SRI SHANMUGAM vs SRI K THANGAVELU
- Court
- Karnataka High Court
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CRL.RP No. 603 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
R
TH
DATED THIS THE 10 DAY OF JULY, 2026
BEFORE
THE HON'BLE MR. JUSTICE H.P.SANDESH
CRIMINAL REVISION PETITION NO.603 OF 2023
BETWEEN:
SRI. SHANMUGAM
AGED ABOUT 67 YEARS
MANAGING DIRECTOR
SREE SHANMUGA MODERN
RICE MILLS PVT. LTD.
DESHIHALLI
BANGARPET-563114
PETITIONER
(BY SRI. S. BALAKRISHNAN, ADVOCATE)
AND:
SRI. K. THANGAVELU
S/O M. KANNAPPA NAIDU
AGED ABOUT 73 YEARS
R/AT KASTURI NIVAS
RD
3 CROSS ROAD, DOWN
ROBERTSONPET POST
KGF-563115.
…RESPONDENT
(BY SRI. N. MURALI, ADVOCATE A/W
SRI. KUMAR S.J., ADVOCATE)
THIS CRL.RP IS FILED UNDER SECTION 397 R/W 401 OF
CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF
CONVICTION PASSED IN C.C.NO.259/2018 DATED 03.12.2022
BY HONBLE COURT OF THE PRINCIPLE CIVIL JUDGE AND
ADDL. JMFC, KGF AND CONFIRMED IN CRIMINAL APPEAL
NO.88/2022 BY HONBLE III ADDITIONAL DISTRICT AND
SESSION JUDGE AT KOLAR SITTING AT KGF, ON 20.04.2023
Digitally signed
by DEVIKA M
Location: HIGH
COURT OF
KARNATAKA
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CRL.RP No. 603 of 2023
FOR THE OFFENCE PUNISHABLE UNDER SECTION 138 OF
NEGOTIABLE INSTRUMENT ACT AND ETC.
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 03.07.2026, THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE H.P.SANDESH
CAV ORDER
This revision petition is filed against the judgment of
conviction and sentence dated 03.12.2022 passed in
C.C.No.259/2018 by the Trial Court and also against the
judgment of confirmation dated 20.04.2023 passed in
Crl.A.No.88/2022 by the Appellate Court and prayed this Court
to acquit the petitioner for the offence punishable under Section
138 of the Negotiable Instruments Act (‘N.I. Act’ for short).
2. Heard the learned counsel appearing for the
respective parties.
3. The factual matrix of case of the complainant while
invoking Section 138 of N.I. Act is that the complainant has
invested an amount of Rs.4,00,000/- with the accused in the
month of September 2016 and accused has acknowledged the
same and paid interest for two months at the rate of 1.10% per
month. Due to demonetization in the year 2016, accused
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CRL.RP No. 603 of 2023
stopped to pay the interest and also not paid the principal
amount to the complainant. Hence, the complainant requested
the accused for refund of his deposited amount and accused
was giving false promise to repay the same and finally, in the
month of March 2018, accused has issued the subject matter of
cheque dated 19.03.2018 towards his liability. When the said
cheque was presented, the same was returned with an
endorsement ‘funds insufficient’ on 31.03.2018. Thus, the
complainant has issued legal notice and the same was served
on the accused and accused given the reply denying the very
transaction. Hence, complaint was filed and cognizance was
taken. The accused was secured before the Trial Court and he
did not plead guilty.
