Full Judgment Text
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CASE NO.:
Appeal (crl.) 838 of 2008
PETITIONER:
Aneeta Hada
RESPONDENT:
M/s Godfather Travels & Tours Pvt.Ltd.
DATE OF JUDGMENT: 08/05/2008
BENCH:
S.B. SINHA & V.S. Sirpurkar
JUDGMENT:
JUDGMENT
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 838 OF 2008
[Arising out of SLP (Crl.) No. 2094 of 2007]
Aneeta Hada ...Appellant
Versus
M/s. Godfather Travels and Tours Pvt. Ltd. ...Respondent
WITH
CRIMINAL APPEAL NO. 842 OF 2008
[Arising out of SLP (Crl.) No. 2117 of 2007]
JUDGMENT
S.B. SINHA, J :
1. Leave granted.
2. Appellant is said to be an authorised signatory of M/s. Intel Travels
Ltd (Company). The said Company as also the respondent company had
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business transactions. Appellant on behalf of the company issued a cheque
dated 17.1.2001 for a sum of Rs.5,10,000/- in favour of respondent which
was dishonoured. Respondent filed a complaint petition against the
appellant under Section 138 of the Negotiable Instruments Act, 1881 (’the
Act’ for short).
The Company which is a juristic person was not arrayed as an
accused.
The learned Magistrate took cognizance of the offence against her.
Respondent had not even served any notice upon the Company in terms of
Section 138 of the Act. It served a notice only on the appellant presumably
on the premise that she was in charge and responsible to the company for its
day to day affairs.
3. The High Court by reason of the impugned judgment refused to quash
the proceedings, as prayed for by the appellant, holding:
"This section does not say that the cheques should
have been drawn for the discharge of any debt or
other liability of the drawer towards the payee.
Even the Section 139 of the Negotiable
Instruments Act, by which a legal presumption is
created, the Parliament has only fixed the
presumption that the cheque was issued ’for the
dishcarge, in whole or in part, or any debt or other
liability.’ This would mean that the debt or other
liability includes the due from any other person. It
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is not necessary that the debt or liability should be
due from the drawer himself. It can be issued for
the discharges of any other man’s debt liability.
Legally enforceable debt or liability would have a
reference to the nature of the debt or liability and
not the person against whom the debt or liability
can be enforced. One has to go by the averments
in the complaint. The complainant has averred that
it is the petitioner who had purchased the tickets
from the complainant and the cheque in question
was given by them in discharge of their liability.
The demand notice dated 8.5.2001 is also sent to
the two petitioners and not to the company. What
the petitioners state here may be their defence."
4. A company being a body corporate is capable of suing and being sued
in its own name.
Section 7 of the Act defines "drawer" to mean the maker of a
bill of exchange or a cheque. The authorised signatory of a company does
not become the drawer of the cheque only because he has been authorised to
do so for the purpose of banking operations. Admittedly, the bank account
was also in the name of the company. The account was, therefore,
maintained by the Company.
5. Section 138 of the Act reads as under:
"Dishonour of cheque for insufficiency, etc., of
funds in the account.- Where any cheque drawn by
a person on an account maintained by him with a
banker for payment of any amount of money to
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another person from out of that account for the
discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either
because of the amount of money standing to the
credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to
be paid from that account by an agreement made
with that bank, such person shall be deemed to
have committed an offence and shall, without
prejudice to any other provision of this Act, be
punished with imprisonment for a term which may
be extended to two years, or with fine which may
extend to twice the amount of the cheque, or with
both;
Provided that nothing contained in this
section shall apply unless-
(a) the cheque has been presented to the
bank within a period of six months from the date
on which it is drawn or within the period of its
validity, whichever is earlier;
(b) the payee or the holder in due course of
the cheque, as the case may be, makes a demand
for the payment of the said amount of money by
giving a notice in writing, to the drawer of the
cheque, within thirty days of the receipt of
information by him from the bank regarding the
return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make
the payment of the said amount of money to the
payee or as the case may be, to the holder in due
course of the cheque within fifteen days of the
receipt of the said notice."
6. A complaint petition may be maintainable at the instance of the
person in whose favour the cheque was drawn only when:-
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(i) the cheque was drawn by ‘a person’; and
(ii) the cheque was drawn on an account maintained by ‘him’ with a banker
for payment of any amount of money to ‘another person’ from out of that
account for the discharge, in whole or in part, of any debt or other
liability, is returned by the bank unpaid, either because of the amount of
money standing to the credit of the drawer is insufficient to honour the
cheque or that it exceeds the amount to be paid from that account; and
(iii)in that event ‘such a person’ shall be deemed to have committed an
offence.
7. The person referred to in the said provisions, therefore, must not only
be the drawer of the cheque but should have been maintaining an account
with the banker.
8. Appellant does not answer either of the descriptions of such ‘the
person’ referred to in Section 138 of the Act. Admittedly, she was only an
authorised signatory and the amount with the banker was to be maintained
by the Company. Cheque was drawn by the Company and not by the
appellant. She did not do so on her own behalf. She issued the cheque in
course of ordinary business transaction.
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9. The Parliament for meeting a contingency of this nature, namely,
where a company is an offender, has raised a legal fiction in terms whereof
any person who at the time the offence was committed, was incharge of and
was responsible for the conduct of business of the company, shall be
deemed to be guilty of the offence.
10. For the said purpose, the company itself must be made an accused. It
has been so held by this Court in a number of decisions to which I would
refer to a little later.
11. In this case, indisputably the company is the principal offender. A
director of the company inter alia can be proceeded against if he is found to
be responsible therefor as envisaged under Section 141 of the Act.
12. The said provision reads, thus:
"141. Offences by companies .--(1) If the person
committing an offence under Section 138 is a
company, every person who, at the time the
offence was committed, was in charge of, and 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 accordingly:
Provided that nothing contained in this sub-section
shall render any person liable to punishment if he
proves that the offence was committed without his
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knowledge, or that he had exercised all due
diligence to prevent the commission of such
offence:
2 "Provided further that where a person is
nominated as a Director of a company by virtue of
his holding any office or employment in the
Central Government or State Government or a
financial corporation owned or controlled by the
Central Government or the State Government, as
the case may be, he shall not be liable for
prosecution under this chapter."
(2) Notwithstanding anything contained in sub-
section (1), where any offence under this Act has
been committed by a company and it is proved that
the offence has been committed with the consent
or connivance of, or is attributable to, any neglect
on the part of, any director, manager, secretary or
other officer of the company, such director,
manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be
liable to be proceeded against and punished
accordingly.
Explanation.-- For the purposes of this section,--
( a ) "company" means any body corporate and
includes a firm or other association of individuals;
and
( b ) "director", in relation to a firm, means a
partner in the firm."
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13. If a person, thus, has to be proceeded with as being vicariously liable
for the acts of the company, the company must be made an accused. In any
event, it would be a fair thing to do. Legal fiction is raised both against the
Company as well as the person responsible for the acts of the Company.
Unlike other statutes, this Act raises a presumption not only in tems of
Section 139 of the Act but also under Section 118(a) thereof. Those
presumptions in given cases may have to be rebutted. The accused must be
given an opportunity to rebut the said presumption. An accused is entitled
to be represented in a case so as to enable it to establish that allegations
made against it are not correct.
