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shailendra patadia (director)     04 July 2014

Negotiable instrument act liability of directors

Respected Sir's

                   this is with reference to case where in a cheque is issued by a limited company the said cheque gets bounced and a criminal complaint under the N.I Act is file against the company and it director the company who is the drawer of the cheque gets convected and also the director is convcted but the company who is the drawer of the cheque is ordered to pay 1000 rupees while the director is ordered to pay fine of Rs.10,00,000/- ten lacs and out of the fine amount compensation is awarded to complainant and further is directed  to undergo S.I of six months so the court have ordered fine out of the fine recovered compensation to complainant and also S.I of six months is such order a valid order

further  i would like to know that the drawer of the cheque is the company the account is maintained in the name of the company the director is the signatory of the cheque and he is made liable u/s 141 but can he be made to pay the amount of the cheque of the company he may pe punished for the fault or niglence on his part for the dishnour of the cheque but can he be ordered to pay fine of the cheque amount whic was the liability of the company  as  the directors of limited company are made liable unlimitedly



Learning

 9 Replies

shailendra patadia (director)     04 July 2014

the drawer of the cheque is the company the liability is of the company the director could not have been made liable to pay the liability of the company as if the complainant would had filed a civil siuit the amount would have been orderd to be paid by the company and not the director of the company so how is that in a criminal case the director is made liable for the cheque amount and liability of the company.


(Guest)

As of my understanding U\S 141 of NI act it is specifically explained that if the complaint has been filed against the company whether limited or unlimited liability, the then director of the company of whoever is in incharge of that particular company at the time of issuing the cheque will be held and punishable for the offence.  However there is an exception for Central Govt. or State Govt. owned companies but otherwise if its a private company then the liability of offence falls on director(s) of the company.  Maybe the case could have been directed for mediation and SI or penaltiy could have been reduced but now except appealing to HC i don't see other way around. As for the law point of view Section 141 of NI is pretty clear on liability

 

Regrds

Adv Deepak Saxena

T. Kalaiselvan, Advocate (Advocate)     06 July 2014

Without seeing the orders, no proper opinion can be given about this, better while preferring an appeal include the said observations as grounds of appeal.

R Trivedi (advocate.dma@gmail.com)     06 July 2014

Ld. Magistrate will say that it is the criminal case, and he can impose penalty on any accused. This may not even be reversed at ASJ level as the thinking lines are almost same.

 

But the order is in violation of the fundamental principle of limited liability of director in case of registered limited companies, so please move over to HC, here the order will be corrected.

R Trivedi (advocate.dma@gmail.com)     06 July 2014

The compensation is awarded under NI Act to give reasonable justice to holder. this tantamounts to clearing of liability of complainant due to accused company, so only the company can be asked to pay for the compensation not the directors. Directors can be imposed imprisonment terms or even penalty under the law (which is miniscule: around Rs. 5000)

shailendra patadia (director)     07 July 2014

Sir  

            the can you help me with any judgment's for the above view so as to enable me to represent the same before the court

R Trivedi (advocate.dma@gmail.com)     08 July 2014

S.357 CrPC

Order to pay compensation.

XXXXXX  (b) in the payment to any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the Court, recoverable by such person in a Civil Court  XXXX


The liability of company under civil law is in general not recoverable from Directors in person. The compensation to complainant under S.138 cases is given under S.357 CrPC, which if imposed on director then will violate S.357(b) of CrPC.

 

It is the question of law, you must escalate and it may go up to Hon SC if not decided already. I have not come across any order, i will try to find.

 

It is sufficient for you to state S.357(b) CrPC, no need to cite any authority at this stage.

Sudhir Kumar, Advocate (Advocate)     20 October 2014

a criminal case is never against a corporate body but against a natural person only.

 

Action u/s 138 is not a civl suit and a criminal action.  In criminal action the defendest is described as

 

"Mr/Miss/Mrs __________________- s/o,/do, w/o _____________________ age _______ r/o__________ caste __________. "

 

Based on given fact the director is rightly sentences.

 

Prasun Chandra Das (Banker)     22 October 2014

141.

Offences by companies.

 

141.(1)Offences by companies. 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:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence Was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

(2)Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly,

 

Explanation.-For the purposes of this section,-

(a)"company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.


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