4. In order to prove the case of the complainant, he
himself examined as PW1 and got marked the documents at
Ex.P1 to P6. On closure of the complainant's evidence, accused
was subjected to 313 statement and put the incriminating
circumstances against him, but he denies the same and he did
not choose to lead any defence evidence. The Trial Court
having considered both oral and documentary evidence placed
on record and also taking note of defence which was taken in
the cross-examination of PW1 comes to the conclusion that the
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CRL.RP No. 603 of 2023
burden of proving the Cheque that the same has not been
issued for any debt or liability is on the accused and mere
plausible explanation is not sufficient to disprove the case of
the complainant where the presumption is in favour of the
complainant. The Trial Court having considered the material on
record comes to the conclusion that complainant has lent the
amount of Rs.4,00,000/- to the accused and in repayment of
the same, accused has issued Ex.P1-cheque and the said
cheque was dishonored. The overall evidence of the accused
during the course of cross-examination of PW1 cannot be
accepted when the documentary evidence stand in higher
pedestal compared to the ocular evidence. Hence, the Trial
Court convicted the accused and sentenced to pay fine of
Rs.5,10,000/-.
5. Being aggrieved by the judgment of the Trial Court,
an appeal was preferred by the accused before the Appellate
Court. The Appellate Court having taken note of grounds which
have been urged in the appeal memo, framed nine points for
consideration and answered all the points as negative in coming
to the conclusion that appellant/accused has not substantiated
his defence placing any preponderance of probabilities. In
paragraph 17, the Appellate Court held that the accused has
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not made any efforts to substantiate his defence and even he
did not enter into the witness box and he need not enter into
the witness box does not mean that he should not have to
produced any documents in support of his defence. The defence
of accused is that cheque was lost and the same is not
substantiated by leading any rebuttal evidence. When the
ground was taken that the company was not made as a party
and only the Managing Director has been made as a party and
without making the Directors and company as parties, the
complaint is not sustainable under law was also taken note of
by the Appellate Court in paragraph 34 of the judgment and
also discussed Section 141 of N.I. Act in paragraph 35 and also
in paragraphs 36 to 38, taken note of the defence and comes to
the conclusion in paragraph 43 which reads as follows:
“43. The legal position on this aspect is very clear
that, the person who is responsible for the company can
be made as an accused and the payee can array the
company or its directors or managing directors or both as
party to the proceedings. Ex.P1 cheque is signed by
accused as Managing Director of Sree Shanmuga Modern
Rice Mills Pvt., Ltd., and the accused being the Managing
Director of the company is responsible for the
administration of the company and he has issued cheque
on behalf of the company and in view of law laid down in
the above referred decisions and Section.141 of
Negotiable Instruments Act, the accused being Managing
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Director of the company can be prosecuted and there is
no legal hindrance in prosecuting the accused. Hence,
contention raised by the Learned Counsel for Accused is
not acceptable.”
6. Hence, the Appellate Court considering both oral
and documentary evidence placed on record comes to the
conclusion that the Trial Court has not committed any error
while convicting the appellant/accused and confirmed the
judgment of the Trial Court.
7. Being aggrieved by the concurrent finding of both
the Courts, the present revision petition is filed before this
Court.
8. The learned counsel for the petitioner mainly relied
upon the very complaint itself and contended that without
arraigning the company as a party to the proceedings, the
complaint is not maintainable. The counsel in his arguments
would vehemently contend that the cheque was issued by the
petitioner in the name of the company being a Managing
Director. The counsel also would submit that notice was issued
to the petitioner - Shanmugam i.e., in his individual capacity
but notice was not issued to the company. The counsel in
support of his argument would vehemently contend that Ex.P1
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- cheque in question indicates that the drawer is the company
registered under the Companies Act, named as Sree
Shanmugam Modern Rice Mill Private Limited and signed by its
Managing Director. But the company is not made as necessary
party, therefore, there is non-compliance of Section 141 of N.I.
Act which disentitles the relief.
9. The counsel for the petitioner in support of his
arguments relies upon judgment of the Apex Court in respect of
the principles laid down in respect of Section 141 of N.I. Act in
the case of ANEETA HADA vs GODFATHER TRAVELS AND
TOURS PRIVATE LIMITED reported in (2012) 5 SCC 661 .
The counsel referring this judgment would vehemently contend
that the Apex Court in detail discussed with regard to non-
arraying of the company as a party and brought to notice of
this Court paragraph 21 wherein Section 141 of N.I. Act is
extracted. The counsel referring this judgment categorically
contend that when the company is not made as party, question
of proceedings against the Managing Director does not arise.
