Legal Notice to Company Suffices: High Court Upholds Trial Court’s Summoning in Cheque Bounce Case Against Former Director

In a significant ruling, the Delhi High Court dismissed a petition seeking to quash a summoning order against Prabha Shankar Singh, a former Director of Delhi Infratech Limited (DIL), involved in a cheque bounce case under Section 138 of the Negotiable Instruments Act. The judgment, delivered by Hon’ble Mr. Justice Saurabh Banerjee, emphasized that legal notices sent to a company are sufficient for its Directors, setting a precedent in cases involving corporate entities and their individual directors.

The case, titled Prabha Shankar Singh Vs. Sangita Kumari, revolved around a dishonored cheque of Rs. 2,50,000, issued by DIL to the respondent, Sangita Kumari. The cheque was returned due to the account being blocked. While a legal notice was sent to DIL, the petitioner, Mr. Singh, contended that he did not receive a personal legal notice and had ceased to be a Director at DIL, thus challenging the summoning order dated October 30, 2021, by the Trial Court.

In his judgment, Justice Banerjee noted, “A company is an independent entity run by living persons. As per settled position of law, in a complaint filed under Section 138 of the N.I. Act against any Company, it is not necessitated a Legal Notice to be sent to each of the Director(s), specifically/ individually, whence the same is issued to the company instead.” This observation upholds the principle that a legal notice to a company suffices for its Directors.

Further, the Court dismissed the petitioner’s arguments, stating that the petitioner’s role at the time of the issuance of the cheque requires a trial. The Court cited the precedent set in the case of Krishna Texport and Capital Markets Limited vs Ilaa Agarwal & Ors, reinforcing that individual notices to Directors under Section 138 N.I. Act are not required.

Date of Decision: December 18, 2023

PRABHA SHANKAR SINGH VS  SANGITA KUMARI @ SANGITA