Rajasthan HC Quashes Cheque-Dishonour Cognizance Against Ex-Principal Who Had Resigned Before the Cheque Was Dated

A former school principal's Section 138 NI Act prosecution is quashed after the court found he had resigned weeks before the cheque bore his signature.

The High Court of Judicature for Rajasthan, Bench at Jaipur, has quashed the cognizance order taken against a 74-year-old retired school principal under Section 138 of the Negotiable Instruments Act, holding that a person who has already resigned before the date of the disputed cheque cannot be held responsible for the affairs of the institution. Justice Anoop Kumar Dhand, sitting singly, allowed S.B. Criminal Miscellaneous (Petition) No. 7077/2021 on 14 July 2026, setting aside the order dated 01.09.2017 passed by the Additional Chief Judicial Magistrate, Nainwa, District Bundi, in Complaint Case No. 620/2017. The court found it “quite shocking and surprising” that cognizance was taken against the ex-principal while the school's management and director were left untouched.

The Dispute Before the Court

Mohan Lal Sharma, formerly the Principal of St. Soldier Senior Secondary School at Nainwa, District Bundi, resigned from that post on 24 March 2017. A cheque bearing his signatures, dated 28 April 2017, was presented to the bank by the complainant, Ashok Vardhan Singh, on 10 May 2017. The cheque was dishonoured on the same day with the remarks “funds insufficient.”

The complainant filed a complaint under Section 138 of the Negotiable Instruments Act, arraying Sharma, the school through its then Principal Priyanka Sharma, and the school's Director, Rajveer Sualika, as accused. The Additional Chief Judicial Magistrate, Nainwa, took cognizance on 01.09.2017. However, no cognizance was taken against the school's management or director — only against Sharma, who by then had no subsisting connection with the school.

Sharma challenged that cognizance order in the Rajasthan High Court through this criminal miscellaneous petition, which was registered in 2021.

The Legal Issue

The central question was straightforward: can a person who resigned as principal of an institution before the date printed on a cheque bearing his signatures be prosecuted under Section 138 of the Negotiable Instruments Act for its dishonour?

The petitioner's counsel, Mr. S.S. Hora (with Mr. Tara Chand Sharma and Mr. Himanshu Agarwal), argued that resignation severed all responsibility. The cheque dated 28 April 2017 post-dated the resignation by over a month. The petitioner had no concern with the school's affairs after 24 March 2017. If any liability existed, it lay with the school itself or those managing it at the relevant time, not with a person who had already left service.

The complainant's counsel, Mr. Sandeep Sharma (with Mr. Harshit Parashar for Mr. Anupam Sharma), countered that the cheque carried the petitioner's signatures and was dishonoured, which was sufficient to establish the offence. Interference by the court was therefore not warranted.

How the Bench Reasoned

Justice Dhand's reasoning rested on a factual sequence that the complainant's own complaint had conceded. The complaint itself admitted that Sharma had resigned before it was filed. The documents on record confirmed that the resignation was effective from 24 March 2017. The cheque bore the date 28 April 2017 — more than a month after that resignation. The court held it was “emphatically clear” that the petitioner was not discharging his duties as principal when the cheque was presented and dishonoured.

The court drew on two Supreme Court decisions and one Madras High Court ruling placed before it by counsel.

In Adhiraj Singh v. Yograj Singh and Ors., reported in 2024 SCC OnLine SC 5558, the Supreme Court had held that where an appellant had already resigned on the date the cheques were issued and was no longer a director of the company, he could not be held responsible for the company's affairs under Section 141 of the NI Act.

In Anita Malhotra v. Apparel Export Promotion Council and Ors., reported in 2012 (1) SCC 520, the Supreme Court held that a director who had validly resigned in 1998 could not be held responsible for cheques dishonoured in 2004.

The Madras High Court in K. Sundari v. C.A.R.P. Mari, decided in Crl. O.P. (MD) Nos. 1293/2021 on 27 November 2024, had similarly taken the view that a criminal trial would not proceed against an authorised signatory who had resigned from the post before the complaint was filed.

Applying these precedents to the facts, the court found that the petitioner's relationship as employee with the school had ended upon resignation. He could not be held responsible for the school's affairs after that date, including any amount allegedly borrowed from the complainant. The court also observed that criminal prosecution is a serious matter affecting personal liberty, and that no greater damage can be done to a person's reputation than being dragged into a criminal case without justification.

The selective nature of the cognizance troubled the court. The school's management and director — respondents in the very same complaint — were not proceeded against. Cognizance was confined to the person who had already severed his connection with the institution. The court described this as “quite shocking and surprising.”

Outcome

Justice Dhand held that the petitioner was neither liable nor responsible for the cheque in question, even if it bore his signatures, since it was issued after his resignation. On that basis alone, the impugned cognizance order was found unsustainable.

The order dated 01.09.2017 passed by the Additional Chief Judicial Magistrate, Nainwa, in Complaint Case No. 620/2017 was quashed and set aside. The criminal miscellaneous petition was allowed. All pending applications, including the stay application, were disposed of.

The court clarified that the complainant remains at liberty to proceed against those actually responsible for the offence.