Manager Of Firm Not Entitled To Maintain Cheque Dishonour Complaint Under Section 138 NI Act In Personal Capacity | Kerala High Court Holds Only Payee Firm Competent To Prosecute
Sanchayita Lahkar
The High Court of Kerala Single Bench of Justice A. Badharudeen dismissed a criminal appeal challenging the acquittal of an accused in a cheque dishonour case. The Court held that a prosecution under Section 138 of the Negotiable Instruments Act, 1881, can be initiated only by the payee or holder in due course of the cheque. Finding that the complaint had been instituted in a personal capacity by an individual who was neither the payee nor the holder in due course, the Court concluded that the prosecution was not maintainable in law and upheld the trial court’s decision to acquit the accused.
The appeal arose from a private complaint filed before the Judicial Magistrate of First Class-I, Perinthalmanna, regarding a cheque allegedly issued towards the discharge of liability. The complainant, who was the Branch Manager of Kerala Roadways Ltd. at Perinthalmanna, initiated proceedings against the accused following the dishonour of a cheque dated 20 June 1997. The cheque, drawn on Vijaya Bank, Manjeri Branch, was issued for an amount of ₹65,000.
According to the complainant, the cheque was issued by the accused to Kerala Roadways Ltd., and he, as the company’s manager, filed the complaint in his individual capacity alleging commission of an offence under Section 138 of the Negotiable Instruments Act, 1881.
During the trial, the prosecution examined two witnesses as PW1 and PW2 and produced documentary evidence marked as Exhibits P1 to P6. The accused did not adduce any evidence in defence, despite being given the opportunity.
The trial court, after evaluating the evidence, acquitted the accused on two principal grounds. First, it found that no legal notice had been issued within the stipulated time frame as required under the NI Act. Second, it held that the cheque was not issued in discharge of any personal liability of the complainant but was related to the dues of Kerala Roadways Ltd.
The complainant, aggrieved by the acquittal, filed Criminal Appeal No. 968 of 2007 before the Kerala High Court, arraying the accused and the State of Kerala as respondents.
The core legal issue for determination before the High Court was whether a manager of a firm or company could file a complaint in his personal capacity for a cheque issued in favour of the company or firm, and whether such a complaint satisfied the statutory requirement under Section 142(1)(a) of the NI Act.
Upon examination of the trial court records and after hearing both sides—including the learned counsel for the complainant, counsel for the accused, and the Public Prosecutor—the Court proceeded to determine the legitimacy of the complaint and the competence of the complainant to initiate the proceedings.
The Court recorded that in cases involving prosecution for an offence under Section 138 of the Negotiable Instruments Act, 1881, following the dishonour of a cheque issued in favour of a firm, company, or concern, the legal right to file a complaint lies with the firm, company, or concern itself. It was noted that Section 142(1)(a) of the Act stipulates that a court shall not take cognizance of any offence under Section 138 unless the complaint is made in writing by the payee or the holder in due course of the cheque.
Upon reading Section 142(a) along with Sections 7 to 9 of the Act, the Court stated that only the payee or the holder in due course is competent to file such a complaint. In the present matter, the cheque in question was issued towards the liability of Kerala Roadways Ltd., and therefore, the consideration of the cheque was due to the company.
The Court observed that the petitioner, who was the manager of Kerala Roadways Ltd., did not fall within the definition of either ‘payee’ or ‘holder in due course’ because the amount was not personally owed to him. It was further stated that when an authorised officer of a company acts in such matters, it is done on behalf of the firm, company, or concern, not in an individual capacity.
Accordingly, in instances where a cheque issued in favour of a firm, company, or concern is dishonoured, the complainant must be the firm, company, or concern itself, which may be represented by a legally authorised officer, after being properly named as the complainant. The only exception to this rule is when the payee is a sole proprietorship, in which case the proprietor can file the complaint.
In the present case, the prosecution was initiated by Ramachandran in his individual capacity, despite the cheque being issued in favour of Kerala Roadways Ltd. As such, the Court found the prosecution to be defective and not in accordance with legal requirements. The trial court’s conclusion that the complainant’s case could not succeed was therefore held to be justified.
“In the result, this appeal fails and is accordingly dismissed.”
Advocates Representing the Parties
For the Petitioners: Sri M. Shaju Purushothaman, Advocate
For the Respondents: Shri P. Venugopal, Advocate; Smt. Sheeba Thomas, Public Prosecutor
Case Title: K. Ramachandran v. Gopi & State of Kerala
Neutral Citation: 2025:KER:42704
Case Number: Crl. Appeal No. 968 of 2007
Bench: Justice A. Badharudeen
