Cheque Dishonour under S.138 of Negotiable Instruments Act, 1881 : Who can Maintain a Complaint for Cheque Dishonour

Cheque Dishonour under S.138 of Negotiable Instruments Act, 1881 : Who can Maintain a Complaint for Cheque Dishonour 

In the case of Milind Shripad Chandurkar v. Kalim M. Khan [2011] GCtR 6603 (SC) dealing with a case related to Section 138 of Negotiable Instruments Act, 1881 it was held that  Section 7 of the Act 1881 defines “Payee” as the person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid. Section 8 defines “the holder of the cheque” as any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Section 9 defines “holder in due course” as any person who for consideration became the possessor of a cheque if payable to a bearer or the payee or endorsee thereof.

Section 138 of NI Act, 1881 provides for penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts. However, exception is contained in clause (c). 

It was explained that where the “payee” is a proprietary concern the complaint can be filed (i) by the proprietor of the proprietary concern describing himself as the sole proprietor of the “payee”; (ii) the proprietary concern describing itself as the sole proprietary concern represented by its proprietor; and (iii) the proprietor or the proprietary concern represented by the Attorney Holder under the power of attorney executed by the sole proprietor. However, it shall not be permissible for an Attorney Holder to file the complaint in his own name as if he was the complainant. He can initiate criminal proceedings on behalf of the principal.

In a case of a nature, where the “payee” is a company or a sole proprietary concern, such issue cannot be adjudicated upon taking any guidance from Section 142 of the NI Act but the case shall be governed by the general law i.e. the Companies Act 1956 or by civil law where an individual carries on business in the name or style other than his own name. In such a situation, he can sue in his own name and not in trading name, though others can sue him in the trading name. So far as Section 142 of NI Act is concerned, a complaint shall be maintainable in the name of the “payee”, proprietary concern itself or in the name of the proprietor of the said concern.

General principles of company law or civil law would apply for maintaining the complaint under Section 138 of the Act 1881 and a person can maintain a complaint provided he is either a “payee” or “holder in due course” of the cheque.