Sri Gopalaiah vs K. Manjunath - Further, any breach of Section 269SS of the Income Tax Act, 1961 is subject to a penalty under the provisions of that Act i.e., Section 271D. Neither Section 269SS nor Section 271 D of the Income Tax Act, states that any transaction in breach thereof will be illegal, invalid or statutorily void. Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the N.I. Act or rebut the presumptions under sections 118 and 139 of the N.I. Act, because such a person, assuming him/her to be the payee/ holder in due course, is liable to be visited by a penalty only as prescribed.

 SCI (2026.07.16) in Sri Gopalaiah vs K. Manjunath  [Criminal Appeal NO.583/2016] held that;

• The presumption mandated by Section 139 include the existence of a legally enforceable debt or liability and to raise that presumption, the N.I. Act nowhere requires that complaint must contain averments about proof of capacity of the lender. Besides above, the High Court observed that Section 269SS refers to the recipient of money and not the lender.

• Suffice to state that once the execution of the cheque is admitted, the presumption under Section 118 (a) of the NI Act, that the cheque in question was drawn for consideration, and the presumption under Section 139, that the holder of the cheque received the said cheque in discharge of a legally enforceable debt or liability, arise against the accused.

• Further, any breach of Section 269SS of the Income Tax Act, 1961 is subject to a penalty under the provisions of that Act i.e., Section 271D. Neither Section 269SS nor Section 271 D of the Income Tax Act, states that any transaction in breach thereof will be illegal, invalid or statutorily void.

• Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the N.I. Act or rebut the presumptions under sections 118 and 139 of the N.I. Act, because such a person, assuming him/her to be the payee/ holder in due course, is liable to be visited by a penalty only as prescribed.

• Consequently, the view that any transaction in cash above Rs. 20,000 is illegal and void and therefore does not fall within the definition of legally enforceable debt cannot be countenanced.

• No doubt, the presumption under Section 139 of the N.I. Act is rebuttable but mere denial is not sufficient to rebut the presumption. To rebut such presumption the accused, inter alia, would have to explain the circumstances in which the cheque in question came to be issued and as to how it came to be with the payee thereof.

• Circumstance that the payee had no funds to create a legally enforceable debt of the amount equivalent to the cheque is a circumstance, if proved, which may help in dislodging the presumption.

Excerpts of the Order; 

# 1. Heard learned counsel for the parties.

# 2. This appeal is directed against the judgment and order of remand passed by the High Court1 dated 10.10.2013 in Criminal Appeal No.228 of 20092.

# 3. The appellant was prosecuted for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 on account of dishonor of two cheques drawn on Vijaya Bank, Vidyanagar Branch. One cheque was of Rs.8,00,000/- (Rupees Eight lakhs) and the other was of Rs.50,000/- (Rupees Fifty Thousand). Both cheques returned unpaid with endorsement ‘insufficient funds’ in the account. The complainant served the requisite notice of demand on the accused. Despite service of notice, the requisite amount was not paid. As a result, the respondent filed a complaint.

# 4. The defense of the accused-appellant was that though the two cheques bore the signature of the drawer, those were delivered to one Srinivas. One was a blank cheque given by way of security for return of Rs.50,000/- taken from Srinivas, and the other was a cheque of Rs.50,000/- issued to return the money taken from him. It was the case of the appellant that those cheques were passed on by Srinivas to the complainant who misused the same.

# 5. The complainant besides appearing as a witness produced the relevant documents to indicate that the necessary ingredients of the offence punishable under Section 138 of N.I. Act were satisfied. However, the Trial Court acquitted the appellant by holding that except oral evidence, no documentary evidence was produced to show that the complainant had advanced Rs.8.50 lacs to the accused, particularly when Section 269SS of Income Tax Act proscribes receipt of loan of amount exceeding Rs.20,000/- by cash. It, accordingly, concluded that the complainant failed to prove existence of a legally enforceable debt. Apart from above, the Trial Court observed that the accused already had funds therefore needed no money.