14. Section 141 of the Act raises a legal fiction. Such a legal fiction can
be raised only when the conditions therefor are fulfilled; one of it being that
company is also prosecuted.
15. The Section uses the terms "as well as the company". The company
which is, thus, the principal offender must be included in the category of the
accused. Here, I am not dealing with a case where an individual act of a
person is purporting to represent a company. In relation to business
transactions, a company as a corporate entity may have created its own
reputation. It must maintain it. If a complaint is filed, in a given case, only
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on the basis of the presumptions raised in the statute, it may be held to be
guilty as a result whereof the reputation of the company shall suffer. It may,
thus, suffer grave civil consequences.
16. It is no longer res integra that a company can be proceeded against in
a criminal proceeding, even where imposition of substantive sentence is
provided for.
17. The question as to whether a company can be proceeded against when
a mandatory imprisonment is prescribed in law came up for consideration
before a Constitution Bench of this Court in Standard Chartered Bank and
Others v. Directorate of Enforcement and Others [(2005) 4 SCC 530]
wherein this Court upon considering a large number of decisions as also the
principle "lex non cogit ad impossibilia" opined:
"30. As the company cannot be sentenced to
imprisonment, the court has to resort to
punishment of imposition of fine which is also a
prescribed punishment. As per the scheme of
various enactments and also the Indian Penal
Code, mandatory custodial sentence is prescribed
for graver offences. If the appellants’ plea is
accepted, no company or corporate bodies could
be prosecuted for the graver offences whereas they
could be prosecuted for minor offences as the
sentence prescribed therein is custodial sentence
or fine. We do not think that the intention of the
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legislature is to give complete immunity from
prosecution to the corporate bodies for these grave
offences. The offences mentioned under Section
56(1) of the FERA Act, 1973, namely, those under
Section 13; clause ( a ) of sub-section (1) of
Section 18; Section 18-A; clause ( a ) of sub-
section (1) of Section 19; sub-section (2) of
Section 44, for which the minimum sentence of six
months’ imprisonment is prescribed, are serious
offences and if committed would have serious
financial consequences affecting the economy of
the country. All those offences could be
committed by company or corporate bodies. We
do not think that the legislative intent is not to
prosecute the companies for these serious
offences, if these offences involve the amount or
value of more than Rs. one lakh, and that they
could be prosecuted only when the offences
involve an amount or value less than Rs. one lakh.
(Emphasis supplied)
31. As the company cannot be sentenced to
imprisonment, the court cannot impose that
punishment, but when imprisonment and fine is
the prescribed punishment the court can impose
the punishment of fine which could be enforced
against the company. Such a discretion is to be
read into the section so far as the juristic person is
concerned. Of course, the court cannot exercise
the same discretion as regards a natural person.
Then the court would not be passing the sentence
in accordance with law. As regards company, the
court can always impose a sentence of fine and the
sentence of imprisonment can be ignored as it is
impossible to be carried out in respect of a
company. This appears to be the intention of the
legislature and we find no difficulty in construing
the statute in such a way. We do not think that
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there is a blanket immunity for any company from
any prosecution for serious offences merely
because the prosecution would ultimately entail a
sentence of mandatory imprisonment. The
corporate bodies, such as a firm or company
undertake a series of activities that affect the life,
liberty and property of the citizens. Large-scale
financial irregularities are done by various
corporations. The corporate vehicle now occupies
such a large portion of the industrial, commercial
and sociological sectors that amenability of the
corporation to a criminal law is essential to have a
peaceful society with stable economy."
(Emphasis supplied)
An earlier decision of this Court in Asstt. Commissioner v. Velliappa
Textiles Ltd. [(2003) 11 SCC 405] was overruled by the Constitution
Bench.
In the context of the provisions of the Income Tax Act, recently a
Division Bench of this Court in Madhumilan Syntex Ltd. & Ors. v. Union of
India & Anr. [AIR 2007 SC 1481], held :
"23. From the above provisions, it is clear that
wherever a Company is required to deduct tax at
source and to pay it to the account of the Central
Government, failure on the part of the Company in
deducting or in paying such amount is an offence
under the Act and has been made punishable. It,
therefore, cannot be said that the prosecution
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against a Company or its Directors in default of
deducting or paying tax is not envisaged by the
Act.
24. It is no doubt true that Company is not a
natural person but ’legal’ or ’juristic’ person. That,
however, does not mean that Company is not
liable to prosecution under the Act. ’Corporate
criminal liability’ is not unknown to law. The law
is well settled on the point and it is not necessary
to discuss it in detail."
18. Section 141 of the Act even does not provide for a mandatory
minimum imprisonment. A fine can be imposed upon the offender for
commission of an offence under Section 138 of the Act.
19. Interpretation of Section 141 of the Act came up for consideration
before a Three-Judge Bench of this Court in S.M.S. Pharmaceuticals Ltd. v.
Neeta Bhalla and Another [(2005) 8 SCC 89] wherein it was opined that
criminal liability on account of dishonour of cheque primarily falls on the
drawer company and is extended to the officers of the company. Analysing
Section 141 of the Act, the Bench observed:
"...Section 141 of the Act is an instance of
specific provision which in case an offence under
Section 138 is committed by a company, extends
criminal liability for dishonour of a cheque to
officers of the company. Section 141 contains
conditions which have to be satisfied before the
liability can be extended to officers of a company.
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Since the provision creates criminal liability, the
conditions have to be strictly complied with. The
conditions are intended to ensure that a person
who is sought to be made vicariously liable for an
offence of which the principal accused is the
company, had a role to play in relation to the
incriminating act and further that such a person
should know what is attributed to him to make him
liable. In other words, persons who had nothing to
do with the matter need not be roped in. A
company being a juristic person, all its deeds and
functions are the result of acts of others.
Therefore, officers of a company who are
responsible for acts done in the name of the
company are sought to be made personally liable
for acts which result in criminal action being taken
against the company. It makes every person who,
at the time the offence was committed, was in
charge of, and was responsible to the company for
the conduct of business of the company, as well as
the company, liable for the offence. The proviso to
the sub-section contains an escape route for
persons who are able to prove that the offence was
committed without their knowledge or that they
had exercised all due diligence to prevent
commission of the offence."
[underlining is mine]
20. In Sabitha Ramamurthy and Anr. v. R.B.S. Channabasavaradhya
[2006 (9) SCALE 212], this court held that though a person was not
personally liable for the offences committed by the company, however, he
would only be liable vicariously for the acts of company in terms of Section
141 of the Act only if the requisite averments, are made in the complaint
petition.
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21. In S.V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and
Anr. (2005) 4 SCC 173, this Court explicitly laid down the following
categories of persons who are covered under Section 141 of the act:
(1) The company who committed the offence.
(2) Everyone who was in charge of and was responsible for the business
of the company.
(3) Any other person who is a director or a manager or a secretary or
officer of the company with whose connivance or due to whose
neglect the company has committed the offence.
22. In Sarav Investment and Financial Consultants Pvt. Ltd. and Anr. v.
Llyods Register of Shipping Indian Office Staff Provident Fund and Anr.
2007 (12) SCALE 123, this Court opined that the director of the company is
only vicariously liable for the acts of the company, and could be prosecuted
only if the conditions precedent laid down in Section 141 of the Act are
satisfied.
