B.S.K. Prasad vs Laxmi Vessels and Another

C.Y. Somayajulu, J.—First respondent filed a complaint for an offence u/s 138 of the Negotiable Instruments Act (the Act) against one Y.V.K. Prasad (A1) and the petitioner (A2) alleging that, for a debt due to him, A-1 issued a cheque, which, on presentation for payment into the bank, was dishonoured and that statutory notice issued to A-1 and the petitioner, intimating them about the dishonour of the cheque and demanding payment of the amount covered by the dishonoured cheque, was returned unclaimed.

The contention of the learned counsel for the petitioner is that since Section 138 of the Act contemplates prosecution only of the drawer of the bounced cheque, and since petitioner, admittedly, did not draw the dishonoured cheque on any account maintained by him on any bank, even assuming that all the allegations in the complaint are true, question of petitioner being liable for an offence u/s 138 of the Act, does not arise and so the complaint against the petitioner is liable to be quashed. The contention of the learned counsel for first respondent is that since the dishonoured cheque was issued by A-1 in respect of a debt due to the 1st respondent from a company of which petitioner is the Managing Director and A-1 is the Director, petitioner also is liable for the offence u/s 138 of the Act.

A-1 and the petitioner are described as the Director and Managing Director, respectively, of a company which is not made an accused in the case. Though the complaint does not disclose as to who drew the cheque that was dishonoured, xerox copy of that cheque, filed along with this petition, (original of which was produced by the 1st respondent along with the complaint) shows that it was drawn by A-1 in his individual capacity, but not for and on behalf of the company of which he is the Director and petitioner is the Managing Director. So it is clear that the dishonoured cheque was not issued for and on behalf of the company, of which petitioner is the Managing Director, for the 1st respondent to invoke the aid of Section 141 of the Act to make the Managing Director of the company vicariously liable for the offence committed by the company u/s 138 of the Act.

As per Section 138 of the Act the drawer of a dishonoured cheque only is liable for punishment. If the ''person'' that committed the offence u/s 138 of the Act is a company the Directors and the per-son-in-charge of the affairs of the company, who look after the day to day affairs of that company, apart from the company, would also be liable for the said offence, by virtue of Section 141 of the Act. As stated earlier there is no scope for invoking Section 141 of the Act because the dishonoured cheque was not issued for and on behalf of a company. Since petitioner, admittedly, did not draw the dishonoured cheque on an account maintained by him in a bank, and since there is no scope for invoking Section 141 of the Act to rope in the petitioner as Managing Director of a company of which A-1 is the Director, merely because A-1 is said to have given the dishonoured cheque in partial or full settlement of a debt due to 1st respondent from a company of which petitioner is the Managing Director, petitioner cannot be made liable for an offence u/s 138 of the Act. The fact that 1st respondent has a right to sue petitioner also for recovery of the debt due to him is not and cannot be a ground for making the petitioner liable for an offence u/s 138 of the Act, when the dishonoured cheque was not drawn for and on behalf of that company, on an account maintained by it in a bank. Therefore the fact that A1 who drew the dishonoured cheque happens to be a Director in the company of which petitioner is the Managing Director, for the debt allegedly due to 1st respondent from the said company, is of no consequence.

Therefore even if all the allegations in the complaint are taken to be true, petitioner cannot be said to have committed an offence u/s 138 of the Act. Therefore, in view of the ratio in State of Haryana and others Vs. Ch. Bhajan Lal and others, the complaint against the petitioner is liable to be and therefore is quashed.

The Criminal Petition is accordingly allowed.