Dishonour of cheques: Is it mandatory to implead a company in order to convict directors? Supreme Court to decide

The Supreme Court on Friday agreed to hear a plea on the issue of whether directors of a company can be held liable for dishonouring a cheque without making the company a party to the proceedings [Rarichan PJ v. KP Varghese]..A Bench of Justices BR Gavai and Vikram Nath issued notice on the appeal against a judgment of the Kerala High Court where the petitioners were found guilty of the offence under Section 138 of the Negotiable Instruments (NI) Act."It is found that Company was not alleged in the complaint as committed an offence under Section 138 NI Act and therefore the company was not arraigned as an accused...It was purely a prosecution launched against the accused for commission of offence under Section 138 NI Act in their personal capacity," the High Court's judgment held. .By way of a plea filed through advocates Sriram Parakkat, Shyam V and MS Vishnu Shankar the top court was informed that the petitioners were falsely implicated by the complainant who lent money deceitfully and used cheques issued by petitioners in lieu of security for funds..The trial court had acquitted the petitioners. However, the High Court set aside the acquittal and remitted the case to the trial court solely for the purpose of hearing the accused on sentence and to impose punishment..The primary question before the top court is whether the High Court failed to appreciate the trial court's finding that liability of directors cannot be fixed without making a company a party to the proceeding.“Because the complainant by not impleading the company to whom the alleged payments were made as a chit subscriber and then using the security check issued to them and now claiming that the debt is personally liable on the accused and not the company is in antithetical,” the plea said..It was also argued that the complainant had failed to put forth sufficient proof that the petitioner did not issue the cheques in his capacity as director.In this regard, the petitioners placed reliance on the case of Aneeta Hada v. M/s Godfather Tours Pvt Ltd where it was held that impleading a company as an accused is imperative in cases where the company committed an offence under Section 138..Therefore, seeking interim relief, the petitioner claimed that his name was being arrayed in a vague and unfounded manner with a motive to wreak vengeance.

Dishonour of cheques: Is it mandatory to implead a company in order to convict directors? Supreme Court to decide

Shagun Suryam

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