# 6. Aggrieved by the order of the Trial Court, the complainant went in appeal. The High Court clubbed multiple appeals including the appeal of the respondent herein (i.e., Criminal Appeal No.228 of 2009) and decided them by a common judgment and order dated 10.10.2013. Paragraph 17 of the impugned judgment which deals with the appeal of the respondent is extracted below:

• “17. Regarding Crl.A. No.228/09: This appeal is directed against the judgment in C.C. No.417/2006 dated 12.02.2009 on the file of the Addl.Civil Judge (Jr.Dn.) Devanahalli acquitting the respondent/accused Gopalaiah of the offence punishable under section 138 of the N.I. Act. Records reveal the complainant sought prosecution of the respondent on the allegation that the accused had approached him for loan of Rs.8,50,000/- in the month of November 2005 promising to repay the same with interest within three months. After expiry of the period, when the complainant approached the accused, he voluntarily, issued impugned cheques on 13.02.2006 for Rs.8,00,000/- and Rs.50,000/- respectively. Cheques on presentation were dishonored for insufficiency of funds by the bank on 25.02.2006 through its intimation served on 09.03.2006. The complainant issued statutory notice about the dishonor of the cheque which the accused received but failed to pay the amount instead the accused issued a reply notice on 23.03.2006 contending he has not availed loan from the complainant. He took up specific plea that the complainant is a stranger to him. He (accused) had issued two cheques to one Srinivas. Srinivas misused the cheque and without authority passed on to the complainant. Therefore, he denied the liability to pay the amount to the complainant. In the trial, that ensued, the complainant tendered evidence as PW1 and examined two witnesses K.B. Shankar as PW2 and Raghavendrachar as P.W.3 and relied on impugned cheques C1, C2, the bank endorsements C3, notice copies C4 and C5 reply notice sent by the accused C8. The accused tendered evidence as DW1 and examined one witness as DW2. He relied on D1 sale deed and passbook D2. The learned trial Judge analyzing the evidence opined that even though the complainant has tendered evidence as PW1 supporting his contention that he lent money to the accused and examined the manager of the bank – as PW 2 and 3. The defense of the accused that he had issued cheque to Srinivas and not to the complainant for Rs.80,000/- in the month of April 2005 has not been rebutted by the complainant. The learned trial Judge also noticed from the evidence of the accused that the accused had sufficient money with him because he and his brother had entered into an agreement of sale of their immovable property and received Rs.7,50,000/- on 24.10.2005. The accused had further received Rs.16,00,000/- in the month of January 2006 as seen from D1 and D2. Thus, the learned trial Judge has opined since the accused had sufficient money with him at the relevant period the burden had shifted on the complainant to establish that the accused had borrowed money. In para 10 of his judgment the trial judge has opined that the complainant has tended ocular evidence regarding payment of Rs.8,50,000/- to the accused without any document. The complainant has not discharged the burden of proof. The learned trial Judge further opined the accused has established he is earning Rs.1,50,000/- to Rs.2,00,000/- from agriculture and also from vending milk earns Rs.20000/- to 30000/- p.m. On that basis opined the accused would not have borrowed money from the complainant. Relying on the decision in the case of Shivamurthy vs. Anantharaju reported in ILR 2008 Kar. 4629 learned Judge has opined burden rests on the complainant and Complainant has failed to prove payment of amount, presumption under section 139 of the N.I. Act cannot be raised. On that basis the accused has been acquitted. As rightly contended by the appellant’s counsel the learned trial Judge has not analyzed the evidence tendered by the complainant to record finding as to whether or not the evidence establishes the ingredients constituting the offence punishable under section 138 of the N.I. Act”

# 7. While deciding the appeal(s) the High Court framed two questions for it to jointly dispose of several appeals. Those questions were as follows:

• (a) Whether in an action under Section 138 of the N.I. Act for dishonour of cheque, the complainant is required to establish his financial capacity to lend money?

• (b) Will not presumption under Section 139 of the N.I. Act accrues to the benefit of the complainant unless the accused rebuts that presumption?

