NI Act | Company Can Be Summoned Through Person In-Charge Of Its Affairs, No Separate Summon To The Company Required: Allahabad High Court
The Allahabad High Court has held that a company is juristic person can be summoned through the person in-charge of its affairs and if such a juristic person summoned through the person in-charge, it cannot be said that the company has not been summoned for trial under the Negotiable Instruments Act, 1881.The Court held that once company is also made a party to the proceedings under Section...
The Allahabad High Court has held that a company is juristic person can be summoned through the person in-charge of its affairs and if such a juristic person summoned through the person in-charge, it cannot be said that the company has not been summoned for trial under the Negotiable Instruments Act, 1881.
The Court held that once company is also made a party to the proceedings under Section 138 and 141 of the Act, if the signing Director signing the cheque is summoned, then it must be presumed that the company has been summoned.
Observing that a company is a juristic person, Justice Anish Kumar Gupta held
“once a complainant has been made against the company as an accused alongwith the Directors and the person in-charge in day-to-day affairs of the company including the signatory of the cheque and also made assertions in the company in terms of Section 141 of the N.I. Act, there is sufficient compliance on the part of the complainant. Therefore, such juristic person can be summoned only through the person who is in- charge of the affairs of the company and if the person in-charge of the company is summoned, therefore, it can't be said that the company has not been summoned for the trial.”
Factual Background
Applicant is the Director of M/s Signapurkar's Leather House Pvt.Ltd. who along with other directors was made party to the complaint case under Section 138 NI Act filed by M/s Indcoat Shoe Component Ltd. Applicant had issued 12 cheques in favour of the opposite party. At the time of encashment, they were dishonored on grounds of 'stop payment' by the applicant.
Since the demand notices sent by the Opposite part were not complied with, the cases under the NI Act were filed. Applicant, being the director of the company, was summoned. Applicant challenged the summons on grounds that they were issued without summoning the company.
High Court Verdict
The Court relied on Electronics Trade and Technology Development Corpn. Ltd. vs Indian Technologists and Engineers (Electronics) (P) Ltd. and Modi Cements Ltd. vs. Kuchil Kumar Nandi wherein the Supreme Court held included “stop payment” instruction within the meaning of dishonor of cheques under Section 138 of the NI Act.
Relying on Section 141 of the Act, the Court observed that “if a person is able to prove that when the offence was committed, he was not in- charge of the day-to-day affairs of the company or such offence was committed without his knowledge, despite he has exercised all due diligence to prevent the commission of such offence, such person cannot be punished for the offence.”
In K.K. Ahuja vs. V.K. Vora, the Apex Court held that when a person has signed the cheques or is the Managing Director or the Joint Managing Director of the defaulting company, then specific averments regarding the person's involvement and responsibility in the company is not necessary. It was held that if the dishonoured cheque is signed by a person, such person will liable by virtue of Section 141(2) of the Act.
The Court observed that in Aneeta Hada vs. Godfather Travels & Tours (P) Ltd., the Supreme Court had held that for prosecuting for dishonour of cheque under Section 141 of the NI Act, it was imperative to arraign the company as an accused.
Further, in S.P. Mani & Mohan Dairy vs. Snehalatha Elangovan the Supreme Court held that the burden to prove that they were not involved in the affairs of the company lies on the person averring the same as it is within his/ her special knowledge. It was held that if the status of the partners “qua” the firm has been specifically averred in the plaint, then they would be liable to prosecution, which may not necessarily imply conviction.
“If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court,” held the Apex Court.
The Court held that summons to the Director who signed the cheque shall be deemed to summons served on the company if both are arrayed as parties in the case under the NI Act.
The Court held that as the demand notice and the notice to the company was issued to the company through the applicant, the service of summons on the applicant was summons to the company as well as to him as an individual.
Accordingly, the application under Section 482 of CrPC was dismissed.
Case Title: Kishore Shankar Signapurkar v. State Of U.P. And Anr [APPLICATION U/S 482 No. - 4898 of 2019]