TaxTMI 
TaxTMI 
2025 (1) TMI 58
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....ned trial Court. 3. The factual position, in brief, which had given the occasion to the petitioners to file the present petition, before this Court, may be summed up as under:3.1. ComplainantDurga Devi has filed a complaint under Section 138 of the Negotiable Instruments Act, before the learned trial Court, against the accused. Accused No.1 to 5 are being referred as Managing Directors/Directors, whereas, accused No.6 has been referred to as the cashier of the Company, namely Himudayath Producer Company Limited, having its registered office at Negi Building, Upper Khalini, Shimla2. 3.2. The said complaint has been filed on the ground that the accused persons are Managing Directors/ Directors/Cashier of registered Company working in the name and style of Himdyuath Producer Company Ltd., and they were running their business collectively in Nirmand Tehsil. 3.3. According to the complainant, the accused persons, were carrying out the business of collecting milk, as well as, daily RD by collecting Rs.200/per day. When, the said amount was required to be returned to the complainant, at that time, the accused persons were not having cash, in hand, as such, they had issued cheque ....
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....bove facts, Shri Hemant Kumar Thakur, Advocate, has prayed that the present petition may kindly be allowed, by quashing the summoning order, as well as, the complaint. 11. Per contra, Shri Romesh Verma, learned Senior Advocate assisted by Mr. Sumit Sharma, Advocate has argued that there is no substance in the present petition as the cheque, in question, has been issued, by the Company and the petitioners being Managing Directors/Directors/ Cashier are liable for the act of the Company. 12. Perusal of the record shows that the complaint, under Section 138 of the NI Act, read with Section 420 IPC, was initiated, on account of the fact that the cheque No.341481, which was issued in this case, had not been encashed, when, the same was presented for encashment. The cheque, against account No.89412100000925, was issued by the Directors of Himudayath Producer Company Ltd. 13. Admittedly, the said Company has neither been impleaded, as, accused in the complaint, under Section 138 of the NI Act, nor in the legal notice issued against the Company, before filing the complaint. 14. The complaint, as well as, legal notice was issued against the Managing Directors, Directors and Cash....
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....on 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. [59] In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [(1970) 3 SCC 491] which is a threeJudge Bench decision. Thus, the view expressed in Sheoratan Agarwal [(1984) 4 SCC 352], does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [(2000) 1 SCC 1] is overruled with the qualifier as stated in paragraph 37. The decision in Modi Distilleries [AIR 1988 Supreme Court 1128] has to be treated to be restricted to its own facts as has been explained by us hereinab....
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....h the offending company. Similarly the words "shall also" in subsection (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 of the Act 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 men alone the other two categories of persons can also become liable for the offence. 13. 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 company has not committed the offence, though such company is not made an accused, and hence the prosecuted accused is not liable to be punished The provisions do....
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....f offence by the company is an express condition precedent to attract the vicarious liability of others. 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. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh which is a threeJudge Bench decision. Thus, the view expressed in....
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....ted then even an employee of the Company, who on account of his being an authorized signatory signs a cheque issued by the Company towards discharge of the debt or other liability of the Company, would be liable to prosecution and conviction under Section 138 of NI Act even after he resigns from the company and is no more in its employment. This certainly could not have been the intention of the legislature. Even the vicarious liability created under Section 138 of NI Act would not be attracted in respect of a Director or an employee of the Company who resigns and severs his connections with the company, unless the complainant is able to bring his case within the purview of sub - Section 2 of Section 141, by proving that the offence had been committed with his consent or connivance or was otherwise attributable to any neglect on his part. 47. We would hasten to add that the above interpretation should not in any manner be misconstrued to affix liability upon the joint account holder of an account unless the cheque is shown to have been made/drawn jointly by such joint account holder. A company visàvis its authorised signatory stands on a completely different footing....