Gujarat High Court
J.K.P. Agro Foods Pvt Ltd Through ... vs Mahindarpur Balaji Trading (Opc) Co. ... on 1 November, 2023
NEUTRAL CITATION
R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR LEAVE TO APPEAL) NO. 3191 of
2022
In R/CRIMINAL APPEAL NO. 335 of 2022
With
R/CRIMINAL APPEAL NO. 335 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE NISHA M. THAKORE
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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J.K.P. AGRO FOODS PVT LTD THROUGH DIRECTOR KALPESH
PRAJAPATI
Versus
MAHINDARPUR BALAJI TRADING (OPC) CO. PVT. LTD., THROUGH
DIRECTOR GIRIRAJ S. MAHESHWARI
==========================================================
Appearance:
MS ANUSHREE M SONI(11431) for the Applicant(s) No. 1
NOTICE SERVED for the Respondent(s) No. 1
MR RC KODEKAR ADDIL. PUBLIC PROSECUTOR for the Respondent(s)
No. 2
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CORAM:HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 01/11/2023
ORAL JUDGMENT
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1. Rule. Learned APP waives service of Rule on behalf of the respondent No.1 - State.
2. This is an application filed by the applicant - original complainant under Section 378(4)(3) of the Code of Criminal Procedure challenging the judgment and order dated 10.12.2021 passed by the learned 2nd Additional Chief Judicial Magistrate, Anand, in Criminal Case No.3043 of 2018. By the said judgment and order, the learned Magistrate has proceeded to record the acquittal of the present respondent No.1 for the offence punishable under Section 138 of the Negotiable Instruments Act.
3. Brief facts leading to filing of the present appeal are summarized as under:
3.1 The respondent No.1 has been arraigned as an accused in his capacity as Director of Mahindarpur Balaji Trading (OPC) Co. Pvt.
Ltd. The complainant is a Company registered under the Companies Act, 2013 and has filed the complaint through its Director - Kalpesh Prajapati. It is the case of the complainant that the respondent - accused has purchased the goods worth Page 2 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined Rs.14,47,400/-, which was reflected as outstanding amount in its account. The complainant has produced the bilty issued by Surya Logistic Services as well as All India Road Transport Company in support of alleged delivery of the goods to the respondent - original accused. Hence, according to the complainant the legally enforceable debt to be realized from the accused is to the tune of Rs.14,47,4000/-.
3.2 The complainant has further contended that the respondent - accused had issued a cheque of the aforesaid Mahindarpur Balaji Trading (OPC) Co. Pvt. Ltd. towards the payment of the aforesaid outstanding amount on 29.05.2018. The said cheque was issued under the signature of the original accused. It is further contended that the respondent - accused had assured the complainant about realization of the aforesaid amount. Thus, the complainant had become the holder in due course of the said disputed cheque. 3.3 The complainant had presented the said cheque dated 29.05.2018, however, the said 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 Page 3 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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 the learned Magistrate and his plea was recorded vide Page 4 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined Exhibit 23, wherein he had denied the alleged offence. In such circumstances, the learned Magistrate has proceeded with summary trial of the aforesaid Criminal Case. After framing issues and upon recording the evidence led by the respective parties as well as taking into consideration the statement of the respondent - accused recorded under Section 313 of the Code of Criminal Procedure, the learned Magistrate proceeded to record the acquittal of present respondent - accused by holding that the complaint itself was not maintainable.
5. I have heard learned advocate Ms. Anushree Soni, who has appeared on record for the applicant and learned APP Mr. R.C. Kodekar has appeared on behalf of the respondent - State.
6. This Court vide order dated 09.02.2022 had issued notice upon the respondent - accused. Such notice issued by the Court has been duly served, however, the respondent - accused has chosen not to contest this application seeking special leave to appeal by entering his appearance. In such circumstances, noticing the issue involved, this Court has proceeded for final adjudication of this application seeking special leave to appeal along with appeal. Page 5 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023
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7. Learned advocate for the applicant at the outset has assailed the order of acquittal mainly on the ground that the learned Magistrate though initially after recording on verification, having satisfied with the compliance of basic ingredients under Section 138 of the Negotiable Instruments Act issued summons upon the respondent - accused however later on proceeded to dismiss the complaint on erroneous ground by holding the complaint itself being not maintainable. She, therefore, submitted that the special leave to appeal requires consideration, more particularly, the erroneous determination of non-maintainability of the complaint has entailed acquittal of the respondent - accused on technical ground, which is required to be examined closely after admission of the appeal.