The counsel brought to notice of this Court paragraph 59 of the
judgment which reads as follows:
“59. In view of our aforesaid analysis, we arrive at
the irresistible conclusion that for maintaining the
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prosecution under Section 141 of the Act, arraigning of a
company as an accused is imperative. The other
categories of offenders can only be brought in the drag-
net on the touchstone of vicarious liability as the same
has been stipulated in the provision itself. We say so on
the basis of the ratio laid down in C.V. Parekh’s case
([1970] 2 SCC 491) which is a three-Judge Bench
decision. Thus, the view expressed in Sheoratan
Agarwalls’ s case ([1984] 4 SCC 352) does not correctly
lay down the law and, accordingly, is hereby overruled.
The decision in Anil Hada ([2000] 1 SCC 1) is overruled
with the qualifier as stated in para 51. The decision in
Modi Distillery’s case ([1987]3 SCC 684) has to be
treated to be restricted to its own facts as has been
explained by us herein above.”
10. The counsel also relies upon the judgment reported
in (2019) 3 SCC 797 in the case of HIMANSHU vs B
SHIVAMURTHY AND ANOTHER . The counsel referring this
judgment would contend that in the absence of the company
being arraigned as an accused, a complaint against the
Managing Director of the company is not maintainable. The
counsel brought to notice of this Court paragraph 13 of the
judgment which reads as follows:
“13. In the absence of the company being
arraigned as an accused, a complaint against the
appellant was therefore not maintainable. The appellant
had signed the cheque as a Director of the company and
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for and on its behalf. Moreover, in the absence of a notice
of demand being served on the company and without
compliance with the proviso to Section 138, the High
Court was in error in holding that the company could now
be arraigned as an accused.”
11. The counsel also relies upon the judgment reported
in 2021 SCC ONLINE UTT 745 in the case of RAMESH
NAGARKOTI vs KEDAR DATT PUROHIT . The counsel
referring this judgment would vehemently contend that in this
judgment also the judgments of Aneeta Hada and Himanshu
was taken note of by the High Court of Uttaranchal and comes
to the conclusion that without the company, there cannot be
any proceedings against its Managing Director. The counsel
brought to notice of this Court paragraphs 32 wherein
discussion was made with regard to the principles laid down in
the Aneeta Hada ’s case and extracted paragraphs 21, 22, 23,
24, 53 and 59 of the said judgment wherein analysing the
material comes to the conclusion that we arrive at the
irresistible conclusion that for maintaining the prosecution
under Section 141 of the Act, arraigning of a company as an
accused is imperative.
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12. The counsel also relies upon the judgment of this
Court passed in Criminal Appeal No.1011/2010 dated
29.07.2021 in the case of K GOPAL vs T MUKUNDA and
contend that Aneeta Hada case also discussed in the said
judgment and brought to notice of this Court paragraph 9,
wherein this Court held that if cheques are issued by the
company, none other than the company should be arrayed as
accused and not its Director. Because Section 141 of the Act
fastens vicarious liability on the Director or other Officers of the
company who were responsible for the affairs of the company,
they are made as parties. It is not as though that the Directors
or Officers are personally liable for dishonour of cheque. In this
case company is not arrayed as an accused. The cause title of
the complaint clearly discloses the presence of only one
accused i.e., T Mukunda, who might have been described as
Managing Director of Span Floritech Private Limited.
13. The counsel referring these judgments would
vehemently contend that these judgments are aptly applicable
to the case on hand since the notice at Ex.P3 was issued in the
name of a individual person who is a Managing Director of a
company and company was not made as party. In the absence
of company as a party, there cannot be any proceedings
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against the Managing Director of a company i.e., the petitioner
herein.
