Managing Director not liable for dishonored cheque issued by another individual under Section 138

The court ruled in favor of the Managing Director in a case involving a dishonored cheque issued by another individual. The court held that the Managing Director cannot be held liable under Section 138 of the Negotiable Instruments Act as the cheque was not drawn on behalf of the company. Citing the case law State of Haryana v. Bhajanlal, the court quashed the complaint against the Managing Director, emphasizing that he cannot be held responsible for the actions of the Director in his individual capacity.

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Issues:
Complaint under Section 138 of the Negotiable Instruments Act against two individuals - liability of the Managing Director for a dishonoured cheque issued by another individual.

Analysis:
The complaint was filed under Section 138 of the Negotiable Instruments Act against two individuals, one being the Managing Director and the other the Director of a company. The petitioner, the Managing Director, argued that as per Section 138, only the drawer of the dishonoured cheque is liable for punishment. The petitioner contended that since he did not draw the cheque on any account maintained by him, he should not be held liable. The first respondent, however, argued that the Managing Director is also liable under Section 138 as the cheque was issued in relation to a debt owed by the company. The court noted that the dishonoured cheque was not drawn on behalf of the company but by the Director in his individual capacity, ruling out the application of Section 141 which holds company officials liable. The court emphasized that the Managing Director cannot be made liable for an offence under Section 138 if the cheque was not drawn on behalf of the company.

The court further elaborated that even if the allegations in the complaint were true, the petitioner cannot be held liable under Section 138. The court referenced the case law State of Haryana v. Bhajanlal to support its decision to quash the complaint against the petitioner. The judgment highlighted that the petitioner, as the Managing Director, cannot be held responsible for the dishonoured cheque issued by the Director, especially when it was not drawn on behalf of the company. Therefore, the court allowed the Criminal Petition and quashed the complaint against the petitioner.

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