Manjula Kapoor v. State of Himachal Pradesh & Another – Criminal Appeal No. __ of 2026 [Arising out of SLP (Crl.) No. 8240 of 2016] – 2026 INSC 789 – 29 July 2026 – Hon’ble Manoj Misra and Vijay Bishnoi, JJ.
https://api.sci.gov.in/supremecourt/2016/34306/34306_2016_11_12_72755_Judgement_29-Jul-2026.pdf
Appellant and impugned order challenged
Appellant Manjula Kapoor, director and authorised signatory of M/s Cine Prime Entertainment, filed a petition under Section 482 CrPC read with Article 227 before Himachal Pradesh High Court at Shimla for quashing Complaint Case No.25/1 of 2009 under Section 138 NI Act, titled Pankaj Sharma v. Manjula Kapoor, pending before JMFC, Barsar. The impugned order dated 19.09.2016 declined to quash but directed Trial Court to suo motu issue notice to company under Section 319 CrPC and implead it as accused No.2 and commence trial de novo.
Factual matrix
As per complaint, company owed Rs.5,00,000 to complainant Pankaj Sharma for services rendered and issued a cheque signed by appellant as authorised signatory, which was dishonoured. Complaint was filed only against appellant without making company an accused or issuing statutory demand notice under Section 138 to company.
Lower courts verdicts
The Judicial Magistrate 1st Class, Barsar, took cognizance of complaint under Section 138 NI Act against the director alone and proceeded with trial. The High Court of Himachal Pradesh, vide order dated 19.09.2016 in Section 482 petition, refused quashing and instead directed the Trial Court to invoke Section 319 CrPC to summon the company as additional accused.
Core legal arguments of appellant vs respondent
Appellant contended that when cheque is drawn on company account, company must be arraigned as principal accused under Section 141 NI Act, and prosecution of director alone without company is not maintainable, and such fundamental defect cannot be cured under Section 319 CrPC after limitation under Section 142 has expired. Respondent/complainant contended that defect was curable, and High Court rightly invoked Section 319 CrPC to prevent failure of justice by summoning company during trial.
Ratio Decidendi
Under Sections 138 and 141 NI Act, commission of offence by company is condition precedent to attract vicarious liability of directors; company being drawer is principal offender, directors are vicariously liable. Arraignment of company as accused at filing is mandatory; non-impleadment is fatal defect affecting cognizance itself. Proviso to Section 142(1) NI Act permitting condonation of delay cannot be used to circumvent substantive requirement and allow removal of fatal defect after threshold stage. Section 319 CrPC power to summon additional accused cannot be invoked to cure initial non-arraignment of company, particularly after expiry of limitation prescribed under Section 142. High Court exceeded jurisdiction in directing suo motu impleadment [Paras 10-16, 19-23 of 2026 INSC 789].
Directions issued
None. Appeal allowed, High Court order dated 19.09.2016 set aside, complaint and all consequential proceedings under Section 138 NI Act quashed. No directions to State/police/authorities.
Who is affected and what changes
Affects complainants, companies, directors and authorised signatories in cheque dishonour prosecutions. Practically mandates that complaint must implead company where cheque is drawn on its account, issue demand notice to company, and file within limitation under Section 142. Trial Courts cannot salvage defective complaints by resorting to Section 319 CrPC; such complaints are liable to be quashed at threshold.
Important Paragraphs
Section 138 NI Act: Burden on complainant to prove
9. A plain reading of Section 138 of NI Act would make it clear that to successfully prosecute a person for an offence punishable under Section 138, the complainant must prove:
(i) that the person drew a cheque on an account maintained by him with the banker;
(ii) that such cheque was drawn for payment of any amount of money to another person out of that account for the discharge, in whole or in part, of any debt or other liability;
(iii) that such cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity, whichever is earlier;
(iv) that such cheque was returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank;
(v) that the payee or the holder in due course of the cheque, as the case may be, demanded in writing from the drawer of the cheque, the payment of the amount of the money due under the cheque to the payee;
(vi) that such a notice for payment is made within a period of thirty days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid;
(vii) that the drawer of such cheque has failed to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within 15 days of the receipt of the said notice.