14. Per contra, the counsel appearing for the
respondent would vehemently contend that the defence of the
revision petitioner is one of total denial. Though it is contended
that cheque was lost, no complaint was given stating that he
has lost the cheque. Even with regard to misusing of the
cheque by the complainant also, no complaint was lodged. The
counsel would vehemently contend that when the amount was
invested, interest was paid for two months by the accused, but
subsequently, did not pay the interest as well as principal
amount. But on several requests and demands, accused had
issued the subject matter of cheque in 2018. While issuing the
Cheque, he had collected on demand promissory note which
was executed in favour of the complainant and having collected
the same, the subject matter of cheque was given. The counsel
would vehemently contend that Section 141 of N.I. Act is not
applicable to the facts of the case on hand as the company is
also mentioned in the cause title since the name of the
Managing Director mentioned first in the complaint. The
counsel also would vehemently contend that for the first time,
the said ground was taken in the appeal. The Appellate Court
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discussed the same in detail in paragraphs 33 to 43 and comes
to the conclusion that the contention of the revision petitioner
cannot be accepted to invoke Section 141 of N.I. Act. The
counsel would vehemently contend that amount was paid to the
Managing Director and Managing Director in turn paid the
interest for a period of two months and thereafter, did not
make the payment of interest or principal amount. Both the
Courts have rightly given finding in respect of the transaction is
concerned. The counsel also vehemently contend that accused
did not choose to enter into the witness box to substantiate his
defence with regard to the loss of cheque and misuse of the
cheque. The counsel would vehemently contend that if
complaint was given in 2016 with regard to the loss of cheque,
what made him to give cheque in 2018. The counsel would
vehemently contend that at this juncture, the revision
petitioner cannot raise the technical ground and the same
cannot be considered.
15. The counsel for the respondent in support of his
arguments relies upon the judgment passed by this Court dated
23.08.2018 in Crl. P. No.4533/2018 connected with other
cases . The counsel would contend that this Court already
discussed the similar issue when the same was raised in
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connection with the cases filed against the present petitioner
and this Court comes to the conclusion that do not find any
justifiable reason to interfere with the action initiated by the
complainants for dishonour of the cheque issued by the
petitioner as a Managing Director of M/s Sree Shanmuga
Modern Rice Mills Pvt. Ltd. and the same will be a curable
defect and such a mis-description of the accused could be
rectified by effecting necessary amendment to bring it in line
with the averments made in the complaint. This Court also
taken note that description of the accused are available in the
body of the complaints as well as in the cause title thereto and
referred the judgment of the Apex Court in the case of S . R.
Sukumar vs S. Sunaad Raghuram passed in SLP (Crl)
No.4813/2012 wherein the Apex Court held that no specific
provision in the Code is available to amend either a complaint
or a petition filed under the provisions of the Code and the
amendment to correct curable infirmities can always be allowed
in the larger interest of justice.
16. In reply to this arguments, the counsel appearing
for the petitioner would contend that legal notice was issued in
the name of Shanmugam as Managing Director and not in the
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name of the company but there was no any individual
transaction since the transaction is in favour of the company.
17. Having heard the counsel appearing for the
petitioner and also the counsel appearing for the respondent
and also considering the principles laid down in the judgments
referred supra which are relied upon by both the counsels and
also considering the averments made in the complaint as well
as defence which was taken, the Points that would arise for the
consideration of this petition are:
1. Whether a Managing Director of a company would
be liable for prosecution under Section 138 of N.I.
Act without the company being arraigned as an
accused?
2. Whether a complaint under Section 138 of N.I. Act
would be liable to be proceeded against the
Managing Director of the company without there
being any averments in the complaint that the
Managing Director arraigned as an accused was in
charge of and responsible for the conduct and the
business of the company without making the
company as an accused?
3. Whether the Trial Court and the Appellate Court
have committed an error in convicting and
sentencing the accused for the offence punishable
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under Section 138 of N.I. Act without pressing
into the Section 141 of the said Act, a company
could have been made liable for the prosecution
without being impleaded as an accused and
whether it requires interference of this Court
exercising the revisional powers?
