Tag: Section 138

Supreme Court Clarifies: Trustees Can Be Sued for Dishonored Cheques, Even If Trust Is Not Named as Accused
24Dec By The Legal ChamberNo Comments
Supreme Court

Supreme Court Clarifies: Trustees Can Be Sued for Dishonored Cheques, Even If Trust Is Not Named as Accused

This Supreme Court judgment holds that under the Negotiable Instruments Act, 1881, a Trust is not a juristic person capable of being sued. A complaint for a dishonored cheque issued on behalf of a Trust is maintainable against the Trustee who signed it, without needing to array the Trust itself as an accused. The ruling clarifies that vicarious liability attaches directly to the responsible Trustee. Facts Of The Case: The dispute arose from a financial arrangement concerning William Carey University. Facing a crisis, its sponsoring body, ACTS Group, entered an MoU with Orion Education Trust on 12.10.2017 to hand over the university's management. The Respondent, Vijaykumar Agarwal, was Orion's Chairman. In this capacity, he authorized the Appellant, Sankar Padam Thapa, to liaise wit...
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No Redemption After Auction Notice: Supreme Court Major Ruling on Bank Loan Recovery
10Nov By The Legal ChamberNo Comments
Supreme Court

No Redemption After Auction Notice: Supreme Court Major Ruling on Bank Loan Recovery

This Supreme Court judgment clarifies that the right of redemption of a mortgagor under Section 13(8) of the SARFAESI Act is extinguished upon the publication of the notice of sale, as per the 2016 amendment. The Court held that this amended provision is retrospective in operation and overrides the general right of redemption under the Transfer of Property Act, 1882. The ruling emphasizes that only a single composite notice of sale is required under the SARFAESI Rules, irrespective of the mode of transfer adopted by the secured creditor. Facts Of The Case: The borrowers, M/s KPK Oils and Proteins India Pvt. Ltd. and its guarantors, availed credit facilities from the respondent Bank in January 2016, creating an equitable mortgage over various properties. After the loan account was classif...
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Cheque Bounce Notice Must Demand Exact Cheque Amount, Rules Supreme Court
10Nov By The Legal ChamberNo Comments
Supreme Court

Cheque Bounce Notice Must Demand Exact Cheque Amount, Rules Supreme Court

In a significant ruling under the Negotiable Instruments Act, 1881, the Supreme Court held that a demand notice under Section 138 Proviso (b) must specify the exact cheque amount. Demanding a different sum, even due to a typographical error, renders the notice legally invalid and fatal to the complaint, as the provision mandates strict compliance. Facts Of The Case: The appellant, Kaveri Plastics, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, against the respondents. The case originated from a Memorandum of Understanding related to the sale of land. As part of this agreement, the accused company issued a cheque for Rs. 1,00,00,000/- in favour of the appellant. However, upon presentation, the cheque was dishonoured by the bank due to "insufficient fund...
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Supreme Court Revives Cheque Bounce Cases, Says ‘Sick Company’ Status is Not a Get-Out-of-Jail Card
9Oct By The Legal ChamberNo Comments
Supreme Court

Supreme Court Revives Cheque Bounce Cases, Says ‘Sick Company’ Status is Not a Get-Out-of-Jail Card

The Supreme Court held that proceedings under Section 138 of the Negotiable Instruments Act are not automatically barred against a company declared sick under SICA, even if a restraint order under Section 22A exists. The nature of the restraint and the purpose of the cheque issuance are mixed questions of law and fact to be decided during trial based on evidence. Furthermore, a Magistrate lacks the inherent power to review or recall the issuance of summons. Facts Of The Case: The appellant, Shree Nagani Silk Mills Pvt. Ltd., supplied goods to the first respondent, L.D. Industries Ltd., which was declared a sick company by the BIFR. Towards the payment for these supplies, the accused company issued several cheques in 2001, which were subsequently dishonoured due to "insufficient funds"....
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Supreme Court Simplifies Amendment Rules for NI Act Complaints
23Aug By The Legal ChamberNo Comments
Supreme Court

Supreme Court Simplifies Amendment Rules for NI Act Complaints

The Supreme Court held that a criminal complaint can be amended post-cognizance if it cures a curable infirmity and causes no prejudice to the accused. The amendment should not alter the complaint's fundamental nature. The test of prejudice is the cardinal factor, and procedural rules are subservient to the interests of justice. Facts Of The Case: The appellant, Bansal Milk Chilling Centre, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, alleging that three cheques issued by the respondents, Rana Milk Food Private Ltd., for a sum of ₹14 lakhs were dishonored. The complaint stated the transaction was for the purchase of "Desi Ghee (milk products)." After summons were issued and the complainant's chief-examination was concluded, the appellant sought to amend th...
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Supreme Court Clarifies: Partners Liable for Bounced Cheques Even If Firm Isn’t Named
4Aug By The Legal ChamberNo Comments
Supreme Court

Supreme Court Clarifies: Partners Liable for Bounced Cheques Even If Firm Isn’t Named

The Supreme Court ruled that in cases under Section 138 of the Negotiable Instruments Act, a partnership firm need not be separately arraigned as an accused if its partners are prosecuted. The notice to partners constitutes notice to the firm, as partners are jointly and severally liable. The Court clarified that unlike companies, partnership firms lack a separate legal identity, making partners directly liable. The judgment distinguishes between vicarious liability (for companies) and joint liability (for firms), upholding the complaint’s validity despite the firm’s omission. The High Court’s order quashing the complaint was set aside. Facts Of The Case: The appellant, Dhansingh Prabhu, advanced a loan of ₹21 lakh to the respondents, Chandrasekar and another, who were partners of the fi...
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