In K. Srikanth Singh v. North East Securities Ltd. and Anr. [2007 (9)
SCALE 371], a Criminal complaint was filed for the dishonour of cheque.
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Appellant therein had been proceeded against for alleged commission of an
offence under Section 138 of the Negotiable Instruments Act by the Trial
Court. Before the High Court, quashing of proceedings under Section 482
of the Code of Criminal Procedure, 1973 was sought.
It was contended by the appellant that at the relevant point of time
since he was not the Director of the Company, hence no cognizance could
be taken as the same does not satisfy the requirements of Section 141. The
High Court dismissed the petition holding the same as fact in respect thereof
was required to be established before the Trial Court.
In an appeal to this court, this Court while referring inter-alia to the
decisions in S.M.S. Pharmaceuticals Ltd.( Supra) and Sabitha Ramamurthy
(supra) held that for showing a vicarious liability of a Director of a
Company, it was incumbent to plead that the accused was responsible to the
Company for the conduct of the business of the Company in the complaint.
The allegation in the complaint petition would not give rise to an inference
that the Appellant was responsible for day-to-day affairs of the Company. A
negotiation for obtaining financial assistance on behalf of the Company by
its Directors itself was not an ingredient for the purpose of constituting an
offence under Section 138. Thus, vicarious liability on the Director of the
company part must be pleaded and proved and not inferred. [See also
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Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. and Ors. 2008 (1)
SCALE 331]
In Municipal Corporation of Delhi v. Ram Kishan Rohtagi and Ors.
[(1983) 1 SCC 1], the Respondent No. 1 was the manager and respondents
No. 2 to 5 were directors of X company . Respondents were charged for
offences under Sections 7 and 16 of the Prevention of Food Adulteration
Act, 1954 and Section 482 of Criminal Procedure Code, 1973 as the Toffees
manufactured by X company was found to be not conforming to the
standards prescribed for toffees . On appeal, the High Court quashed the
proceedings against respondents.
It was held by this court that:
"So far as the Manager is concerned, we are
satisfied that from the very nature of his duties it
can be safely inferred that he would undoubtedly
be vicariously liable for the offence; vicarious
liability being an incident of an offence under the
Act. So far as the Directors are concerned, there is
not even a whisper nor a shred of evidence nor
anything to show, apart from the presumption
drawn by the complainant, that there is any act
committed by the Directors from which a
reasonable inference can be drawn that they could
also be vicariously liable."
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However, as regards the Manager of the Company, the court held that
since he could not fall in the same category as the Directors, and as he was
directly incharge of the affairs of the company, he should be held to be
liable.
23. In S.M.S. Pharmaceuticals Ltd. (supra) it was held that requisite
averments must appear on the face of the complaint petition itself stating:
"18. To sum up, there is almost unanimous judicial
opinion that necessary averments ought to be
contained in a complaint before a person can be
subjected to criminal process. A liability under
Section 141 of the Act is sought to be fastened
vicariously on a person connected with a
company, the principal accused being the company
itself. It is a departure from the rule in criminal
law against vicarious liability. A clear case should
be spelled out in the complaint against the person
sought to be made liable. Section 141 of the Act
contains the requirements for making a person
liable under the said provision. That the
respondent falls within the parameters of Section
141 has to be spelled out. A complaint has to be
examined by the Magistrate in the first instance on
the basis of averments contained therein. If the
Magistrate is satisfied that there are averments
which bring the case within Section 141, he would
issue the process. We have seen that merely being
described as a director in a company is not
sufficient to satisfy the requirement of Section
141. Even a non-director can be liable under
Section 141 of the Act. The averments in the
complaint would also serve the purpose that the
person sought to be made liable would know what
is the case which is alleged against him. This will
enable him to meet the case at the trial."
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24. This position was reiterated in N. Rangachari v. Bharat Sanchar
Nigam Ltd. 2007 (5) SCALE 821, wherein this court referring to the
observations in S.M. Pharmaceuticals on specific averments in the
complaint itself opined that
"The scope of Section 141 has been authoritatively
discussed in the decision in S.M.S.
Pharmaceuticals Ltd. (supra) binding on us and
there is no scope for redefining it in this case.
Suffice it to say, that a prosecution could be
launched not only against the company on behalf
of which the cheque issued has been dishonoured,
but it could also be initiated against 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."
It was further held:
"Therefore, a person in the commercial world
having a transaction with a company is entitled to
presume that the directors of the company are
incharge of the affairs of the company. If any
restrictions on their powers are placed by the
memorandum or articles of the company, it is for
the directors to establish it at the trial. It is in that
context that Section 141 of the Negotiable
Instruments Act provides that when the offender is
a company, every person, who at the time when
the offence was committed was incharge of and
was responsible to the company for the conduct of
the business of the company, shall also be deemed
to be guilty of the offence along with the
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company. It appears to us that an allegation in the
complaint that the named accused are directors of
the company itself would usher in the element of
their acting for and on behalf of the company and
of their being incharge of the company."
25. Again in Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of
Delhi and Ors. 2007 (5) SCALE 479, this court relying on S.M.
Pharmaceuticals (supra) and Saroj Kumar Poddar v. State (NCT of Delhi)
and Anr. 2007 (2) SCALE 36 on the question of the liability of the
company officials held that :
"The averments must state that the person who is
vicariously liable for commission of the offence
of the Company both was incharge of and was
responsible for the conduct of the business of the
Company. Requirements laid down therein must
be read conjointly and not disjunctively. When a
legal fiction is raised, the ingredients therefor
must be satisfied."
To the same effect is the decision of this court in N.K. Wahi v.
Shekhar Singh and Ors. 2007 (4) SCALE 188.
In Balaji Trading Company v. Kejriwal Paper Ltd. and Anr. [2005 (2)
ALD (Cri) 162 : 2005 Cri L J 3805], a similar question arose for the
consideration before the Andhra Pradesh High Court.
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In the said case, on the dishonour of the cheques issued by the
accused-company, a proceedings was initiated against the company in the
trial court. During the pendency of the said ease, the accused-company filed
a Criminal Misc. Petition under Sections 239 and 245, Cr. P.C. for
discharge and acquittal for the offence under Section 138 read with Section
141 of the Act. In the said application the Director of the company pleaded
that as the complainant did not mention anywhere in the complaint that he
was personally responsible for the day-to-day business of the accused firms,
he is not liable to be prosecuted. The learned Magistrate after hearing both
parties dismissed the application. The accused-company being aggrieved by
the order, preferred an revision before the Sessions court. respondent-
company contended before the Sessions Court that the learned Magistrate
erred in holding that a complaint can be lodged against the company
through its Director without there being any specific allegation that the said
Director was incharge of and was responsible to the company in the conduct
of the business at the relevant point of time and that the offence was
committed with his consent or connivance and the non-pleading of the
Directors in their personal capacity is contrary to Section 141 of the Act, as
such, the Director cannot be made to undergo the trial in the absence of any
allegation or averment in the complaint that he was incharge of the affairs of
the company.
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The learned Sessions Judge set aside the order on the ground that
Section 141 had not been complied with as the said director was not
impleaded as an accused.
