Complaints Can’t Proceed Against Directors In Their Personal Capacity When Company Which Issued Cheques Is Not Made Accused: Allahabad High Court Quashes NI Act Proceedings

The High Court was considering an application filed under Section 482 of the CrPC by the applicant, seeking quashing of the orders passed by the Additional Chief Judicial Magistrate whereby cognisance was taken, and summons were issued to the applicant under Section 138 of the Negotiable Instruments Act (NI Act). The applicant also sought the quashing of the proceedings.

The Single Bench of Justice Brij Raj Singh held, “In view of the aforesaid discussions, it is held that the complaints filed against the applicants cannot sustain because the company is not made an accused and no vicarious liability can be imposed upon the applicants. The complaints cannot proceed against the applicants in their personal capacity as the cheques were issued by the company.”

Advocate Brij Raj Singh represented the Applicant while Govt. Advocate represented the Respondent.

Factual Background

A complaint case was filed against the applicant under Section 138 of the N.I. Act, stating therein that he was carrying on business under the name and style of Approach Advertising and Exhibitors Pvt. Ltd. The complainant advertised the products of the accused, against which he made payment through cheques in order to discharge his liabilities. It was further mentioned in the complaint that the accused had made a payment of Rs 1 lakh through a cheque. The cheque issued by the accused was presented to his banker for clearance, and the same cheque was sent to the banker of the accused, but was returned with the remark that the amount was insufficient.

The complainant sent legal notices through his counsel, calling upon the accused to make payment of the amount mentioned in the cheque within fifteen days of receipt of the legal notice. However, the accused refused to accept the legal notices. The two cases filed by the applicant also have similar factual aspects, and two cheques of Rs 9 lakh and Rs 3 lakh had been dishonoured therein. The cheques were issued by the company, and the company had not been made a party in the complaints filed under Section 138 of N.I. Act.

Arguments

It was the case of the applicants that the offence was committed by the company, whereas the applicants are one of the Managing Directors of the company, and the liability cannot be fastened upon them.

Reasoning

The Bench referred to the judgment in Aneeta Hada vs. Godfather Travels and Tours Private Ltd. (2012), wherein the Apex Court has categorically held that the commission of an offence by the company is an express condition precedent to attract the vicarious liability of others. It has further been observed that the words “as well as the company” appearing in the Section make it absolutely clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence, subject to the averments in the complaint and proof thereof.

As per the Bench, the complaints filed against the applicants could not sustain because the company was not made an accused and no vicarious liability could be imposed upon the applicants.

Thus, allowing the applications, the Bench quashed the consequential proceedings pending against the applicants. “It is, however, open for opposite party no.2 to seek legal remedies as available under law to recover the amount, if so advised”, it ordered.

Cause Title: Rajiv Gupta Complaint Case v. The State Of U.P. (Neutral Citation: 2026:AHC-LKO:17690)

Appearance

Applicant: Advocate R.P Shukla

Opposite Party: Govt. Advocate, Advocate Nadeem Murtaza

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