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of <h1>High Court quashes Chit Funds Act proceedings, stresses corporate liability inclusion.</h1> The High Court allowed both criminal petitions challenging proceedings under the Chit Funds Act and IPC. The Court quashed the impugned orders and all ... Maintainability of petition - party to the proceedings or not - Company which ran the chit fund - vicarious liability of directors - section 141 of Negotiable Instruments Act - HELD THAT:- The issue with regard to whether the proceedings could be initiated against the petitioner alone who is an employee of the Company and not the Company, is no longer res integra, as the issue stands covered by the judgment of the Apex Court in the case of ANEETA HADA VERSUS GODFATHER TRAVELS & TOURS (P.) LTD. [2012 (5) TMI 83 - SUPREME COURT] where it was held that the proceedings without making the Company a party was not maintainable. The complaint itself was not maintainable without the corporate entity being made as a party but having brought only the Board of Directors or the officers of the Company as accused. Criminal Petitions are allowed. Issues: Challenge to proceedings under Chit Funds Act and IPC, Company not made party, Vicarious liability of individuals.Analysis:1. Challenge to Proceedings: The petitioners contested proceedings in C.C.No.4950/2016 and C.C. No. 5285/2016 under Sections 3 and 4 of the Chit Funds Act, 1982, and Section 420 r/w Section 34 of the IPC. They claimed innocence based on resignations before the complaint was lodged. The FIR and charge sheet were filed against them, leading to the petition before the High Court.2. Company Not Made Party: The petitioners argued that the chit fund Company was not included in the proceedings, making the petitions non-maintainable. Citing the Apex Court's judgment in Aneeta Hada v. Godfather Travels And Tours Private Limited, the Court highlighted the corporate criminal liability and vicarious liability of individuals in charge of the company. The Court emphasized the necessity of involving the company in such proceedings for maintainability.3. Vicarious Liability of Individuals: Referring to the judgment in the case of Mr. Arvind Mediratta v. State of Karnataka, the Court reiterated the importance of strict construction in cases involving vicarious liability. It emphasized that the commission of an offense by the company is a prerequisite for holding individuals vicariously liable. The Court held that individual prosecution without including the corporate entity was not maintainable, as it did not fulfill the legal requirements.4. Judgment and Orders: Based on the legal precedents and arguments presented, the High Court allowed both criminal petitions. The impugned orders in C.C.No.4950/2016 and C.C.No.5285/2016 were quashed, along with all further proceedings. The State was granted the liberty to take appropriate action in accordance with the law, emphasizing the importance of including the company in proceedings involving corporate criminal liability.
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