TaxTMI 
TaxTMI 
2019 (3) TMI 294
X X X X Extracts X X X X
X X X X Extracts X X X X
....881 was instituted by the respondent against the appellant. According to the complainant, the appellant had borrowed a sum of Rs. 4,15,000/- "for his business development" and on the same day, the appellant issued a cheque drawn on Karnataka Bank, Hosadurga for an equivalent amount. When the cheque was presented on 26 December 2003 for encashment to the State Bank of Mysore, Beligere Branch, the bank returned the cheque with an endorsement on 29 December 2003 stating that funds were insufficient. The complainant issued a notice to the appellant on 19 January 2004 which was served on 28 January 2004. Upon the failure of the appellant to pay the amount due under the cheque, a complaint was instituted. The Civil Judge, Junior Division, T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ustries Ltd., a public limited company. In other words, the cheque was not issued by the signatory in his personal capacity. Hence, it was urged that the complaint ought to have been instituted against the company and its Directors and not against the appellant. The High Court by its order dated 24 January 2006 dismissed the petition. The High Court rejected the submissions urged on behalf of the appellant on the ground that the complainant had pleaded ignorance about the existence of the company. Moreover, in the view of the High Court, it would not be difficult for the complainant to take steps to proceed against the company as well as against other persons who are responsible for the affairs of the company. The judgment of the High....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted." In similar terms, the Court further held: "59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaini....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... constitute an offence and become punishable. The first condition is that the cheque ought to have been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The third condition is that the drawer of such a cheque should have failed to make payment of the said amount of money to the payee or as the case may be,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director. A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. In the absence of the company being arraigned as an accused, a complai....