Paid Advise

A company committed offence under section 138 N I Act

Shivendra Pratap Singh



Reading Time:

Whether a company is liable for the offence of cheque dishonour under section 138 of the NI Act?

When a company issued a cheque and it is dishonoured by the drawee bank it is said that offence under section 138 of the negotiable instrument act, is committed by the company. But the company cannot be prosecuted for the offence because it is a legal entity and no physical punishment can be imposed upon a company.

When such an offence has been committed by a company its director will be punished for the offence under section 138. A company performs all acts through its directors so vicarious liability shall be imposed upon its directors.

In N. K. Wahi vs Shekher Singh (2007) 9 SCC; the supreme court has held that under section 141, N I Act, if any offence has committed by a company then every person who is a director or employee is not liable, only that person is liable who was in-charge for the conduct of the business of the company at the time when the cheque was issued.

Hence, if the offence has committed by a company the person responsible for the affairs of the company at that particular time when the cheque was issued, shall be liable and punishable under section 138. Section 141 does not postulate that all the directors are liable, this section envisages constructive or vicarious liability upon the directors for the offence punishable under section 138.

It infers from a co-joint reading of section 138 and 141, that only those persons or directors will be liable for the offence who, at the time of issuance of cheque, in-charge of the affairs of the company.

In N.K. Wahi v. Shekhar Singh, (2007) 9 SCC 481; the supreme court has held that “to launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction.

There should be clear and unambiguous allegation as to how the Directors are in-charge and responsible for the conduct of the business of the company.”

In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [(2005) 8 SCC 89; a clear case should be spelt out in the complaint against the person sought to be made liable.

Therefore, a complaint must clearly show that who was the responsible person for the affair of business of the company at a particular time when the alleged cheque was issued.

shivendra pratap singh advocate

Shivendra Pratap Singh


Practising lawyer in the High Court Lucknow. You can consult on Criminal, Civil, Matrimonial, Writ, Service matters, Property, Revenue and RERA related issues.

More For you

Section 142 NI Act

Section 142: Cognizance of offences (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),— (a) no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or,...

Section 138: Negotiable Instrument Act

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 amount of money to another person from out of that account for the discharge, in whole...

Cheque bounce due to the closure of account

I have given 28000 to my friend after some time he gave me a cheque. When I presented that cheque to the bank for its encashment, it became dishonoured due to the closure of the account. However, I have his bike ok and RTO papers and want to recover that amount by...

How to file a complaint under the NI Act

Dishonour of cheque is an offence under section 138 of the Negotiable Instrument Act. Section 142 of the Negotiable Instrument Act enunciates about the cognizance of the offence committed under section 138 of the N I Act. The court shall take cognizance only on the complaint in writing filed by the payee or the holder in due course of the cheque.

Trial of cheque bounce case

I like to file a check bounce case in fast track court. Is there any specific procedure for applying a case in fast track court? Will I get a quick judgement than the normal court? ( I have heard check bounce cases pending for 3 years in normal court). Is it possible...

Cheque bounce case

Within what time can I expect justice for a check bounce case? (either I have to get money or action against the person who issued the check) . a. if he fails to pay, what would be the minimum and maximum legal action against that person? What would be the approximate...

Kanoonirai has been advising in legal issues since October 2014. You can consult a lawyer through online media, telephonic consultation and video conferencing.