Before the High Court it was contended by the revisioner petitioner
that since the cheques issued by the company were dishonoured, the
prosecution against the company is perfectly maintainable under Section
141 of the Act and the non-prosecution of the person in charge of the affairs
of the company or other Directors in their individual capacity is no bar to
maintain the prosecution against the company.
Thus, the point for consideration was Whether the respondent-
company was liable to be prosecuted under Section 138 of the Negotiable
Instruments Act by virtue of Section 141 of the Act in the absence of
prosecution of the person incharge of the affairs or other Directors of the
company?
The High Court after going through Section 141 opined:
"The above provision makes it clear that the
company as well as the person in-charge of the
affairs of the company is liable to be prosecuted.
The liability envisaged in Section 141(1) on the
person so incharge of and responsible for the
conduct of the business of the company is directly
responsible for the offence. He can escape from
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his liability only if he proves that the offence was
committed without his knowledge or that he has
exercised his powers with due diligence to prevent
commission of such offence. Where the offence is
committed by a company, the company as well as
the person incharge of the business of the
company are liable to be prosecuted for the
offence under Section 138 of the Act. Though the
company is an artificial person handicapped of
committing any crime personally, if certain crimes
are committed by its officials, the company is
liable for prosecution. But, when the company is
convicted, the liability can be only in terms of fine
as the company is responsible for the acts of
commissions and omissions of the persons
working for it."
Referring to a large number of judgments of this court on Section 10
of the Essential Commodities Act as also on Section 141, setting aside the
order of the Sessions Court, it was held:
"Section 141 is specifically incorporated to
prosecute the companies for the offence under
Section 138 of the Act. The mandate of the section
clearly indicates that the company is liable for
prosecution when a cheque is issued on its behalf
and bounced on presentation of such cheque. The
intendment of the section is not to give scope for
individuals to escape by issuing cheques in the
names of the companies. Therefore, when cheques
are issued in the name of the company, the
company is invariably liable for prosecution for
the offence under Section 138 of the Act.
Regarding the prosecution of the Directors of the
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company, the legal position makes it clear that the
person who is in charge of and was responsible to
the company in conduct of its business at the
material time is also liable to be prosecuted. But,
the non-prosecution of any of the Directors is no
bar to prosecute the company. The revision
petitioner is pleading that he is prejudiced on
account of mentioning of his name as the person
representing the company. The prosecution never
intended to prosecute Sri Rahul Kejrlwal in his
Individual capacity. The Courts below also made it
clear that Sri Rahul Kejrlwal is not personally
liable for prosecution on account of the absence of
specific allegations that he is in charge of the
affairs of the company or managing its affairs. The
judgments placed on behalf of the revision
petitioner are only regarding the aspect whether a
Director or Directors arc liable to be prosecuted
when there are no specific allegations that he or
they were in charge of and were responsible to the
company in conduct of its business. In the light of
the above circumstances. I find sufficient force in
the grounds of revision. The company is liable for
prosecution despite non-prosecution of the
Director or Directors responsible for the
management of the affairs of the company or in
charge of its affairs."
[Emphasis Supplied]
26. While saying so, I am not unmindful of views differently taken by
some Benches of this Court. I would notice some of them to place on
record how different Benches took different views.
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27. I may, however, notice first a three Judge Bench decision of this
Court in State of Madras v. C.V. Parekh and another, [(1970) 3 SCC 491].
There the company was not made an accused. The Directors of the
company were acquitted. A contention was raised that the accused being
liable to the company should have been convicted. This Court held :-
"3. Learned Counsel for the appellant, however,
sought conviction of the two respondents on the
basis of Section 10 of the Essential Commodities
Act under which, if the person contravening an
order made under Section 3 (which covers an
order under the Iron and Steel Control Order,
1956), i<a company, every person who, at the time
the contravention was committed, was in charge
of, and 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
contravention and shall be liable to be proceeded
against and punished accordingly. It was urged
that the two respondents were in charge of, and
were responsible to, the Company for the conduct
of the business of the Company and, consequently,
they must be held responsible for the sale and for
thus contravening the provisions of clause (5) of
the Iron and Steel Control Order. This argument
cannot be accepted, because it ignores the first
condition for the applicability of Section 10 to the
effect that the person contravening the order must
be a company itself. In the present case, there is no
finding either by the Magistrate or by the High
Court that the sale in contravention of clause (5)
of the Iron and Steel Control Order was made by
the Company. In fact, the Company was not
charged with the offence at all. The liability of the
persons in charge of the Company only arises
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when the contravention is by the Company itself.
Since, in this case, there is no evidence and no
finding that the Company contravened clause (5)
of the Iron and Steel Control Order, the two
respondents could not be held responsible. The
actual contravention was by Kamdar and
Vallabhdas Thacker and any contravention by
them would not fasten responsibility on the
respondents. The acquittal of the respondents is,
therefore, fully justified. The appeal fails and is
dismissed."
(Emphasis supplied)
The clear findings contained in a binding precedent were, however,
sought to be explained by a two Judge Bench of this Court in Sehoratan
Agarwal and another v. State of Madhya Pradesh, [ (1984) 4 SCC 352 ]
stating :-
"The Section appears to our mind to be plain
enough. If the contravention of the order made
under Section 3 is by a Company, the persons who
may be held guilty and punished are (1) the
Company itself (2) every person who, at the time
the contravention was committed, was in charge
of, and was responsible to, the Company for the
conduct of the business of the Company whom for
short we shall describe as the person-in-charge of
the Company, and (3) any director, manager,
secretary or other officer of the Company with
whose consent or connivance or because of
neglect attributable to whom the offence has been
committed, whom for short we shall describe as an
officer of the Company. Any one or more or all of
them may be prosecuted and punished. The
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Company alone may be prosecuted. The person-in-
charge only may be prosecuted. The conniving
officer may individually be prosecuted. One, some
or all may be prosecuted. There is no statutory
compulsion that the person-in-charge or an officer
of the Company may not be prosecuted unless he
be ranged alongside the Company itself. Section
10 indicates the persons who may be prosecuted
where the contravention is made by the Company.
It does not lay down any condition that the person-
in-charge or an officer of the Company may not be
separately prosecuted if the Company itself is not
prosecuted. Each or any of them may be separately
prosecuted or alongwith the Company. Section 10
lists the person who may be held guilty and
punished when it is a Company that contravenes
an order made Under Section 3 of the Essential
Commodities Act. Naturally, before the person-in-
charge or an officer of the Company is held guilty
in that capacity it must be established that there
has been a contravention of the Order by the
Company. That should be axiomatic and that is all
that the Court laid down in State of Madias v. C.V.
Parekh (supra) as a careful reading of that case
will show and not that the person-in-charge or an
officer of the Company must be arraigned
simultaneously along with the Company if he is to
be found guilty and punished. The following
observations made by the Court clearly bring out
the view of the Court :
It was urged that the two respondents were in
charge of, and were responsible to, the company
for the conduct of the business of the Company
and, consequently, they must be held responsible
for the sale and for thus contravening the
provisions of Clause 5 of the Iron and Steel
(Control) Order. This argument cannot be
accepted, because it ignores the first condition for
the applicability of Section 10 to the effect that the
person contravening the order must be a company
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itself. In the present case, there is no finding either
by the Magistrate OR by the High Court that the
sale in convention of Clause 5 of the Iron & Steel
(Control) Order was made by the Company. In
fact, the Company was not charged with the
offence at all. The liability of the persons in
charge of the Company only arises when the
contravention is by the Company itself. Since, in
this case, there is no evidence and no finding that
the Company contravened Clause 5 of the Iron &
Steel (Control), Order the two respondents could
not be held responsible. The actual contravention
was by Kamdar and Villabhadas Thacker and any
contravention by them would not fasten
responsibility on the respondents."
