Wednesday, May 16, 2012

PROSECUTING DIRECTOR IN CHEQUE BOUNCING CASE, WITHOUT ARRAIGNING THE ISSUER-COMPANY, IS UNJUSTIFIED

The Supreme Court has held that In case of dishonour of cheques issued by the company, prosecution under section 141 of the Negotiable Instrument Act, 1882 against directors (vicarious liability) is possible subject to arraigning of company as an accused. If directors are prosecuted without arraigning of company as an accused, prosecution order against directors is liable to be quashed. However, directors can be proceeded against with or without arraigning company as an accused where company cannot be arraigned as accused due to some legal impediment which attracts "lex
non cogit ad impossiblia" rule (law does not recognize that which is impossible).

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