Rules of companies are irrelevant for cases of dishonour of cheques in private transactions between employees: HC

A view of Karnataka High Court in Bangalore. Photo: V. Sreenivasa Murthy

A view of Karnataka High Court in Bangalore. Photo: V. Sreenivasa Murthy  


Convicts an employee of HAL in a criminal case filed by his colleague for dishonour of cheque for ₹8 lakh

The Karnataka High Court has held that the conduct and business rules, which prohibits employees of a company from indulging in mutual money transactions without the permission of higher authorities, cannot be a relevant factor in criminal proceedings related to dishonour of cheque between employees under provisions of the Negotiable Instruments Act.

“The magistrate, while dealing with a matter under the Negotiable Instruments Act, is in no way concerned with the permission that was required to be taken from the higher authority, if the conduct rules would require such permission. Adherence to the disciplinary or conduct rules is an issue totally irrelevant for consideration of criminal proceedings under Section 138 of Negotiable Instruments Act,” the High Court said.

Justice R. Devdas passed the order while reversing a judgment of a magistrate court in Bengaluru, which had dismissed a complaint of dishonour of cheque filed in 2016 by Sathisha B.A., an employee of Hindustan Aeronautics Ltd. (HAL) against his colleague R. Prasad.

Though the complainant proved that he had lent ₹8 lakh and had established dishonour of cheque by the accused, the magistrate court rejected the complaint stating that complainant had not taken permission from higher authorities as per HAL’s Conduct, Disciplinary and Appeals (CDA) Rules, 1984 for money transaction.

However, the High Court held that, “It was not within the domain of the magistrate to find out as to whether the complainant had sought permission from higher authorities. Taking permission or not is a matter of disciplinary proceedings, which could be initiated only by the disciplinary authority.”

“The magistrate court, while dealing with the matter under Section 138 of the Negotiable Instruments Act, was required to find out whether the complainant had proof to show that he had lent money to the accused, and whether he had source to lend money,” the High Court said while also pointing out that the CDA Rules were not applicable in this case as both the complainant and the accused were not officers of the Grade-1 level.

Relying on the evidence on record, the High Court convicted R. Prasad for dishonour of cheque and directed him to pay a fine of ₹9 lakh, of which ₹8 lakh is to be paid to the complainant and ₹1 lakh to be credited in favour of the State government.

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Printable version | Dec 12, 2019 9:42:35 AM |

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