28. With the greatest of respect to the learned judges, it is difficult to
agree therewith. The findings, if taken to its logical corollary lead us to an
anomalous position. The trial court, in a given case although the company
is not an accused, would have to arrive at a finding that it is guilty.
Company, although a juristic person, is a separate entity. Directors may
come and go. The company remains. It has its own reputation and standing
in the market which is required to be maintained. Nobody, without any
authority of law, can sentence it or find it guilty of commission of offence.
Before recording a finding that it is guilty of commission of a serious
offence, it may be heard. The Director who was in charge of the company at
one point of time may have no interest in the company. He may not even
defend the company. He need not even continue to be its Director. He may
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have his own score to settle in view of change in management of the
company. In a situation of that nature, the company would for all intent and
purport would stand convicted, although, it was not an accused and, thus,
had no opportunity to defend itself.
29. Any person accused of commission of an offence, whether natural or
juristic, has some rights. If it is to be found guilty of commission of an
offence on the basis whereof its Directors are held liable, the procedures
laid down in the Code of Criminal Procedure must be followed. In
determining such an issue all relevant aspects of the matter must be kept in
mind. The ground realities cannot be lost sight of. Accused persons are
being convicted for commission of an offence under Section 138 of the Act
inter alia on drawing statutory presumptions.
Various provisions contained therein lean in favour of a drawer of the
cheque or the holder thereof and against the accused. Sections 20, 118(c),
139 and 140 of the Act are some such provisions. The Act is a penal statute.
Unlike offences under the general law it provides for reverse burden. The
onus of proof shifts to the accused if some foundational facts are
established.
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It is, therefore, in interpreting a statute of this nature difficult to
conceive that it would be legally permissible to hold a company, the prime
offender, liable for commission of an offence although it does not get an
opportunity to defend itself. It is against all principles of fairness and
justice. It is opposed to the Rule of Law. No statute in view of our
Constitutional Scheme can be construed in such a manner so as to refuse an
opportunity of being heard to a person. It would not only offend a common-
sense, it may be held to be unconstitutional. Such a construction, therefore,
in my opinion should be avoided.
In any event in a case of this nature, the construction which may be
available in invoking Essential Commodities Act, Prevention of Food
Adulteration Act, which affects the Society at large may not have any
application when only a private individual is involved.
30. Our attention has also been drawn to a Two-Judge Bench decision of
this Court in Anil Hada v. Indian Acrlic Ltd. [(2000) 1 SCC 1] and R.
Rajgopal v. S.S. Venkat [AIR 2001 SC 2432].
In Anil Hada v. Indian Acrylic Ltd. [(2000) 1 SCC 1], this court
while construing the meaning of the term "as well as" held that it would
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mean the persons mentioned in the first category within the dragnet of the
offence on a par with the offending company.
31. In Anil Hada (supra), the company was under liquidation. A question
arose as to whether permission of the company court was necessary to
continue prosecution against the company. The court did not go into the
said question. In that case, the Magistrate accepted the contention raised on
behalf of the accused - company that the winding up had been ordered by
the court and hence no prosecution proceeding could be continued against
the accused - company. The said proposition of law in a situation of this
nature must be understood in the factual matrix involved in the matter. In
the peculiar factual matrix involved therein, it was opined:
"12. Thus when the drawer of the cheque who falls
within the ambit of Section 138 of the Act is a
human being or a body corporate or even firm,
prosecution proceedings can be initiated against
such drawer. In this context the phrase "as well as"
used in sub-section (1) of Section 141 of the Act
has some importance. The said phrase would
embroil the persons mentioned in the first category
within the tentacles of the offence on a par with
the offending company. Similarly the words "shall
also" in sub-section (2) are capable of bringing the
third category persons additionally within the
dragnet of the offence on an equal par. The effect
of reading Section 141 is that when the company
is the drawer of the cheque such company is the
principal offender under Section 138 of the Act
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and the remaining persons are made offenders by
virtue of the legal fiction created by the legislature
as per the section. Hence the actual offence should
have been committed by the company, and then
alone the other two categories of persons can also
become liable for the offence."
The ratio laid down in the said case is to be understood in the factual
matrix obtaining therein, namely, the company could not have been
prosecuted due to a legal snag, although was made an accused.
However, with utmost respect, the observations of the court that
‘company need not be proceeded against’, in my opinion is obiter dicta and
not its ratio-decidendi. We are otherwise also bound by the Three-Judge
Bench decision of this Court in S.M.S. Pharmaceuticals Ltd (supra) and
C.V. Parekh (supra)
32. It is one thing to say that the complaint petition proceeded against the
accused persons on the premise that the company had not committed the
offence but the accused did, but it is another thing to say that although the
company was the principal offender, it need not be made an accused at all.
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I have no doubt whatsoever in our mind that prosecution of the
company is a sine qua non for prosecution of the other persons who fall
within the second and third categories of the candidates, viz., everyone who
was in-charge and was responsible for the business of the company and any
other person who was a director or managing director or secretary or officer
of the company with whose connivance or due to whose neglect the
company had committed the offence.
33. In Raghu Lakshminarayanan v. Fine Tubes 2007(5) SCALE 353, the
issue before this court was whether having regard to the explanation
appended to the definition of company in section 141 of the Act would
include a proprietary concern. Although the answer was rendered in the
negative, the court however made a very pertinent observation as regards
the liability of the directors of the company. It opined:
"It is of some significance to note that in view of
the said description of "Director", other than a
person who comes within the purview thereof,
nobody else can be prosecuted by way of his
vicarious liability in such a capacity. If the offence
has not been committed by a Company, the
question of there being a Director or his being
vicariously liable, therefore, would not arise.
Appellant herein categorically contended that
accused No. 1 was a proprietary concern of the
accused No. 2 and he was merely an employee
thereof. If accused No. 1 was not a Company
within the meaning of Section 141 of the
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33
Negotiable Instruments Act, the question of an
employee being preceded against in terms thereof
would not arise."
Indisputably, all the decisions of this Court in no uncertain terms says
- company at the first instance should be proved to be offender and, thus,
only question of proof that the Director is also liable being in charge of its
affairs.
34. True interpretation, in my opinion, of the said provision would be that
a company has to be made an accused but applying the principle "lex non
cogit ad impossibilia", i.e., if for some legal snag, the company cannot be
proceeded against without obtaining sanction of a court of law or other
authority, the trial as against the other accused may be proceeded against if
the ingredients of Sections 138 as also 141 are otherwise fulfilled. In such
an event, it would not be a case where the company had not been made an
accused but would be one where the company cannot be proceeded against
due to existence of a legal bar. A distinction must be borne in mind
between cases where a company had not been made an accused and the one
where despite making it an accused, it cannot be proceeded against because
of a legal bar.
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35. R. Rajgopal (supra) does not lay down any law.
