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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. OF 2026

(Arising out of SLP Criminal No. 8240 of 2016)

MANJULA KAPOOR …APPELLANT(S)

VERSUS

THE STATE OF HIMACHAL PRADESH AND ANR.

…RESPONDENT (S)

J U D G M E N T

MANOJ MISRA, J.

1. Leave granted.

2. Appellant filed a petition under Section 482 of

the Code of Criminal Procedure, 1973

1 read with Article

227 of the Constitution of India in the High Court of

Himachal Pradesh at Shimla

2 for quashing proceedings

of Complaint Case No. 25/1 of 2009, titled Pankaj

Sharma v. Manjula Kapoor), in the Court of Judicial

1

CrPC

2

The High Court

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

Magistrate

3 under Section 138 of Negotiable

Instruments Act, 1881

4. By the impugned order dated

19.09.2016, the High Court, though declined the prayer

to quash the proceedings, directed the Trial Court to suo

motu issue notice to M/s Cine Prime Entertainment

5

under Section 319 of CrPC and, after impleading it as

accused No.2, commence trial de novo against the

Company, as per provisions of sub-section (4) of Section

319 of CrPC, and bring it to its logical conclusion

expeditiously and in accordance with law.

Facts:

3. In brief, the facts are as follows:

(i) Pankaj Sharma (i.e., Respondent No.2) filed a

complaint under Section 138 of NI Act against

the accused-appellant, inter alia, alleging that

the Company owed Rs. 5,00,000 to the

complainant in lieu of services rendered by him;

the accused-appellant is one of the directors and

authorised signatory of the Company ; in

3

Judicial Magistrate 1

st

Class, Barsar, Hamirpur (State of Himachal Pradesh)/ Trial Court

4

NI Act

5

Hereinafter referred to as the Company

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

discharge of the liability of the Company, a

cheque of Rs. 5,00,000, duly signed by the

accused-appellant, as authorised signatory of the

Company, was issued to the complainant, which

returned unpaid with remark ‘payment stopped

by drawer’; thereafter, the complainant served a

notice of demand on the accused-appellant;

despite service of the notice, the accused -

appellant failed to make the requisite payment.

(ii) The learned Judicial Magistrate took

cognizance on the complaint and summoned the

appellant under Section 138 of NI Act vide order

dated 30.01.2010. Thereafter, trial commenced.

(iii) When the proceedings were at the stage of

recording statement of accused under Section

313 CrPC, the accused-appellant filed a petition

before the High Court for quashing the

proceedings on the ground that the cheque in

question was drawn on the account maintained

by the Company and, therefore, without

impleading the Company as an accused, the

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

complaint was liable to be quashed in the light of

decision of this Court in Aneeta Hada v.

Godfather Travels & Tours (P) Ltd.

6

(iv) The High Court accepted the legal position

settled by this Court in Aneeta Hada (supra),

but took the view that, since from the evidence

led in the course of trial it appeared that the

offence was committed by the Company, the Trial

Court could have taken recourse to the powers

under Section 319 of CrPC to arraign the

Company as accused No.2. Accordingly, vide the

impugned order, the High Court directed the

Trial Court to act in terms supra.

4. Aggrieved by the order of the High Court, this

appeal has been filed.

Submissions on behalf of the Appellant:

5. On behalf of the appellant, it is submitted that it

is no longer res integra that where an offence punishable

under Section 138 of NI Act is committed by a company,

without impleading the company as an accused, the

6

(2012) 5 SCC 661

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

complaint against the director, or any person, who, at

the time the offence was committed, was in-charge of,

and responsible to the company for conduct of its

business, is not maintainable.

7 Besides, Section 142 of

NI Act provides a limitation for filing the complaint under

Section 138. Therefore, if the complaint suffers from a

fatal defect, the complaint being a dead letter in the eyes

of law, its defect cannot be removed beyond the period

of limitation. Admittedly, the period of limitation had

passed, and the complaint was non est in law, there was

no question of reviving a dead complaint by taking

recourse to the powers under Section 319 CrPC. In such

circumstances, it is submitted , the High Court

committed manifest error in declining the prayer to

quash the complaint and all consequential proceedings.

