Can’t prosecute signatory for cheque bounce if firm not named accused: HC

The Punjab and Haryana high court has said that a firm’s signatory cannot be prosecuted individually in a cheque bounce complaint unless the employer is named as an accused in the case.

Setting aside the conviction of the then managing director (MD) of a private firm in a 23-year-old case, the court said since the cheque was issued by the firm which was not named as an accused in the case, the signatory could not be held “vicariously liable” of the charge levelled against him.

The court bench of justice TPS Mann cited a Supreme Court judgment in 2012 in this regard. The SC had also maintained that other types of offenders could be brought in the purview of “vicarious liability” as per the provisions of the Negotiable Instruments Act, 1881.

GP Kotyal, the petitioner in this case, was given one-year jail with Rs 3,000 fine by a Fatehabad court in Haryana in 2003.

The criminal proceedings were initiated on the complaint of Sat Narain, a Fatehabad resident, who had alleged that Kotyal as MD of GP Economical Traders Private Ltd issued him a Rs 4,00,000 cheque for payment for cotton he had supplied.

The cheque was dishonoured for lack of funds in the account.

The HC held that the petitioner, being the managing director of the firm, was the authorised signatory and he had duly signed the cheque in question in his capacity.

Sat Narain, however, had filed the complaint by arraigning Kotyal and did not name the firm he worked for as accused.