# 8. After considering the law laid down by this Court in several decisions including a three-Judge Bench decision in Rangappa versus Sri Mohan, the High Court concluded that the presumption mandated by Section 139 include the existence of a legally enforceable debt or liability and to raise that presumption, the N.I. Act nowhere requires that complaint must contain averments about proof of capacity of the lender. Besides above, the High Court observed that Section 269SS refers to the recipient of money and not the lender.

# 9. Based on the above conclusions, the High Court remanded the matter for the Trial Court to decide it afresh after considering the evidence brought on record.

# 10. Aggrieved by the order of remand, on behalf of the appellant it is submitted that the High Court failed to consider that there was no good reason for the appellant to borrow money when he had proved that he was possessed of sufficient funds for having sold a parcel of land. It has also been submitted that presumption under Section 139 of the N.I. Act is a rebuttal presumption. As there was no need to borrow, and no documentary evidence of any loan transaction was produced, the accused by denial of receipt of loan had rebutted the presumption, therefore, there was no justification to interfere with the order of acquittal passed by the Trial Court.

# 11. Per contra, on behalf of the complainant – respondent it has been submitted that the stand taken by the accused was not consistent. Before the Trial Court the stand taken by the accused was to the effect that the cheque was issued to Srinivas in lieu of hand loan of Rs.50,000/- taken by the accused; and, on 29th October 2005, Srinivas’ loan was returned but he did not return the cheque by stating that they got misplaced, later, he handed over the cheques to the complainant, who misused the same. The stand in the reply to the notice of demand was different. There it was stated that blank cheques, without signing, were handed over to Srinivas to negotiate a property. In such circumstances, the statutory presumption was not rebutted as the same could only be by leading cogent and reliable evidence. It was submitted that once it is proved that the cheque was drawn, and it returned unpaid on account of insufficient funds in the account, the burden to prove that the cheque was not issued to discharge a legally enforceable debt lies on the drawer. Such presumption arises not only under Section 139 of the N.I. Act but also under Section 118 (a) of the Act. In that light it was submitted that since the trial court proceeded by wrongly putting the burden on the complainant to prove legally enforceable debt, the High Court was justified in remanding the matter to the trial court for a fresh consideration.

# 12. We have accorded due consideration to the rival submissions and have perused the materials on record.

# 13. As the order passed by the High Court is one of remand, it would not be appropriate for us to appreciate evidence and thereby express opinion on the merits of the case. Suffice to state that once the execution of the cheque is admitted, the presumption under Section 118 (a) of the NI Act, that the cheque in question was drawn for consideration, and the presumption under Section 139, that the holder of the cheque received the said cheque in discharge of a legally enforceable debt or liability, arise against the accused. Further, any breach of Section 269SS of the Income Tax Act, 1961 is subject to a penalty under the provisions of that Act i.e., Section 271D. Neither Section 269SS nor Section 271 D of the Income Tax Act, states that any transaction in breach thereof will be illegal, invalid or statutorily void. Therefore, any violation of Section 269SS would not render the transaction unenforceable under Section 138 of the N.I. Act or rebut the presumptions under sections 118 and 139 of the N.I. Act, because such a person, assuming him/her to be the payee/ holder in due course, is liable to be visited by a penalty only as prescribed. Consequently, the view that any transaction in cash above Rs. 20,000 is illegal and void and therefore does not fall within the definition of legally enforceable debt cannot be countenanced.

# 14. No doubt, the presumption under Section 139 of the N.I. Act is rebuttable but mere denial is not sufficient to rebut the presumption. To rebut such presumption the accused, inter alia, would have to explain the circumstances in which the cheque in question came to be issued and as to how it came to be with the payee thereof. Circumstance that the payee had no funds to create a legally enforceable debt of the amount equivalent to the cheque is a circumstance,if proved, which may help in dislodging the presumption.

# 15. In the instant case, it appears, the complainant had led evidence to show his capacity to lend. However, the trial court did not properly consider the evidence on record.

# 16. In such circumstances, we are of the view that the High Court committed no error in remanding the matter to the Trial Court. The appeal is, therefore, dismissed. The Trial Court shall proceed expeditiously bearing in mind that this complaint relates to the year 2006.

