Case Citation
- Court Name: Supreme Court of India
- Case Title: Bijoy Kumar Moni v. Paresh Manna & Anr.
- Case No.: Criminal Appeal No. 5556 of 2024 (Arising out of SLP (Crl) No. 13133/2024) Date of
- Judgment: 20th December 2024
- Judge(s): Hon’ble Justice J.B. Pardiwala
Facts of the Case
The appellant, Bijoy Kumar Moni, alleged that the respondent, Paresh Manna, borrowed Rs. 8,45,000, including Rs. 7,00,000 issued via a bearer cheque and Rs. 1,45,000 given in cash. The respondent issued a cheque for the total amount drawn on the account of Shilabati Hospital Pvt. Ltd., where he was a director. The cheque was dishonored due to insufficient funds. Despite receiving a statutory notice under Section 138 of the Negotiable Instruments Act (NI Act), the respondent failed to make the payment. Consequently, the appellant filed a private complaint leading to the conviction of the respondent by the Trial Court and affirmation by the Sessions Court. However, the High Court quashed the conviction, citing that the respondent, being a director, could not be held liable under Section 138 without the company being arraigned as an accused.
Contentions of the Appellant
The appellant contended that the transaction was personal and had no connection with the company. The cheque was issued by the respondent in discharge of his personal liability, and the respondent had not raised the defense that the cheque was on behalf of the company during the trial. The appellant argued that the High Court erred in acquitting the respondent solely on technical grounds.
Contentions of the Respondent
The respondent argued that the cheque was issued on behalf of the company and not in his personal capacity. He contended that without making the company a party to the case, he could not be held vicariously liable under Section 141 of the NI Act. The respondent also claimed that the cheque was issued as security and not towards repayment of any legally enforceable debt.
Issues on This Judgment
- Whether the complaint under Section 138 of the NI Act was maintainable against the respondent in the absence of the company being arraigned as an accused?
- Whether the respondent could be held liable in his personal capacity for a cheque drawn on the company’s account?
- Whether the transaction in question constituted a legally enforceable debt under Section 138 of the NI Act?
Observations/Findings/Analysis of the Supreme Court
The Supreme Court examined the requirements of Section 138 and Section 141 of the NI Act. It emphasized that liability under Section 138 attaches only to the drawer of the cheque, and vicarious liability under Section 141 arises only when the company, being the principal offender, is arraigned and convicted. The Court observed that the cheque bore the stamp of the company and was drawn on the company’s account. Hence, the respondent, in his capacity as a director, could not be considered the drawer of the cheque. The Court further clarified that the principle of vicarious liability cannot be applied in isolation without prosecuting the company. Consequently, the High Court’s decision to quash the conviction was upheld.
Principle(s) Laid Down by the Court in This Case
- Under Section 138 of the NI Act, only the drawer of the cheque on the account maintained by them can be held liable for dishonor.
- Vicarious liability under Section 141 arises only when the company, being the principal offender, is arraigned as an accused and found guilty.
- Mere issuance of a cheque by an authorized signatory does not render the individual personally liable unless the cheque is drawn on their personal account.
Final Order
The Supreme Court dismissed the appeal, affirming the High Court’s judgment. It held that the respondent could not be convicted under Section 138 of the NI Act in the absence of the company being prosecuted and held liable as the principal offender.
Importance of This Judgment to Society
This judgment underscores the principle of separate corporate personality and ensures that liability under criminal law is imposed only in accordance with statutory requirements. It protects individuals from being unjustly held accountable for corporate actions in the absence of the principal entity’s prosecution. By reinforcing the procedural safeguards under the NI Act, the ruling ensures fairness and upholds the integrity of legal processes, especially in financial and commercial disputes.