8. Learned advocate has invited attention of this Court to the cause title of the original complaint and has contended that in fact, the complaint was filed against the drawer i.e. Mahindarpur Balaji Trading (OPC) Co. Pvt. Ltd. as well as authorized signatory namely Giriraj S. Maheshwari, who is Director of the said Company. She further submitted that in the cause title, since the Page 6 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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 established that there is no another Director in the Company except present respondent - accused, who is also Page 7 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined authorized signatory of the Company, there was sufficient compliance of the provisions of the Section 138 of the Negotiable Instruments Act. By referring to the various documents including certificate of incorporation of the aforesaid Company (Exhibit 25), disputed cheque (Exhibit 26), cheque return memo (Exhibit 27), legal notice issued by the complainant to the accused (Exhibit 28), RPAD slip as well as postal slip (Exhibit 29), tracking consignment report (Exhibit 30), speed post slip (Exhibit 31), tracking consignment report of speed post (Exhibit 32), copy of supplied bills to the accused (Exhibit 33 to 36), transport bills (Exhibit 37 to
40), reply given by the accused (Exhibit 41) and extract of account maintained by the complainant (Exhibit 42) , she has further invited attention of this Court to the findings recorded by the learned Magistrate. She submitted that upon appreciation of the aforesaid documents, the learned Magistrate at one stage, had drawn presumption in favour of the complainant in terms of Sections 118(a) and 139 of the Negotiable Instruments Act. She further submitted that though the complainant had offered himself for cross-examination, the respondent - accused had failed to cross- examine the complainant nor any evidence was led by the respondent - accused. She submitted that only defence, which Page 8 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined has emerged on record, is in the form of a statement of the accused recorded under Section 313 of the Code of Criminal Procedure. The only response is in the form of denial of questions put to the respondent accused. She therefore submitted that in absence of any contradictions being brought on record by the respondent - accused, the presumption drawn by the learned Magistrate in favour of the complainant has remained intact. In such circumstances, the learned Magistrate ought to have convicted the respondent - accused for the offence punishable under Section 138 of the Negotiable Instruments Act.
9. I have heard learned advocate for the applicant and having perused the record as well as the authorities placed on record, the only question which poses for consideration is whether the learned Magistrate committed any error in dismissing the complaint by holding that non-joinder of drawer of the disputed cheque i.e. Company is fatal to the 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 Page 9 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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.
11. Learned advocate for the applicant has tried to distinguish the aforesaid judgment of the Hon'ble Supreme Court by making much emphasize on the fact that invocation of Section 141 would come into play in case where the Company and group of persons guiding Page 10 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined the business of the Company, have any criminal intent, then that would be imputed to the body or the Corporation. Whereas in the facts of the present case, the Company is solely guided by one person i.e. sole Director, who is at the same time authorized signatory of the disputed cheque. To examine the aforesaid argument of the learned advocate, it would be relevant to first take into consideration the cause title of the original complaint. Close examination of the description of cause title of the complaint, suggests narration of the sole accused as under:
"Giriraj Maheshwari, Director of Mahindarpur Balaji Trading (OPC) Co. Pvt. Ltd."
It is evident from the aforesaid narration that only person, who has been arraigned as accused in the complaint is Giriraj Maheshwari, who has been joined in his capacity as Director of the said Company. Thus, it is evident that the Company has not been separately joined as accused in the aforesaid complaint. It would be appropriate to look into the aspect of significance of existence of the Company in cases related to the offence committed by the Company. The Company is a separate "legal person" or "legal entity" in common law with a unique identity from its members. Page 11 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023
NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined Generally, the Company upon incorporation under the provisions of Act becomes a unit of legal entity and it is under control of its Board of Directors. In such circumstances, evidently no crime can be committed by the Company unless it is projected by the Director's decision. In such a set of facts, the theory of law of attribution comes into play which mandates that the persons, who are companies "directing mind" are held liable along with its business. The issue arose for consideration in the case of Maksud Saiyed Vs. State of Gujarat & Ors. reported in 2007 (14) Company Cases 590 (SC), whereby the Court ruled out that the liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. The best instance where the statute provides for certain provisions for vicarious liability, based on the existence of Legislation intention responding to 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 Page 12 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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 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 Page 13 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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.]"