4. What Order?
Point Nos.1 to 3:
18. Having heard the counsel appearing for the
respective parties and also on perusal of the material on
record, this Court would like to take note of contents of the
complaint wherein it discloses that the complainant has stated
that he has invested the amount with the accused for a sum of
Rs.4,00,000/- as the accused has been giving interest at 1.10%
per month to the investors. Hence, the complainant had
invested the amount of Rs.4,00,000/- in September, 2016 and
accused also paid the interest for two months. In view of the
demonetization, the accused stopped to pay the interest to the
complainant and at the insistence of the complainant, cheque
was given in March 2018 with an assurance that the same
would be honored. But the said cheque was dishonored with an
endorsement ‘funds insufficient’ and legal notices were
exchanged and an accusation is made that accused has issued
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the said cheque intentionally, fraudulently, willfully without
arranging the amount in his bank account with a mala fide
intention and knowingfully well that if cheque is presented the
same would be dishonored.
19. Having perused the averments of the complaint, it
discloses that nowhere stated in the complaint with regard to
the existence of the company and company is also incorporated
under the Companies Act. But it is only stated that he has
invested the money with the accused. No doubt, the cheque
which is marked as Ex.P1 was dishonored. This Court has to
take note of the entries made in the Cheque at Ex.P1, which
discloses that the same was issued in the name of Sree
Shanmuga Modern Rice Mills Private Limited and signed by the
Managing Director i.e., the petitioner herein. Hence, it is very
clear that cheque was issued in the name of the company.
20. It is also important to note that Ex.P3 - legal notice
was issued in the name of Sri Shanmugam, Managing Director
of Sree Shanmuga Modern Rice Mills Private Limited and in
paragraph 2 of the notice, it is stated that complainant has
invested the amount with the Shanmugam to the tune of
Rs.4,00,000/- and he was giving interest at 1.10% per month.
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On coming to know about the payment of interest, the amount
was invested. The notice was also served in the name of
Shanmugam and reply was given in terms of Ex.P6 stating that
there was no such investment or borrowed an amount of
Rs.4,00,000/- and he never invested an amount of
Rs.4,00,000/-. But contend that he has given stop payment to
his banker in the month of November 2016 as he had lost/
misplaced certain signed and unsigned cheque leaves. He
indeed approached police for necessary action and he never
issued any cheques to anyone during the year 2017 and 2018
and there was a total denial of transaction of the complainant
by the accused.
21. The first main limb of argument of the counsel
appearing for the petitioner is relying upon the judgment of
Aneeta Hada ’s case referred supra wherein the Apex Court
discussed particularly invoking Section 141 of N.I. Act with
regard to the criminal liability for dishonour of cheque drawn by
company, Officers of company when may be implicated, extent
of deeming fiction in Section 141 also taken note of and
mandatory requirement of impleading company as one of the
accused, Director or authorized signatory of Cheque and
prosecution against the Director without arraigning of company
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as accused held not maintainable. In the case of Himanshu
referred supra, the Apex Court referred Section 138 and 141 of
N.I. Act and held that necessary conditions to be complied with
for constituting offence under Section 138 in general, and
against company and its Directors/Officers, where necessary
conditions under Section 138 not complied with, company
cannot subsequently be arraigned as accused in proceedings
under Section 138. Where cheque is issued by Director of
company, prosecution under Section 138 not maintainable
without arraigning company as accused. The Uttaranchal High
Court also referring these two judgments comes to the very
same conclusion and the Aneeta Hada ’s case was extracted in
paragraph 32. This Court also in the case of K Gopal referred
supra also referred the judgment of Aneeta Hada and comes
to the conclusion in paragraph 9 that it is not as though that
the Directors or Officers are personally liable for dishonour of
cheques. If the company is not arraigned as an accused, the
question of invoking Section 138 does not arise.
