Summary
The cheque was drawn on behalf of a company and signed by its director, but notice and prosecution were directed only against the director. Arraigning the company was necessary for vicarious liability, and failure to serve the company with the statutory demand could not be cured by later adding it. The complaint was quashed. Separately, in view of the intent of an earlier deposit order, the Court directed payment of the deposited cheque amount and accrued interest to the complainant.
Issues
- Whether a company-cheque signatory could be prosecuted without arraigning the company.
- Whether the company could later be added without compliance with the statutory demand requirements.
- How the amount deposited during the appeal should be disbursed.
Provisions considered
- Section 141(1), Negotiable Instruments Act, 1881Company commission of the offence is the condition precedent to officers’ vicarious liability; arraigning the company was imperative. (¶¶ 8, 9, 12, 13, 14)
- Section 138, proviso, Negotiable Instruments Act, 1881The drawer must receive the prescribed demand and fail to pay within the statutory period. Notice only to the director did not satisfy the requirements for prosecuting the company later. (¶¶ 9, 10, 11, 12, 14)
Held
- Where the cheque was signed by a director for and on behalf of the company, prosecution of the director without the company as an accused was not maintainable under the governing principle in Aneeta Hada. The complainant’s claimed ignorance of the company did not justify continuation. (¶¶ 5, 6, 8, 9, 12, 13, 14)
- The Section 138 proviso contains conditions precedent to the offence. The absence of demand notice to the company and compliance with that proviso made the High Court’s suggestion of later arraignment erroneous. The Section 482 petition should have succeeded. (¶¶ 9, 10, 11, 12, 14, 15, 16)
- Despite quashing the complaint, the intent of the earlier order recording willingness to deposit the cheque amount warranted paying the Rs 4,15,000 deposit and accrued interest to the complainant. The Registry must inform him and disburse against identity proof. (¶¶ 17, 18, 19, 20)
Result
Appeal allowed, High Court judgment set aside and complaint quashed. Deposited Rs 4,15,000 with accrued interest directed to the respondent-complainant against proof of identity. Pending applications disposed of.