Case Law Analysis

Section 138 NI Act | Authorised Signatories of Cooperative Societies Vicariously Liable for Cheque Dishonour : Himachal Pradesh HC

Himachal Pradesh High Court rules that authorised signatories of cooperative societies are vicariously liable under Section 138 of the Negotiable Instruments Act for dishonoured cheques. The judgment clarifies that cooperative societies fall within the ambit of Section 141 NI Act, impacting all such entities and their office-bearers in cheque bounce cases.

Cassie News NetworkCassie News Network
May 30, 2026, 2:38 PM(Updated: Nov 3, 2026)
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Section 138 NI Act | Authorised Signatories of Cooperative Societies Vicariously Liable for Cheque Dishonour : Himachal Pradesh HC

The Himachal Pradesh High Court dismissed a criminal revision petition, affirming the conviction of an authorised signatory of a cooperative society under Section 138 of the Negotiable Instruments Act. The judgment clarifies that cooperative societies fall within the ambit of Section 141 NI Act, making office bearers vicariously liable for dishonoured cheques. It also reaffirms the limited scope of revisional jurisdiction, emphasising that concurrent findings of fact cannot be overturned without perversity or jurisdictional error.

Background & Facts

The Dispute

The complainant, Tilak Raj, held an account with the Ispur Cooperative Agricultural Service Society. On 23.04.2020, he approached the petitioner, Sham Pathak (Secretary of the society), seeking ₹5,00,000 for domestic needs. Pathak issued a cheque drawn on the society’s account, which was dishonoured on 26.05.2020 with the remark ‘funds insufficient’. Despite a legal notice demanding payment, the accused failed to comply, leading to a complaint under Section 138 NI Act.

Key Facts

  • 23.04.2020: Cheque for ₹5,00,000 issued by the petitioner as Secretary of the society.
  • 26.05.2020: Cheque presented and dishonoured due to insufficient funds.
  • Legal Notice: Served upon the accused, who failed to pay the amount.
  • Complaint: Filed before the learned Trial Court for offence under Section 138 NI Act.
  • Society’s Role: The society (accused No. 2) was arrayed as the primary accused, with the petitioner as the authorised signatory.

Procedural History

  • 30.12.2023: Trial Court convicted the petitioner under Section 138 NI Act, sentencing him to simple imprisonment for one year and directing payment of ₹6,10,000 as compensation.
  • 12.02.2026: Additional Sessions Judge, Una-I, upheld the conviction and sentence.
  • 27.05.2026: Present revision petition dismissed by the High Court.

The Parties' Positions

The petitioner argued that he was merely an office bearer of the society and could not be held personally liable. He contended that cooperative societies do not fall under Section 141 NI Act, which imposes vicarious liability on companies and associations. The complainant, however, relied on the presumption under Section 139 NI Act, asserting that the cheque was issued in discharge of a legal liability.

Relief Sought

The petitioner sought setting aside of the lower courts’ orders, arguing that the conviction was erroneous and that he had no personal liability. The complainant sought affirmation of the conviction and compensation awarded.

The central question was whether an authorised signatory of a cooperative society can be held vicariously liable under Section 141 NI Act for a dishonoured cheque, and whether the High Court could interfere with concurrent findings of fact in revisional jurisdiction.

Arguments Presented

For the Petitioner

  • The petitioner was merely a Secretary of the society and had no authority to transact on the society’s account.
  • Cooperative societies do not fall within the definition of a ‘company’ under Section 141 NI Act, and thus, vicarious liability cannot be imposed.
  • The lower courts erred in appreciating the material on record, particularly the petitioner’s claim that the cheque was issued blank for a land transaction in Punjab.

For the Respondent

  • The issuance of the cheque and the petitioner’s signature were not disputed.
  • Under Section 139 NI Act, a presumption arises that the cheque was issued in discharge of a legal liability, which the petitioner failed to rebut.
  • The petitioner, as an authorised signatory, was vicariously liable under Section 141 NI Act.

The Court's Analysis

Scope of Revisional Jurisdiction

The Court relied on Malkeet Singh Gill v. State of Chhattisgarh and State of Gujarat v. Dilipsinh Kishorsinh Rao to emphasise that revisional jurisdiction is narrow and limited to correcting patent defects, jurisdictional errors, or perversity. It cannot be used to reappreciate evidence or overturn concurrent findings of fact unless they are grossly erroneous or unreasonable. The Court observed:

“The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error that is to be determined on the merits of individual cases. It is also well settled that while considering the same, the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings.”

