MCA Record Absence Won't Shield Non-Directors In Cheque Dishonour: Punjab & Haryana HC

Persons actively managing a company's business cannot escape vicarious liability under cheque bounce laws merely because their names are absent from formal corporate registry records. The High Court rejected a petition seeking to quash Section 138 proceedings, holding that disputed roles in business conduct require factual determination during trial.

In a single-judge bench, Justice Manisha Batra considered a petition filed under Section 482 of the Code of Criminal Procedure, 1973 seeking to quash a complaint under Section 138 of the Negotiable Instruments Act, 1881 and the summoning order passed by the Judicial Magistrate First Class, Kapurthala.

Court Observations and Directions

The High Court held that statutory relief under Section 141 of the Negotiable Instruments Act, 1881 is not restricted solely to individuals formally listed as Directors in government registers. Examining the scope of the inherent powers under the Code of Criminal Procedure, 1973, the bench observed that factual claims regarding an accused person's role require complete evidentiary evaluation.

The Court, in its reasoning, observed: "The liability contemplated under Section 141 of the N. I. Act is not confined only to persons holding a formal designation as Director or Managing Director. The provision extends to every person who, at the time the offence was committed, was in charge of and responsible for the conduct of the business of the company. Consequently, the mere absence of the petitioner's name from the statutory records of the company cannot, by itself, conclusively determine the issue of his liability when the complainant asserts otherwise and has placed material on record in support thereof."

Addressing the argument regarding security cheques, the High Court relied on Sripati Singh (since deceased) through his Son Gaurav Singh v. State of Jharkhand and another ( "2021 SCC OnLine SC 1002": 2021 CaseBase(SC) 927) to highlight that a security cheque can mature into an enforceable instrument once underlying liability crystallizes.

The Court has following directions:

"Accordingly, finding no merit in the present petition, the same is hereby dismissed. Pending miscellaneous application(s), if any, shall also stand disposed of."

Background

The case originated from a complaint filed by a proprietorship firm alleging that rice was supplied to Jiya Agro Private Limited. Towards part payment of the liability, a cheque worth ₹80,00,000/- was issued, which was dishonoured upon presentation with the remarks "Account Closed". A legal notice was sent under the Negotiable Instruments Act, 1881, but payment was not made, leading to the complaint.

The petitioner, arrayed as an accused, challenged the summoning order on the ground that his name did not appear as a Director or authorised signatory in the records of the Ministry of Corporate Affairs, and that he was not a signatory to the cheque. It was further submitted that the cheque was merely a security cheque. Conversely, the complainant produced an e-mail where the petitioner allegedly held himself out as the Chairman of the company.

Dismissing the petition under Section 482 of the Code of Criminal Procedure, 1973, the High Court declined to quash the complaint, holding that competing factual assertions must be tested during trial.

Case Details:
Case No.: CRM-M-41156-2023 (O&M)
Case Title: Rakesh Singh v. Jee Bala Jee @ Co. and another
Appearances:
For the Petitioner(s): Mr. Vikas Lochab, Advocate and Mr. Madhav S. Mogha, Advocate
For the Respondent(s): Mr. Alok Mittal, Advocate for Respondent No. 1; Ms. Ruchika Sabherwal, Senior DAG, Punjab

Source: 2026 CaseBase(PNH) 6801