Important Authorities on

Negotiable Instruments Act

Research work carried out by
TANMAY KARIA
Advocate,
High Court of Gujarat.
M – 9904050000.
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AIR 2013 SC 426 / 2013 CRI. L. J. 1179

Indra Kumar Patodia v. Reliance Industries Ltd.

Complaint of dishonour of cheque - Need not necessarily be

signed by complainant - Complaint sans signature of
complainant is maintainable.

AIR 2010 SC 1907 / 2010 Cri LJ 2860

Damodar S. Prabhu v. Sayed Babalal

Supreme Court addressed the question of reluctance of offenders

to compound the cases at earlier stages of the case prosecution
leading to a huge pendency of cheque dishonour cases, and
issued the following guidelines proposing levy of 'a graded scale
of fine' to encourage compounding at earlier stages of the case :

"(a) That directions can be given that the Writ of Summons be

suitably modified making it clear to the accused that he could
make an application for compounding of the offences at the first
or second hearing of the case and that if such an application is
made, compounding may be allowed by the court without
imposing any costs on the accused.

(b) If the accused does not make an application for

compounding as aforesaid, then if an application for
compounding is made before the Magistrate at a subsequent

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stage, compounding can be allowed subject to the condition that
the accused will be required to pay 10% of the cheque amount to
be deposited as a condition for compounding with the Legal
Services Authority, or such authority as the Court deems fit.

(c) Similarly, if the application for compounding is made before

the Sessions Court or a High Court in revision or appeal, such
compounding may be allowed on the condition that the accused
pays 15% of the cheque amount by way of costs.

(d) Finally, if the application for compounding is made before

the Supreme Court, the figure would increase to 20% of the
cheque amount.

The Court made it clear that eventhough the imposition of costs

by the competent Court is a matter of discretion, the scale of
costs has been suggested in the interest of uniformity. The
competent Court can of course reduce the costs with regard to
the specific facts and circumstances of a case, while recording
reasons in writing for such variance.

Cheques issued in one transaction - Filing of multiple

complaints - Causes tremendous harassment and prejudice to
drawers of cheque - Supreme Court made it mandatory to
complainant to file along with complaint sworn affidavit that
no other complaint has been filed in other Court in respect
of same transaction - High Court directed to levy heavy costs
on complainant resorting to practice of filing multiple
complaints - Directions however given prospective effect.

AIR 2012 SUPREME COURT 719

K. N. Govindan Kutty Menon v. C. D. Shaji

Legal Services Authorities Act - S.20 , S.21 - LEGAL

SERVICES AUTHORITIES - LOK ADALAT - Award of Lok
Adalat - Passed on compromise between parties - Shall be
deemed to be decree of civil Court and as such executable by

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that Court - Whether reference is made by civil Court or
criminal Court, immaterial.

AIR 2012 SC 2795 / 2012 CRI. L. J. 2525

Aneeta Hada v. M/s. Godfather Travels and Tours Pvt. Ltd.
Coram : 3

COMPANY - Company - Not immune from criminal liability -

Plea that company cannot possess necessary criminal intent -
Not tenable as criminal intent of persons guiding company gets
imputed to company.

Dishonour of cheque - Offence by company - Directors/other

officer of company cannot be prosecuted alone - Arraigning
company as accused is condition precedent for their prosecution.

AIR 2012 SC 2844

Sangeetaben Mahendrabhai Patel v. State of Gujarat

Criminal P.C. , S.300 - NI Act S.138 - Penal Code (45 of 1860) ,

S.407 , S.420 , S.114 - DOUBLE JEOPARDY - DISHONOUR
OF CHEQUE - BREACH OF TRUST - Double jeopardy -
Applicability - Person tried for offence of dishonour of cheque -
Can be again tried for offences of criminal breach of trust,
cheating and abetment - Ingredients of offences are not same -
Doctrine of double jeopardy does not apply.

AIR 2011 SC 641

Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao

Criminal P.C. - S.300(1) - Constitution of India , Art.20(2) -

DOUBLE JEOPARDY - DISHONOUR OF CHEQUE -
CHEATING - Double jeopardy - Appellant already convicted
u/S.138, Negotiable Instruments Act - Cannot be again tried or
punished on same facts u/S.420 or any other provisions of IPC
or any other Statute - S.300(1), Criminal P.C. is wider than
Art.20(2) of Constitution.

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AIR 2011 SC 3076
Nitinbhai Saevatilal Shah v. Manubhai Manjibhai Panchal

Criminal P.C. - S.326 , S.263 , S.264 - MAGISTRATE -

SUMMARY TRIAL - Power of successor Magistrate - Case
tried summarily - Successor Magistrate has no authority to
appreciate evidence only on basis of evidence recorded by his
predecessor - He has got to try case de novo - No amount of
consent by parties can confer jurisdiction on successor
Magistrate.

