LI Network
Published on: February 9, 2024 at 11:50 IST
In a recent development, the Allahabad High Court has declined to quash a cheque bounce complaint, asserting that all directors bear equal responsibility for actions undertaken on behalf of the company.
The Court’s decision came in response to an application under Section 482 of the Criminal Procedure Code (CrPC) seeking to annul the summoning order issued by the Additional Chief Judicial Magistrate.
Justice Prashant Kumar, presiding over a Single Bench, stated, “Undoubtedly, a company is a separate legal entity, which can only be represented through its officers, directors, managing directors, chairman, etc. If such a company commits an offense, it would normally be taken as an action of that individual who has acted on behalf of the company.”
Background of the Case:
The accused faced summons from the Trial Court for an offense under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
The complainant, a private company engaged in the business of Sponge Iron and Silicon Manganese, had placed an order for the supply of such items with another company. Although the complainant supplied the products and received a cheque amounting to Rs. 1,07,05,318/-, the cheque bounced due to insufficient funds.
Subsequently, the complainant issued a legal notice within the stipulated time, and as the buyer company failed to make the payment, the complainant filed a Section 138 complaint under the NI Act before the Chief Judicial Magistrate.
Once the summons were issued, the accused, who was the signatory of the cheque, filed an application in which the High Court issued notices to the opposite parties and stayed further proceedings.
As a result, the Trial Court could not proceed for the past eight years, with completed pleadings and the matter ready for hearing.
The High Court, after considering the arguments, noted, “In view of the aforesaid facts and circumstances and the ratio laid down by the Hon’ble Supreme Court… the argument advanced by the counsel for the applicant that the other director, Narendra Singh Pawar, had nothing to do with the transaction is also not correct. All the directors are equally responsible for the act done on behalf of the company.”
The Court emphasized that it is a well-established principle that if the payee is a company, the complaint must be filed in the name of the company.
Section 142 of the NI Act does not specify who should represent the company if it is the complainant, allowing representation by an employee or an authorized representative duly empowered by resolution or power of attorney.
The Court further observed that the application had been pending for eight years, and the trial had not progressed. In the interest of justice, the court urged the trial to conclude expeditiously, preferably within six months. Consequently, the High Court dismissed the application.
Case Title: Ashok Sharma v. State of U.P. and Another (Neutral Citation: 2024:AHC:21054)