There are other statutes whose provisions is pari materia with Section
141 of the Act, e.g., Section 35H Wealth Tax Act, Section 14A Employees
Provident Fund and Miscellaneous Provisions Act, Section 34 Drugs and
Cosmetics Act, Section 10 Essential Commodities Act, Section 6 Indian
Merchandise Act, Section 38 Narcotic Drugs and Psychotropic Substances
Act and Section 17 Prevention of Food Adulteration Act.
In Rajasthan Pharmaceutical Laboratory, Bangalore and Ors. v. State
of Karnataka [1981 (1) SCC 645] on the interpretation of the words
"punished accordingly" in Section 34 of the Drugs and Cosmetics Act,
1940, this Court observed:
"It seems clear to us that the words "punished
accordingly" in the context mean that a person
deemed to be guilty of an offence committed by a
company shall receive the punishment that is
prescribed by the Act for that offence."
To the same effect is the decision of this court in State of Punjab v.
Kasturi Lal and Others [2004(12) SCC 195].
In R. Banerjee and others v. H.D. Dubey and others[ 1992(2) SCC
552] the question which arose for determination was whether it was
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35
permissible to launch prosecution under Sub-section (1) of Section 17 of the
Prevention of Food Adulteration Act, 1954 against the Directors and
Managers of public limited companies, for the commission of the alleged
offence punishable under the aforesaid provisions notwithstanding the
nomination made by the said companies as required by Sub-section (2) of
Section 17 of the Act. This court after reading the said provision held as
under:
"It is clear from the plain reading of Section 17 that
where an offence under the Act is alleged to have been
committed by a company, where the company has
nominated any person to be in charge of, and responsible
to, the company for the conduct of its business that
person will be liable to be proceeded against and
punished for the commission of the offence. Where,
however, no person has been so nominated, every person
who at the time of the commission of the offence was in
charge of, and responsible to, the company for the
conduct of its business shall be proceeded against and
punished for the said crime."
36. I may notice that in some of the decisions of this Court a liberal
interpretation of notice had been advocated to suggest that a notice served
upon a managing director of the company or a director of the company shall
satisfy the requirements of law. [See Bilakchand Gyanchand Co. v. A.
Chinnaswami JT 1999 (10) SC 236 and Rajneesh Aggarwal v. Amit J.
Bhalla JT 2001 (1) SC 325].
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37. The said decisions proceeded on the premise that what is necessary is
the knowledge of the accused that the cheque has been dishonoured so that
the amount may be paid within a period of fifteen days from the date of such
knowledge.
38. A learned Single Judge of the Kerala High Court in Pramod v. C.K.
Velayudhan & Ors. [2006 (1) JCC (NI) 62] inter alia relying on a decision
of this Court in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC
15: 2004 Cri LJ 4249] opined:
"...In other words, commission of offence under
Section 138 of the Act by a juristic person is an
inevitable legal pre-requisite or the condition
precedent to proceed against a person referred to
under Section 141 of the Act and to hold him
guilty of the said offence."
It was further opined:
"19. Learned counsel for petitioner placed reliance
upon the decision of the High Court of Andhra
Pradesh in B.S.K. Prasad v. M/s. Laxmi Vessels,
2005 (1) LJ (NOC) 7 : (2004 Cri LJ 4079) (AP) in
which it is held that "as per Section 138 of the Act
the drawer of a dishonoured cheque only is liable
for punishment". He also cited K. Seetharam
Reddy v. K. Radhika Rani, (2002) 112 Comp Cas
204 (AP) in support of his arguments. It is held in
the said decision that "Section 138 of the
Negotiable Instruments Act, 1881, leaves no doubt
that the person who has drawn the cheque on his
account is alone liable in the event the cheque
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drawn by him is dishonoured". In the light of the
above dictum also, I find that neither first accused-
society nor petitioner, as secretary of the society
can be proceeded against for offence under
Section 138 of the Act.
20. But, despite all these, trial Court issued
summons to petitioner. The mere description on
the cause-title of the complaint appears to be the
sole persuading factor which propelled learned
Magistrate to summon petitioner. There was no
other ground to proceed against the petitioner.
Needless to say, a criminal Court will not get any
jurisdiction to proceed against a person at the mere
sight of the details on the docket-sheet or the
cause title. No Court shall act upon the sole tag,
label or the badge veiled on the cause-title. No
Court shall be carried away by the prints and dots
on the veil of cause-title. The Court is bound to
unveil the complaint, feel the texure of its contents
and test, the criminality. Criminality lies not on
how a person is christened at the cause-title, but
how he acts, as per the contents of the complaint."
39. In B.S.K. Prasad v. M/s. Laxmi Vessels & Anr. [2005 (1) JCC (NI)
86], a learned Single Judge of the Andhra Pradesh High Court has laid
down the law in the following terms:
"4. As per Section 138 of the Act the drawer of a
dishonoured cheque only is liable for punishment.
If the ’person’ that committed the offence under
Section 138 of the Act is a company the Directors
and the per-son-in-charge of the affairs of the
company, who look after the day to day affairs of
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that company, apart from the company, would also
be liable for the said offence, by virtue of Section
141 of the Act. As stated earlier there is no scope
for invoking Section 141 of the Act because the
dishonoured cheque was not issued for and on
behalf of a company. Since petitioner, admittedly,
did not draw the dishonoured cheque on an
account maintained by him in a bank, and since
there is no scope for invoking Section 141 of the
Act to rope in the petitioner as Managing Director
of a company of which A-1 is the Director, merely
because A-1 is said to have given the dishonoured
cheque in partial or full settlement of a debt due to
1st respondent from a company of which
petitioner is the Managing Director, petitioner
cannot be made liable for an offence under Section
138 of the Act. The fact that 1st respondent has a
right to sue petitioner also for recovery of the debt
due to him is not and cannot be a ground for
making the petitioner liable for an offence under
Section 138 of the Act, when the dishonoured
cheque was not drawn for and on behalf of that
company, on an account maintained by it in a
bank. Therefore the fact that A1 who drew the
dishonoured cheque happens to be a Director in
the company of which petitioner is the Managing
Director, for the debt allegedly due to 1st
respondent from the said company, is of no
consequence."
40. In Girish Saxena v. Praveen Kumar Jain & Ors. [2007 (2) JCC (NI)
220], a learned Single Judge of the Delhi High Court opined:
"...It is settled law that only drawer of the cheque
can be prosecuted under Section 138 of the
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Negotiable Instruments Act on the cheque getting
dishonoured. Since the petitioner was neither the
drawer of the cheque nor it is alleged that he was
partner or proprietor of firm when cheque got
dishonoured or he was the person responsible for
non payment of cheque amount, no offence under
Section 138 of Negotiable Instruments Act can be
made out against the petitioner."
41. I agree with the aforementioned decisions of the High Courts as
having laid down the correct law.
42. For the reasons aforementioned, the impugned judgment cannot be
sustained. It is set aside accordingly. Appeals are allowed.
...................................J.
[S.B. Sinha]
New Delhi;
May 08, 2008
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IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.838 OF 2008
(arising out of SLP(Crl.) NO. 2094/2007
Aneeta Hada ...Appellant
Versus
M/s Godfather Travels & Tours Pvt. . ...Respondent
Ltd.