2013(3) GLR 1858

RAMJIBHAI HARIBHAI CHAUDHARI V. STATE OF
GUJARAT

Negotiable Instruments Act, 1881 - Secs. 138 & 143 - Criminal

Procedure Code, 1973 (2 of 1974) - Sec. 326 - Offence under
Sec. 138 summary triable - Successor Magistrate started
proceedings from stage his predecessor left - Held, unless a
speaking order is passed after hearing parties, trial does not
become summons trial merely because his predecessor treated it
as summons trial - Successor Magistrate required to proceed 'de
novo' - Conviction set aside and matter remanded for retrial.

AIR 2010 SC 1898

Rangappa v. Mohan
Coram : 3

NI Act - On account of 'stop payment' instructions sent by

accused to Bank in respect of post dated cheque - S.138 is
attracted - Insufficiency of funds in account, irrespective.
(Para 9)

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NI Act - Existence of legally recoverable debt or liability - Is
matter of presumption u/S.139.

AIR 2002 SC 38
Veera Exports v. T. Kalavathy

N I Act S.87 , S.138 - Invalid cheque - Can be re-validated

voluntarily by altering the dates so as to give fresh life to
cheques for another 6 months - Defence that alteration in the
date was not made voluntarily - Would not constitute ground for
quashing cheque dishonour complaint - It is question of fact to
be established on evidence during trial.

AIR 2001 SC 3641

Punjab and Sind Bank v. Vinkar Sahakari Bank Ltd.

NI Act S.6 , S.5 , S.85A , S.131A , S.138 - Cheque - Pay order -

Is a cheque - Dishonour of pay order - S. 138 proceedings are
competent.

AIR 2013 SC 3447

V.K.Bansal v. State of Haryana

Concurrent running of sentence

In a case involving dishonor of cheques issued by borrower

towards payment of loan, cheques dishonoured could be said to
be arising out of single transaction. Therefore concurrent
running of sentences are to be directed.

AIR 2013 SC 3283

Econ Antri Ltd. V Rom Industries Ltd. & Anr.

Period of limitation

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For computing the period of limitation, calculating one month
which is prescribed u/s 142(b), the period has to be reckoned by
excluding the date on which the cause of action arose. S.9 of
General Clauses Act applicable.

2002(III) BC 199 (Karn) / 2002 (1) KarLJ 233

Sannidhi Agencies vs Brooke Bond Lipton Ltd.

The penal liability whatever incurred consequent to the

bouncing of the cheque would not get obliterated by the merger
of the complainant company.

2000 CrLJ 2386 (AP)

Amit Desai vs Shine Enterprises

Prosecution u/s 138 of NI Act against an unregistered

partnership firm is maintenable.

AIR 2005 SC 3512

S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla
Coram:3

It is necessary to specifically aver in a complaint under Section

141 that at the time the offence was committed, the person
accused was in charge of, and responsible for the conduct of
business of the company. This averment is an essential
requirement of Section 141 and has to be made in a complaint.
Without this averment being made in a complaint, the
requirements of Section 141 cannot be said to be satisfied. (Para
20)

A liability under S. 141 of the Act is sought to be fastened

vicariously on a peson connected with a Company, the principal
accused being the company itself. It is a departure from the rule
in criminal law against vicarious liability. A clear case should be
spelled out in the complaint against the person sought to be

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made liable. Merely being described as a Director in a company
is not sufficient to satisfy the requirement of S. 141. (Para 19)

Offence by company - Managing Director, Joint Managing

Director are in charge of and responsible for conduct of business
of company by virtue of office they hold - They get covered
under S. 141 - Signatory of cheque which is dishonoured is
clearly responsible for incriminating act - Is covered under sub-
sec. (2) of S. 141. (Para 20)

AIR 2009 SC 1284 / 2009 CRI. L. J. 1299 SC

National Small Industries Corporation Ltd. v. State (NCT of
Delhi) and Ors.

Complaint by Government Company - Examination of

complainant and witnesses - Requirement as to - Compliance
with - Not necessary since employee representing in such
company is a Public Servant.

IPC S.21 - Public servant - Government Company is not a

'Public Servant' - But every employee of such company is
'Public Servant'. (Para 8)

A company can be represented by an employee or even by a

non-employee authorized and empowered to represent the
company either by a resolution or by a power of attorney.(Para
10)

AIR 2010 SC (Supp) 569

National Small Industries Corporation Ltd. v. Harmeet
Singh Paintal

NI Act - Dishonour of cheque - Offence by company -

Prosecution of Directors - Complaint should contain specific
averments as to how accused Director was guilty of consent and
connivance or negligence and so responsible for offence.