Submissions on behalf of Respondent No.2 :

6. Per contra, on behalf of the complainant (i.e.,

respondent No.2), it was submitted that, admittedly, the

appellant was the authorised signatory of the Company;

the appellant had signed the cheque on behalf of the

7

Aneeta Hada (supra)

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Company, therefore, there was only a formal defect in

the complaint which could be rectified by taking

recourse to the provisions of Section 319 CrPC. Any

other view would allow the accused to go scot-free

resulting in grave injustice. Thus, the High Court was

justified in exercising its inherent and constitutional

powers to secure the ends of justice.

Submissions on behalf of State:

7. On behalf of State it was submitted that since it

is a case based on a private complaint, the State has no

role. In so far as the complaint is concerned, it is well

settled that if the person who commits the offence is a

company, without impleading the company as an

accused, the complaint is not maintainable.

Discussion:

8. We have considered the rival submissions and

have perused the materials placed on record. There

exists no dispute that the cheque in question was drawn

on the account maintained by the Company and,

according to the allegation, it was issued to meet the

obligation of the Company, though under the signatures

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

of the appellant. It is also not in dispute that the notice

of demand was not sent to the Company, but to the

appellant, i.e., the authorised signatory of the Company.

9. A plain reading of Section 138

8 of NI Act would

make it clear that to successfully prosecute a person for

an offence punishable under Section 138, the

complainant must prove:

(i) that the person drew a cheque on an account

maintained by him with the banker;

(ii) that such cheque was drawn for payment of any

amount of money to another person out of that

account for the discharge, in whole or in part, of any

debt or other liability;

8

Section 138. Dishonour of cheque for insufficiency, etc. of funds in the account.- Where any cheque drawn by

a person on an account maintained by him with a banker for payment of any money to another person from out

of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid,

either because of the amount of money standing to the credit of that account is insufficient to honour the cheque

or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such

person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of

this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may

extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless-

(a) the cheque has been presented to the bank within a period of six months from the date on which it is

drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the

payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within

30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;

and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as

the case may be, to the holder in due course of the cheque, within 15 days of the receipt of the said

notice.

Explanation.- For the purposes of this section, “debt or other liability” means a legally enforceable debt or other

liability.

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

(iii) that such cheque was presented to the bank

within a period of six months from the date it was

drawn or within the period of its validity, whichever is

earlier;

(iv) that such cheque was returned by the bank

unpaid, either because of the amount of money

standing to the credit of that account is insufficient to

honour the cheque or that it exceeds the amount

arranged to be paid from that account by an

agreement made with that bank;

(v) that the payee or the holder in due course of the

cheque, as the case may be, demanded in writing from

the drawer of the cheque, the payment of the amount

of the money due under the cheque to the payee;

(vi) that such a notice for payment is made within a

period of thirty days from the date of the receipt of the

information by the payee from the bank regarding the

return of the cheque as unpaid.

(vii) that the drawer of such cheque has failed to make

the payment of the said amount of money to the payee

or, as the case may be, to the holder in due course of

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

the cheque, within 15 days of the receipt of the said

notice.

10. In Aneeta Hada (supra), a three-Judge Bench

of this Court observed:

“19. The main part of the provision can be

segregated into three compartments, namely,

(i) the cheque is drawn by a person, (ii) the

cheque drawn on account maintained by him

with the banker for payment of any amount of

money to another person from out of that

account for the discharge, in whole or in part,

of a debt or other liability, is returned unpaid,

either because the amount of money standing

to the credit of that account is insufficient to

honour the cheque or it exceeds the amount

arranged to be paid from that account by an

arrangement made with the bank, and (iii)

such person shall be deemed to have

committed an offence and shall, without

prejudice to any other provision of the Act, be

punished with imprisonment for a term which

may extend to two years or with fine which

may extend to twice the amount of the cheque

or with both. The proviso to the said section

postulates under what circumstances the

section shall not apply. In the case at hand,

we are not concerned with the said aspect. It

will not be out of place to state that the main

part of the provision deals with the basic

ingredients and the proviso deals with certain

circumstances and lays certain conditions

where it will not be applicable. The emphasis

has been laid on the factum that the cheque

has to be drawn by a person on the account

maintained by him and he must have issued

the cheque in discharge of any debt or other

liability.”

