Director signing cheque in personal capacity is liable in a cheque dishonor case#indianlaws

Where the cheque is drawn by the employee of the appellant company on his personal account, even if it be for discharging dues of the appellant-company and its Directors, the appellant-company and its Directors cannot be made liable under Section 138. This is so that the Section itself makes the drawer liable and no other person. 

The present matter dealt with the issue of liability in cheque dishonor case where cheque was issued by the drawer in his individual capacity and not in the capacity as a Director or as Proprietor of the relevant concern.

Trial Court had dismissed the complaint alleging cheque dishonor and acquitted the Accused on the ground that Company in question was not made the accused and instead the Respondent Accused was made accused in his personal capacity. The cheque could not be said to have been issued for the discharge of whole or part of the liability because it exceeded the liability and further it was also not proved that the Respondent was a person liable to make the payment for the company/ firm. High Court also dismissed the appeal affirming the judgment of trial court.

It was contended on behalf of the Appellant that the Courts below failed to appreciate that under Section 138 of the Negotiable Instruments Act (NI Act), it is the drawer of the cheque who is made punishable for offence under Section 138 of the NI Act. Further, the Courts below also failed to appreciate that in the present matter the cheque in question was drawn by the Respondent and not by the Company of which the Respondent is the Managing Director. The cheque was drawn by him in his personal capacity on an account maintained by him with his Banker. The Courts below was contended to have wrongly concluded that notices under Section 138(b) of the N.I. Act were sent to all the Directors of the Company and such conclusion was not supported by any evidence inasmuch as there was only one acknowledgment card on record, showing receipt of notice under Section 138(b) of the Act, by the Respondent.

The issue before court was thus to determine whether the Respondent- accused can be made liable in his personal capacity when the Company has not been made a party to the complaint?

The court observed that as per Section 138 of the NI Act, the first and foremost essential is that the person who is to be made liable should be the drawer of the cheque and should have drawn the cheque on an account maintained by him with a Banker for payment of any amount of money to another person from out of that account for discharge in whole or part, of any debt or other liability.

In the present case, it was an admitted fact that the drawer of the cheque was the Respondent- Accused, who had drawn the cheque in question on a bank account maintained by him. Therefore, he was the drawer of the cheque.

Where the cheque is drawn by the employee of the appellant company on his personal account, even if it be for discharging dues of the appellant-company and its Directors, the appellant-company and its Directors cannot be made liable under Section 138. This is so that the Section itself makes the drawer liable and no other person.

It was accordingly held that the Respondent-Accused has to be made liable under Section 138 of the NI Act, even though the Company had not been named in the notice or the complaint. There was no necessity for the complainant to prove that the said Respondent was incharge of the affairs of the company, by virtue of the position he held.

[Mainuddin Abdul Sattar Shaikh Vs. Vijay D. Salvi]

SC, 06.07.2015 – Criminal Appeal No. 1472 of 2009