2015 (2) TMI 1367 - SC - Indian Laws

Dishonor of Cheque - It is contended that in absence of impleadment of the Company as per Section 141 of NI Act, the punishment Under Section 138 on the Director cannot be sustained - HELD THAT -In ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. 2012 (5) TMI 83 - SUPREME COURT the question that arose for determination by this Court was whether an authorized signatory of a company would be liable for prosecution Under Section 138 of the Act without the company being arraigned as an accused. As there was a difference of opinion between the two learned Judges regarding the interpretation of Sections 138 and 141 of the Act reference was made to the larger Bench of three Judges. In the said case, this Court noticed the ratio laid down in the case of STATE OF MADRAS VERSUS CV. PAREKH 1997 (10) TMI 389 - SUPREME COURT and the view expressed in the case of SHEORATAN AGARWAL ANOTHER VERSUS STATE OF MADHYA PRADESH 1984 (9) TMI 300 - SUPREME COURT while interpreting Section 138 and 141 of the Act, this Court observed that 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. After analyzing all the provisions and having noticed the different decisions rendered by this Court, the three Judges' Bench arrived at the irresistible conclusion that for maintaining the prosecution Under Section 141 of the Act, arraigning a company as an accused is imperative. Hence in this case, we find no reason to refer the matter to the larger Bench. In the present case, only the Appellant was impleaded as an accused. In that view of the matter, we are of the view that complaint with respect to the offence Under Section 138 read with 141 of the Act was not maintainable following the decision in Aneeta Hada - Appellant stands acquitted. Appeal allowed.

Summary

Issues Involved:
1. Whether the complaint under Section 138 of the Negotiable Instruments Act is maintainable without arraigning the company as an accused.
2. Interpretation of Section 141 of the Negotiable Instruments Act regarding vicarious liability.
3. Applicability of precedents from previous judgments on the current case.

Issue-wise Detailed Analysis:

1. Maintainability of Complaint under Section 138 without Arraigning the Company:
The appellant contended that the cheque was issued on behalf of M/s. Naina Devi Steel Castings Pvt. Ltd., and although the appellant was arraigned as an accused, the company itself was not. The appellant argued that in the absence of the company being impleaded, the punishment under Section 138 of the Negotiable Instruments Act (the Act) on the Director cannot be sustained. The Supreme Court referenced the precedent set in Aneeta Hada v. M/s. Godfather Travels & Tours Private Limited, which established that for maintaining prosecution under Section 141 of the Act, arraigning the company as an accused is imperative. Consequently, the complaint against the appellant alone was deemed not maintainable.

2. Interpretation of Section 141 of the Negotiable Instruments Act:
The Court analyzed Section 141, which deals with offenses by companies and the vicarious liability of individuals associated with the company. The Court reiterated the principle that vicarious liability under Section 141 gets attracted only when the company itself is prosecuted. The three-Judge Bench in Aneeta Hada's case had clarified that the prosecution of the company is a condition precedent for the prosecution of individuals under Section 141. This interpretation was contrasted with the earlier judgment in Sheoratan Agarwal's case, which was overruled by the larger Bench in Aneeta Hada's case.

3. Applicability of Precedents:
The Court examined the precedents from State of Madras v. C.V. Parekh and Sheoratan Agarwal v. State of Madhya Pradesh. In C.V. Parekh's case, it was held that the liability of individuals in charge of a company arises only when the company itself is found guilty of contravention. Sheoratan Agarwal's case, which allowed for the prosecution of individuals without the company being prosecuted, was found to be incorrectly decided. The larger Bench in Aneeta Hada's case reaffirmed the necessity of prosecuting the company to establish vicarious liability of individuals.

Conclusion:
The Supreme Court concluded that the complaint against the appellant under Section 138 read with Section 141 of the Act was not maintainable since the company was not arraigned as an accused. The Court set aside the judgments of the Trial Court, the Appellate Court, and the High Court, thereby acquitting the appellant. However, it allowed the complainant the liberty to seek appropriate relief from the Court of Competent Jurisdiction and to file a petition under Section 14 of the Limitation Act for exclusion of the period during which the respondent was seeking remedy before other forums. The appeal was allowed with these observations.