Offence Under SEC.138 NI Act Is Person Specific. Concept Of ‘Taking Cognizance Of The Offence And Not The Offender’ Not Appropriate In Cheque Cases: SC [Read Judgment]

The Supreme Court has pronounced a point of law that the offence under Section 138 of Negotiable Instruments Act is person specific. It was also clarified that the general concept under Cr.P.C that cognizance was taken against the offence and not against the offender was not appropriate in prosecution under NI Act.

The complainant in the case was issued a cheque, which was signed by one Harihara Krishnan. The cheque was drawn allegedly in discharge of balance sale consideration payable by M/s Norton Granites Pvt. Ltd. However, the cheque was in fact drawn on account of another private limited company, M/s Dakshin Granites Pvt.Ltd., in which also Harihara Krishnan was a director. The cheque was dishonoured for want of funds.

Under the impression that the cheque was drawn on the account of Norton Granites Pvt.Ltd( presumably because consideration was allegedly due from them), the complaint was filed only arraying Harihara Krishnan as an accused, in his capacity as director of Norton Ltd. Later realizing the folly, the prosecution sought to summon Dakshin Pvt.Ltd. as an accused invoking powers under Seciton 319 Cr.P.C.

The learned Magistate allowed the application under Section 319. The revision filed against it by Harihara Krishnan was dismissed by the High Court. The High Court reasoned that there was no delay in adding Dakshin as an accused, since cognizance of offence was already taken. The reasoning of the High Court was on the ground that cognizance is taken of the offence and not of the offender, and hence there was no impediment in adding an additional accused once the cognizance was already taken.

However, the Supreme Court held that the reasoning was erroneous.  Relying on Aneeta Hada v. Godfather Travels & Tours Private Limited, (2012) 5 SCC 661 it was stated that complaint against a director was not maintainable without arraying the company as an accused. It was also stated that the offence under Section 138, unlike other offences under IPC, was person specific. It was held as follows :

"By the nature of the offence under Section 138 of THE ACT, the first ingredient constituting the offence is the fact that a person drew a cheque. The identity of the drawer of the cheque is necessarily required to be known to the complainant (payee) and needs investigation and would not normally be in dispute unless the person who is alleged to have drawn a cheque disputes that very fact. The other facts required to be proved for securing the punishment of the person who drew a cheque that eventually got dishonoured is that the payee of the cheque did in fact comply with each one of the steps contemplated under Section 138 of THE ACT before initiating prosecution. Because it is already held by this Court that failure to comply with any one of the steps contemplated under Section 138 would not provide “cause of action for prosecution”. Therefore, in the context of a prosecution under Section 138, the concept of taking cognizance of the offence but not the offender is not appropriate. Unless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the Court cannot take cognizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of law to investigate the offence under Section 138, there would be no person against whom a Court can proceed. There cannot be a prosecution without an accused. The offence under Section 138 is person specific. Therefore, the Parliament declared under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non-obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint"

The appeal filed by Harihara Krishnan was allowed with costs of Rs. 1,00,000/-.