Sec.138 and sec.141 of N.I. Act - Whether the complaint against the accused alone maintainable leaving the company set free -NO - High court quashed the summons issued against the company by trial court and confirmed the summons issued against the appellant - Apex court held 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 drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh17 which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove.” In the present case, the High Court by impugned judgment dated 13th August, 2007 held that the complaint against respondent no.2-Company was not maintainable and quashed the summon issued by the Trial Court against respondent no.2-Company. Thereby, the Company being not a party to the proceedings under Section 138 read with Section 141 of the Act and in view of the fact that part of the judgment referred to by the High Court in Anil Hada (supra) has been overruled by three Judge Bench of this Court in Aneeta Hada (supra), we have no other option but to set aside the rest part of the impugned judgment whereby the High Court held that the proceedings against the appellant can be continued even in absence of the Company. We, accordingly, set aside that part of the impugned judgment dated 13th August, 2007 passed by the High Court so far it relates to appellant and quash the summon and proceeding pursuant to complaint case No.698 of 2001 qua the appellant.The appeal is allowed with aforesaid observation.=
The aforesaid three
cheques were presented before the Indian Overseas Bank, Gandhi Nagar, Jammu
and were dishonoured on 6.01.2004.
Respondent No.1 served notice on
respondent no.2-Company with a demand notice separately for all the three
cheques.
Respondent no.2-Company replied to the said notice on 20.01.2004
informed respondent no.1 that payments were stopped because of their
inability to stop the piracy due to which the cable operators did not make
payments.
Thereafter, respondent no.1 issued second notice dated 28.01.2004 on
the appellant based on the same facts and based on the same memo of
dishonor in respect of the aforesaid three cheques.
Respondent no.1 also
issued a corrigendum of the same date to the said notice.
The appellant
submitted reply to the said notice on 3.02.2004.
4. Respondent no.1 filed a Criminal Complaint under Sections 138 and 141
of the Act on 17.03.2004 =
By the impugned judgment, the High Court held that
the complaint under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the, ‘Act’) was barred by
limitation and quashed the summon order against respondent no.2-Visionaries
Media Network (hereinafter referred to as the, ‘Company’).
It further held
that the dispute qua the appellant (petitioner no.2 before High Court) is
within limitation and affirmed the summon order against the appellant.=
Whether the complaint against the accused alone maintainable leaving the company set free
Again the same question was considered by three Judge Bench of this
Court in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. (2012) 5 SCC
661. The Court noticed the decisions in Anil Hada (supra) case and Aneeta
Hada (supra) case. The three Judge Bench while partly overruled the
finding of Anil Hada (supra) affirmed the decision of Aneeta Hada (supra).
This Court held
“51. We have already opined that the decision in Sheoratan Agarwal runs
counter to the ratio laid down in C.V. Parekh which is by a larger Bench
and hence, is a binding precedent. On the aforesaid ratiocination, the
decision in Anil Hada has to be treated as not laying down the correct law
as far as it states that the Director or any other officer can be
prosecuted without impleadment of the company. Needless to emphasise, the
matter would stand on a different footing where there is some legal
impediment and the doctrine of lex non cogit ad impossibilia gets
attracted.”
“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.”
“58. Applying the doctrine of strict construction, we are of the considered
opinion that commission of offence by the company is an express condition
precedent to attract the vicarious liability of others. Thus, the words “as
well as the company” appearing in the section make it absolutely
unmistakably clear that when the company can be prosecuted, then only the
persons mentioned in the other categories could be vicariously liable for
the offence subject to the averments in the petition and proof thereof. One
cannot be oblivious of the fact that the company is a juristic person and
it has its own respectability. If a finding is recorded against it, it
would create a concavity in its reputation. There can be situations when
the corporate reputation is affected when a Director is indicted.
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 drag-net on the
touchstone of vicarious liability as the same has been stipulated in the
provision itself. We say so on the basis of the ratio laid down in C.V.
