Non-Impleadment Of Company Fatal To Section 138 NI Act Case: Patna HC

In a crucial ruling on corporate vicarious criminal liability, the Patna High Court held that failure to array the company as a primary accused renders a cheque bounce complaint against its Managing Director legally unsustainable. The High Court affirmed that inherent powers under Section 482 of the Code Of Criminal Procedure can be invoked to quash inherently defective complaints even at advanced stages of trial.

A single-judge bench of Justice Soni Shrivastava quashed criminal proceedings and an interim compensation order against the Managing Director of a private company in a complaint arising under Section 138 of the Negotiable Instruments Act, 1881.

Court Observations and Directions

The Patna High Court observed that when a cheque is drawn on a company's account, the primary offense under Section 138 of the Negotiable Instruments Act, 1881 is committed by the corporate entity itself. Drawing upon established precedents, the Court emphasized that statutory vicarious liability of directors or officers under Section 141 of the Negotiable Instruments Act, 1881 cannot be triggered in isolation without prosecuting the principal juristic entity.

The Court, in its reasoning, observed: "Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words “as well as the company” appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence..."

Addressing the maintainability of a quashing petition at an advanced stage, the Court reiterated that procedural progress cannot validate a fundamentally non-est prosecution. The Court noted that continuing proceedings based on a fatally flawed complaint constitutes an abuse of judicial process.

The Court issued the following directions:
"However, it is made clear that since the above mentioned applications have been allowed in view of the unignorable and fatal defect in the complaint and not on merits of allegations, the complainant/opposite party no.2 would be at liberty to pursue other remedies, if so advised, in law in order to redress his grievances."

Background

The dispute originated from business transactions where the complainant paid funds amounting to Rs. 52 lakhs into the account of Sona Infracon Pvt. Ltd., along with further payments to its associates. The petitioner, functioning as the Managing Director, issued a cheque of Rs. 40 lakhs bearing an explicit endorsement that it was issued solely for security purposes and not for encashment. Upon dishonour of the cheque and subsequent non-payment, the complainant instituted a complaint under Section 138 of the Negotiable Instruments Act, 1881 solely naming the Managing Director as an accused without impleading the company.

The Judicial Magistrate took cognizance under Section 138 of the Negotiable Instruments Act, 1881 and subsequently ordered interim compensation of 20% under Section 143A of the Negotiable Instruments Act, 1881. The petitioner challenged both the cognizance order and the interim compensation directive under Section 482 of the Code Of Criminal Procedure.

The petitioner argued that non-impleadment of the company was fatal, relying on decisions in Aneeta Hada vs. Godfather Travels & Tours (P) Ltd., Himanshu vs. B. Shivamurthy & Anr. ( "(2019) 3 SCC 797": 2019 CaseBase(SC) 1125), and Bijoy Kumar Moni vs. Paresh Manna & Anr. ( "(2026) 5 SCC 380": 2024 CaseBase(SC) 775). It was further asserted that security cheques accompanied by explicit non-payment endorsements could not be presented for encashment, citing Sripati Singh (since deceased) Through His Son Gaurav Singh vs. State of Jharkhand & Anr. ( "(2022) 18 SCC 614": 2021 CaseBase(SC) 927). Highlighting the power to quash proceedings despite trial progress, references were made to Kamlesh Kumar vs. State of Bihar & Anr. ( "(2014) 2 SCC 424": 2013 CaseBase(SC) 974), Shirish Subhash Kekan & Ors. vs. State of Maharashtra & Anr., Shesh Rao S/o Makhram Jadhav vs. State of Maharashtra, Md. Nausad Khan @ Md. Naushad Khan & Ors. Vs. State of Bihar & Anr., Madan Mohan Agarwala vs. State of Orissa, Anand Kumar Mohatta & Anr. vs. State (NCT of Delhi) & Anr., Manjula Kapoor vs. State of State of Himachal Pradesh & Anr., Ramawatar vs. State of Madhya Pradesh ( "(2022) 13 SCC 635": 2021 CaseBase(SC) 1487), and Ramagopal & Anr. Vs. State of Madhya Pradesh ( "(2022) 14 SCC 531": 2021 CaseBase(SC) 605).

Conversely, the respondent argued that the petitioner was the sole controller of the family-owned entity and authorized signatory. Relying on Sri. Om Sales vs. Abhay Kumar Alias Abhay Patel & Anr. and N. Harihara Krishnan vs. J. Thomas ( "(2018) 13 SCC 663": 2017 CaseBase(SC) 1063), the respondent contended that whether a security cheque covers a subsisting debt is a triable issue, and Section 482 Code Of Criminal Procedure should not be exercised at the Section 313 Code Of Criminal Procedure stage.

Accepting the petitioner's primary contention, the Patna High Court quashed the order taking cognizance as well as the directive under Section 143A of the Negotiable Instruments Act, 1881, while granting liberty to the complainant to pursue alternate legal remedies.

Case Details:
Case No.: Criminal Miscellaneous No.63509 of 2024 with Criminal Miscellaneous No. 55533 of 2025
Case Title: Naveen Kumar @ Naween Kumar v. The State of Bihar & Anr.
Appearances:
For the Petitioner(s): Mr. Chitranjan Sinha, Sr. Adv., Mr. Baidhyanath Thakur, Adv., Mr. Kaushik Deo, Adv.
For the Respondent(s): Mr. Arun Kumar Singh, Adv., Mr. Ram Sumiran Rai, Adv., Mr. Rajesh Ranjan, Adv., Mr. Mohammad Farooq, Adv., Mr. Himanshu Ranjan, Adv., Ms. Sakshi Bhatnagar, Adv., Mr. Ankur Agraj, Adv.

Source: 2026 CaseBase(PAT) 2656