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Vicarious liability on the part of a person must be pleaded and
proved and not inferred.(Para 25)

The primary responsibility is on the complainant to make

specific averments as are required under the law in the
complaint so as to make the accused vicariously liable. For
fastening the criminal liability, there is no presumption that
every Director knows about the transaction. (Para 25)

Section 141 does not make all the Directors liable for the
offence. The criminal liability can be fastened only on those
who, at the time of the commission of the offence, were in
charge of and were responsible for the conduct of the business
of the company. (Para 25)

Offence by company - Complaint against Managing Director,

person or Director signing cheque - Complaint need not contain
specific averments. (Para 25)

AIR 2005 SC 48
Jimmy Jahangir Madan v. Bolly Cariyappa Hindley
(deceased by L. Rs.)

Application u/s 302 of CrPC to continue prosecution cannot be

filed by power of attorney holder of heirs of the complainant.

Power of attorney holder cannot be treated to be "pleader" of

heirs.

2013 (3) GLR 2550

VINODKUMAR NAYAR THROUGH SHRI CHAKRA
UDYOG PVT. LTD. AND ORS. V. STATE OF GUJARAT
AND ANR.

NI Act - Secs. 138 & 141 - Criminal Procedure Code, 1973 -

Sec. 482 - Complaint against ordinary Director of Company -

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He is neither a signatory to cheque nor a Managing Director -
No allegation/averments in complaint that accused is
responsible for day-to-day conduct of business/affairs of
Company - Held, complaint against such Director not
maintainable - Criminal proceedings quashed under Sec. 482 of
Cr.P.C.

Dishonour of cheque by company not impleaded as accused in

complaint - Held, in absence of impleadment of company as
accused Directors of company cannot be held, vicariously liable
- Complaint liable to be quashed on this ground.

2011(5) GLR 4388

LAXMANBHAI BHIMJIBHAI SUHAGIYA V. STATE OF
GUJARAT AND ANR.

Other Liability

Criminal Procedure Code, 1973 (2 of 1974) - Sec. 482 -

Cheques issued by accused to avoid attachment of property in
execution of award against his wife - Contention by accused that
there was no legal debt, dues payable by him to drawee/payee,
therefore, ingredients of Sec. 138 not satisfied - Contention
negatived - Held, cheques in question fall under "other liability"
under Sec. 138 - Once, accused accepted liability of his wife and
avoided attachment of properly of his wife by issuing cheques, it
is not open to him to contend that there was no legal debt, dues
payable by him to payee - Application dismissed.

2012(2) GLR 1257

RAMESHBHAI MANIBHAI PATEL AND ORS. V. STATE
OF GUJARAT AND ORS.

Negotiable Instruments Act, 1881 - Secs. 138, 142, 7 & 9 -

"Payee" or "holder in due course" only has locus standi to file
complaint for dishonour of cheque - Held, joint holder of Bank

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account has no locus standi to file complaint merely by virtue of
being joint account holder with payee - Whether heir or L.R. of
deceased payee can file complaint without obtaining succession
certificate/probate - Question left open - Criminal proceedings
quashed.

AIR 2014 SC 630

A.C.Narayan v. State of Maharashtra
Coram: 3

Filing of complaint through power of attorney is perfectly legal

and competent.

Power of attorney holder can depose.

For the purpose of issuing process under Section 200 of the

Code of Criminal Procedure, 1973, it is open to the Magistrate
to rely upon the verification in the form of affidavit filed by the
complainant in support of the complaint under Section 138 of
the Negotiable Instruments Act, 1881 and the Magistrate is not
obliged to call upon the complainant to remain present before
the Court, nor to examine the complainant or his witnesses upon
oath for taking the decision whether or not to issue process on
the complaint under Section 138 of the Negotiable Instruments
Act, 1881. It is only if and where the Magistrate, after
considering the complaint under Section 138 of the Negotiable
Instruments Act, 1881 and the documents produced in support
thereof and the verification in the form of affidavit of the
complainant, is of the view that examination of the complainant
or his witness is required, that the Magistrate may call upon the
complainant to remain present before the Court and examine the
complainant and/or his witness upon oath for taking decision
whether or not to issue process on the complaint under Section
138 of the Negotiable Instruments Act, 1881.

AIR 2014 SC / 2014 CR.L.R. (SC) 273

Rameshchandra Ambalal Joshi v. State of Gujarat

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For reckoning the period of six months, the day on which the
cheque was drawn has to be excluded.

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