Parekh17 which is a three-Judge Bench decision. Thus, the view expressed in
Sheoratan Agarwal does not correctly lay down the law and, accordingly, is
hereby overruled. The decision in Anil Hada is overruled with the qualifier
as stated in para 51. The decision in Modi Distillery has to be treated to
be restricted to its own facts as has been explained by us hereinabove.”
15. In the present case, the High Court by impugned judgment dated 13th
August, 2007 held that the complaint against respondent no.2-Company was
not maintainable and quashed the summon issued by the Trial Court against
respondent no.2-Company. Thereby, the Company being not a party to the
proceedings under Section 138 read with Section 141 of the Act and in view
of the fact that part of the judgment referred to by the High Court in Anil
Hada (supra) has been overruled by three Judge Bench of this Court in
Aneeta Hada (supra), we have no other option but to set aside the rest part
of the impugned judgment whereby the High Court held that the proceedings
against the appellant can be continued even in absence of the Company. We,
accordingly, set aside that part of the impugned judgment dated 13th
August, 2007 passed by the High Court so far it relates to appellant and
quash the summon and proceeding pursuant to complaint case No.698 of 2001
qua the appellant.
16. The appeal is allowed with aforesaid observation.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1364 OF 2014
(arising out of SLP(Crl.) No.7039 of 2007)
Anil Gupta … APPELLANT
VERSUS
Star India Pvt. Ltd. & Anr. … RESPONDENTS
J U D G M E N T
SUDHANSU JYOTI MUKHOPADHAYA,J.
Leave granted.
2. This appeal is directed against the judgment dated 13th August, 2007
passed by the High Court of Delhi at New Delhi in Criminal Miscellaneous
Case No.2380 of 2004. By the impugned judgment, the High Court held that
the complaint under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the, ‘Act’) was barred by
limitation and quashed the summon order against respondent no.2-Visionaries
Media Network (hereinafter referred to as the, ‘Company’). It further held
that the dispute qua the appellant (petitioner no.2 before High Court) is
within limitation and affirmed the summon order against the appellant.
3. The factual matrix of the case is as follows:
A subscription agreement was entered into between respondent nos.1
and 2 whereby respondent no.2-Company was appointed as distributor of Star
Channels and collecting subscription fee for the same. On 27.12.2003,
respondent no.2-Company issued three cheques bearing nos.790913, 790912 and
790911 for Rs.6,00,000/-, Rs.5,00,000/- and Rs.5,00,000/- respectively
drawn on the Indian Overseas Bank, Gandhi Nagar, Jammu. The aforesaid three
cheques were presented before the Indian Overseas Bank, Gandhi Nagar, Jammu
and were dishonoured on 6.01.2004. Respondent No.1 served notice on
respondent no.2-Company with a demand notice separately for all the three
cheques. Respondent no.2-Company replied to the said notice on 20.01.2004
informed respondent no.1 that payments were stopped because of their
inability to stop the piracy due to which the cable operators did not make
payments.
Thereafter, respondent no.1 issued second notice dated 28.01.2004 on
the appellant based on the same facts and based on the same memo of
dishonor in respect of the aforesaid three cheques. Respondent no.1 also
issued a corrigendum of the same date to the said notice. The appellant
submitted reply to the said notice on 3.02.2004.
4. Respondent no.1 filed a Criminal Complaint under Sections 138 and 141
of the Act on 17.03.2004. According to appellant, respondent no,1 concealed
the material fact of having earlier issued notice dated 14.1.2004 with
regard to the aforesaid three cheques and by misleading the Court got
summons issued by Metropolitan Magistrate in Complaint No.698 of 2001 to
the appellant and respondent no.2-Company.
5. Thereafter, respondent no.2-Company and appellant jointly filed
Criminal Miscellaneous Petition No.2380 of 2004 under Section 482 of the
Criminal Procedure Code, 1973 before the High Court of Delhi at New Delhi
for quashing the aforesaid criminal complaint filed by respondent no.1. In
its reply, respondent no.1 taken the plea that first notice dated
14.01.2004 was not a notice under Section 138 of the Act. It was contended
on behalf of the appellant that he was only vicariously liable on behalf of
respondent no.2-Company. Learned counsel for the appellant placed reliance
on decisions of this Court in support of his claim.
