2015 (8) TMI 907 - SC - Indian Laws

Strict liability for dishonored cheques upheld; respondent personally liable under Section 138

Mainuddin Abdul Sattar Shaikh Versus Vijay D. Salvi

The Supreme Court held the respondent personally liable under Section 138 of the Negotiable Instruments Act, despite the Company not being named in the ... Dishonour of cheque - Liability of drawer of cheque - whether the respondent can be made liable in his personal capacity when the Company has not been made a party to the complaint - Held that:- Drawer of the cheque was the respondent, who had drawn the cheque, bearing No.075073 for ₹ 74,200/- on a bank account maintained by him towards the refund of the booking amount. Therefore, he was the drawer of the cheque. The case of the appellant, apart from being supported by the provision of Section 138 of the NI Act, also gets buttressed by the judgment in P.J. Agro Tech Limited and Ors. Vs. Water Base Limited, [2010 (7) TMI 280 - SUPREME COURT OF INDIA] where this Court has dealt with the scope of Section 138 and held that it is very clear that in order to attract the provisions thereof a cheque which is dishonoured will have to be drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part of any debt or other liability. It is only such a cheque which is dishonoured which would attract the provisions of Section 138 of the above Act against the drawer of the cheque. In the light of the position which the respondent in the present case held, we are of the view that the respondent 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 appellant to prove that the said respondent was incharge of the affairs of the company, by virtue of the position he held. Thus, we hold that the respondent Vijay D Salvi is liable for the offence under Section 138 of the NI Act. - compensation is awarded to the extent of twice the cheque amount and simple interest thereon at 9% per annum to the complainant. Accordingly, the respondent Vijay D Salvi is sentenced to undergo simple imprisonment for a period of five months for the offence under Section 138 of the NI Act. - Decided in favour of appellant. Issues:1. Liability of the respondent in his personal capacity when the Company is not a party to the complaint.Analysis:The case involved an appeal against the judgment of the High Court, where the appellant sought leave to appeal against the Trial Court's decision. The appellant had booked a flat in a project that did not materialize, leading to a refund dispute. The respondent, in his personal capacity, issued a cheque for the refund amount, which bounced. The appellant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881. The Metropolitan Magistrate acquitted the respondent, stating the Company was not made the accused, and the cheque exceeded the liability. The High Court dismissed the appeal, upholding the Trial Court's reasoning.The primary issue revolved around whether the respondent could be held liable in his personal capacity when the Company was not part of the complaint. The Supreme Court analyzed Section 138 of the NI Act, emphasizing that the drawer of the cheque is primarily liable. The Court referred to precedents like P.J. Agro Tech Limited case, highlighting that personal liability applies even if the cheque is drawn for the company's dues. The Court stressed that strict interpretation is essential in criminal cases, holding only the drawer accountable.The respondent argued lack of averment regarding his position in the Company, but the Court cited the National Small Industries Corporation Ltd. case, stating that specific averments were unnecessary for Managing Directors. Considering the respondent's role in the Company, the Court held him liable under Section 138, despite the Company not being named in the complaint. The Court referred to R. Vijayan case, emphasizing the need for compensation in cheque dishonor cases.Consequently, the Court allowed the appeal, setting aside the High Court and Trial Court's orders. The respondent was sentenced to five months' simple imprisonment and directed to pay compensation of twice the cheque amount with interest. Failure to pay would result in an additional six months' imprisonment. The judgment highlighted the importance of upholding cheque credibility and ensuring consistent application of legal provisions in such cases.