(Emphasis supplied)

11. What is clear from above is that the liability for

the offence falls on “such person” who has drawn the

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

cheque on an account maintained by him with a banker.

Company is a ‘juristic person’ and can maintain an

account with the bank. Thus, if the cheque concerned is

drawn on the account maintained by the Company,

subject to fulfilment of other ingredients of Section 138

of NI Act, it would be the Company which would commit

the offence. Section 141

9 of NI Act creates vicarious

liability of certain other persons when the offence is

committed by the company. Section 141 provides that

if the person committing an offence under Section 138

is a company, every person who, at the time the offence

was committed, was in charge of, and was responsible

to the company for the conduct of the business of the

company, as well as the company, shall be deemed to be

9

Section 141. Offences by companies.— (1) If the person committing an offence under section 138 is a company,

every person who, at the time the offence was committed, was in charge of, and was responsible to the company

for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the

offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves

that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the

commission of such offence:

Provided further that where a person is nominated as a director of a company by virtue of his holding any office

or employment in the Central Government or State Government or a financial corporation owned or controlled

by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution

under this Chapter.

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed

by a company and it is proved that the offence has been committed with the consent or connivance of, or is

attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such

director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be

proceeded against and punished accordingly.

Explanation.-- For the purposes of this section,-

(a) “company” means anybody corporate and includes a firm or other association of individuals;

(b) “director” in relation to a firm, means a partner in the firm.

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guilty of the offence and shall be liable to be proceeded

against and punished accordingly. Interpreting the

provisions of Sections 138 and 141 of NI Act, in Aneeta

Hada (supra), it was held that for maintaining

prosecution of any director of the company arraigning a

company as an accused is mandatory. It was further

held that commission of offence by the company is a

condition precedent to attract the vicarious liability of

others. This Court went on to observe that the words “as

well as the company” appearing in Section 141 make it

absolutely clear that when the company can be

prosecuted, then only the persons mentioned in other

categories could be held vicariously liable for the offence

subject to the averments in the petition and pro of

thereof. The relevant paragraphs of this Court’s decision

in Aneeta Hada (supra) are being reproduced below:

“58. Applying the doctrine of strict

construction, we are of the considered opinion

that commission of offence by the company is

an express condition precedent to attract the

vicarious liability of others. Thus, the words,

“as well as the company” appearing in the

section make it absolutely unmistakably clear

that when the company can be prosecuted,

then only the persons mentioned in the other

categories could be vicariously liable for the

offence subject to the averments in the

petition and proof thereof. One cannot be

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Criminal Appeal @ SLP (Crl.) No. 8240 of 2016

oblivious of the fact that the company is a

juristic person and it has its own

respectability. If a finding is recorded against

it, it would create a concavity in its reputation.

There can be situations when the corporate

reputation is affected when a Director is

indicted.

59. In view of our aforesaid analysis, we arrive

at the irresistible conclusion that for

maintaining the prosecution under Section

141 of the Act, arraigning of a company as an

accused is imperative. The other categories of

offenders can only be brought in the drag-net

on the touchstone of vicarious liability as the

same has been stipulated in the provision

itself. We say so on the basis of the ratio laid

down in C.V. Parekh

10

which is a three-Judge

Bench decision. Thus, the view expressed in

Sheoratan Agarwal

11

does not correctly lay

down the law and, accordingly, is hereby

overruled. The decision in Anil Hada

12

is

overruled with the qualifier as stated in para

51. The decision in Modi Distillery

13

has to

be treated to be restricted to its own facts as

has been explained by us hereinabove.”

12. Now we shall consider whether recourse can be had to

the provisions of Section 319 of CrPC to arraign the

company as an accused when the complaint fails to implead

the company. To appropriately answer the issue we must

have a look at the provisions of Section 142 which deals

with cognizance of the offence punishable under Section

138 of NI Act. Section 142

14 of NI Act provides that

10

State of Madras v. C.V. Parekh, (1970) 3 SCC 491: 1971 SCC (Cri) 97

11

Sheoratan Agarwal v. State of M.P., (1984) 4 SCC 352: 1984 SCC (Cri) 620

12

Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1: 2001 SCC (Cri) 174

13

U.P. Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684: 1987 SCC (Cri) 632

14

Cognizance of offences.— (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2

of 1974)--

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notwithstanding anything contained in CrPC no Court shall