6. The High Court by impugned judgment while recording the stand taken
by respondent no.1 that letter dated 14.01.2004 constituted a valid notice
under Section 138 of the Act and hence the complaint based on second notice
against respondent no.2-Company was not maintainable and quashed the summon
issued by the Trial Court against respondent no.2-Company. However, so far
as appellant is concerned, the High Court relying on decision of this Court
in Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1, held that the
proceeding against the Director can be issued even in absence of the
Company being impleaded, The High Court further held that the summoning
order was valid since the first notice was not addressed to the appellant
and the second notice which was also addressed to the appellant was issued
within time and. therefore, criminal complaint filed by respondent no.1
against the appellant on the basis of the said notice is maintainable.
7. Learned counsel appearing on behalf of the appellant contended that
the order of the High Court is contrary to the law in as much as this is
not a case where proceedings were initiated against the Managing Director
alone. On the contrary, the proceedings are instituted against the
company/accused and its Managing Director. In the event of the
company/accused being let off, the same cannot continue against the
Managing Director who admittedly is only vicariously liable.
8. It is further submitted that even as per law laid down in Anil
Handa’s case, the Director of a company/accused is only liable vicariously
and upon his showing that the principal accused is not liable he cannot be
held guilty.
9. On the other hand, according to counsel for the respondents, the
issue is no longer res integra as held by the High Court.
10. Section 138 of the Act deals with dishonor of cheque for
insufficiency etc. as follows:
“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 arrangement 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 a term
which may extend 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
[pic]
(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.”
From the aforesaid provision, it is clear that only the drawer of the
cheque falls within the ambit of Section 138 of the Act whether human being
or a body corporate or even a firm.
11. The guilt for offence under Section 138 will be deemed to be upon
other persons connected with the Company in view of Section 141 of the Act,
which reads as follows:
“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
[pic]without his knowledge, or that he had exercised all due diligence to
prevent the commission of such offence.
(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.”
12. Similar question was raised and considered by two Judge Bench of this
Court in Anil Hada v. India Acrylic Ltd. (2000) 1 SCC 1. This Court held:
“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 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.
13. If the offence was committed by a company it can be punished only if
the company is prosecuted. But instead of prosecuting the company if a
payee opts to prosecute only the persons falling within the second or third
category the payee can succeed in the case only if he succeeds in showing
that the offence was actually committed by the company. In such a
[pic]prosecution the accused can show that the company has not committed
the offence, though such company is not made an accused, and hence the
prosecuted accused is not liable to be punished. The provisions do not
contain a condition that prosecution of the company is sine qua non for
prosecution of the other persons who fall within the second and the third
categories mentioned above. No doubt a finding that the offence was
committed by the company is sine qua non for convicting those other
persons. But if a company is not prosecuted due to any legal snag or
otherwise, the other prosecuted persons cannot, on that score alone, escape
from the penal liability created through the legal fiction envisaged in
Section 141 of the Act.”
“21. 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.”
13. In Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., (2008) 13
SCC 703, taking note of the maxim lex non cogit ad impossibilia, two Judge
Bench of this Court observed:
“54. True interpretation, in my opinion, of the said provision would
be that a company has to be made an accused but applying the principle of
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 Section 138 as also Section 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.”
14. Again the same question was considered by three Judge Bench of this
Court in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. (2012) 5 SCC
661. The Court noticed the decisions in Anil Hada (supra) case and Aneeta
Hada (supra) case. The three Judge Bench while partly overruled the
finding of Anil Hada (supra) affirmed the decision of Aneeta Hada (supra).