12. Thus, on plain reading of the aforesaid provision, it curled out the Legislation intention which drew the vicarious responsibility of the Director for the violation committed by the Corporate body by virtue of his role as Director. Later on, the aforesaid view was reiterated in the case of Sunil Bharti Mittal Vs. Central Bureau of Investigation reported in 2015(4) SCC 609. The Hon'ble Supreme Court in the case of Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others reported in (1998) 5 SCC 749 held that Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It further held that while issuing summons, it was for the learned Magistrate to record satisfaction about prima facie Page 14 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined case against the accused, who is a Managing Director, Company Secretary and / or Director of the Company and the role played by the Company in their respective capacity. Thus, the aforesaid compliance was held sine qua non for initiating summary proceedings. Same view was followed by and much emphasis was put on proceedings against the Director as a consequence of creation of legal fiction in the case of Kirshna Texport & Capital markets Ltd. vs. Ila A. Agrawal & Ors., reported in 2015 (8) SCC
28. In light of the aforesaid authorities, undoubtedly putting criminal proceedings in motion is a serious affair where strict adherence of statutory provisions is expected.
13. Apart from the aforesaid authorities, if one looks at strict adherence of section 141 of the NI Act is concern, the Hon'ble Supreme Court in the case of Anita 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 Page 15 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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 an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 19 [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-- Page 16 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023
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(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, 20 [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."
14. Aforesaid provisions have been dealt with by the Hon'ble Supreme Court in the case of Anita Handa(Supra). The relevant observations are as under:
"19. The main part of the provision can be segregated into three compartments, namely, (i) the cheque is drawn by a person, (ii) the cheque drawn on an account maintained by Page 17 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined him with the 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 a debt or other liability, is returned unpaid, either because the amount of money standing to the credit of that account is insufficient to honour the cheque or it exceeds the amount arranged to be paid from that account by an arrangement made with the bank and (iii) such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of the Act, be punished with imprisonment for a term which may extend to two years or with fine which may extend to twice the amount of the cheque or with both. The proviso to the said section postulates under what circumstances the section shall not apply. In the case at hand, we are not concerned with the said aspect. It will not be out of place to state that the main part of the provision deals with the basic ingredients and 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.
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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, there is a 'deemed' concept of criminal liability.
32. We have referred to the aforesaid authorities to highlight that the company can have criminal liability and further, if a Page 19 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain. As is perceptible, the provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own signification.
38. From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term 'deemed' has to be read in its context and further the fullest logical purpose and import are to be understood. It is because in modern legislation, the term 'deemed' has been used for manifold purposes. The object of Page 20 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined the legislature has to be kept in mind.
39. The word 'deemed' used in Section 141 of the Act applies to the company and the persons responsible for the acts of the company. It crystallizes the corporate criminal liability and vicarious liability of a person who is in charge of the company. What averments should be required to make a person vicariously liable has been dealt with in SMS Pharmaceuticals Ltd. (supra). In the said case, it has been opined that the criminal liability on account of dishonour of cheque primarily falls on the drawee company and is extended to the officers of the company and as there is a specific provision extending the liability to the officers, the conditions incorporated in Section 141 are to be satisfied.
43. A contention was raised before this Court on behalf of the State of Madras that the conviction could be made on the basis of Section 10 of the 1955 Act. The three-Judge Bench repelled the contention by stating thus: -
"3. Learned counsel for the appellant, however, sought conviction of the two respondents on the basis of Section Page 21 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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 Page 22 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined condition is that the company should be held to be liable; a charge has to be framed; a finding has to be recorded, and the liability of the persons in charge of the company only arises when the contravention is by the company itself.
53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.
56. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It Page 23 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context.
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 Page 24 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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.
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 Page 25 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023 NEUTRAL CITATION R/CR.MA/3191/2022 JUDGMENT DATED: 01/11/2023 undefined 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 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, no arguable case is made out to grant this application seeking special leave to appeal. Hence, present application is hereby dismissed. Rule is discharged.
In view of the dismissal of the application seeking leave to appeal, the Criminal Appeal No.335 of 2022 hereby stands disposed of.
(NISHA M. THAKORE,J) Y.N. VYAS Page 26 of 26 Downloaded on : Wed Nov 01 20:49:48 IST 2023