# 17. All pending applications shall stand disposed of.

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Shijosh K. & Anr. vs The State of Kerala & Anr. - It is the well settled law that in a prosecution alleging commission of offence punishable under Section 138 of the NI Act, the complainant would get the benefit of twin presumptions under Sections 118 and 139 of the NI Act and the pre condition for the same is proof of the transaction and execution of the cheque in a convincing manner.

 HC Kerala (2026.06.09) in Shijosh K. & Anr. vs The State of Kerala & Anr. [2026:KER:40471, Crl. Appeal No.1403/2008] held that;

• It is the well settled law that in a prosecution alleging commission of offence punishable under Section 138 of the NI Act, the complainant would get the benefit of twin presumptions under Sections 118 and 139 of the NI Act and the pre condition for the same is proof of the transaction and execution of the cheque in a convincing manner.

• On scrutiny of the evidence of PW1 and the discussion as aforesaid, it is emphatically clear that the transaction which led to execution of Ext.P1 cheque failed to be proved by the evidence of PW1 and the complainant had miserably failed to discharge the initial burden cast upon him, to prove the transaction which led to the execution of the cheque, which would disentitle him the benefit of presumptions under Sections 118 and 139 of the NI Act in favour of him.

Excerpts of the Order;

The complainant in C.C.No.1252/2004 on the files of Judicial First Class Magistrate-II (Mobile) Kottayam, has filed this appeal challenging the judgment in the said case dated 21.3.2007.

# 2. Heard the learned counsel for the appellant/complainant as well as the learned counsel for the 2nd respondent/accused and the learned Public Prosecutor appearing for the State in detail.

# 3. On the facts of the case, consequent to dishonour of a cheque dated 09.03.2004 alleged to be issued by the accused to the complainant in discharge of an amount of Rs.4,50,000/- alleged to be borrowed by the accused from the complainant, the complainant lodged prosecution alleging commission of offence punishable under Section 138 of the Negotiable Instruments Act (`NI Act' for short) .

# 4. After securing the presence of the accused for trial, the  learned Magistrate tried the matter and finally acquitted the accused. 

# 5. While challenging the verdict with support of the twin presumptions under Sections 118 and 139 of the NI Act, it is argued by the learned counsel for the appellant/complainant that in this case PW1, the complainant, deposed supporting the averments in the complaint and proved the transaction and execution of the cheque. Therefore the learned Magistrate went wrong in acquitting the accused. Thus he pressed for reversal of the verdict to record conviction and imposition of proper sentence.

# 6. Whereas it is submitted by the learned counsel for the 2nd respondent/accused that in this case PW1 the complainant, while giving evidence deposed that the money was given by his father on 5 installments and the details of the same were noted by the father in a note book and the same would be available at his house. He argued further that the complainant has no direct knowledge regarding the transaction which led to execution of the cheque and in such a case the learned Magistrate is right in holding that the complainant failed to prove the case beyond reasonable doubt and the allegation of the complainant is in the midst of doubt and the same would dis-entitle the benefit of presumptions under Sections 118 and 139 of the N.I Act. Therefore, the verdict is liable to be confirmed.

# 7. Adverting to the rival contentions, the points arise for consideration are :

• (i) Whether the learned Magistrate went wrong in holding that the appellant/complainant failed to prove the case beyond reasonable doubts?

• (ii) Whether the verdict impugned is liable to be reversed to record conviction?

• (iii) Is it necessary to interfere with the judgment in any manner?

• (iv) The order to be passed?

Point Nos.(i) to (iv)

# 8. In the instant case the evidence is confined to that of PW1 and Exts.P1 to P6. Ext.P1 is the original cheque dated 09.03.2004 issued for Rs.4,50,000/-. Ext.P2 is the dishonour memo, Ext.P3 is the dishonour intimation memo, Ext.P4 is the copy of lawyer notice, Ext.P5 is the postal receipt and Ext.P6 is the postal acknowledgment.

