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Complaint against Chairman/Director of Company isn’t maintainable in Absence of Company being arraigned as an Accused: Madhya Pradesh HC [Read Order]

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The High Court of Madhya Pradesh held that in the absence of the company being arraigned as an accused, a complaint against the Chairman or Director of the company was therefore not maintainable under Section 138 of the Negotiable Instruments Act.

The respondent, Sai Traders is a trading firm and filed a complaint through its proprietor against the petitioner who is the chairman of the company namely ‘Well Built Industry India Ltd., Kalyan Pura, Ashta, District-Sehore’. It is mentioned in the complaint that on account of the business relationship between the parties, the petitioner borrowed money of Rs. 2,00,000/- from the respondent. He assured the respondent to return the same within a period of four months. But, after the expiry of the stipulated period, when the respondent demanded his money, the petitioner started procrastinating, and after insisting, the petitioner has given a cheque amounting to Rs. 2,00,000/- to the respondent.

When the respondent submitted the said cheque before the bank, the same was dishonored due to “stop payment” by the petitioner. Thereafter, the respondent sent a legal notice to the petitioner, even then he did not make a payment, hence, the respondent filed a complaint before JMFC, Narsinghpur.

The petitioner contended that the respondent has given the amount in question to the petitioner for business purpose and the petitioner has given the said cheque under the capacity of chairman of company namely ‘Well Built Industry India Ltd.’ but the respondent has not impleaded the company as a party in the complaint case. The respondent/complainant also failed to specify the role of the present petitioner on behalf of the company. Hence, in view of the provision of Section 141 Negotiable Instrument Act, the proceedings under Section 138  Negotiable Instrument Act are bad in law and deserve to be quashed.

On the other hand, the respondent contended that the petitioner had borrowed the money from the respondent for his own business purpose, there was no need to implement the company as an accused.

The single-judge bench of Justice Rajendra Kumar Srivastava allowed the petition and held that in the absence of the company being arraigned as an accused, a complaint against the Chairman or Director of the company was therefore not maintainable.

The court further observed, “the appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused”.

To Read the full text of the Order CLICK HERE
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