2023 (9) TMI 1361 - HC - Indian Laws

Dishonour of Cheque - absence of a notice of demand being served on the company - compliance with the proviso to Section 138 of NI Act or not - company could now be arraigned as an accused or not - HELD THAT - In the present case - a) The company has not been made an accused nor was any notice served upon the company. b) The petitioner has been made an accused as the Director of the company, who signed and issued the cheque for and on behalf of the company. In the absence of the company being arraigned as an accused, a complaint against the petitioner is not maintainable. Revision allowed.

Summary

Issues Involved:
The issues involved in this case are the quashing of proceedings in connection with a complaint case u/s 138 of the Negotiable Instruments Act, 1881, due to the absence of the company being arraigned as an accused and the failure to issue a notice to the company.

Details of the Judgment:

Issue 1: Quashing of Proceedings in Connection with Complaint Case u/s 138 of the Negotiable Instruments Act, 1881

The petitioner, a Director of a private limited company, issued an undated account payee cheque on behalf of the company to the complainant. The complainant alleged that the cheque was dishonored due to insufficient funds and initiated proceedings against the petitioner. However, the petitioner argued that the complaint was false and solely aimed at extracting money. The petitioner contended that the company, being the entity involved in the transaction, should have been made a party to the proceedings as per legal precedents. The petitioner emphasized that the absence of a demand notice to the company rendered the proceedings against the petitioner not maintainable. Citing relevant Supreme Court judgments, the petitioner asserted that without the company being arraigned as an accused, the complaint against the petitioner was not maintainable.

Issue 2: Failure to Implead the Company and Serve Notice Under Section 138 of the Negotiable Instruments Act, 1881

The petitioner highlighted that the complainant failed to include the company as an accused in the proceedings despite acknowledging the company's involvement in the transaction. It was argued that the complainant's failure to serve a notice under Section 138 of the Act to the company rendered the proceedings against the petitioner unjust. The petitioner's counsel emphasized that the continuation of the proceedings without involving the company would amount to a misuse of legal process and should be quashed in the interest of justice.

Conclusion:
In line with the legal arguments presented, the High Court allowed the revision petition, quashing the proceedings under Section 138 of the Negotiable Instruments Act, 1881, against the petitioner due to the failure to implead the company as an accused and serve a notice to the company. The Court directed the Trial Court to comply with the judgment and supplied a certified copy of the judgment for necessary actions.