# 9. The complainant got examined as PW1 after filing proof  affidavit. During cross examination, his evidence is that Rs.4,50,000/- was given to the accused by his father on 5 installments and whether the accused agreed for a particular period to repay the same was not known to him. His further version is that his father maintained a note book and in the said note book each installments with date thereof were endorsed and the note book would be available in his house. Despite this evidence, the said note book was not tendered in evidence. Further he deposed that he was unaware of the fact that when his father had given the first installment to the accused and stamp paper and a cheque were obtained. Then he added that the stamp paper was available, but when a question was asked as to what was written in the agreement, he answered that he did not read the same.

# 10. It is the well settled law that in a prosecution alleging commission of offence punishable under Section 138 of the NI Act, the complainant would get the benefit of twin presumptions under Sections 118 and 139 of the NI Act and the pre condition for the same is proof of the transaction and execution of the cheque in a convincing manner. The same would definitely include passing of consideration covered by the cheque. Indubitably such evidence shall be given by the person, who had direct knowledge regarding the transaction and execution of the cheque and the evidence of a person, who does not know the same is insufficient to prove the transaction and the execution of the cheque. In the instant case, as per the evidence given by PW1, money was given to the accused by 5 installments by the father of the complainant and details of the same were noted by his father in a note book. This evidence would show that, in fact, the transaction and passing of consideration are in between the father and the accused, and the complainant did not know the transaction or execution of the cheque, including passing of consideration. Thus in the instant case the competent person to depose about the transaction and execution of Ext.P1 cheque is none other than the father of PW1. It is relevant to note that, despite this fact, the father of the complainant was not examined. According to the learned counsel for the 2nd respondent/complainant, the father was engaged in money lending business even though he had been working as a police officer and thereby he could not do the business of money lending as against the prohibition contained in the Conduct Rules applicable to Government servants. That is why, he did not opt to give evidence.

# 11. On scrutiny of the evidence of PW1 and the discussion as aforesaid, it is emphatically clear that the transaction which led to execution of Ext.P1 cheque failed to be proved by the evidence of PW1 and the complainant had miserably failed to discharge the initial burden cast upon him, to prove the transaction which led to the execution of the cheque, which would disentitle him the benefit of presumptions under Sections 118 and 139 of the NI Act in favour of him. In such view of the matter, the learned Magistrate is right in holding that the complainant failed to prove the case beyond reasonable doubts and therefore the impugned verdict is only to be confirmed. In the result, the appeal fails and is accordingly dismissed confirming the verdict of the learned Magistrate.

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Abhaykumar Anandkumar Bhambore & Anr. Vs. Ortho Relief Hospital and Research Centre & Anr. - High Court allowed the Writ Petition observing that liability under S.138 of the NI Act would subsist despite the initiation of proceedings under the Insolvency and Bankruptcy Code, 2016. The order discharging the petitioners was quashed and set aside.

 SCI (2026.04.16) in Abhaykumar Anandkumar Bhambore & Anr. Vs. Ortho Relief Hospital and Research Centre & Anr. [Special Leave to Appeal (CRL.) NO(S). 19823/2025] held that;-

• High Court allowed the Writ Petition observing that liability under S.138 of the NI Act would subsist despite the initiation of proceedings under the Insolvency and Bankruptcy Code, 2016. The order discharging the petitioners was quashed and set aside. 

Blogger’s Comments; The position stands amply clarified by the Hon’ble Supreme Court (2023.03.15) In Ajay Kumar Radheshyam Goenka Vs. Tourism Finance Corporation of India Ltd. [Criminal Appeal No. 170 of 2023 (SLP(Crl) No. 417 of 2020) with Criminal Appeal No. 172 of 2023 (SLP(Crl) No. 482 of 2020) & Criminal Appeal No. 171 of 2023 (SLP (Crl) 446 of 2020)] wherein it held that;

• Thus, for the period of moratorium, since no Sections 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Sections 141(1) and (2) of the Negotiable Instruments Act. 

• This being the case, it is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act.”

