Case Laws on Section 138 of The Negotiable Instruments Act wherein, Director of a firm is made accused.

Case Excerpts:

1.Standard Chartered Bank v. State Of Maharashtra And Ors. Etc 

Supreme Court of India | 06-04-2016

Thus, considering the totality of assertions made in the complaint and also taking note of the averments put forth relating to the respondent Nos. 2 and 3 herein that they are whole-time Director and Executive Director and they were in charge of day to day affairs of the Company, we are of the considered opinion that the High Court has fallen into grave error by coming to the conclusion that there are no specific averments in the complaint for issuance of summons against the said accused persons.

https://www.legitquest.com/case/standard-chartered-bank-v-state-of-maharashtra-and-ors-etc/9A879

2. Garnet Speciality Paper Ltd.  v. State of Gujarat

High Court of Gujarat At Ahmedabad | 08-01-2019

A conspectus of the aforenoted observations of the Apex Court is that if the cheque is singed by the Director or an officer of the Company who has signed the cheque on behalf of the Company would give rise to the responsibility of liability under section 141 of the Act. 

https://www.legitquest.com/case/garnet-speciality-paper-ltd-v-state-of-gujarat/1905FB

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

Supreme Court of India | 20-09-2005

The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.

https://www.legitquest.com/case/sms-pharmaceuticals-ltd-v-neeta-bhalla/4069

4. K.K. Ahuja v. V.K. Vora & Another 

Supreme Court of India | 06-07-2009

The position under section 141 of the Act can be summarised thus:

(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix `Managing to the word `Director makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.

(ii) In the case of a director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of Section 141.

https://www.legitquest.com/case/kk-ahuja-v-vk-vora–another/471D9

5. Bilakchand Gyanchand Company v. A. Chinnaswamy 

Supreme Court of India | 12-03-1999

It is evident that proceedings were initiated by the appellant against A. Chinnaswamy who happened to be the managing director of Shakti Spinners Ltd. The cheques in question which were dishonoured were signed by him. The process was issued by the Judicial Magistrate in his name. We see no infirmity in the notice issued under section 138 addressed to A. Chinnaswamy, who was a signatory of the said cheques.

https://www.legitquest.com/case/bilakchand-gyanchand-company-v-a-chinnaswamy/26178

6. Anil Hada v. Indian Acrylic Ltd

Supreme Court of India | 26-11-1999 

We, therefore, hold that even if the prosecution proceedings against the company were not taken or could not be continued, it is no bar for proceeding against the other persons falling within the purview of sub-sections (1) and (2) of Section 141 of the Act…Hence we are not impressed by the contention that Section 139 of the Act would afford support to the plea that prosecution of the company is sine qua non for persecuting its directors under section 141 of the Act.

https://www.legitquest.com/case/anil-hada-v-indian-acrylic-ltd/34A

7. S.M. Omar & Others v. Zackaria Thomas

High Court of Judicature At Madras | 01-02-2011

The complaint was filed against the second party with a description Managing Director, Jewel Base Target Private Limited. In my considered view, when the drawer has been addressed with or without any description of his position and when the intention of the holder of the cheque was to make a demand for the payment of the dishonored cheque from such drawer, the provision under section 138 (b) of the Act is satisfied. Sec.138(b) contemplates issuance of notice to the drawer demanding payment and the notice and its content is important then the address. When a person has issued the cheque towards the legally enforceable debt of a company, merely describing the drawer of the cheque by his position as Chairman and Managing Director of the Company, will not invalidate the notice.

https://www.legitquest.com/case/sm-omar–others-v-zackaria-thomas/51723

8. Rajneesh Aggarwal v. Amit J. Bhalla 

Supreme Court of India | 04-01-2001

The cheques had been issued by M/s Bhalla Techtran Industries Limited, through its Director Shri Amit Bhalla. The appellant had issued notice to said Shri Amit J. Bhalla, Director of M/s Bhalla Techtran Industries Limited. Notwithstanding the service of the notice, the amount in question was not paid. The object of issuing notice indicating the factum of dishonour of the cheques is to give an opportunity to the drawer to make payment within 15 days, so that it will not be necessary for the payee to proceed against in any criminal action, even though the bank dishonoured the cheques. 

It is Amit Bhalla, who had signed the cheques as the Director of M/s Bhalla Techtran Industries Ltd. When the notice was issued to said Shri Amit Bhalla, Director of M/s Bhalla Techtran Industries Ltd., it was incumbent upon Shri Bhalla to see that the payments are made within the stipulated period of 15 days. It is not disputed that Shri Bhalla has not signed the cheques, nor is it disputed that Shri Bhalla was not the Director of the company. Bearing in mind the object of issuance of such notice, it must be held that the notices cannot be construed in a narrow technical way without examining the substance of the matter.

But by no stretch of imagination, a criminal proceeding could be quashed on account of deposit of money in the Court or that an order of quashing of criminal proceeding, which is otherwise unsustainable in law, could be sustained because of the deposit of money in this Court. In this view of the matter, the so-called deposit of money by the respondent in this Court is of no consequence…In the aforesaid premises, we set aside the impugned orders of the High court and allow these appeals and direct that the criminal proceedings would be continued.

https://www.legitquest.com/case/rajneesh-aggarwal-v-amit-j-bhalla/150C

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