DCM FINANCIAL SERVICES LTD. versus J.N. SAREEN & ANR.

Citation: [2008] 8 S.C.R. 603 · Decided: 13-05-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

[2008] 8 S.C.R. 603 
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DCM FINANCIAL SERVICES LTD. 
A 
v. 
J.N. SAREEN & ANR. 
(Criminal Appeal No. 875 of 2008) 
MAY 13, 2008 
B 
.... 
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[S.B. SINHA AND DR. MUKUNDAKAM SHARMA,JJ.] 
Negotiable Instruments Act, 1881; Ss. 138, 140 & 141: 
Dishonour of Cheque - Liability of Director/signatory of 
a company - Held: No contention has been raised by com- c 
plainant before Court below that accused-director of Company 
signed the cheque in question in his capacity as authorized 
signatory, but raised for the first time before Supreme Court -
If he was to be proceeded against as a signatory to the cheque, 
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it should have been disclosed before the Courts below for their D 
consideration - liability attached to him "Nas not personal but 
constructive liability - In order to fix constructive liability, spe-
cific averment in the complaint petition about the role played 
by accused in terms ofs. 141of1881 Act are imperative- By 
the time the cheque in question, a post-dated cheque, pre-
E 
sented, accused resigned from directorship of the company -
Despite having the knowledge, he was impleaded as one of 
the accused in the complaint as director in charge of the com-
),_ 
pany, which he was not- Since accused resigned in 1996 he 
could not be held liable as person in-charge of the company 
F 
in 1998, when the cheque was dishonoured 
Section 140 - Applicability of - Held: Reason to believe 
on the part of a drawer, in that the cheque would not be 
dishonoured, cannot be taken as defence. 
Constitution of India, 1950 - Article 136 - Scope of -
G 
... ). 
Discussed. 
Respondent No.1 was a director of a company. As a 
part of certain business transaction, some post-dated 
603 
H 
\ 
• 
604 
SUPREME COURT REPORTS 
[2008] 8 S.C.R. 
A cheques were issued by the company in favour of the ap-
pellant. One of the cheques, when presented to the bank· 
for encashment, was dishonoured. A notice was issued 
by the appellant to accused, respondent No.1 and the 
company. Accused persons failed to make the payment, 
B a complaint petition was filed by respondent No.1 in terms 
of s. 138 of the Negotiable Instruments Act against the 
4 
accusEi!d. However, no allegation was made again_st re-
spondent No.1 that he was a signatory to the cheque or 
he was authorized therefor. Respondent No.1 filed an ap-
e plication for his discharge, which was allowed by the 
trial Court. The revision petition filed thereagainst by the 
appellant was dismissed by the High Court. Hence th.e 
present appeal. 
· 
Appellant-complainant contended that although be-
.0 fore th(! High Court no material was placed to show that 'r-
the 1•1 respondent was a signatory to the cheque, in ques-
tion, but in view of the fact thatthe entire records were 
available to the High Court, it should have been held that 
the First Respondent was primarily liable for payment of 
E the amount thereunder. 
Dismissing the appeal, the Court 
HELD: 1.1 The trial Judge has noticed that no con-
tention had been raised that the 1•1 respondent in his ca-
..i.. 
F pacity as an authorized signatory signed the cheque. 
Such a contention appears to have been raised before 
this Court for the first time. (Para - 8) [611-E-F] 
1.2 Averments made in the complaint petition sup-
ported by the statements of the complainant form the ba-
G sis for taking cognizance of an offence by the Magistrate. 
H 
Application of mind on the averments made in the com-
--'< 
plaint petition vis-a-vis the order which is required to be 
passed for summoning the witnesses is imperative. (Para 
- 11) [612-8). 
. 
DCM FINANCIAL SERVICES LTD. v. J.N. SAREEN 
605 
&ANR. 
1.3 The complaint petition did not disclose as to who A 
had signed the cheque on behalf of the Company. Involve-
ment of 1•1 respondent in commission of the offence as 
signatory was ,-ieither averred nor stated by the autho-
rized representative of the complainant. Even the com-
plaint petition proceeded on the basis that the averments B 
contained in the complaint petition were sufficient to en-
+.-
able the Magistrate to summon the accused. Even be-
fore the High Court such a contention has not been raised. 
(Para - 12) (612-C-D] 
1.4 Respondent No.1 was a Director of the Company. C 
The liability attached to him was not a personal liability. It 
was a constructive liability. The cheque was drawn on 
behalf of the Company. He might have been liable as a 
person incharge of the company within the meaning of 
Section 141 of the Act. (Para -15) (613-E-G] 

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