• Thus, the heart of the matter is the second proviso appended to Section 32A(1) (b) of the IBC which provides statutory recognition of the criminal liability of the persons who are otherwise vicariously liable under Section 141 of NI Act, in the context of Section 138 offence.

• No clause in the resolution plan even if accepted by the adjudicating authority/appellate tribunal can take away the power and jurisdiction of the criminal court to conduct and dispose of the proceedings before it in accordance with the provisions of the CrPC.

• Thus, where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act.

• This Court in Lalit Kumar Jain v. Union of India and Others reported in (2021) 9 SCC 321 has held that the approval of the resolution plan per se does not operate as a discharge of guarantors’ liability. That is because:

• Section 30(2)(e) of the IBC requires the resolution professional to approve the resolution plan, only if the same does not violate any of the provisions of the law for the time being in force. Thus, the clauses of the resolution plan cannot control the Enactment/Rules in force.

• After passing of the resolution plan under Section 31 of the IBC by the adjudicating authority & in the light of the provisions of Section 32A of the IBC, the criminal proceedings under Section 138 of the NI Act will stand terminated only in relation to the corporate debtor if the same is taken over by a new management.

• Section 138 proceedings in relation to the signatories/directors who are liable/covered by the two provisos to Section 32A(1) will continue in accordance with law.

Excerpts of the Order;

Briefly stated, the facts of the case are that the petitioners/accused took a loan of Rs. 15,00,000/- from respondent No.1/complainant, and allegedly repaid the amount through a post-dated cheque dated 12.12.2018. The cheque was signed by petitioner No.1 in his capacity as a director and authorized signatory of respondent No.2 company (of which petitioner No.2 herein is also a director). This cheque was dishonoured on 14.12.2018. 

On 8.02.2019, respondent No.1 filed a complaint under  Section 138 of the Negotiable Instruments Act, 1881 (‘NI Act’). This was registered as S.C.C. No. 7281/2019. On 08.04.2019, an order of liquidation was passed against the respondent No.2 company (accused No.1). The petitioners subsequently filed an application for discharge, which was allowed by the Trial Court by order dated 31.01.2025. The Trial Court observed that since the petitioners had lost their positions as directors of the respondent No.2 company post liquidation, they could not be liable.

Aggrieved, respondent No.1 filed Criminal W.P.No.251/2025 before the Bombay High Court, Nagpur Bench. By the impugned order dated 01.10.2025, the High Court allowed the Writ Petition observing that liability under S.138 of the NI Act would subsist despite the initiation of proceedings under the Insolvency and Bankruptcy Code, 2016. The order discharging the petitioners was quashed and set aside. Aggrieved, the petitioners have preferred the present Special Leave Petition.

We have heard learned counsel for the petitioners and learned counsel for the respondents at length. 

do not find any reason to interfere with the impugned order. 

Special Leave Petition is hence, dismissed.

It is needless to observe that all other contentions on both sides are left open to be advanced before the trial court.

Pending application(s), if any, shall stand disposed of.

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Saroj Pandey vs Govt. of NCT of Delhi and Ors. - “In the instant case the substance of establishing the appellant’s day-to-day involvement in the affairs of the Company is that she had signed the Board Resolutions. . . . . . This, however, does not in any manner mean that each and every member of the Board of Directors is aware of all decisions taken in the everyday transactions that are involved in running a business concern. That apart, there is not even as much as a whisper of direct allegation against the present appellant in the complaint made which, as per the judgment referred to immediately hereinabove is the sine qua non for Section 141 N.I. Act to be attracted – “accused was in charge of, and responsible for the conduct of business of the company.”

 SCI (2026.04.07) in Saroj Pandey vs Govt. of  NCT of Delhi and Ors. [2026 INSC 324, Criminal Appeal NO….. OF 2026 (@ SLP (CRL.) NO.21322 of 2025)] held that;- 

• “In the instant case the substance of establishing the appellant’s day-to-day involvement in the affairs of the Company is that she had signed the Board Resolutions. . . . . . This, however, does not in any manner mean that each and every member of the Board of Directors is aware of all decisions taken in the everyday transactions that are involved in running a business concern. That apart, there is not even as much as a whisper of direct allegation against the present appellant in the complaint made which, as per the judgment referred to immediately hereinabove is the sine qua non for Section 141 N.I. Act to be attracted – “accused was in charge of, and responsible for the conduct of business of the company.”