22. No doubt, the counsel appearing for the respondent
relied upon the judgment of this Court and the same was
considered at the time when approach was made before this
Court invoking Section 482 of Cr.P.C and comes to the
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conclusion that it was a curable defect. But admittedly even
after the proceeding was initiated before this Court under
Section 482, the complaint was not amended.
23. Having taken note of principles laid down in the
judgments referred supra, this Court also would like to rely
upon the judgment reported in 2022 SCC ONLINE SC 1598 in
the case of PAWAN KUMAR GOEL vs STATE OF U.P. AND
ANOTHER , wherein considering the material on record, a
similar question was framed. That is, two main issues which
falls for the consideration: whether the Director of a company
would be liable for prosecution under Section 138 of N.I. Act
without the company being arraigned as an accused. The Apex
Court also in paragraph 19 extracted Section 138 of N.I. Act
and also in paragraph 20 extracted Section 141 of the said Act.
Apex Court also taken note of the grounds which have been
urged and in paragraph 21 held that while Section 141 extends
such criminal liability in case of a company to every person who
at the time the offence was committed, was in charge of, and
was responsible for the conduct of the business of the
company. The Apex Court also taken note of the judgment of
K. K. Ahuja vs V. K. Vora [(2012) 5 SCC 661] in the said
judgment and also taken note of the judgment of Aneeta
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Hada ’s case and also SMS Pharmaceuticals Ltd. vs Neeta
Bhalla and in detail discussed the same and extracted
paragraph 16 of the judgment of K. K. Ahuja . This Court would
like to extract paragraph 25 of the said judgment. In paragraph
26, the Apex Court referred the judgment of Himanshu’ s case
and extracted paragraphs 11 to 13 of the said judgment and
also referred Aneeta Hada ’s case in paragraph 27 particularly
referring paragraphs 58 and 59 of the said judgment and the
said discussions is extracted herein:
“25. This Court has been firm with the stand that if
the complainant fails to make specific averments against
the company in the complaint for the commission of an
offence under Section 138 of NI Act, the same cannot be
rectified by taking recourse to general principles of
criminal jurisprudence. Needless to say, the provisions
of Section 141 impose vicarious liability by deeming
fiction which pre-supposes and requires the commission
of the offence by the company or firm. Therefore, unless
the company or firm has committed the offence as a
principal accused, the persons mentioned in sub-Section
(1) and (2) would not be liable to be convicted on the
basis of the principles of vicarious liablity.
26. Reference in this connection may also be made
to another judgment of the two-Judge Bench of this Court
in Himanshu Vs. B. Shivamurthy and Another (Supra), the
facts wherein have a stark similarity to the facts of the
present case, considering the issue where the complaint
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was lodged only against the director without arraigning
the company as an accused and whether the company
could be subsequently arraigned as an accused, it was
observed as under:-
“11. In the present case, the record
before the Court indicates that the cheque was
drawn by the appellant for Lakshmi Cement and
Ceramics Industries Ltd., as its Director. A
notice of demand was served only on the
appellant. The complaint was lodged only
against the appellant without arraigning the
company as an accused.
12. The provisions of Section
141 postulate that if the person committing an
offence under Section 138 is a company, 4
(2018) 13 SC 663 every person, who at the
time when the offence was committed was in
charge of or was responsible to the company for
the conduct of the business of the company as
well as the company, shall be deemed to be
guilty of the offence and shall be liable to be
proceeded against and punished.
13. In the absence of the company being
arraigned as an accused, a complaint against
the appellant was therefore not maintainable.
The appellant had signed the cheque as a
Director of the company and for and on its
behalf. Moreover, in the absence of a notice of
demand being served on the company and
without compliance with the proviso to Section
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138, the High Court was in error in holding that
the company could now be arraigned as an
accused.”