This Court held
“51. We have already opined that the decision in Sheoratan Agarwal runs
counter to the ratio laid down in C.V. Parekh which is by a larger Bench
and hence, is a binding precedent. On the aforesaid ratiocination, the
decision in Anil Hada has to be treated as not laying down the correct law
as far as it states that the Director or any other officer can be
prosecuted without impleadment of the company. Needless to emphasise, the
matter would stand on a different footing where there is some legal
impediment and the doctrine of lex non cogit ad impossibilia gets
attracted.”
“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.”
“58. Applying the doctrine of strict construction, we are of the considered
opinion that commission of offence by the company is an express condition
precedent to attract the vicarious liability of others. Thus, the words “as
well as the company” appearing in the section make it absolutely
unmistakably clear that when the company can be prosecuted, then only the
persons mentioned in the other categories could be vicariously liable for
the offence subject to the averments in the petition and proof thereof. One
cannot be oblivious of the fact that the company is a juristic person and
it has its own respectability. If a finding is recorded against it, it
would create a concavity in its reputation. There can be situations when
the corporate reputation is affected when a Director is indicted.
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 drag-net on the
touchstone of vicarious liability as the same has been stipulated in the
provision itself. We say so on the basis of the ratio laid down in C.V.
Parekh17 which is a three-Judge Bench decision. Thus, the view expressed in
Sheoratan Agarwal does not correctly lay down the law and, accordingly, is
hereby overruled. The decision in Anil Hada is overruled with the qualifier
as stated in para 51. The decision in Modi Distillery has to be treated to
be restricted to its own facts as has been explained by us hereinabove.”
15. In the present case, the High Court by impugned judgment dated 13th
August, 2007 held that the complaint against respondent no.2-Company was
not maintainable and quashed the summon issued by the Trial Court against
respondent no.2-Company. Thereby, the Company being not a party to the
proceedings under Section 138 read with Section 141 of the Act and in view
of the fact that part of the judgment referred to by the High Court in Anil
Hada (supra) has been overruled by three Judge Bench of this Court in
Aneeta Hada (supra), we have no other option but to set aside the rest part
of the impugned judgment whereby the High Court held that the proceedings
against the appellant can be continued even in absence of the Company. We,
accordingly, set aside that part of the impugned judgment dated 13th
August, 2007 passed by the High Court so far it relates to appellant and
quash the summon and proceeding pursuant to complaint case No.698 of 2001
qua the appellant.
16. The appeal is allowed with aforesaid observation.
…………………………………………J.
(SUDHANSU JYOTI MUKHOPADHAYA)
…………………………………………J.
(V. GOPALA GOWDA)
NEW DELHI,
JULY 07, 2014.
The aforesaid three
cheques were presented before the Indian Overseas Bank, Gandhi Nagar, Jammu
and were dishonoured on 6.01.2004.
Respondent No.1 served notice on
respondent no.2-Company with a demand notice separately for all the three
cheques.
Respondent no.2-Company replied to the said notice on 20.01.2004
informed respondent no.1 that payments were stopped because of their
inability to stop the piracy due to which the cable operators did not make
payments.
Thereafter, respondent no.1 issued second notice dated 28.01.2004 on
the appellant based on the same facts and based on the same memo of
dishonor in respect of the aforesaid three cheques.
Respondent no.1 also
issued a corrigendum of the same date to the said notice.
The appellant
submitted reply to the said notice on 3.02.2004.
4. Respondent no.1 filed a Criminal Complaint under Sections 138 and 141
of the Act on 17.03.2004 =
By the impugned judgment, the High Court held that
the complaint under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the, ‘Act’) was barred by
limitation and quashed the summon order against respondent no.2-Visionaries
Media Network (hereinafter referred to as the, ‘Company’).
It further held
that the dispute qua the appellant (petitioner no.2 before High Court) is
within limitation and affirmed the summon order against the appellant.=
Again the same question was considered by three Judge Bench of this
Court in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. (2012) 5 SCC
661. The Court noticed the decisions in Anil Hada (supra) case and Aneeta
Hada (supra) case. The three Judge Bench while partly overruled the
finding of Anil Hada (supra) affirmed the decision of Aneeta Hada (supra).
