Company arraignment is mandatory before vicarious liability can attach in cheque dishonour prosecutions against officers.

For prosecution under the Negotiable Instruments Act, 1881, arraignment of the company is a prerequisite before vicarious liability can be imposed on its directors or employees. Where a cheque is drawn on a company account but the company is not impleaded or proceeded against as an accused, the complaint is legally defective because Sections 138, 141 and 142 require strict construction in view of the penal nature of the liability. On that basis, proceedings against the directors and cashier alone were not maintainable and were liable to be quashed.

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Issues: Whether a complaint under the Negotiable Instruments Act, 1881 against directors and the cashier of a company, without arraigning the company as an accused, was maintainable and whether the proceedings were liable to be quashed.

Analysis: The cheque was issued from an account maintained in the name of the company, but the company was neither impleaded as an accused nor proceeded against in the complaint or notice. The governing principle under Sections 138, 141 and 142 of the Negotiable Instruments Act, 1881 is that where the offence is committed by a company, prosecution of the company is the foundation for fastening vicarious liability on persons in charge of its affairs. The legal position requires strict construction because the liability is penal in nature. In the absence of the company being arraigned, the prosecution against the other accused is legally defective and cannot be sustained.

Conclusion: The complaint and the consequential proceedings were not maintainable against the petitioners alone and were liable to be quashed.

Final Conclusion: The petition succeeded and the summoning order as well as all consequential proceedings were set aside, leaving the complainant free to pursue other available remedies in law.

Ratio Decidendi: For prosecution under Section 141 of the Negotiable Instruments Act, 1881, arraignment of the company as an accused is imperative before vicarious liability can be imposed on its officers.

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