27. This issue stands concluded by a decision of
three-Judge Bench of this Court in the case of Aneeta
Hada Vs. Godfather Travels & Tours (P) Ltd. (Supra),
wherein it has been held that for maintaining the
prosecution under Section 141 of NI Act, arraigning of the
company as an accused is imperative and non-
impleadment of the company would be fatal for the
complaint. It may be relevant to extract the following
from the said judgment :-
“58. Applying the doctrine of strict
construction, we are of the considered opinion
that commission of offence by the company is
an express condition precedent to attract the
vicarious liability of others. Thus, the words “as
well as the company” appearing in the Section
make it absolutely unmistakably clear that
when the company can be prosecuted, then
only the persons mentioned in the other
categories could be vicariously liable for the
offence subject to the averments in the petition
and proof thereof. One cannot be oblivious of
the fact that the company is a juristic person
and it has its own respectability. If a finding is
recorded against it, it would create a concavity
in its reputation. There can be situations when
the corporate reputation is affected when a
director is indicted.
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59. In view of our aforesaid analysis, we
arrive at the irresistible conclusion that for
maintaining the prosecution under Section
141 of the Act, arraigning of a company as an
accused is imperative. The other categories of
offenders can only be brought in the dragnet on
the touchstone of vicarious liability as the same
has been stipulated in the provision itself.”
24. Having considered the principles laid down in the
judgments referred supra, it discloses that as on today also,
the very same judgment of Aneeta Hada and Himanshu
which were referred by the counsel appearing for the revision
petitioners, still holds good, so also the judgment of SMS
Pharmaceuticals Ltd .
25. This Court also would like to rely upon the recent
judgment of the Apex Court reported in (2025) 10 SCC 96 in
the case of DHANASINGH PRABHU vs CHANDRASEKAR
AND ANOTHER wherein also the Apex Court distinguished with
regard to the proceedings initiated by the partnership firm as
well as the company under Section 141 and explanations (a)
and (b) read with Section 141(2) and Section 138 was
discussed and held that maintainability of the complaint, when
cheque in question issued/signed by one of the partners of the
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partnership firm, but neither statutory notice issued to the firm
nor the firm arraigned as an accused in the complaint. So also
discussed with regard to interpretation of ‘company’ and
‘Director’ in Section 141 explanation in the context of the
partners of the partnership firm, law also clarified and held that
in terms of the explanation to Section 141, the expression
“company”, held, defined to mean any body corporate and to
include a firm or other association of individuals, as per Section
141(1), where an offence is committed under Section 138 by a
company, the company as well as every person who, at the
time when the offence was committed, was in charge of and
was responsible to the company for the conduct of the
business, held, shall be deemed to be the guilty of the offence.
Though a director of a company, can be held vicariously liable
for an offence committed by a company, when offence is
committed by a partnership firm, the offence, held, is
committed by the partners of the firm and not just the firm per
se. Further held that unlike a company which is a separate
juristic entity from its Directors thereof, a partnership firm
comprises of its partners who are the persons directly liable on
behalf of the partnership firm and by themselves. Further
distinguished with regard to the proceeding against the
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company and also against the partnership. In this judgment in
paragraph 12 held that extending the above argument, he
submitted that the expression “person” would also include a
partnership firm, as Section 141 of the Act deems a partnership
firm to be a company and hence, point was raised that whether
the High Court was right in dismissing the complaint on the
ground that the name of the partnership firm was not
mentioned in statutory notice issued by the appellant-
complainant to the respondents under Section 138 of the Act
and was also not arraigned as an accused in the complaint filed
by the appellant-complainant. Wherein also discussion was
made in respect of the Aneeta Hada ’s case in paragraph 17
and in paragraph 20, extracted paragraph 17 of Aneeta
Hada ’s case and so also in paragraph 24, the explanation of
Section 141 also taken note of and comes to the conclusion
that in a case of partnership, there cannot be a complaint
against the firm without their partners. But in respect of
offences by the company, under Section 141, if the person
committing an offence under Section 138 representing the
company, every person who, at the time when the offence was
committed, was in charge of and was responsible to the
company for the conduct of the business of the company as
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well as the company shall be deemed to be the guilty of the
offence and shall be liable to be proceeded against and
punished accordingly. In paragraph 25 also reiterated in
respect of Section 141. If a company is a borrower, hence,
allowed the appeal as distinguished in this judgment invoking
Section 141 of the N.I. Act.
