TaxTMI 
TaxTMI 
2026 (8) TMI 320
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....er dated 19.09.2016, the High Court, though declined the prayer to quash the proceedings, directed the Trial Court to suo motu issue notice to M/s Cine Prime Entertainment [Hereinafter referred to as the Company] under Section 319 of CrPC and, after impleading it as accused No. 2, commence trial de novo against the Company, as per provisions of sub-section (4) of Section 319 of CrPC, and bring it to its logical conclusion expeditiously and in accordance with law. Facts: 3. In brief, the facts are as follows: (i) Pankaj Sharma (i.e., Respondent No. 2) filed a complaint under Section 138 of NI Act against the accused-appellant, inter alia, alleging that the Company owed Rs. 5,00,000 to the complainant in lieu of services rendered by him; the accused-appellant is one of the directors and authorised signatory of the Company; in discharge of the liability of the Company, a cheque of Rs. 5,00,000, duly signed by the accused-appellant, as authorised signatory of the Company, was issued to the complainant, which returned unpaid with remark 'payment stopped by drawer'; thereafter, the complainant served a notice of demand on the accused-appellant; despite service of the notic....
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.... Submissions on behalf of Respondent No. 2: 6. Per contra, on behalf of the complainant (i.e., respondent No. 2), it was submitted that, admittedly, the appellant was the authorised signatory of the Company; the appellant had signed the cheque on behalf of the Company, therefore, there was only a formal defect in the complaint which could be rectified by taking recourse to the provisions of Section 319 CrPC. Any other view would allow the accused to go scot-free resulting in grave injustice. Thus, the High Court was justified in exercising its inherent and constitutional powers to secure the ends of justice. Submissions on behalf of State: 7. On behalf of State it was submitted that since it is a case based on a private complaint, the State has no role. In so far as the complaint is concerned, it is well settled that if the person who commits the offence is a company, without impleading the company as an accused, the complaint is not maintainable. Discussion: 8. We have considered the rival submissions and have perused the materials placed on record. There exists no dispute that the cheque in question was drawn on the account maintained by the Company and, accordi....
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....onour 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 may extend to two years or with fine which may extend to twice the amount of the cheque or with both. The proviso to the said section postulates under what circumstances the section shall not apply. In the case at hand, we are not concerned with the said aspect. It will not be out of place to state that the main part of the provision deals with the basic ingredients and the proviso deals with certain circumstances and lays certain conditions where it will not be applicable. The emphasis has been laid on the factum that the cheque has to be drawn by a person on the account maintained by him and he must have issued the cheque in discharge of any debt or other liability." (Emphasis supplied) 11. What is clear from above is that the liability for the offence falls on "such person" who has drawn the cheque on an account maintained by him with a banker. Company is a 'juristic ....
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....ive 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 drag-net 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 [State of Madras v. C.V. Parekh, (1970) 3 SCC 491: 1971 SCC (Cri) 97] which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [Sheoratan Agarwal v. State of M.P., (1984) 4 SCC 352: 1984 SCC (Cri) 620] does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1: 2001 SCC (Cri) 174] is overruled with the qualifier as stated in para 51. The decision in Modi Distillery [U.P. Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684: 1987 SCC (Cri) 632] has to be treated to be restricted to its own facts as has been explained by us hereinabove." 12. Now we shall consider whether recourse can be had to the provisions of Section 319 of CrPC to arraign the company as an accused wh....
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....he complaint suffers from so fundamental a defect that no cognizance can be taken thereupon, the Court cannot proceed and take recourse to the provisions of Section 319 to cure that defect. The reason is simple, if the complaint suffers from a fatal defect, there is no valid institution of a proceeding. In such circumstances, only a fresh complaint can be filed after removing the defect provided it is within the period of limitation prescribed by the Act. However, if the fresh complaint is beyond the prescribed period of limitation, the Court concerned may take cognizance if it is satisfied that the complainant had sufficient cause for not making the complaint within the prescribed period. 16. For the reasons above, we are of the view that the High Court clearly exceeded its jurisdiction by directing the learned Magistrate/ Trial Court to suo moto arraign company as an accused. In consequence, and having regard to the finding that the complaint suffered from a fatal defect, we have no hesitation in holding that the complaint and all consequential proceedings arising there from are liable to be quashed and are hereby quashed. 17. The appeal is allowed. The impugned order of th....
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....to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any 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 neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.-- For the purposes....