‘Such person’: Company is a juristic person and can maintain an account with the bank
11. What is clear from above is that the liability for the offence falls on “such person” who has drawn the cheque on an account maintained by him with a banker. Company is a juristic person and can maintain an account with the bank. Thus, if the cheque concerned is drawn on the account maintained by the Company, subject to fulfilment of other ingredients of Section 138 of NI Act, it would be the Company which would commit the offence. Section 141 of NI Act creates vicarious liability of certain other persons when the offence is committed by the company. Section 141 provides that if the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Interpreting the provisions of Sections 138 and 141 of NI Act, in Aneeta Hada (supra), it was held that for maintaining prosecution of any director of the company arraigning a company as an accused is mandatory. It was further held that commission of offence by the company is a condition precedent to attract the vicarious liability of others. This Court went on to observe that the words “as well as the company” appearing in Section 141 make it absolutely clear that when the company can be prosecuted, then only the persons mentioned in other categories could be held vicariously liable for the offence subject to the averments in the petition and proof thereof. The relevant paragraphs of this Court’s decision in Aneeta Hada (supra) are being reproduced below:
“58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words, “as well as the company” appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.
- In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove.”
Invoking section 319 Cr.P.C for impleading company in cheque dishonour cases
12. Now we shall consider whether recourse can be had to the provisions of Section 319 of CrPC to arraign the company as an accused when the complaint fails to implead the company. To appropriately answer the issue we must have a look at the provisions of Section 142 which deals with cognizance of the offence punishable under Section 138 of NI Act. Section 142 of NI Act provides that notwithstanding anything contained in CrPC no Court shall take cognizance of any offence punishable under Section 138 except upon a complaint in writing made by the payee or, as the case may be, the holder in due course of the cheque; and such complaint must be made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138. Clause (c) of the proviso to Section 138 gives 15 days’ time to the drawer to make payment upon service of notice of demand. This would imply that cause of action crystalises when the drawer of such cheque fails to make payment of the amount concerned within fifteen days of the receipt of the notice contemplated in clause (b) of the proviso to Section 138. Therefore, the statute fixes a time period within which the complaint is to be made for an offence punishable under Section 138.
Section 319 Cr.P.C cannot be used to circumvent fatal defect of complainant failing to implead the company at the threshold
13. No doubt, the Court empowered to take cognizance has the power, under the proviso to sub-section (1) of Section 142 of NI Act, to take cognizance of a complaint made after the prescribed period upon being satisfied that the complainant had sufficient cause for not making the complaint within such period. But this power must not be used to circumvent the provisions of the Act and allow the complainant to remove fatal defects in the course of the proceedings when the complaint itself deserved dismissal at the threshold.
14. Here, the complaint suffered from a fatal defect for its failure to implead the Company as an accused on whose account the cheque was drawn. In such circumstances, no cognizance on that complaint could have been taken in view of the decision in Aneeta Hada (supra). Hence, all further proceedings on the complaint were bad in law.
N. Harihara Krishnan vs. J. Thomas case is followed on this aspect
15. In N. Harihara Krishnan v. J. Thomas, a somewhat similar issue had arisen for consideration before this Court. It was held that power under Section 319 of CrPC should not be used as a device to initiate prosecution against the company beyond the period of limitation stipulated under the Act. We respectfully agree with the aforesaid view of this Court. Besides, in our view, where the complaint suffers from so fundamental a defect that no cognizance can be taken thereupon, the Court cannot proceed and take recourse to the provisions of Section 319 to cure that defect. The reason is simple, if the complaint suffers from a fatal defect, there is no valid institution of a proceeding. In such circumstances, only a fresh complaint can be filed after removing the defect provided it is within the period of limitation prescribed by the Act. However, if the fresh complaint is beyond the prescribed period of limitation, the Court concerned may take cognizance if it is satisfied that the complainant had sufficient cause for not making the complaint within the prescribed period.
Conclusion
High Court erred in directing the Magistrate to arragn company as accused
16. For the reasons above, we are of the view that the High Court clearly exceeded its jurisdiction by directing the learned Magistrate/ Trial Court to suo moto arraign company as an accused. In consequence, and having regard to the finding that the complaint suffered from a fatal defect, we have no hesitation in holding that the complaint and all consequential proceedings arising there from are liable to be quashed and are hereby quashed.
17. The appeal is allowed. The impugned order of the High Court is set aside. The impugned Complaint and all consequential proceedings under Section 138 of NI Act are hereby quashed.
Judgments cited
Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 Cited for proposition that arraigning company as accused is mandatory for maintaining prosecution of director and that commission of offence by company is condition precedent to attract vicarious liability under Section 141 NI Act 16c3
Acts and Sections involved:
– Negotiable Instruments Act, 1881 – Section 138 – Dishonour of cheque
– Negotiable Instruments Act, 1881 – Section 141 – Offences by companies, vicarious liability of directors
– Negotiable Instruments Act, 1881 – Section 142 – Cognizance and limitation
– Code of Criminal Procedure, 1973 – Section 319 – Power to proceed against other persons appearing to be guilty
– Code of Criminal Procedure, 1973 – Section 482 – Inherent powers of High Court