take cognizance of any offence punishable under Section

138 except upon a complaint in writing made by the payee

or, as the case may be, the holder in due course of the

cheque; and such complaint must be made within one

month of the date on which the cause of action arises under

clause (c) of the proviso to Section 138. Clause (c) of the

proviso to Section 138 gives 15 days’ time to the drawer to

make payment upon service of notice of demand. This

would imply that cause of action crystalises when the

drawer of such cheque fails to make payment of the amount

concerned within fifteen days of the receipt of the notice

contemplated in clause (b) of the proviso to Section 138.

(a) no court shall take cognizance of any offence punishable under section 138 except upon a

complaint, in writing, made by the payee or, as the case may be, the holder in due course of the

cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under

clause (c) of the proviso to section 138:

Provided that the cognizance of a complaint may be taken by the Court after the prescribed

period, if the complainant satisfies the court that he had sufficient cause for not making a complaint

within such period.

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall

try any offense punishable under section 138.

(2) The offence under section 138 shall be inquired into and tried only by a court within whose local

jurisdiction,--

(a) if the cheque is delivered for collection through an account, the branch of the account

where the payee or holder in due course, as the case may be, maintains the account, is

situated; or

(b) if the check is presented for payment by the payee or holder in due course, otherwise

through an account, the branch of the drawee bank where the drawer maintains the

account, is situated.

Explanation.-- For the purposes of clause (a), when a cheque is delivered for collection at any branch at

the Bank of the payee or the holder in due course, then the cheque shall be deemed to have been

delivered to the branch of the bank in which the payee or holder in due course, as the case may be,

maintains the account.

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Therefore, the statute fixes a time period within which the

complaint is to be made for an offence punishable under

Section 138.

13. No doubt, the Court empowered to take cognizance

has the power, under the proviso to sub-section (1) of

Section 142 of NI Act, to take cognizance of a complaint

made after the prescribed period upon being satisfied that

the complainant had sufficient cause for not making the

complaint within such period. But this power must not be

used to circumvent the provisions of the Act and allow the

complainant to remove fatal defects in the course of the

proceedings when the complaint itself deserved dismissal at

the threshold.

14. Here, the complaint suffered from a fatal defect for its

failure to implead the Company as an accused on whose

account the cheque was drawn. In such circumstances, no

cognizance on that complaint could have been taken in view

of the decision in Aneeta Hada (supra). Hence, all further

proceedings on the complaint were bad in law.

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15. In N. Harihara Krishnan v. J. Thomas

15, a

somewhat similar issue had arisen for consideration before

this Court. It was held that power under Section 319 of

CrPC should not be used as a device to initiate prosecution

against the company beyond the period of limitation

stipulated under the Act. We respectfully agree with the

aforesaid view of this Court. Besides, in our view, where the

complaint suffers from so fundamental a defect that no

cognizance can be taken thereupon, the Court cannot

proceed and take recourse to the provisions of Section 319

to cure that defect. The reason is simple, if the complaint

suffers from a fatal defect, there is no valid institution of a

proceeding. In such circumstances, only a fresh complaint

can be filed after removing the defect provided it is within

the period of limitation prescribed by the Act. However, if

the fresh complaint is beyond the prescribed period of

limitation, the Court concerned may take cognizance if it is

satisfied that the complainant had sufficient cause for not

making the complaint within the prescribed period.

15

(2018) 13 SCC 663

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16. For the reasons above, we are of the view that the High

Court clearly exceeded its jurisdiction by directing the

learned Magistrate/ Trial Court to suo moto arraign

company as an accused. In consequence, and having regard

to the finding that the complaint suffered from a fatal

defect, we have no hesitation in holding that the complaint

and all consequential proceedings arising there from are

liable to be quashed and are hereby quashed.

17. The appeal is allowed. The impugned order of the High

Court is set aside. The impugned Complaint and all

consequential proceedings under Section 138 of NI Act are

hereby quashed.

18. Pending application(s), if any, shall stand disposed.

..............................J.

(MANOJ MISRA)

..............................J.

(VIJAY BISHNOI)

New Delhi;

July 29, 2026