2017 (10) TMI 1234 - HC - Indian Laws

High Court quashes criminal proceedings for failure to include company as accused

The High Court quashed the criminal proceedings against the applicant, citing the failure to initially implead the company as an accused under Section 138 ... Offence punishable under Section 138 of NI Act - court taking cognizance of the offence - Held that:- In the present case, the complainant did not arraign the company as an accused when there was no legal impediment in impleading the company as accused. The drawer of the cheque was company which was evident from the cheque. The complainant had knowledge that the accused was impleaded by filing complaint, he was in­charge and responsible for conduct of the business of the said company. Therefore, the complainant ought to have impleaded the company as an accused. Therefore, the present case cannot be equated with the case where during trial it is disclosed that some other accused is required to be impleaded as an accused, or that the evidence on record which may be in the form of examination­-in­-chief disclosed the involvement of the accused, who is not arraigned as accused in the complaint. From the face of cheque, statement in the complaint, evidence of the complainant, it was manifestly clear that the drawer of the cheque was company. The respondent no.2 filed the application u/s 319 only when she knew that as per Aneeta Hada’s decision (2012 (5) TMI 83 - SUPREME COURT OF INDIA ), the complaint would become void and untenable in law. The Trial Court failed to appreciate that powers could have been exercised where it is difficult to ascertain as to who exactly committed the offence. In a technical offence like Section 138 of N.I.act, the offender is known to the complainant but is not arraigned as an accused, then in such eventuality, the company cannot be arraigned as an accused at a later stage to circumvent the decision of Supreme Court. It is pertinent to note that offence u/s 138 of N.I.Act is qua the drawer of the cheque. The cognizance can be taken within the time limit prescribed under the Act. The order passed by the Trial Court is against the settled principles of law. The cases relied upon by learned advocate for respondent no.2 were delivered in distinct facts and are not applicable in the present case, also contrary to the recent decision in case of N.Harihara Krishnan Vs. J.Thomas (2017 (9) TMI 1 - SUPREME COURT OF INDIA ). In the said decision it has been observed that failing to comply with the steps contemplated u/s 138 of N.I.Act, would not provide cause of action for prosecution and, therefore, in the context of prosecution u/s 138, the concept of taking cognizance of the offence but not an offender, is not appropriate. Unless a complaint of necessary factual allegations constituting each of the ingredients of the offence u/s 138 of N.I. Act is made out, the Court cannot take cognizance of the offence. There is no substance in the contentions of respondent no.2 respectively in these applications and the same are devoid of merit. The prosecution in all these applications which are subject matter of challenge under these applications as well as the orders passed by the learned Magistrate u/s 319 of Cr.P.C deserves to be quashed and set aside. Issues Involved:1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act, 1881 (N.I. Act) without impleading the company as an accused.2. Invocation of Section 319 of the Code of Criminal Procedure, 1973 (Cr.P.C) to implead the company as an accused at a later stage.3. Compliance with the procedural requirements of Section 138 and Section 142 of the N.I. Act.4. Relevance and applicability of the Supreme Court's decision in Aneeta Hada vs. Godfather Travels and Tours Private Limited (2012)5-SCC-661.Detailed Analysis:1. Maintainability of the Complaint under Section 138 of the N.I. Act without Impleading the Company as an Accused:The applicant was impleaded as an accused in the complaint filed by respondent no.2 for the offence punishable under Section 138 of the N.I. Act. The applicant contended that the cheque was issued on behalf of M/s. Harvest Financials Limited and not in his personal capacity. The Supreme Court in Aneeta Hada vs. Godfather Travels and Tours Private Limited held that for maintaining prosecution under Section 141 of the N.I. Act, arraigning the company as an accused is imperative. The Court concluded that the prosecution against the applicant without impleading the company was not maintainable.2. Invocation of Section 319 of the Cr.P.C to Implead the Company as an Accused at a Later Stage:Respondent no.2 preferred applications under Section 319 of the Cr.P.C to implead the company as an accused after realizing the necessity post the Supreme Court's decision in Aneeta Hada. The Trial Court allowed this application, but the High Court found that the invocation of Section 319 of the Cr.P.C was erroneous. The High Court noted that the involvement of the company was known from the outset, and the complainant was aware that the company was the drawer of the cheque. Therefore, invoking Section 319 at a belated stage to overcome the initial defect was not permissible.3. Compliance with the Procedural Requirements of Section 138 and Section 142 of the N.I. Act:The High Court emphasized that to initiate proceedings under Section 138 of the N.I. Act, certain conditions must be met, including the issuance of notice to the drawer of the cheque. In this case, the notice was issued to the applicant and not the company. The High Court reiterated that the failure to comply with these procedural requirements rendered the complaint invalid. The Supreme Court in N. Harihara Krishnan vs. J. Thomas further clarified that the prosecution must be initiated within the stipulated period, and the complainant cannot circumvent this by invoking Section 319 of the Cr.P.C.4. Relevance and Applicability of the Supreme Court's Decision in Aneeta Hada:The High Court extensively relied on the Supreme Court's decision in Aneeta Hada, which mandates that the company must be arraigned as an accused for the prosecution of its directors or officers. The High Court found that the Trial Court's order allowing the impleadment of the company at a later stage was contrary to this principle. The High Court also referred to the Supreme Court's decision in N. Harihara Krishnan, which reinforced that the prosecution against an individual director without prosecuting the company is not maintainable.Conclusion:The High Court quashed the criminal proceedings against the applicant and set aside the Trial Court's order dated 7th October 2015, which allowed the impleadment of the company at a later stage. The Court held that the prosecution was not maintainable due to the failure to initially implead the company and the non-compliance with the procedural requirements of the N.I. Act. The applications preferred by respondent no.2 to implead the company were disposed of accordingly.