ripunjay Prasad Singh v. The State of Jharkhand & Anr.

Appearance:

Petitioner: Advocate Kaushik Sarkhel

Respondents: Advocates Binit Chandra and Shashank Shekhar

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