Supreme Court agrees to hear plea on whether prosecution under Section 138 NI Act requires signatory to be made party

A bench of Justices Abhay S Oka and Rajesh Bindal issued notice on the plea.

The Supreme Court recently agreed to hear a plea regarding whether the prosecution under Section 138 of the Negotiable Instruments Act (NI Act) requires the signatory of the cheque to be made a party to the case [Priyom Condiments Pvt Ltd vs State of Andhra Pradesh and Ors.]

A bench of Justices Abhay S Oka and Rajesh Bindal issued notice on the plea by Priyom Condiments Pvt Ltd’s challenging an order of the Andhra Pradesh High Court that had refused to quash a complaint against the company under Section 138.

Venkataramana Traders had filed the complaint against the petitioner under Sections 190 and 200 of the Code of Criminal Procedure (CrPC) as well as Sections 138 and 142 of the NI Act alleging that the petitioner had presented them a cheque for ₹25,00,000, which was dishonoured.

The plea by the petitioners for quashing of the complaint was rejected by the Andhra Pradesh High Court on January 4, leading to them moving the Supreme Court.

The appeal before the Supreme Court stated that the plea was dismissed erroneously by the High Court as the person who had actually signed the cheque had not been made party to the proceedings.

It underlined that the Supreme Court in SMS. Pharmaceuticals Ltd. Versus Neeta Bhalla & Anr. clearly laid down that without arraigning the signatory, prosecution under Section 138 of is not possible.

The High Court failed to consider the same, the plea stated.

Accordingly, it sought that the operation of the assailed order of January 4 be stayed.

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