Answer By law4u team
Cheque bounce cases against public sector companies (PSUs) in India are handled under the Negotiable Instruments Act, 1881 (Section 138), but with some key differences due to their government ownership. 1. Liability of a Public Sector Company (PSU) in Cheque Bounce Cases A PSU is treated as a juristic person, meaning it can be sued under Section 138 of the Negotiable Instruments Act for dishonored cheques. The complaint is filed against the company and its responsible officers (e.g., Managing Director, Finance Head, or authorized signatories). 2. Filing a Case Against a PSU A legal notice must be sent within 30 days of the cheque dishonor. The PSU has 15 days to make the payment after receiving the notice. If no payment is made, a complaint can be filed in the Magistrate’s Court within 30 days after the notice period ends. 3. Who is Liable in a PSU? In private companies, directors are held responsible, but for public sector companies, only officers directly responsible for issuing the cheque can be prosecuted. A government officer cannot be personally liable unless they acted with fraudulent intent. 4. Special Protection for Public Sector Officials No vicarious liability: Unlike private companies, all government officers are not automatically liable—only those who signed the cheque or authorized the payment. Sanction under Section 197 CrPC: If the accused officer is a public servant, prosecution may require government approval. 5. Possible Defenses for PSUs in Cheque Bounce Cases Lack of personal liability for government officials. The cheque was issued without authorization. No fraudulent intent—delay in funds due to government procedures. Financial constraints or government policy restrictions. 6. Penalties and Consequences If convicted, the PSU may face a fine up to twice the cheque amount and may have to pay the due amount to the complainant. The responsible official may face imprisonment up to 2 years or a fine unless they prove they were not personally responsible.
