TaxTMI 
TaxTMI 
1999 (11) TMI 808
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....trate of First Class Chandigarh against Rama Fibres Ltd. ('the accused company') and 11 other persons who are shown as directors of the accused company. The complaints contained the allegations that cheques were issued on behalf of the accused company for the debts due to the complainant and such cheques were dishonoured by the drawee bank on the ground of insufficiency of funds in the account; and notices were issued to the accused company as well as to the directors demanding payment of the amounts covered by the cheques, but no amount was paid. Hence the complainant alleged that all the accused have committed the offence under section 138 in respect of each of the cheques. 4. The magistrate took cognizance of the offence on each of the complaints and issued process against the accused. Objections were raised by the accused company on the premise that winding up proceedings have been ordered by the Court on the accused company and hence no prosecution proceedings could be continued against the accused company. It appears that the magistrate had accepted the said contention and in respect of three complaints the magistrate ordered the complaint to remain in suspense against the....
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....s before us since it has not challenged the said order of the magistrate. Shri Nidesh Gupta further contended that there is no legal requirement that the company should necessarily have been made an accused in the prosecution case in order to sustain a conviction of the offending directors. According to the learned counsel where an offence is committed by a company, either the company alone or the person in charge of the business of the company alone, or both of them together can be prosecuted for the offence under section 138. He cited a few decisions to bolster up his contention and presented a written submission in aid of his arguments. 8. It must be pointed out at the outset that the offender in section 138 is the drawer of the cheque. He alone would have been the offender thereunder if the Act did not contain other provisions. It is because of section 141 that penal liability under section 138 is cast on other persons connected with the company. It is necessary to extract section 141 which is as under : "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....
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....b-section (1) of section 141 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 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. 11. 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 prosecution the accused can show that the compa....
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....ution of the company is sine qua non for persecuting its directors under section 141. 14. In C.V. Parekh's case (supra) a prosecution was launched against the Managing Director of a private limited company for the offence under section 7 of the Essential Commodities Act, 1955 with the aid of section 10 of that Act. (That provision is very much analogous to section 141 of the Negotiable Instruments Act. The said private limited company was not included as an accused in the case. When the trial court acquitted the managing director the State challenged the acquittal before the High Court and having failed there also the State filed an appeal before this Court by special leave. It was contended before this Court that if the person arrayed as accused was shown to be in charge and was responsible for the conduct of the business of the company such person is liable to be convicted. This Court did not accept the contention and held that it must further be proved that the company has contravened the order issued under the Essential Commodities Act. The following observations of this Court in the said decision are relevant.: "This argument cannot be accepted, because it ignores the fi....