2024 (9) TMI 103 - HC - Indian Laws

Company signatory cannot be prosecuted under Section 141 without arraigning the company as accused

The Punjab & Haryana HC quashed a complaint under Section 138 of the Negotiable Instruments Act, 1881 and the summoning order. The petitioner, as an ... Dishonour of Cheque - discharge of legal laibility - quashing of complaint under section 138 of Negotiable Instruments Act, 1881 and summoning order - prosecution under section 141 of the Negotiable Instruments Act, 1881 arraigning of a company as an accused - HELD THAT:- The present case in hand pertains to quashing of complaint under section 138 of Negotiable Instruments Act, 1881 wherein the petitioner has been alleged to have defraud the respondent-company whereas it has been alleged by the respondent-company that the petitioner has clearly admitted the cheques in question to have been signed by him in discharge of his legal liability. The present petitioner had signed the cheque in question bearing no. 113603 (Annexure P-3) as an authorized signatory of M.R.Trading co. Indeed it is not the case of the respondent that he was not aware of the said fact. Moreover, even the statutory notice, before filing the complaint was issued only to the present petitioner and not to the company wherein M.R.Trading Co was required to be arrayed as an accused and in view of the settled law in the case of Aneeta Hada Vs. M/s Godfather Travels and Tours Pvt Ltd. [2012 (5) TMI 83 - SUPREME COURT] wherein it has been held that for maintaining the prosecution under section 141 of the Negotiable Instruments Act, 1881 arraigning of a company as an accused is imperative. A company being an artificial person acting through its management has a separate legal entity wherein it owns its assets and is liable for debts. To attract section 138 of NI Act, it is necessary to understand the essence of the section 141 of NI Act in true sense which unmistakably on a plain reading itself makes clear the importance of impleading the company in cases involving cheques issued on its behalf. This court while finding merit in this case strongly holds that the petitioner in his official capacity cannot be prosecuted in the absence of the company. Even otherwise, it is crystal clear that the petitioner had signed the cheque in his capacity of an authorized signatory however, the trial court while passing summoning order had not looked into this legal aspect. The complaint dated 04.02.2021 and the summoning order dated 10.03.2021 passed by the trial court, Chandigarh suffer from serious legal infirmity and are ordered to be quashed. Issues:Quashing of complaint under section 138 of Negotiable Instruments Act, 1881 and summoning order based on legal liability and identity of the accused company.Analysis:The case involved a petition under section 482 Cr.P.C. seeking to quash a complaint and summoning order under section 138 of the Negotiable Instruments Act, 1881. The respondent filed a complaint against the petitioner for a friendly loan taken to set up an Ice Factory, alleging dishonored cheques issued by the petitioner. The petitioner contended that the dishonored cheque pertained to a company's account, 'M.R. Trading Co.', and not his personal account, thus challenging his liability. The respondent argued that the petitioner had mala fide intentions to defraud the company by issuing the cheques. The key contention revolved around the legal identity and liability of the company in relation to the cheques issued.The court examined the provisions of section 138 of the Negotiable Instruments Act, emphasizing the elements required for an offense under the Act. It highlighted that the cheque must be drawn by a person on his account for the discharge of a debt, and if returned unpaid, it constitutes an offense. The court also analyzed section 141 of the Act, which deals with offenses by companies, holding responsible persons liable for company offenses. The court referred to precedents emphasizing the necessity of arraigning the company as an accused for maintaining a prosecution under section 141.Relying on legal principles and precedents, the court concluded that the petitioner, being an authorized signatory of the company, could not be prosecuted in the absence of the company being impleaded as an accused. It emphasized the importance of understanding the legal entity of a company and the significance of involving the company in cases involving cheques issued on its behalf. The court found serious legal infirmities in the complaint and summoning order, ultimately quashing both based on the lack of legal liability established against the petitioner in his personal capacity without the company being implicated.In summary, the judgment delved into the legal intricacies of liability under the Negotiable Instruments Act, emphasizing the necessity of involving the company as an accused in cases involving cheques issued on its behalf. It highlighted the distinction between personal liability and corporate liability, ultimately leading to the quashing of the complaint and summoning order due to the absence of the company's involvement as an accused party.