This Court held
“51. We have already opined that the decision in Sheoratan Agarwal runs
counter to the ratio laid down in C.V. Parekh which is by a larger Bench
and hence, is a binding precedent. On the aforesaid ratiocination, the
decision in Anil Hada has to be treated as not laying down the correct law
as far as it states that the Director or any other officer can be
prosecuted without impleadment of the company. Needless to emphasise, the
matter would stand on a different footing where there is some legal
impediment and the doctrine of lex non cogit ad impossibilia gets
attracted.”
“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.”
“58. Applying the doctrine of strict construction, we are of the considered
opinion that commission of offence by the company is an express condition
precedent to attract the vicarious liability of others. Thus, the words “as
well as the company” appearing in the section make it absolutely
unmistakably clear that when the company can be prosecuted, then only the
persons mentioned in the other categories could be vicariously liable for
the offence subject to the averments in the petition and proof thereof. One
cannot be oblivious of the fact that the company is a juristic person and
it has its own respectability. If a finding is recorded against it, it
would create a concavity in its reputation. There can be situations when
the corporate reputation is affected when a Director is indicted.
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 drag-net on the
touchstone of vicarious liability as the same has been stipulated in the
provision itself. We say so on the basis of the ratio laid down in C.V.
Parekh17 which is a three-Judge Bench decision. Thus, the view expressed in
Sheoratan Agarwal does not correctly lay down the law and, accordingly, is
hereby overruled. The decision in Anil Hada is overruled with the qualifier
as stated in para 51. The decision in Modi Distillery has to be treated to
be restricted to its own facts as has been explained by us hereinabove.”
15. In the present case, the High Court by impugned judgment dated 13th
August, 2007 held that the complaint against respondent no.2-Company was
not maintainable and quashed the summon issued by the Trial Court against
respondent no.2-Company. Thereby, the Company being not a party to the
proceedings under Section 138 read with Section 141 of the Act and in view
of the fact that part of the judgment referred to by the High Court in Anil
Hada (supra) has been overruled by three Judge Bench of this Court in
Aneeta Hada (supra), we have no other option but to set aside the rest part
of the impugned judgment whereby the High Court held that the proceedings
against the appellant can be continued even in absence of the Company. We,
accordingly, set aside that part of the impugned judgment dated 13th
August, 2007 passed by the High Court so far it relates to appellant and
quash the summon and proceeding pursuant to complaint case No.698 of 2001
qua the appellant.
16. The appeal is allowed with aforesaid observation.
2014 – July. Part – http://judis.nic.in/supremecourt/filename=41752
SUDHANSU JYOTI MUKHOPADHAYA, V. GOPALA GOWDAREPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1364 OF 2014
(arising out of SLP(Crl.) No.7039 of 2007)
Anil Gupta … APPELLANT
VERSUS
Star India Pvt. Ltd. & Anr. … RESPONDENTS
J U D G M E N T
SUDHANSU JYOTI MUKHOPADHAYA,J.
Leave granted.
2. This appeal is directed against the judgment dated 13th August, 2007
passed by the High Court of Delhi at New Delhi in Criminal Miscellaneous
Case No.2380 of 2004. By the impugned judgment, the High Court held that
the complaint under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the, ‘Act’) was barred by
limitation and quashed the summon order against respondent no.2-Visionaries
Media Network (hereinafter referred to as the, ‘Company’). It further held
that the dispute qua the appellant (petitioner no.2 before High Court) is
within limitation and affirmed the summon order against the appellant.
3. The factual matrix of the case is as follows:
A subscription agreement was entered into between respondent nos.1
and 2 whereby respondent no.2-Company was appointed as distributor of Star
Channels and collecting subscription fee for the same. On 27.12.2003,
respondent no.2-Company issued three cheques bearing nos.790913, 790912 and
790911 for Rs.6,00,000/-, Rs.5,00,000/- and Rs.5,00,000/- respectively
drawn on the Indian Overseas Bank, Gandhi Nagar, Jammu. The aforesaid three
cheques were presented before the Indian Overseas Bank, Gandhi Nagar, Jammu
and were dishonoured on 6.01.2004. Respondent No.1 served notice on
respondent no.2-Company with a demand notice separately for all the three
cheques. Respondent no.2-Company replied to the said notice on 20.01.2004
informed respondent no.1 that payments were stopped because of their
inability to stop the piracy due to which the cable operators did not make
payments.