26. Having perused the principles laid down in the
judgments referred supra and also considering the factual
aspects of the case on hand, it discloses that Ex.P1-cheque was
issued in the name of the company and the same is signed by
the Managing Director, but the company is not made as an
accused. This Court also in the beginning taken note of
contents of the complaint wherein it is stated that complainant
had invested the money with the accused. On perusal of the
complaint, it discloses that nowhere in the complaint it is
mentioned with regard to the persons who are at the helm of
affairs of the company and in charge of affairs of the company.
Thus, with regard to the company is concerned, nothing is
stated. But when the instrument at Ex.P1 is issued in the name
of the company signed by the Managing Director, ought to have
been made the company as accused No.1 and thereafter
Managing Director would have been shown as accused No.2
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and the same is not mentioned in the complaint and complaint
is found in the individual capacity of Shanmugam as a
Managing Director. No doubt, the name of the company is also
mentioned but not arraigned as an accused. In the judgments
referred supra all these factors were taken note of as the
company was not made as an accused since when the cheque
was issued in the name of the company, the company ought to
have been made as the accused. When such being the case,
the Trial Court as well as the Appellate Court fails to take note
of Section 141 of N.I. Act and also the principles laid down in
the judgments of the petitioner referred supra.
27. Having taken note of the judgments referred by the
petitioner counsel and also the judgments referred by this
court, it is very clear that company ought to have been made
as an accused. On perusal of the complaint, it discloses that
nothing is stated with regard to the affairs of the company
which was managed by the Managing Director. But the fact is
that Shanmugam is the Managing Director of Sree Shanmuga
Modern Rice Mill Private Limited and the same is not in dispute.
The cheque was also issued in the capacity of Managing
Director on behalf of the company. Though Appellate Court in
detail discussed with regard to Section 141 of the Act is
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concerned and this Court also extracted paragraph 43 of the
reasoning of the Appellate Court, wherein the Appellate Court
comes to the conclusion that accused being the Managing
Director of the company is responsible for the administration of
the company and he has issued the cheque on behalf of the
company, thus, the accused being a Managing Director of the
company can be prosecuted and there is no legal hindrance in
prosecuting the accused and the said reasoning of the Appellate
Court is erroneous for the reason that when the Appellate Court
comes to the conclusion that cheque was issued on behalf of
the company, ought to have been made company as an
accused. Hence, there is a force in the contention of the
counsel appearing for the revision petitioner that without
arraigning the company as an accused there cannot be any
proceedings against its Managing Director and the same is also
mandatory as held by the Apex Court in the judgment of
Aneeta Hada’ s case and thereafter in SMS Pharmaceuticals
Ltd’ s case as well as in Himanshu’ s case and also the recent
judgments of Apex Court in a case of Pawan Kumar Goel as
well as in Dhanasingh Prabhu case referred supra. Hence,
this Court answered all the Points as affirmative in coming to
the conclusion that there cannot be a proceeding against the
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Managing Director of a company without arraigning the
company as an accused as contemplated under Section 141 of
N.I. Act.
Point No.4
28. In view of the discussions made above, I pass the
following:
ORDER
(i) The revision petition is allowed.
(ii) The impugned judgment of conviction and
sentence dated 03.12.2022 passed in
C.C.No.259/2018 by the Trial Court and also
the judgment of confirmation dated 20.04.2023
passed in Crl.A.No.88/2022 by the Appellate
Court are set aside.
(iii) The revision petitioner is acquitted for the
offence punishable under Section 138 of N.I.
Act.
(iv) The bail bond, if any, executed by the revision
petitioner stands cancelled.
Sd/-
(H.P.SANDESH)
JUDGE
SN