Can a Complainant be substituted under section 138 of NI Act | Sample substitution petition

 a complainant in a case under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) can be substituted, but only under certain circumstances, and courts have laid down specific guidelines for the same. The legal foundation for substitution primarily arises when the original complainant (payee or holder in due course) is unable to continue due to death, incapacity, merger/amalgamation (in case of companies), etc.

Legal Position on Substitution of Complainant in NI Act Cases

Section 142 of the NI Act requires that the complaint must be filed by the payee or the holder in due course. However, substitution has been allowed under the Code of Criminal Procedure (CrPC) read with judicial pronouncements, especially where the cause of action survives.

Important Case Laws on Substitution in NI Act:

1. J.K. Bank Ltd. v. Abhishek Industries (P) Ltd.

(2006 Cri LJ 3841)
Held: Substitution is permitted where the company merges or amalgamates. The successor company, being the holder of the cheque, can pursue the complaint.

" Where the original complainant merges with another company, the successor can be substituted as complainant. "

2. A.C. Narayanan v. State of Maharashtra

(2013) 11 SCC 225
Held: The complaint under Section 138 NI Act can be filed through a power of attorney holder, who can also be substituted if the principal is unable to proceed.

"So long as the complainant is the holder in due course, substitution via a power of attorney is valid."

3. M/S. Shankar Finance and Investments v. State of Andhra Pradesh

(2008) 8 SCC 536
Held: A complaint can be prosecuted by a legally authorized representative of the payee, especially after death.

"Legal representatives of the deceased complainant can be substituted if the cheque amount is part of estate."

4. S.P. Mani and Mohan Dairy v. Snehalatha Elangovan

(2010) 4 MLJ (Crl) 654
Held: Mere change in partners or proprietary concerns doesn't bar substitution, especially if the successor firm continues the same business.

"Natural justice and continuity of proceedings permit substitution of the complainant in genuine business reconstitution cases."

5. United Engineers v. State of Kerala

(2014 Cri LJ 1480)
Held: Substitution allowed when complainant company is struck off but gets restored during proceedings. Restoration relates back to the original filing date.

"A revived company can substitute itself back in the complaint case under NI Act."

Sample Substitution Petition under Section 302 CrPC read with Section 138 NI Act

IN THE COURT OF THE METROPOLITAN MAGISTRATE AT ___________

C.C. No. ___________ / 20__

In the matter of:

M/s ABC Pvt. Ltd. (Original Complainant)

Through its Authorized Representative

Having its registered office at ________.

                                      ... Complainant

Versus

Mr. XYZ

S/o _________

R/o _________.

                                      ... Accused

APPLICATION FOR SUBSTITUTION OF COMPLAINANT

UNDER SECTION 302 CrPC READ WITH SECTION 142 AND 138 OF NI ACT

The humble petition of the petitioner above-named

MOST RESPECTFULLY SHOWETH:

1. That the above-mentioned complaint was filed by M/s ABC Pvt. Ltd. through its authorized representative under Section 138 of the Negotiable Instruments Act, 1881.

2. That during the pendency of the complaint, the said company merged with M/s DEF Pvt. Ltd. as per the Scheme of Amalgamation approved by the Hon’ble High Court (or NCLT), vide order dated ____.

3. That as a result of the amalgamation, M/s DEF Pvt. Ltd. has stepped into the shoes of M/s ABC Pvt. Ltd. and has become the lawful successor and holder in due course of the cheque in question.

4. That the cause of action survives and the substitution will not prejudice the rights of the accused in any manner.

5. That this Hon’ble Court has the power to allow such substitution under Section 302 CrPC, as the complainant is a private party and such substitution is in the interest of justice.

                                                                                      Hence it is most respectfully prayed that this                                                                                                Hon’ble Court may be pleased to allow the                                                                                                  present application and permit substitution of the                                                                                        complainant from M/s ABC Pvt. Ltd. to M/s DEF                                                                                        Pvt. Ltd. in the interest of justice; and pass any                                                                                            other order(s) as this Hon’ble Court may deem fit                                                                                        and proper.

AND FOR THIS ACT OF KINDNESS, THE PETITIONER AS IN DUTY BOUND SHALL EVER PRAY.

Filed by

(Advocate)

Place: _______

Date: ________

(Signature)

Authorized Signatory / Counsel

For M/s DEF Pvt. Ltd.