Fallacy of Trial Court in not impleading Company u/s 138 & 141 of the NI Act, 1881: Addressing practical considerations & takeaways

[2022] 136 taxmann.com 125 (Article)

Introduction

Dishonour of cheques has now become a perennial issue that has led to docket explosion due to prolonged trials and perhaps inefficiency in timely disposal of the cases. In the recent past, cases involving the dishonour of cheques were observed to be languishing before the subordinate courts that even prompted the Hon’ble Supreme Court of India (“Supreme Court”) to take suo motu cognizance of the prolonged and never-ending trials of cases filed under Section 138 of the Negotiable Instruments Act, 1881 (“the Act”)1. Whilst there are multiple grey areas that still require an authoritative decision from the apex court, the present article endeavors to shed light on a pressing issue i.e., the incoherent error committed by a learned trial court by selectively issuing summons to the authorized signatory of the cheque, without summoning the company on whose behalf the cheque was issued.

To illustrate in simpler terms, while taking cognizance of the complainant for dishonor of cheque issued on companies’ behalf, if a trial court solely summons the signatory of the cheque and not the company and its directors in-charge as arrayed in the complaint, that creates an untoward legal anomaly, disadvantageous to the innocuous complainant. An illogical approach of issuing summons to the signatory of the cheque, but not the company on whose behalf the cheque was issued, negates the scheme of the Act, jeopardizing the legitimate claims of the complainant and prejudicial to its right.

In cases of not arraying the Company as a respondent in a complaint filed for dishonour of the cheque issued on behalf of the Company, the Supreme Court in Aneeta Hada v. Godfather Travels & Tours (P.) Ltd.2, observed it to be a vital and substantial error, enabling ground for quashing of the complaint under Section 482 of the Code of Criminal Procedure, 1973 (“CrPC”).

In view of the above background, the purported research question arises in cases where the company is arrayed as an accused along with other necessary parties i.e. signatory of cheque and director(s), however, the summons is exclusively issued to the signatory of the cheque but not to the company. Not issuing summons to the company by the Ld. Trial Court is an error which is fatal in nature for quashing complaint in its entirety or is it an error that can be rectified at the stage of trial is the moot proposition that warrants an answer.

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