Excerpts of the Order;

Leave Granted.

# 2. The appellant is aggrieved by the High Court of Delhi’s refusal to exercise its inherent powers under Section 482, Code of Criminal Procedure, 1973, in terms of order dated 7th August 2025 passed and Criminal MC No.8110/2023 and Criminal M.A. 14:22:29 to quash the summoning order issued by the Metropolitan Magistrate, in connection with complaint CC NI Act 12597/2021 under Sections 138 and 142 of the Negotiable Instruments Act, 18811, as confirmed as a consequence of the dismissal of CR No. 115/2023 by the Additional Sessions Judge, Dwarka Courts .

# 3. The facts of the matter are that the appellant is one of the Directors of the accused Company namely Projtech Engineering Private Limited. The accused Company issued cheques, three in number, all dated 20th April 2021worth 15 lacs, 20 lacs and 15 lacs each, as payment for supply of iron and steel. Despite confirmation from the accused Company of availability of funds at the time of deposit of cheques, the same were returned unpaid. The reason therefor was:

• “DRAWERS SIGNATURES DIFFERS AND ALTERNATIONS/CORRECTIONS ON INSTRUMENTS OTHER THAN DATE” 

Legal notice in this connection was sent on 12th May 2021 through counsel and on 18th May 2021, through ‘speed post’. The proceedings under the N.I. Act were initiated on 25th June 2021. By order dated 23rd September 2021, MM(NI-Act) Dwarka Courts, New Delhi, issued summons and put up the matter for appearance of the accused on 15th December 2021.

# 4. In revision proceedings, the present appellant was the second revisionist. The ground for rejecting the revision was that she was the Director of the Company and she had also signed a  Board Resolution which, as per the Court, ipso facto evidenced a fact that she was involved in the day-to-day management of the affairs of the Company.

# 5. In the High Court, similar reasoning was adopted. Moreover, it was observed that when revision has been preferred a petition under Section 482 CrPC on the same grounds, is circumscribed to a much narrower jurisdiction. The petition was as such dismissed.

# 6. The law with regard to prosecutions under Section 138 of the N.I. Act is generally well settled. This Court has, on numerous occasions considered the scope of prosecutions thereunder as also under Section 141 of the N.I. Act. (See: N. Vijay Kumar v. Vishwanath Rao N.) The only aspect that we have to consider is whether the appellant is indeed conversant with the day-to-day management of the Company, thereby justifying the issuance of summons to her. Section 141 of N.I. Act reads as under:

• ”141. Offences by companies.—(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

• Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his  knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financialcorporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.

• (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

• Explanation.—For the purposes of this section, —

• (a) “company” means any body corporate and includes a firm or other association of individuals; and

• (b) “director”, in relation to a firm, means a partner in the firm.”

# 7. A bench of three judges in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, crystallised the law on the point. The relevant extract is as follows:

• “19. In view of the above discussion, our answers to the questions posed in the reference are as under:

• (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

• (b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases.

• ... … …

”In Gunmala Sales (P) Ltd. v. Anu Mehta4, the Court concluded as follows regarding proceedings under Section 138 NI Act:

• “34. We may summarise our conclusions as follows:

• 34.1. Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director.

• … … … 

• 34.3. In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of court. Despite the presence of basic  averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm- twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed.

• 34.4. No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director.” [See also: Hitesh Verma v. Health Care at Home (India) (P) Ltd.,; K.S. Mehta v. Morgan Securities & Credits (P) Ltd.]

