Law on Company's Liability for Cheque Dishonour under S.138 of Negotiable Instruments Act, 1881

Law on Company's Liability for Cheque Dishonour under S.138 of Negotiable Instruments Act, 1881

In the case of SRK Devbuild Pvt Ltd v. GNCTD [2026] GCtR 197 (Delhi), dealing with a case of S.138 of Negotiable Instruments Act, 1881, Company argued that the cheque that is the basis of the criminal complaint under Section 138 of the NI Act, viz., Cheque No. 000011 dated 05.06.2018 for Rs. 2 crores, was drawn on the personal account of Accused No. 2 Mr. Subhash Chand Aggarwal, and not on the petitioner company‟s bank account; and therefore, the company could never have been arrayed as an accused in the criminal complaint. 

High Court relied on Sunil Todi v.State of Gujarat [2021] GCtR 2775 (SC) and held that a summoning order passed by a Magistrate should reflect his application of mind. 

Cheque on Personal Account

It was held that the subject cheque, though admittedly drawn on the personal account of one of the directors-Mr. Subhash Chand Aggarwal, was drawn inter alia in accordance with the Deed of Personal Guarantee dated 31.03.2017, whereby the said director had stood guarantee for performance by the petitioner-company of certain obligations. Therefore, it is not possible to infer, least of all at this stage, that the subject cheque was not issued in discharge of a debt or liability owed by the petitioner-company. 

Effect of CIRP under IBC

The liability of the petitioner-company under section 138 of the NI Act, as may come to be determined in the course of the trial, arose well before the CIRP or liquidation proceedings, and therefore, whether or not that liability would be effaced by subsequent events, would have to be seen in the course of the trial, subject to the provisions of the IBC inter-alia sections 33(5) and 35(1)(k) of that statute.