2026 (2) TMI 172 - HC - Indian Laws

Dishonour of cheque and vicarious liability of company officer affirmed; conviction and sentence confirmed on revision.

Dishonour of cheque prosecution under the Negotiable Instruments framework: court found that the company officer, in his capacity as managing director and ... Dishonour of cheque - Offence u/s 138 of Negotiable Instruments Act - Notice and demand requirement - Vicarious liability of company officer u/s 141 - Proof of issuance and dishonour of cheque and service of statutory notice - Interference with conviction and sentence on revision - HELD THAT:- In the case in hand, complainant has specifically stated that the 2nd accused is the Managing Director of the 1st accused company and he was in charge and responsible for the day-to-day affairs of the company and was managing the business of the 1st accused company at the relevant time. Revision petitioner/A2 is the signatory to Exts.P2 to P4 cheques and it was he who issued Ext.P2 to P4 cheques to the complainant. The complainant has succeeded in establishing that the revision petitioner/2nd accused in his capacity as the Managing Director of the 1st accused company and who was in charge of the day-to-day affairs of the company issued Exts.P2 to P4 cheques in partial discharge of the amount due to the complainant company. It also stands established that Exts.P2 to P4 cheques issued by the accused were dishonoured due to insufficient funds in the account of the accused and in spite of Ext.P6 notice, accused failed to pay the amount covered by the cheques. The learned Magistrate and the learned Sessions Judge have appreciated the facts, evidence and law in its correct perspective. Hence, this Court find no reasons to interfere with the finding rendered by the learned Magistrate and the learned Sessions Judge that the accused have committed the offence punishable under Section 138 of the N.I Act. The sentence against the 2nd accused/revision petitioner as modified by the Sessions Court do not warrant any interference by this Court and accordingly, the conviction and sentence passed against the accused stand confirmed. The revision petition is devoid of any merit and accordingly, it stands dismissed. Issues: Whether the conviction under Section 138 of the Negotiable Instruments Act, 1881 and the sentence imposed on the 2nd accused (Managing Director) require interference by this Court; and whether the 2nd accused can be held vicariously liable under Section 141 of the Negotiable Instruments Act, 1881.Analysis: The Court examined the evidence proving issuance of cheques (Exts.P2-P4) by the 1st accused company's account, the bank dishonour memos (Exts.P5 series) showing insufficiency of funds, the lawyer's notice (Ext.P6) with postal receipts and acknowledgements (Exts.P7/P7(a)/P8/P8(a)), and the accused's reply (Ext.P9) admitting the transaction and seeking time for payment. The accused, in his Section 313 Cr.P.C. examination, admitted being the Managing Director in charge of day-to-day affairs and admitted the credit transaction and cheques. The Court applied the statutory framework of Section 138 (dishonour of cheque) and Section 141 (offences by companies) of the Negotiable Instruments Act, observing that vicarious liability under Section 141 requires that the person was, at the relevant time, in charge of and responsible for the conduct of the company's business and that such facts were specifically averred and proved.Conclusion: The conviction under Section 138 of the Negotiable Instruments Act, 1881 and the sentence as modified by the Sessions Court are confirmed; the revision petition is dismissed and the findings that the accused is vicariously liable under Section 141 are upheld.