Director absolved in cheque case

The director of a company who signs a cheque which bounces would not be liable if the company is not arraigned as an accused, the Supreme Court reiterated in its judgment in Himanshu vs B Shivamurthy. In the case, the payee filed a complaint against the signatory of the bounced cheque under Section 138 of the Negotiable Instruments Act. The magistrate issued summons to the signatory, who was a director of Lakshmi Cement and Ceramics Industries Ltd. He moved the Karnataka High Court for quashing the summons.

The high court refused to do so. So he appealed to the Supreme Court. He argued that the cheque was not issued in his personal capacity and the complaint was not maintainable as it was not instituted against the company and its directors. The notice, according to the Act, was also not served on the company. The court agreed and allowed the appeal.