TaxTMI 
TaxTMI 
2026 (8) TMI 145
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....us, not legally sustainable. M/s NIPL which purportedly availed the ITC and utilized it was not arrayed as party and the complaint against the petitioner in his individual capacity was legally untenable and procedurally flawed. The complaint did not allege that petitioner availed the ITC for personal use in the course or furtherance of business, in contravention of Section 16 CGST Act, 2017, therefore, essential ingredients of Section 132(1)(c) of the GST Act, were conspicuously missing. The initiation and continuation of trial proceedings amounted to abuse of the process of law and the complaint was liable to be quashed on this sole ground. 3. Respondent No.1 has filed reply to the petition stating that the complaint was filed after due investigation, based on credible material evidencing that M/s NIPL, of which petitioner was Director, availed and utilized fraudulent ITC to the tune of Rs.15.44 crores without receipt of goods, thereby committing offences under Section 132 of CGST, 2017. Petitioner being Director of M/s NIPL, was actively involved in the management and operations of the Company, during the relevant period and was thus vicariously liable under Section 137 of CGS....
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....'ble Supreme Court, in various precedents, while interpreting the scheme of Section 141 of NI Act had categorically laid down that Director or individual officer cannot be prosecuted without impleading the Company. The principle of law enunciated by Hon'ble Supreme Court was fully applicable to the facts of the case. Thus, proceedings against the petitioner being unsustainable, were liable to be quashed. Reliance was also placed on judgments of coordinate Benches in Anil Khandelwal etc. Vs. Phoenic India and another, 2025 SCC online SCC 1883, Nilesh Aggarwal Vs. ITO 2025 SCC online Del 6433, Amar Tea P. Ltd. Vs. State Govt. of NCT of Delhi 2025 SCC online Del 810, Managing Director Sanghi Industries Ltd. Vs. State of Gujarat and another 2016 SCC online Guj 6303, and William Scott Pinckney Vs. Union Territory of Chandigarh, 2018 SCC online P&H 7025, Jaskore Singh Vs. The State of Punjab and another 2016 SCC online P&H 10119, G.P. Kotyal @ Kottiyal Vs. Jindal Udyog and another 2016 SCC online P&H 18364, Surinder Kumar Vs. M/s Punjab Agro Food Grains Corporation Ltd. 2018 SCC online P&H 164 and Manish Jain Vs. Surender Singh 2015 SCC Online P&H 4895. 6. Learned counsel for the resp....
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....ood less invoices of various firms. The poser for determination is whether petitioner, who is a Director of M/s NIPL, can be prosecuted individually without impleading the company M/s NIPL as an accused. 9. Section 137 of CGST 2017 deals with offences by companies, relevant portion thereof is reproduced below: Section 137 Offences by companies. (1) Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of 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 accordingly. (2) Notwithstanding anything contained in subsection (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be pro....
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.... the maximum amount not being more than one hundred per cent. of the tax involved]. (3) On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated. 10. Evidentally, if a person who commits the offence under Section 132 of the CGST Act, 2017, is a company, every person who, at the time of commission of offence, was incharge of and responsible to the company for the conduct of business of the company shall be deemed to be guilty and shall be liable to be proceeded against. Sub Section (2) deals with the concept of consent, connivance, negligence on part of any Director or office bearer of the Company. 11. At this juncture, it would be relevant to examine the provisions contained under Section 141 of the NI Act, which provide as under: 141. 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 of, and was responsible ....
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....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 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. P....
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....C 781 as under:- '11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the company, but the company has not been made arrayed as a party. Therefore, the allegations have to be restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened on certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours Private Limited6 in the context of Negotiable Instruments Act, 1881. (2) At this juncture, it is interesting to note, as we have stated earlier, that the learned Magistrate while passing the order dated 22.10.2001, had opined, thus :- It appears prima-facie from the complaint filed by the complainant, documents, evidence and arguments that accused company has committed cheating with the complaint by delivering old and accidented vehicle to her at the cost of a new 5 (2013) 4 SCC....