'Cheque Bounce' Complaint Against Director Not Maintainable If Company Is Not Arraigned As Accused, Reiterates SC [Read Judgment]

The bench comprising Justice DY Chandrachud and Justice Hemant Gupta quashed the complaint while setting aside the high court order that had dismissed the petition filed by the accused under Section 482 of the Code of Criminal Procedure.

The bench observed that the complainant had issued notice of demand only on the director and lodged the complaint against him without arraigning the company as an accused. It further noted that the accused had drawn the cheque not in his personal capacity, but as the director for Lakshmi Cement and Ceramics Industries Ltd.

The bench said that it is important to fulfill some conditions before lodging such a complaint. It said: "These conditions are; (i) presentation of the cheque to the bank within six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (ii) a demand being made in writing by the payee or holder in due course by the issuance of a notice in writing to the drawer of the cheque within thirty days of the receipt of information from the bank of the return of the cheques; and (iii) the failure of the drawer to make payment of the amount of money to the payee or the holder in due course within fifteen days of the receipt of the notice."

Referring to earlier judgments and Section 141 of the Negotiable Instruments Act, the bench said: "In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused."

Quashed The Complaint, But Complainant Will Get The Money

Though the court quashed the complaint, it said that the amount deposited by the accused in the court as per its earlier direction (Rs 4,15,000 was the cheque amount and the accused had deposited the entire amount in the court) would be paid over to the complainant.

The court said: "In pursuance of the aforesaid directions, the appellant deposited an amount of Rs. 4, 15,000/- on 23 February 2009. The amount has been invested in a fixed deposit which has been renewed periodically. In our view, having regard to the intent of the order which was passed by this Court on 28 November 2008, it would be appropriate and proper if the amount deposited in this Court, together with accrued interest, is paid over to the respondent-complainant."

Since the complainant had not appeared despite service of notice in this case, the bench directed the registry to intimate him regarding this order.

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