# 8. In the instant case the substance of establishing the appellant’s day-to-day involvement in the affairs of the Company is that she had signed the Board Resolutions. To say the least, the same is not inspiring in confidence because a Board Resolution is a document that is signed by the members of the Board of Directors for decisions taken or conclusions arrived at for matters placed before the Board for consideration and decision. This may be inter alia regarding hiring of personnel at management levels, acquisition or liquidation of assets affecting the overall position of the assets and liabilities of the Company or any other such major directional issue. This, however, does not in any manner mean that each and every member of the Board of Directors is aware of all decisions taken in the everyday transactions that are involved in running a business concern. That apart, there is not even as much as a whisper of direct allegation against the present appellant in the complaint made which, as per the judgment referred to immediately hereinabove is the sine qua non for Section 141 N.I. Act to be attracted – “accused was in charge of, and responsible for the conduct of business of the company.”

# 9. As an aside, we consider the statement of law expressed by the High Court to the effect that once a petition under Section 397 Cr.PC has been entertained, irrespective of its end result, a subsequent petition under Section 482 Cr.PC on the same grounds limits the jurisdiction of the latter and in ordinary course matters, such as the present one, are liable to be dismissed on this short ground alone.

# 10. This question was determined by a bench of three judges in Krishnan & Anr. v. Krishnaveni & Anr7 with reference to earlier decision of this Court in Madhu Limaye v. State of Maharashtra8 and V.C Shukla v. State through CBI9 as follows:

• “14. In view of the above discussion, we hold that though the revision before the High Court under sub- section (1) of Section 397 is prohibited by sub- section (3) thereof, inherent power of the High Court is still available under Section 482 of the Code and as it is paramount power of continuous superintendence of the High Court under Section 483, the High Court is justified in interfering with the order leading to miscarriage of justice and in setting aside the order of the courts below…” Holding to a similar effect has been given in Dhariwal Tobacco Products Ltd. v. State of Maharashtra10, which has been followed and affirmed in Prabhu Chawla v. State of Rajasthan11. The relevant extract of the former is as follows:

• “6. Indisputably issuance of summons is not an interlocutory order within the meaning of Section 397 of the Code. This Court in a large number of decisions beginning from R.P. Kapur v. State of Punjab [AIR 1960 SC 866] to Som Mittal v. Govt. of Karnataka [(2008) 3 SCC 574 : (2008) 2 SCC (Cri) 1 : (2008) 1 SCC (L&S) 910] has laid down the criterion for entertaining an application under Section 482. Only because a revision petition is maintainable, the same by itself, in our considered opinion, would not constitute a bar for entertaining an application under Section 482 of the Code. Even where a revision application is barred, as for example the remedy by way of Section 115 of the Code of Civil Procedure, 1908, this Court has held that the remedies under Articles 226/227 of the Constitution of India would be available. (See Surya Dev Rai v. Ram Chander Rai [(2003) 6 SCC 675] Even in cases where a second revision before the High Court after dismissal of the first one by the Court of Session is barred under Section 397(2) [Ed.: The intended provision seems to be Section 397(3). In this regard See (1) Krishnan v. Krishnaveni, [(1997) 4 SCC 241 : 1997 SCC (Cri) 544]; (2) Puran v. Rambilas, [(2001) 6 SCC 338 : 2001 SCC (Cri) 1124]; (3) Kailash Verma v. Punjab State Civil Supplies Corpn., [(2005) 2 SCC 571 : 2005 SCC (Cri) 538.] of the Code, the inherent power of the Court has been held to be available.

• 7. …The inherent power of the High Court is not conferred by statute but has merely been saved thereunder. It is, thus, difficult to conceive that the jurisdiction of the High Court would be held to be barred only because the revisional jurisdiction could also be availed of. (See Krishnan v. Krishnaveni [(1997) 4 SCC 241 :1997 SCC (Cri) 544])”  

# 11. In that view of the matter, we also find fault with the statement of law as stated by the High Court in the impugned judgment and set aside the same on both the counts. The proceedings against the instant appellant namely Saroj Pandey, shall stand quashed and set aside. It is clarified that any observation made herein is for the limited purpose of consideration of her case only and have no bearing or impact on the trial of the co-accused persons. The appeal is allowed to aforesaid extent.

Pending application(s), if any, shall stand disposed of..

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