Rajasthan HC Imposes Rs 5 Lakh Cost on Ex-Director | Bars Asset Sale Over Cheque Bounce ; Vicarious Liability Upheld
Sanchayita Lahkar
The High Court of Rajasthan Single Bench of Justice Praveer Bhatnagar dismissed a criminal miscellaneous petition challenging the imposition of a 20% pre-deposit condition on compensation in a cheque dishonour case. The Court directed the petitioner to bear a cost of Rs. 5,00,000/- and restrained him from alienating any assets until proof of legitimate acquisition is submitted. The Court found no merit in the petitioner’s claim for waiver and upheld the directive passed by the Appellate Court.
The present petition was filed under Section 528 of the Bhartiya Nagarik Suraksha Sanhita, 2023, seeking quashing of an order dated 27.11.2024 (to the extent it required a 20% compensation pre-deposit) and another dated 02.05.2025 passed by the Additional District and Sessions Court in Criminal Appeal No. 83/2024. These orders pertained to the petitioner’s conviction under Section 138 of the Negotiable Instruments Act, 1881, for issuing a dishonoured cheque in his capacity as Director and authorized signatory of Shiv Mahima Ispat Pvt. Ltd. to the complainant, Steel Authority of India Ltd.
The complaint originated when a cheque issued by the petitioner on behalf of the company was returned with the remark "Exceeds arrangement." Following the dishonour and non-payment after a legal notice, proceedings were initiated under Section 138 of the NI Act.
By judgment dated 28.10.2024, the Trial Court convicted the petitioner, sentencing him to two years of simple imprisonment and a compensation payment of Rs. 8.10 crores under Section 357(3) of the CrPC. An additional six-month sentence was imposed in case of default.
Upon appeal, the Appellate Court on 27.11.2024 suspended the sentence, conditioned on the deposit of 20% of the compensation amount within 60 days. The petitioner then moved an application seeking waiver of this condition, which was dismissed by the Court on 02.05.2025.
The petitioner contended that he had signed the cheque solely in his capacity as Director and that he was not the drawer under Section 148 of the NI Act, citing Bijay Agarwal v. M/s Medilines. He further claimed that the company and its directors are separate legal entities and referred to his resignation dated 10.02.2016, with the company being wound up by High Court order on 01.12.2016.
It was submitted that the Official Liquidator had admitted the claim of the complainant would be addressed under due process. Relying on Jamboo Bhandari v. M.P. State Industrial Development Corporation Ltd. (2023) 10 SCC 446, the petitioner argued for the court's discretion in waiving pre-deposit.
The respondents submitted that no amount had been paid by the petitioner either before the cheque was presented or after the legal notice was served. They cited Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel (2023) 1 SCC 578 to assert that the dishonour of an endorsed cheque upon maturity attracts liability under Section 138.
The Trial Court had initially taken cognizance against other directors, who were exonerated via an order dated 12.05.2014. The petitioner did not challenge this order.
The Court recorded, "That the petitioner was director and authorized signatory of the Company- respondent No.3."
Referring to the transaction, the Court stated, "Memorandum of Understanding dated 17.04.2012 was signed inter-se the complainant- respondent No.2 and the respondent No.3 qua HR totalling 12001 metric tonnes coils." It was found that goods worth approximately Rs. 4.82 crores were dispatched as per Central Excise Invoice terms.
The cheque in question, dated 03.01.2013, was issued and signed by the petitioner and returned dishonoured with the remark "Exceeds arrangement." The Court noted, "Respondent No.2 served a notice for demand upon the petitioner along-with interest and liability which was accepted by the petitioner and the Company- respondent No.3 vide letter dated 12.01.2013 with assurance to pay the due amount by 20.01.2013."
On the issue of goods quality, the Court found, "Invoice(s) sent by the respondent No.2 were supported by the certificate of the material quality, which was duly admitted by the petitioner upon receipt of the said goods, therefore, the plea that goods were of inferior quality is an afterthought."
Regarding the vicarious liability of directors, the Court cited Ravindranatha Bajpe v. Mangalore SEZ Ltd. (2022) 15 SCC 430 and recorded, "Crime committed by a company often involves mens rea, that is actions and decisions of the said individuals. However, criminal law generally doesn't recognize vicarious liability unless specifically provided by the statute."
The Court explained that Section 141 of the NI Act specifically imposes such liability, stating, "The petitioner can be held liable for the acts of the Company. Therefore, the learned Trial Court has rightly held the petitioner vicariously liable."
On pre-deposit under Section 148 of the NI Act, the Court stated, "Despite the same, the petitioner has flouted the said condition imposed by the concerned Court and instead filed a modification/amendment application, after the expiry of the 60 days as directed and with a significant delay, which reflects petitioner’s vindictive attitude and intent to frustrate the proceedings under NI Act."
It also observed, "Learned Trial Court has adjudicated the matter without adhering to the provision of Section 143 of NI Act... Cognizance was taken in the Year 2014, and the decision was rendered in 2024, reflecting significant delay."
Discussing the petitioner’s resignation, the Court relied on Harshendra Kumar D. v. Rebatilata Koley (2011) 3 SCC 351, stating, "It can be deduced that the petitioner was involved in the affairs of the company, thereby making him liable for the acts of the Company."
The Court concluded by noting, "The dispute in the instant matter pertains to the year 2012-13 for default in making payment qua the amount of Rs. 5 crore approximately; that the petitioner has admitted the obligation/liability due towards respondent No.2."
It stated, "The petitioner has never assailed the order dated 12.05.2014... that direction passed by the learned Appellant Court qua deposition of 20 % of the compensation amount... was flouted by the petitioner."
The Court further recorded, "The petitioner till date has not paid any amount to the respondent No.2; that the petitioner has acted as a compulsive litigant and has attempted to frustrate the provisions of the NI Act."
Accordingly, the Court directed: "This Court deems it apposite to dismiss the present petition with a cost of Rs.5,00,000/- (Rupees Five Lakhs only), which is to be recovered from the petitioner only."
It also stated, "The petitioner is hereby restrained from alienating any of his personal assets, whether movable or immovable, until such time as petitioner satisfy the Official Liquidator that these assets were acquired through legitimate means unrelated to the company's funds."
Advocates Representing the Parties:
For the Petitioners: Dr. Sachin Kumar Sharma, Advocate
For the Respondents: Mr. Rishi Raj Singh Rathore, Public Prosecutor; Mr. Manvendra Singh Shekhawat, Public Prosecutor
Case Title: Bharat Mittal v. State of Rajasthan & Ors.
Neutral Citation: 2025: RJ-JP:20828
Case Number: S.B. Criminal Miscellaneous (Petition) No. 2912/2025
Bench: Justice Praveer Bhatnagar
[Read/Download order]
