Mere Absence From MCA Records Cannot Absolve Accused Under Section 138 NI Act If Prima Facie Role Is Shown: Punjab & Haryana High Court

"The liability contemplated under Section 141 of the N.I. Act is not confined only to persons holding a formal designation as Director or Managing Director. The provision extends to every person who, at the time the offence was committed, was in charge of and responsible for the conduct of the business of the company." Punjab and Haryana High Court, in a significant & latest ruling, held that criminal proceedings under Section 138 of the Negotiable Instruments Act cannot be quashed merely because an accused's name is absent from Ministry of Corporate Affairs records, if material on record prima facie establishes active participation in the company's management.

A bench of Justice Manisha Batra observed that the role performed by an accused in the affairs of a company involves disputed questions of fact that cannot be adjudicated under Section 482 of the CrPC.

The petitioner, arrayed as an accused in a criminal complaint filed by respondent No. 1 for the dishonour of two cheques worth ₹50,00,000 each, approached the High Court seeking quashing of the complaint and summoning order. The petitioner contended that he was neither a director, managing director, nor authorised signatory of the accused company, and that his name did not appear in MCA records. It was further argued that the cheques were merely security cheques and that the complaint lacked foundational averments regarding his specific responsibility.

The primary question before the court was whether criminal proceedings under Section 138 read with Section 141 of the N.I. Act could be quashed against a person whose name does not figure in the statutory records of the company as a director or authorised signatory. The court was also called upon to determine whether the defence of a cheque being issued merely as a security cheque warrants threshold interference under Section 482 of the CrPC.

Court Rejects Reliance Solely On MCA Records

The court noted that the impugned complaint contained specific foundational averments asserting that the accused persons were actively participating in the day-to-day affairs and management of the company. Justice Batra emphasized that the liability under Section 141 of the N.I. Act is not confined strictly to persons holding formal designations. The provision extends to every person in charge of and responsible for the conduct of the business.

"The mere absence of the petitioner's name from the statutory records of the company cannot, by itself, conclusively determine the issue of his liability when the complainant asserts otherwise and has placed material on record in support thereof."

Email Correspondence Establishes Prima Facie Control

Highlighting the factual matrix, the court observed that the complainant had brought on record an email dated October 17, 2018, wherein the petitioner had described himself as the Chairman of the company while corresponding with a rice purchaser. The court held that this document prima facie demonstrated that the petitioner was actively representing the company, creating a disputed question of fact regarding his role that required trial.

"The appreciation of such competing factual assertions necessarily requires examination of documentary evidence and, if required, oral evidence during trial. Such disputed questions of fact cannot be satisfactorily adjudicated in proceedings under Section 482 of the Code."

Security Cheque Defence Cannot Be Examined At Threshold

Addressing the argument concerning security cheques, the court ruled that describing a cheque as a security cheque does not automatically take the transaction outside the sweep of Section 138. Relying on the Supreme Court precedent in Sripati Singh v. State of Jharkhand, the bench reiterated that a security cheque cannot be treated as a worthless piece of paper if the underlying obligation has matured.

"If the obligation for which such cheque was issued has matured and the cheque is presented towards discharge of the liability, its dishonour would attract the consequences envisaged under Section 138 of the N.I. Act."

Previous Litigations Indicate Subsisting Triable Issues

The court also took note of the fact that the petitioner's successive anticipatory bail applications and a Special Leave Petition before the Supreme Court arising out of the connected criminal case had already been dismissed. While clarifying that those orders did not determine guilt, the court noted they reinforced that the allegations warranted proper trial adjudication.

"The inherent powers preserved under Section 482 of the Code are undoubtedly wide, but they are to be exercised sparingly, with circumspection and only in those rare cases where continuation of criminal proceedings would amount to abuse of the process of Court."

Concluding that the petitioner's contentions constituted matters of defence best evaluated by the trial court after evidence is led, the Punjab and Haryana High Court dismissed the petition under Section 482 of the CrPC as devoid of merit.

Date of Decision: 10 August 2026