With
Criminal Appeal No.842 /2008
(arising out of SLP(Crl.) No. 2117/2007
O R D E R
In view of the difference of opinion, let the matters be placed
before three-Judge Bench. The Registry is directed to place the records before the
Hon’ble the Chief Justice of India for appropriate orders.
.....................
.J.
[S.B. SINHA]
.....................
.J.
[V.S. Sirpurkar]
New Delhi,
May 8, 2008.
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"REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.__838_______OF 2008
(Arising out of SLP (Criminal) No.2094 of 2007)
Aneeta Hada .... Appellant
Versus
M/s.Godfather Travels & Tours Pvt. Ltd. .... Respondent
WITH
CRIMINAL APPEAL NO.___842_______OF 2008
(Arising out of SLP (Criminal) No.2117 of 2007)
Anil Hada .... Appellant
Versus
M/s.Godfather Travels & Tours Pvt. Ltd. .... Respondent
JUDGMENT
V.S. SIRPURKAR,J.
1. I have the benefit of going through the opinion of my esteemed
Brother Justice S.B. Sinha, J. However, I am unable to agreed with the
said judgment.
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2. Leave granted in both the cases.
3. The present judgment will dispose of the Criminal Appeal arising out
of SLP (Criminal) 2094 of 2007 and also Criminal Appeal arising out of SLP
(Criminal) 2117 of 2007. However, for the convenience sake we will be
dealing with the facts arising out of SLP (Criminal) 2094 of 2007 which are
identical with the facts arising out of SLP (Criminal) 2117 of 2007.
4. The facts have been succinctly stated in the judgment, therefore, the
same need not be referred here. It is an admitted position that the
appellant herein was a signatory to the cheque and the said cheque was
bounced. It is not as if the appellant herein suggests that she is not, in any
way, connected with M/s.Intel Travels on whose cheque book she has
issued the cheque. The appellant had the authority to use the cheque
book and sign on behalf of M/s.Intel Travels. Even if she wrote a cheque
on the cheque-book of M/s.Intel Travels for paying her own debts and the
cheque is bounced, the offence under Section 138 of the Negotiable
Instruments Act (hereinafter referred to as "the Act") will be complete
atleast against her. That is the clear import of the language of Section 138
of the Act and her act is squarely covered under the said Section. The
High Court had correctly relied on Section 139 of the Act. We accept that
finding of the High Court. It is true that for a proper complaint under
Section 138 of the Act, the cheque must have been drawn by a person and
secondly the account must be maintained by "such person" and it should
have been given for payment of amount of money to another person from
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out of that account for the discharge of any debt or other liability and when
such cheque is returned by the bank unpaid because of the insufficient
funds to honour the cheque. Then such person would be liable under
Section 138 of the Act. In the present case, the account was being
maintained by "Intel Travels" and the appellant had the authority to sign the
cheque of that account. Therefore, there will be a clear liability if the
appellant used the cheque which she had the authority to use and that too
for discharging the debt. It must be pointed out at this juncture that the
words in Section 138 of the Act are "any debt" or "other liability". In this
case since M/s. Intel Travels was maintaining the account and the
appellant had the authority to operate the same, the conditions will be
satisfied even if it was given for the discharge of the liability of the
appellant.
5. Even if it is presumed that the account was meant to be maintained
by the company, since the appellant was authorized signatory, it will have
to be presumed that she had the authority to operate the account. Again
even if it is presumed that the cheque was issued by the company, that will
make no difference as the appellant has put her signatures on the cheque
which signature she was authorized to put. This is apart from the fact that
as yet no evidence is led for proving as to whose debt was sought to be
discharged by the cheques which were dishonoured.
6. The legal fiction created by the Legislature under Section 138 of the
Act is to be found via Section 141 where along with the company, every
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person who was incharge of and was responsible to the company for the
conduct of the business is also made guilty. However, sub-section (2) of
Section 141 which starts with non obstante clause creates an "additional
criminal liability", in that, the language of the sub-section is as follows:
"141(2) Notwithstanding anything contained in sub-section (1),
where any offence under this Act has been committed by a
company and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to, any
neglect on the part of, any director, manager, secretary, or
other officer of the company, such director, manager,
secretary or other officer shall also be deemed to be guilty of
that offence and shall be liable to be proceeded against and
punished accordingly."
A glance at this provision would suggest that sub-section (2) starts with the
non obstante clause and fixes additional criminal liability. That is clear from
the words "such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence". In using the cheque book of M/s. Intel
Travels, which the appellant was authorized to use and in signing the same
which cheque ultimately was bounced, it would have to be presumed that
the signatory of the cheque shall also be deemed to be guilty of the
offence.
7. Even if the liability against the appellant is vicarious herein on
account of the offence having allegedly been committed by M/s. Intel
Travels, it would have to be presumed that the appellant had also
committed the offence. However, though M/s. Intel Travels has not been
joined as an accused, that would be of no consequences.
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8. There can be no quarrel against the proposition that a company can
be proceeded against in the criminal proceeding even where the imposition
of sentence is provided for. That law is laid down in Standard Chartered
Bank & Others v. Directorate of Enforcement & Ors. [(2005) 4 SCC
530]. However, there is nothing in that judgment to suggest that there
cannot be a prosecution of the signatory alone in the absence of the
company like Intel Travels in this case.
9. It is true that in S.M.S. Pharmaceuticals Ltd. V. Neeta Bhalla &
Anr. [(2005) 8 SCC 89] a vicarious liability has been found against the
person responsible for running the company where the principal accused is
the company. However, it is nowhere laid down in SMS Pharmaceuticals
case that unless the company itself is made an accused, the person
responsible for running the same, in the present case, the signatory of the
cheque, cannot be joined as an accused. Even in Sabitha Ramamurty &
Anr. V. R.B.S. Channabasavaradhya [2006 (9) SCALE 212] such precise
observations are not to be found.
10. In the present case it is yet to be decided as to whether the liability
was that of the company or the appellant herself. It could be personal
liability of the appellant herself for discharging her debt for which she might
have misused the cheque-book of the company. Even under such
circumstances the offence against her could be complete is not known at
this stage since no evidence has been led in this regard. Therefore, the
inference that the liability was that of the company and she was merely
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vicariously liable would, therefore, be a premature finding. On the other
hand even if she has misused the cheque-book to discharge her own
liability, taking advantage of her authorization to put the signatures on the
cheque-book of M/s.Intel Travels, she still would be liable to be proceeded
against and it would be a question between herself and the company
whether she has committed any offence vis-‘-vis the company also. At this
stage, however, it is not possible to say anything without any evidence
having been led.
11. Law laid down in S.V. Muzumdar & Ors. V. Gujarat State Fertilizer
Co. Ltd. & Anr. [(2005) 4 SCC 173], Sarav Investment and Financial
Consultants Pvt. Ltd. & Anr. V. Llyods Register of Shipping Indian
Office Staff Provident Fund & Anr. [2007 (12) SCALE 123] as also in K.
Srikanth Singh v. North East Securities Ltd. & Anr. [(2007) 9 SCALE
371] does not even impliedly suggest that unless the company is joined as
an accused it is not possible to proceed against the signatory of the
cheque.
