Maintainability of Section 138 prosecution against Managing Director without impleading the company as an accused.

The complainant (respondent) invested ₹4,00,000 with the accused (petitioner), who was the Managing Director of Sree Shanmuga Modern Rice Mills Pvt. Ltd., in 2016

Following the cessation of interest payments, the accused issued a cheque dated 19.03.2018 for the principal amount

The cheque was returned for "funds insufficient"

The complainant issued a legal notice to the petitioner in his individual capacity as Managing Director, but did not address or implead the company itself

The Trial Court convicted the petitioner under Section 138 of the N.I. Act

The petitioner challenged these findings on the grounds that the prosecution was not maintainable without arraigning the company as an accused

1. Whether a Managing Director of a company can be liable for prosecution under Section 138 of the N.I. Act without the company being arraigned as an accused

2. Whether the absence of specific averments in the complaint regarding the Managing Director's responsibility for the business conduct of the company, coupled with the non-inclusion of the company as an accused, vitiates the proceedings

3. Whether the Trial and Appellate Courts erred in convicting the petitioner by overlooked the mandate of Section 141 of the N.I. Act

The Court primarily applied Section 138 (dishonour of cheque) and Section 141 (offences by companies) of the Negotiable Instruments Act, 1881

It relied heavily on the landmark Supreme Court precedent Aneeta Hada v. Godfather Travels and Tours Private Limited (2012), which established that arraigning the company as an accused is a condition precedent to invoking vicarious liability against its directors

Further reliance was placed on Himanshu v. B. Shivamurthy (2019) and Pawan Kumar Goel v. State of U.P. (2022), which reaffirmed that prosecution against a director is not maintainable without the company as a principal accused

The Court observed that the subject cheque (Ex.P1) was issued on the account of "Sree Shanmuga Modern Rice Mills Private Limited" and signed by the petitioner as its Managing Director

Under Section 141 of the N.I. Act, when a company commits an offence, the company itself must be prosecuted to fasten vicarious liability on its officers

The Court noted that the complainant failed to implead the company in the cause title or the legal notice

It rejected the Appellate Court’s reasoning that the petitioner could be prosecuted alone simply because he was at the helm of affairs, noting that such a finding contradicts the doctrine of strict construction applied to criminal statutes

The Court highlighted that the commission of the offence by the company is an "express condition precedent" to attract the liability of others

Thus, the failure to array the juristic person (the company) was deemed a fatal legal defect that could not be overlooked as a mere technicality

The revision petition was allowed, and the judgments of conviction passed by the Trial Court and confirmed by the Appellate Court were set aside. The petitioner was acquitted of the offence punishable under Section 138 of the N.I. Act, and his bail bonds were cancelled