Thereafter, respondent no.1 issued second notice dated 28.01.2004 on
the appellant based on the same facts and based on the same memo of
dishonor in respect of the aforesaid three cheques. Respondent no.1 also
issued a corrigendum of the same date to the said notice. The appellant
submitted reply to the said notice on 3.02.2004.
4. Respondent no.1 filed a Criminal Complaint under Sections 138 and 141
of the Act on 17.03.2004. According to appellant, respondent no,1 concealed
the material fact of having earlier issued notice dated 14.1.2004 with
regard to the aforesaid three cheques and by misleading the Court got
summons issued by Metropolitan Magistrate in Complaint No.698 of 2001 to
the appellant and respondent no.2-Company.
5. Thereafter, respondent no.2-Company and appellant jointly filed
Criminal Miscellaneous Petition No.2380 of 2004 under Section 482 of the
Criminal Procedure Code, 1973 before the High Court of Delhi at New Delhi
for quashing the aforesaid criminal complaint filed by respondent no.1. In
its reply, respondent no.1 taken the plea that first notice dated
14.01.2004 was not a notice under Section 138 of the Act. It was contended
on behalf of the appellant that he was only vicariously liable on behalf of
respondent no.2-Company. Learned counsel for the appellant placed reliance
on decisions of this Court in support of his claim.
6. The High Court by impugned judgment while recording the stand taken
by respondent no.1 that letter dated 14.01.2004 constituted a valid notice
under Section 138 of the Act and hence the complaint based on second notice
against respondent no.2-Company was not maintainable and quashed the summon
issued by the Trial Court against respondent no.2-Company. However, so far
as appellant is concerned, the High Court relying on decision of this Court
in Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1, held that the
proceeding against the Director can be issued even in absence of the
Company being impleaded, The High Court further held that the summoning
order was valid since the first notice was not addressed to the appellant
and the second notice which was also addressed to the appellant was issued
within time and. therefore, criminal complaint filed by respondent no.1
against the appellant on the basis of the said notice is maintainable.
7. Learned counsel appearing on behalf of the appellant contended that
the order of the High Court is contrary to the law in as much as this is
not a case where proceedings were initiated against the Managing Director
alone. On the contrary, the proceedings are instituted against the
company/accused and its Managing Director. In the event of the
company/accused being let off, the same cannot continue against the
Managing Director who admittedly is only vicariously liable.
8. It is further submitted that even as per law laid down in Anil
Handa’s case, the Director of a company/accused is only liable vicariously
and upon his showing that the principal accused is not liable he cannot be
held guilty.
9. On the other hand, according to counsel for the respondents, the
issue is no longer res integra as held by the High Court.
10. Section 138 of the Act deals with dishonor of cheque for
insufficiency etc. as follows:
“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 arrangement 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 a term
which may extend 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
[pic]
(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.”
From the aforesaid provision, it is clear that only the drawer of the
cheque falls within the ambit of Section 138 of the Act whether human being
or a body corporate or even a firm.
11. The guilt for offence under Section 138 will be deemed to be upon
other persons connected with the Company in view of Section 141 of the Act,
which reads as follows:
“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
[pic]without his knowledge, or that he had exercised all due diligence to
prevent the commission of such offence.
(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.”
12. Similar question was raised and considered by two Judge Bench of this
Court in Anil Hada v. India Acrylic Ltd. (2000) 1 SCC 1. This Court held:
“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 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.
