TMI Blog2023 (11) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Director or authorized signatory of the cheque without arraigning the company as accused, was maintainable? Initially, the matter was notified before two Judges Bench, which due to diversion of opinion, was referred to the three Judges bench. The Hon ble Supreme Court had upon analysis of relevant provisions of the Negotiable Instruments Act, held that Section 141 uses terms ``person and refers it to a company. The Company is treated as a juristic person in the eyes of law and the concept of corporate criminal liability is attracted to a corporation and company. The said provisions of the Act invariably held in offences by the Company, certain categories of officers in certain circumstances are deemed to be guilty of the offence under Section 138 of the Negotiable Instruments Act. In view of the aforesaid analysis drawn by the Hon ble Supreme Court, this Court is of the view that non-joinder of the Company as accused, which otherwise is treated as principal offender being drawer of the cheque, the Director of the Company joined as sole accused representing the company as well as authorised signatory, would not served the provisions of Section 141 of the Act. Thus, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque was not realized pursuant to the instructions issued by the drawer for stop payment. The aforesaid fact of non-realization was communicated to the complainant by the concerned bank on 01.06.2018. Hence, the cause had arisen for the complainant to proceed for issuance of statutory notice under Section 138 of the Negotiable Instruments Act. 3.4 The aforesaid legal notice dated 18.06.2018 raising demand of outstanding amount was sent through RPAD as well as by Speed Post at the known address of the respondent accused. Such notice, according to the complainant, was duly served upon the accused on 22.06.2018 as well as through Speed Post on 21.06.2018. The respondent accused had given vague reply dated 25.06.2018 and had avoided the payment of the outstanding amount. This gave cause for the complainant to proceed for lodging of the complainant before the Court of 2nd Additional Chief Judicial Magistrate, Anand. On 17.07.2018, such a complaint was registered as Criminal Case No.3043 of 2018. 4. Learned Magistrate upon recording the verification of the complainant had proceeded to issue summons upon the respondent accused. The respondent accused had appeared before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he description of the respondent accused was narrated as Company through its Director, the learned Magistrate ought to have appreciated the fact that both the drawer as well as authorized signatory were represented and joined as accused. She further contended that the learned Magistrate wrongly disbelieved the case of the complainant by applying the principle laid down by the Hon ble Supreme Court in the case of Anita Handa Vs. Godfather Travels and Tours Pvt. Ltd. reported in (2012) 5 Supreme Court Cases 661 in the facts of the present case. At this stage, the learned advocate has placed on record the Company Master Data, wherein the details of the said Company goes to indicate that the respondent accused is the sole Director of the Company and thus, the said Company is categorized as Private (one person) Company. Learned advocate has placed reliance upon Section 2(62) of the Companies Act, 2013 and has argued that the Company can be incorporated with one Director also. In fact, in such a category of the Company, the compliance requirements are much lesser than that of private Company. By referring to the aforesaid provisions, she further contended that once it had been establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under Section 138 of the Negotiable Instruments Act. 10. The aforesaid issue being the question of law is no longer res integra. The similar had question arose for consideration before three Judges Bench of the Hon'ble Supreme Court in the case of Anita Handa (Supra) as to whether the complaint under Section 138 of the Negotiable Instruments Act and Section 141 thereto against the Director or authorized signatory of the cheque without arraigning the company as accused, was maintainable? Initially, the matter was notified before two Judges Bench, which due to diversion of opinion, was referred to the three Judges bench. The Hon ble Supreme Court had upon analysis of relevant provisions of the Negotiable Instruments Act, held that Section 141 uses terms ``person and refers it to a company. The Company is treated as a juristic person in the eyes of law and the concept of corporate criminal liability is attracted to a corporation and company. The said provisions of the Act invariably held in offences by the Company, certain categories of officers in certain circumstances are deemed to be guilty of the offence under Section 138 of the Negotiable Instruments Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vicarious liability in the criminal case committed by the Corporate body, is available in the form of Section 141 of the Negotiable Instruments Act. Section 141 of the Negotiable Instruments Act reads as under: Section 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 knowledge, or that he had exercised all due diligence to prevent the commission of such offence: 22 [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 liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Handa (Supra) noted that if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate and in this backdrop, Section 141 of the Act was analyzed. The legal position which emerges from the aforesaid authority and plain reading of Section 141 of Negotiable Instruments Act, invariably suggests the legislative intent about the constructive liability of the Director on behalf of the Company was created by the legal fiction. At this stage, it would be relevant to revisit the charging section under the Negotiable Instruments Act. Section 138 of the Negotiable Instruments Act read as under: Section 138: 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso deals with certain circumstances and lays certain conditions where it will not be applicable. The emphasis has been laid on the factum that the cheque has to be drawn by a person on the account maintained by him and he must have issued the cheque in discharge of any debt or other liability. 20. Section 7 of the Act defines drawer to mean the maker of a bill of exchange or a cheque. An authorised signatory of a company becomes a drawer as he has been authorised to do so in respect of the account maintained by the company. 22. On a reading of the said provision, it is plain as day that if a person who commits offence under Section 138 of the Act is a company, the company as well as every person in charge of and responsible to the company for the conduct of business of the company at the time of commission of offence is deemed to be guilty of the offence. The first proviso carves out under what circumstances the criminal liability would not be fastened. Sub-section (2) enlarges the criminal liability by incorporating the concepts of connivance, negligence and consent that engulfs many categories of officers. It is worth noting that in both the provisions, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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), is 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, the two respondents could not be held responsible. The actual contravention was by Kamdar and Vallabhadas Thacker and any contravention by them would not fasten responsibility on the respondents. ( emphasize supplied ) The aforesaid paragraph clearly lays down that the first condition is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. We say so on the basis of the ratio laid down in C.V. Parekh (supra) which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada (supra) is overruled with the qualifier as stated in paragraph 51. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove. 15. In view of the aforesaid analysis drawn by the Hon ble Supreme Court, this Court is of the view that non-joinder of the Company as accused, which otherwise is treated as princip ..... X X X X Extracts X X X X X X X X Extracts X X X X
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