Presumption Under Section 139 NI Act

The Court reiterated the presumption under Section 139 NI Act that a cheque is issued in discharge of a legal liability. This presumption is rebuttable, but the burden lies on the accused to lead evidence to disprove it. The petitioner’s mere denial in his statement under Section 313 CrPC was insufficient, as held in Sumeti Vij v. Paramount Tech Fab Industries:

“The statement of the accused recorded under Section 313 of the Code is not substantive evidence of defence, but only an opportunity for the accused to explain the incriminating circumstances appearing in the prosecution's case against the accused. Therefore, there is no evidence to rebut the presumption that the cheques were issued for consideration.”

Vicarious Liability Under Section 141 NI Act

The Court addressed the petitioner’s argument that cooperative societies are not covered under Section 141 NI Act. It relied on S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, where the Supreme Court held that a signatory of a cheque is liable by virtue of their signature, and office bearers of companies (or associations) are vicariously liable for the conduct of the business. The explanation to Section 141 NI Act defines a ‘company’ as including a firm or association of individuals, thereby encompassing cooperative societies. The Court observed:

“The society is an association of individuals and will be covered under the provisions of Section 141 of the NI Act.”

Dishonour of Cheque and Service of Notice

The Court noted that the complainant’s statement regarding the dishonour of the cheque was corroborated by a return memo (Ex.C2), which carries a presumption of correctness under Mandvi Cooperative Bank Ltd. v. Nimesh B. Thakore. The service of the legal notice was also proved through acknowledgment (Ex.C7). Thus, all ingredients of Section 138 NI Act were satisfied.

The Verdict

The High Court dismissed the revision petition, upholding the conviction and sentence imposed by the lower courts. The petitioner was directed to undergo simple imprisonment for one year and pay compensation of ₹6,10,000, which included ₹5,00,000 as the cheque amount and ₹1,10,000 as interest at 9% per annum for three years, as calculated under Kalamani Tex v. P. Balasubramanian.

What This Means For Similar Cases

Cooperative Societies Are Covered Under Section 141 NI Act

  • Office bearers of cooperative societies, including Secretaries and authorised signatories, can be held vicariously liable for dishonoured cheques under Section 141 NI Act.
  • The explanation to Section 141 NI Act includes associations of individuals, making cooperative societies liable in the same manner as companies.

Presumption Under Section 139 NI Act Is Strong

  • Once the issuance of a cheque and the signature are admitted, the presumption under Section 139 NI Act arises automatically.
  • Mere denial in the statement under Section 313 CrPC is insufficient to rebut this presumption. The accused must lead substantive evidence to disprove the legal liability.

Limited Scope of Revisional Jurisdiction

  • Practitioners must note that revisional courts will not interfere with concurrent findings of fact unless there is perversity, jurisdictional error, or a gross miscarriage of justice.
  • Arguments based on reappreciation of evidence are unlikely to succeed in revisional proceedings.

Case Details

Sham Pathak v. Tilak Raj & Anr.

2026:HHC:20090
PDF
Court
High Court of Himachal Pradesh, Shimla
Date
27 May 2026
Case Number
Cr. Revision No. 235 of 2026
Bench
Mr Justice Rakesh Kainthla
Counsel
Pet: Mr Gurinder Singh Parmar
Res: None

Frequently Asked Questions

Under Section 139 NI Act, there is a presumption that the holder of a cheque received it in discharge of a legally enforceable debt or liability. This presumption arises once the issuance of the cheque and the signature on it are admitted. The accused must lead evidence to rebut this presumption, as mere denial in their statement under Section 313 CrPC is insufficient.
Yes. The explanation to Section 141 NI Act defines a ‘company’ as including a firm or association of individuals. Cooperative societies, being associations of individuals, fall within this definition. Thus, authorised signatories and office bearers can be held vicariously liable for dishonoured cheques issued on behalf of the society.
The scope of revisional jurisdiction is extremely narrow. The High Court can only interfere to correct patent defects, jurisdictional errors, or perversity in the lower courts’ findings. It cannot reappreciate evidence or overturn concurrent findings of fact unless they are grossly erroneous or unreasonable.
The accused must lead substantive evidence to rebut the presumption. Mere denial in their statement under Section 313 CrPC is not sufficient. The accused must prove, for instance, that the cheque was not issued in discharge of a legal liability or that the liability did not exist.
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Disclaimer

This article is for informational purposes only and does not constitute legal advice. The views expressed are based on the judgment analysis and should not be taken as professional counsel. Please consult with a qualified attorney for advice specific to your situation.