SC Agrees To Hear Plea Of Prosecution Under Section 138 Of NI Act

The Supreme Court has recently agreed to hear a plea regarding the prosecution under Section 138 of the Negotiable Instruments Act that requires the signatory of the cheque to be made a party to the case.

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

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

On January 4, the plea by the petitioners for quashing of the complaint got rejected by the Andhra Pradesh High Court, leading to them to move to the Supreme Court.

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

Later, it underlined that the Supreme Court in SMS. Pharmaceuticals Ltd. Versus Neeta Bhalla & Anr. has clearly laid down that without indicting the signatory, prosecution under Section 138 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 stayed.