Managing Director or Joint Director of Company taking Personal Responsibility to Discharge Debt is Solely Liable as Drawer of Cheque: Calcutta HC [Read Order]

The Calcutta High Court recently observed that Managing Director or Joint Director of company taking personal responsibility to discharge debt is solely liable as the drawer of cheque.

The case of the appellant, Abhijit Banerjee, is that he as a complainant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging, that the respondents No.2 and 3 are the Directors of a company under the name and style of M/s Amba Complex Private Limited.

The appellant is an income tax consultant and he worked for the said company previously in relation to their income tax etc. Since respondents No.2 and 3 were closely acquainted with the appellant they approached him to lend a sum of Rs.30,50,001/- to purchase real estate in the name of the said company.

The Judicial Magistrate on due consideration of the evidence on record to the respective cases of the parties and legal position with regard to vicarious liability of the Directors of a company and personal liability of the drawer of cheques came to the finding that the complainant failed to prove charge under Section 138 of the N.I Act and passed an order of acquittal in favour of the respondents.

Sandipan Ganguly, Senior Counsel submitted that there is no ambiguity that a person issuing a cheque in discharge of any debt or either liability is liable under Section 138 of the N.I Act in the event the cheque is dishonoured irrespective of whose debt or liability the drawer of the cheque intends to discharge. The respondent No.2 clearly falls within the ambit the liability in the facts and circumstances of the case and there is no statutory irregularity in issuance of demand notice and filing of the instant case by the appellant.

It was further submitted that the Magistrate has wrongly placed the burden of statutory presumption under Section 139 read with Section 118 of the N.I Act. The presumption contemplated in Section 139 read with Section 118 of the N.I Act is always in favour of the holder of a cheque in due course that the drawer of the cheque has issued the same in discharge of legally enforceable debt or liability. Of course, such presumption is rebuttable by the accused but in the instant case respondent No.2 failed to rebut such presumption.

Sourav Chatterjee, Advocate for the respondents submitted that when the drawer of the cheque is the person(s) who was in charge of, and was responsible to the company for the conduct of the business of the company, such person(s) as well as the company shall be deemed to be guilty of offence and shall be liable to be proceeding against the punished accordingly.

The counsel contended that in the instant case, the respondent No.2 did not issue the cheques in question in discharge of his personal debt or liability but in discharge of the debt or liability of M/s Amba Complex Private Limited. Therefore, the company is the principal offender under Section 141 of the N.I Act

A Single Bench of Justice Bibek Chaudhuri observed that “If the Managing Director or Joint Director of the company takes personal responsibility to discharge the debt or liability which the company owed and issued cheque in his/their capacity, the said person is solely liable as drawer of the cheque.

“On careful perusal of the entire evidence on record this Court finds that the learned Magistrate recorded an order of acquittal on misreading of evidence and the evidence on record is sufficient to hold the respondent No.2 liable for committing offence under Section 138 of the N.I Act” the Court noted.

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