TaxTMI 
TaxTMI 
2023 (11) TMI 360
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.... offence punishable under Section 138 of the Negotiable Instruments Act. 3. Brief facts leading to filing of the present appeal are summarized as under: 3.1 The respondent No.1 has been arraigned as an accused in his capacity as Director of Mahindarpur Balaji Trading (OPC) Co. Pvt. Ltd. The complainant is a Company registered under the Companies Act, 2013 and has filed the complaint through its Director - Kalpesh Prajapati. It is the case of the complainant that the respondent - accused has purchased the goods worth Rs.14,47,400/-, which was reflected as outstanding amount in its account. The complainant has produced the bilty issued by Surya Logistic Services as well as All India Road Transport Company in support of alleged delivery of the goods to the respondent - original accused. Hence, according to the complainant the legally enforceable debt to be realized from the accused is to the tune of Rs.14,47,4000/-. 3.2 The complainant has further contended that the respondent - accused had issued a cheque of the aforesaid Mahindarpur Balaji Trading (OPC) Co. Pvt. Ltd. towards the payment of the aforesaid outstanding amount on 29.05.2018. The said cheque was issued under the ....
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....d. Such notice issued by the Court has been duly served, however, the respondent - accused has chosen not to contest this application seeking special leave to appeal by entering his appearance. In such circumstances, noticing the issue involved, this Court has proceeded for final adjudication of this application seeking special leave to appeal along with appeal. 7. Learned advocate for the applicant at the outset has assailed the order of acquittal mainly on the ground that the learned Magistrate though initially after recording on verification, having satisfied with the compliance of basic ingredients under Section 138 of the Negotiable Instruments Act issued summons upon the respondent - accused however later on proceeded to dismiss the complaint on erroneous ground by holding the complaint itself being not maintainable. She, therefore, submitted that the special leave to appeal requires consideration, more particularly, the erroneous determination of non-maintainability of the complaint has entailed acquittal of the respondent - accused on technical ground, which is required to be examined closely after admission of the appeal. 8. Learned advocate has invited attention of ....
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....2) , she has further invited attention of this Court to the findings recorded by the learned Magistrate. She submitted that upon appreciation of the aforesaid documents, the learned Magistrate at one stage, had drawn presumption in favour of the complainant in terms of Sections 118(a) and 139 of the Negotiable Instruments Act. She further submitted that though the complainant had offered himself for cross-examination, the respondent - accused had failed to crossexamine the complainant nor any evidence was led by the respondent - accused. She submitted that only defence, which has emerged on record, is in the form of a statement of the accused recorded under Section 313 of the Code of Criminal Procedure. The only response is in the form of denial of questions put to the respondent accused. She therefore submitted that in absence of any contradictions being brought on record by the respondent - accused, the presumption drawn by the learned Magistrate in favour of the complainant has remained intact. In such circumstances, the learned Magistrate ought to have convicted the respondent - accused for the offence punishable under Section 138 of the Negotiable Instruments Act. 9. I have....
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....darpur Balaji Trading (OPC) Co. Pvt. Ltd." It is evident from the aforesaid narration that only person, who has been arraigned as accused in the complaint is Giriraj Maheshwari, who has been joined in his capacity as Director of the said Company. Thus, it is evident that the Company has not been separately joined as accused in the aforesaid complaint. It would be appropriate to look into the aspect of significance of existence of the Company in cases related to the offence committed by the Company. The Company is a separate "legal person" or "legal entity" in common law with a unique identity from its members. Generally, the Company upon incorporation under the provisions of Act becomes a unit of legal entity and it is under control of its Board of Directors. In such circumstances, evidently no crime can be committed by the Company unless it is projected by the Director's decision. In such a set of facts, the theory of law of attribution comes into play which mandates that the persons, who are companies "directing mind" are held liable along with its business. The issue arose for consideration in the case of Maksud Saiyed Vs. State of Gujarat & Ors. reported in 2007 (14) Comp....
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....urled out the Legislation intention which drew the vicarious responsibility of the Director for the violation committed by the Corporate body by virtue of his role as Director. Later on, the aforesaid view was reiterated in the case of Sunil Bharti Mittal Vs. Central Bureau of Investigation reported in 2015(4) SCC 609. The Hon'ble Supreme Court in the case of Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others reported in (1998) 5 SCC 749 held that Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It further held that while issuing summons, it was for the learned Magistrate to record satisfaction about prima facie case against the accused, who is a Managing Director, Company Secretary and / or Director of the Company and the role played by the Company in their respective capacity. Thus, the aforesaid compliance was held sine qua non for initiating summary proceedings. Same view was followed by and much emphasis was put on proceedings against the Director as a consequence of creation of legal fiction in the case of Kirshna Texport & Capital markets Ltd. vs. Ila A. Agrawal & Ors., reported ....
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.... bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice." 14. Aforesaid provisions have been dealt with by the Hon'ble Supreme Court in the case of Anita Handa(Supra). The relevant observations are as under: "19. The main part of the provision can be segregated into three compartments, namely, (i) the cheque is drawn by a person, (ii) the cheque drawn on an account maintained by him with the banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of a debt or other liability, is returned unpaid, either because the amount of money standing to the credit of that account is insufficient to honour the cheque or it exceeds the amount arranged to be paid from that account by an arrangement made with the bank and (iii) such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of the Act, be punished with imprisonment for a term which ma....
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.... 38. From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term 'deemed' has to be read in its context and further the fullest logical purpose and import are to be understood. It is because in modern legislation, the term 'deemed' has been used for manifold purposes. The object of the legislature has to be kept in mind. 39. The word 'deemed' used in Section 141 of the Act applies to the company and the persons responsible for the acts of the company. It crystallizes the corporate criminal liability and vicarious liability of a person who is in charge of the company. What averments should be required to make a person vicariously liable has been dealt with in SMS Pharmaceuticals Ltd. (supra). In the said case, it has been opined that the criminal liability on account of dishonour of cheque primarily falls on the drawee company and is extended to the officers of the company ....
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....only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context. 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the w....