12. A close examination of the decision in SMS Pharmaceuticals’s
case (cited supra) as also the decision in N. Rangachari v. Bharat
Sanchar Nigam Ltd. [2007 (5) SCALE 821] does not show such extreme
proposition. All that SMS Pharmaceuticals and N. Rangachari say is that
the prosecution could be launched not only against the company on behalf
of which the cheque issued has been dishonoured but it could also be
initiated against every person who, at that time of committing the offence,
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was incharge and was responsible for the affairs of the company.
However, it does not mean that both the accused must be joined together
for proper prosecution and that the signatory of the cheque cannot
individually be prosecuted in the absence of the company.
13. A complaint has been made against the two accused persons,
namely, Smt.Aneeta Hada who is described as Director of M/s.Intel Travels
and also Anil Hada who has also been described as Director of the
company. It is then specifically suggested in the complaint that the
accused persons used to purchase the air-tickets for their clients and that
they had purchased the air-tickets from the complainant from time to time
and issued the cheques worth Rs.5,10,000/- and Rs.4,21,000/-. It is
specifically stated that Accused No.1 also used to conduct the business of
her company and she also used to purchase the tickets from the
complainant. The basic complaint, therefore, is against two accused
persons in their individual capacity, though they might be purchasing the
tickets for their traveling company. However, merely because of that fact
one cannot reach at a conclusion that in the absence of M/s. Intel Travels
the two accused persons and more particularly the appellant herein who
was the signatory to the cheque and whose cheque was bounced cannot
be prosecuted. That could not be the import of the decision in Everest
Advertising Pvt. Ltd. V. State Govt. of NCT of Delhi & Ors. [2007 (5)
SCALE 479], SMS Pharmaceuticals (cited supra) or the decision in N.K.
Wahi v. Shekhar Singh & Ors. [2007 (4) SCALE 188].
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14. In the decision in Anil Hada v. Indian Acrylic Ltd. [(2000) 1 SCC 1],
it so happened that the company itself was in liquidation and the Division
Bench of this Court was considering the question as to whether the
signatory to the cheque could be proceeded against. The expressions in
paragraph 12 of this judgment are apposite. The words used in Section
141(1) of the Act as also the words "shall also" used in sub-section (2) of
Section 141 had been held to bring the third category of persons
additionally within the dragnet of the offence on an equal path. The words
"company need not be proceeded against" cannot be held as obiter dicta.
Further there is nothing conflicting in the aforesaid two judgments in the
cases of Anil Hada & SMS Pharmaceuticals. On the other hand a
reading of the judgment in Anil Hada’s case would suggest that the court
therein considered the law laid down in State of Madras v. C.V. Parekh
[(1970) 3 SCC 491] wherein the analogous provisions under Section 7 of
the Essential Commodities Act read with Section 10 of that Act fell for
consideration. There also the private limited company was not included as
an accused and the question was as to whether the Managing Director
alone could be proceeded against. This judgment was considered in the
celebrated judgment in Sehoratan Agarwal v. State of M.P. [(1987) 3
SCC 684]. The Court not only explained the observations earlier made in
C.V. Parekh’s case [cited supra) but went on to hold further as follows:
"Any one or more or all of them may be prosecuted and
punished. The company alone may be prosecuted. The
person in charge only may be prosecuted. The conniving
officer may individually be prosecuted. One, some or all may
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be prosecuted. There is no statutory compulsion that the
person in charge or an officer of the company may not be
prosecuted unless he be ranged alongside the company itself.
Section 10 indicates the persons who may be prosecuted
where the contravention is made by the company. It does not
lay down any condition that the person in charge or an officer
of the company may not be separately prosecuted if the
company itself is not prosecuted. Each or any of them may be
separately prosecuted or along with the company." (Emphasis
Supplied)
Ultimately the law laid down in Sheoratan Aggarwal’s case was approved
by the Bench. The Court ultimately held in para 21 as under:
"We, therefore, hold that even if the prosecution proceedings
against the company were not taken or could not be
continued, it is no bar for proceeding against the other persons
falling within the purview of sub-sections (1) and (2) of Section
141 of the Act. In the light of the aforesaid view we do not
consider it necessary to deal with the remaining question
whether winding up order of a company would render the
company non-existent." (Emphasis Supplied)
It will, therefore, be seen that the question as to whether the persons like
accused alone in the absence of the company having been made accused
could be proceeded against or not had directly fallen for consideration and
it cannot be said that any observations in Anil Hada’s case by any chance
could be viewed as obiter. This is a binding precedent.
15. The ratio laid down in Anil Hada’s case was applicable to the factual
matrix thereof which is identical here. The question has been directly
decided that the prosecution of the company is not a sine qua non for the
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prosecution of the other persons who fall within the second and third
categories, namely, those who were incharge and responsible for the
business of the company.
16. Even the law laid down in Raghu Lakshminarayananan v. Fine
Tubes [2007 (5) SCALE 353], would not be apposite. In that case the
question was whether the persons in the second category, as in the
present case, could be prosecuted in the absence of the company.
17. The principle "lex non cogit ad impossibilia" would not apply here,
because of the language of Section 141 of the Act and the present
appellant would be completely liable since the cheques signed by her were
bounced.
18. Since the decision in Sheoratan Agarwal’ case (cited supra) has
already been considered by the Division Bench of this Court and relied
upon in the decision in Anil Hada, it need not be considered afresh.
19. Lastly, since this question was already covered by Anil Hada’s
case, the appellant would be liable to be prosecuted even when M/s.Intel
Travel had not been joined as an accused. It is in the light of decision in
Anil Hada that subsequent decisions in Bilakchand Gyanchand Co. v. A.
Chinnaswami [JT 1999 (10) SC 236] and Rajneesh Aggarwal v. Amit J.
Bhalla [JT 2001 (1) SC 325] would have to be read. The other cases
referred to, one of Kerala High Court in Pramod v. C.K. Velayudhan &
Ors. [(2006) 1 JCC (NI) 62] and Monaben Ketanbhai Shah v. State of
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Gujarat [(2004) 7 SCC 15: 2004 Cri. LJ 4249] in my opinion are not
apposite to the present controversy.
20. The decisions in Andhra Pradesh High Court reported in B.S.K.
Prasad v. M/s.Laxmi Vessels [2005 (1) LJ (NOC) 7: 2004 Cri. LJ 4079
(AP)] and K. Seetharam Reddy v. K. Radhika Rani [(2002) 112
Company Cases 204 (AP) support the view that the person who has
drawn the cheque, in case the cheque is dishonoured, is liable under
Section 138 of the Act itself.
21. No comment is required on the reported decision in B.S.K. Prasad’s
case (cited supra) since the decision in that case turns on the evidence
led in that case. That opportunity has still not been given to the
prosecution in this case and it is not known uptil now as to whether the
cheque issued by the accused was issued on behalf of the company or to
pay off her own debts. Again the judgment does not say anywhere that the
signatory to the cheque cannot alone be prosecuted.
22. Appellant’s reliance on the last case in Girish Saxena v. Praveen
Kumar Jain & Ors. [(2007) 2 JCC (NI) 220] is also unnecessary since in
that case the accused was not a signatory to the cheque. The decision in
that case would not be applicable to the present case.
23. In view of the above I would be of the opinion that the appeals must
be dismissed.
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..............................J.
(V.S. SIRPURKAR)
New Delhi,
May 8, 2008