2021 (6) TMI 1137 - HC - Indian Laws

Dishonour of Cheque - insufficiency of funds - legally enforceable debt - discharge of burden of prove - rebuttal of presumption under Sections 118 and 139 of the N.I. Act - whether an authorised signatory of a company or firm would be liable for prosecution under S. 138 of the N.I. Act without the company being arrayed as an accused? - HELD THAT - The liability of the revision petitioner is only statutory because of his legal status as the Managing Partner of the firm. Every person signing the cheque on behalf of the firm/company on whose account a cheque is drawn does not become the drawer of the cheque. Such a signatory is only a person duly authorised to sigh the cheque on behalf of the firm/company. It is clear from Section 138 of the N.I. Act that in spite of the demand notice referred to above, the drawer of the cheque failed to make payment within 15 days from the date of receipt of notice. Admittedly, no notice was issued to the firm as contemplated under the Act before lodging the complaint - Hence the firm cannot be held liable at this stage. Since no statutory notice was issued against the firm within the time prescribed, the respondent has no sufficient cause for invoking the jurisdiction of this court to implead the firm as an accused in exercise of powers under Section 142 of the N.I. Act. There can be no vicarious liability unless there is a prosecution against the firm. The vicarious liability gets attracted when the condition precedent laid down in Section 141 of the N.I. Act can satisfy. Thus, it can be safely concluded that if the prosecution proceedings against the firm were not taken by the complainant for the offence under Section 138 of the N.I. Act, it is certainly a bar for proceeding against the other person coming within the ambit of sub-sections (1) and (2) of Section 141 of the N.I. Act. In view of the above reasoning and discussion, the conviction and sentence concurrently passed by the two courts below are contrary to the dictum laid down by the Apex Court in Aneeta Hada 2012 (5) TMI 83 - SUPREME COURT and, therefore, cannot be sustained. The conviction and sentence are, accordingly, set aside. The conviction and sentence are, accordingly, set aside. The Crl.R.P. is allowed. The revision Petitioner is found not guilty of the offence under Section 138 of the N.I. Act and he is acquitted of the said offence.

Summary

Issues Involved:
1. Whether an authorized signatory of a company or firm can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881, without the company being arrayed as an accused.
2. Whether the conviction and sentence of the accused under Section 138 of the Negotiable Instruments Act, 1881, by the trial court and the appellate court were legally sustainable.

Issue-wise Detailed Analysis:

1. Prosecution of Authorized Signatory Without Company Being Arrayed as Accused:

The court examined whether an authorized signatory of a company or firm could be held liable under Section 138 of the Negotiable Instruments Act, 1881, without the company being prosecuted. The revision petitioner argued that the company or firm must be prosecuted as the principal entity, and without its prosecution, individuals such as directors or partners cannot be held liable. The petitioner relied on the decision in *Aneeta Hada v. M/s. Godfather Travels and Tours Pvt. Ltd.*, which held that for maintaining prosecution under Section 141 of the Act, arraigning the company as an accused is imperative. The court noted that the liability of the revision petitioner was statutory due to his legal status as the Managing Partner of the firm. The court emphasized that the offence under Section 138 is capable of being committed by the drawer of the cheque, and the drawer in this case was the firm, not the individual signatory.

2. Legality of Conviction and Sentence:

The trial court and the appellate court had concurrently found the accused guilty under Section 138 of the Negotiable Instruments Act, 1881, based on the evidence that the cheque was issued for a legally enforceable debt, and the accused failed to rebut the presumption under Sections 118 and 139 of the Act. The courts held that even if the prosecution against the firm was not taken, it was no bar for proceeding against the partners of the firm under Section 141 of the Act. However, the High Court found that the statutory notice required under Section 138 was not issued to the firm, which was a mandatory step. The court concluded that without the firm being prosecuted, the individuals could not be held vicariously liable. The High Court referred to the decision in *Aneeta Hada*, which clarified that there can be no vicarious liability unless there is prosecution against the firm.

Conclusion:

The High Court set aside the conviction and sentence of the revision petitioner, holding that the prosecution under Section 138 of the Negotiable Instruments Act, 1881, was not sustainable without the firm being arrayed as an accused. The court acquitted the revision petitioner of the offence, canceled his bail bond, and directed that he be set at liberty. The judgment emphasized the necessity of prosecuting the principal entity (the firm) before holding individuals vicariously liable under the Act.