13. If the offence was committed by a company it can be punished only if
the company is prosecuted. But instead of prosecuting the company if a
payee opts to prosecute only the persons falling within the second or third
category the payee can succeed in the case only if he succeeds in showing
that the offence was actually committed by the company. In such a
[pic]prosecution the accused can show that the company has not committed
the offence, though such company is not made an accused, and hence the
prosecuted accused is not liable to be punished. The provisions do not
contain a condition that prosecution of the company is sine qua non for
prosecution of the other persons who fall within the second and the third
categories mentioned above. No doubt a finding that the offence was
committed by the company is sine qua non for convicting those other
persons. But if a company is not prosecuted due to any legal snag or
otherwise, the other prosecuted persons cannot, on that score alone, escape
from the penal liability created through the legal fiction envisaged in
Section 141 of the Act.”
“21. 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.”
13. In Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd., (2008) 13
SCC 703, taking note of the maxim lex non cogit ad impossibilia, two Judge
Bench of this Court observed:
“54. True interpretation, in my opinion, of the said provision would
be that a company has to be made an accused but applying the principle of
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 Section 138 as also Section 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.”
14. Again the same question was considered by three Judge Bench of this
Court in Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. (2012) 5 SCC
661. The Court noticed the decisions in Anil Hada (supra) case and Aneeta
Hada (supra) case. The three Judge Bench while partly overruled the
finding of Anil Hada (supra) affirmed the decision of Aneeta Hada (supra).
This Court held
“51. We have already opined that the decision in Sheoratan Agarwal runs
counter to the ratio laid down in C.V. Parekh which is by a larger Bench
and hence, is a binding precedent. On the aforesaid ratiocination, the
decision in Anil Hada has to be treated as not laying down the correct law
as far as it states that the Director or any other officer can be
prosecuted without impleadment of the company. Needless to emphasise, the
matter would stand on a different footing where there is some legal
impediment and the doctrine of lex non cogit ad impossibilia gets
attracted.”
“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.”
“58. Applying the doctrine of strict construction, we are of the considered
opinion that commission of offence by the company is an express condition
precedent to attract the vicarious liability of others. Thus, the words “as
well as the company” appearing in the section make it absolutely
unmistakably clear that when the company can be prosecuted, then only the
persons mentioned in the other categories could be vicariously liable for
the offence subject to the averments in the petition and proof thereof. One
cannot be oblivious of the fact that the company is a juristic person and
it has its own respectability. If a finding is recorded against it, it
would create a concavity in its reputation. There can be situations when
the corporate reputation is affected when a Director is indicted.
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 drag-net on the
touchstone of vicarious liability as the same has been stipulated in the
provision itself. We say so on the basis of the ratio laid down in C.V.
Parekh17 which is a three-Judge Bench decision. Thus, the view expressed in
Sheoratan Agarwal does not correctly lay down the law and, accordingly, is
hereby overruled. The decision in Anil Hada is overruled with the qualifier
as stated in para 51. The decision in Modi Distillery has to be treated to
be restricted to its own facts as has been explained by us hereinabove.”
15. In the present case, the High Court by impugned judgment dated 13th
August, 2007 held that the complaint against respondent no.2-Company was
not maintainable and quashed the summon issued by the Trial Court against
respondent no.2-Company. Thereby, the Company being not a party to the
proceedings under Section 138 read with Section 141 of the Act and in view
of the fact that part of the judgment referred to by the High Court in Anil
Hada (supra) has been overruled by three Judge Bench of this Court in
Aneeta Hada (supra), we have no other option but to set aside the rest part
of the impugned judgment whereby the High Court held that the proceedings
against the appellant can be continued even in absence of the Company. We,
accordingly, set aside that part of the impugned judgment dated 13th
August, 2007 passed by the High Court so far it relates to appellant and
quash the summon and proceeding pursuant to complaint case No.698 of 2001
qua the appellant.
16. The appeal is allowed with aforesaid observation.
…………………………………………J.
(SUDHANSU JYOTI MUKHOPADHAYA)
…………………………………………J.
(V. GOPALA GOWDA)
NEW DELHI,
JULY 07, 2014.
