Legal Advice

Cheque bounce case against company

Question: I’m running a small factory and in the course of my business, I used to received some cheques from companies. One of my clients committed an offence under section 138 Negotiable Instrument Act. Is it mandatory to give notice to all the directors of the company?


No need to send a separate notice under section 138 NI Act to all the directors of the company. Although directors are responsible for the affairs of the company there is no rule in the NI Act to demand the payment of cheque amount from the directors. The only company is liable, notice given to the company is just and proper.

The section 141 of NI Act states that: 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.

Section 138 of the said Act provides punishment which is as same as applicable in case of the offence committed by a company. The notice period is also the same and there is no provision in the Act for separate notice to all the directors in case company is the drawer of the cheque. B. Raman vs Shushan chemicals & Drugs it is held by the Madras High Court that notice should be given to all the directors.

But in Krishna Taxport company vs A. A. Agrawal AIR 2015 SC; judgment given in B. Raman case is overruled and it is now settled law that it is not required by the law to give a separate notice to all the directors of the company.

It is also unrealistic to know the name of all the directors at the time of issuance of the cheque. According to company law, a company performs its activities through the directors, the company is a separate legal entity in the eye of law for purpose of security of rights of those people who have affairs with the company.

Shivendra Pratap Singh


High Court Lucknow