2013 (11) TMI 1809 - HC - Indian Laws

Summary

Issues involved:
The judgment involves the interpretation of liability under section 138 and section 141 of the Negotiable Instruments Act in a case of dishonored cheque issued by a company, and whether individuals associated with the company can be held vicariously liable.

Issue 1: Liability under section 138 and section 141 of the Negotiable Instruments Act
The judgment pertains to a case where a dishonored cheque was issued by a company, leading to criminal proceedings under section 138 of the Negotiable Instruments Act. The petitioner argued that only the drawer of the cheque can be punished under section 138, and constructive liability under section 141 does not apply to individuals not in charge of the company's affairs at the time of the offense. The petitioner relied on legal precedents to support this argument.

Issue 2: Interpretation of Constructive Liability
The respondent contended that the principle of constructive liability is applicable in penal law, asserting that individuals associated with the company, whose liability was sought to be discharged by the issuance of the cheque, should be held liable upon dishonor of the instrument. Reference was made to a relevant legal case to support this stance.

Judgment:
The court analyzed the provisions of section 138 and section 141 of the Negotiable Instruments Act. It emphasized that penal liability for dishonored cheques primarily rests with the drawer of the cheque, as per section 138, while section 141 creates a legal fiction for constructive liability in the case of a company. The court highlighted the conditions that must be met for extending liability under section 141 and stressed the need for strict compliance due to the penal nature of the provisions.

The court referred to previous legal judgments to support its decision, emphasizing that vicarious liability under section 141 is limited in scope and should not extend beyond the specified conditions. It concluded that individuals not directly involved in the company's affairs at the time of the offense cannot be held vicariously liable under section 141 for the dishonor of a cheque issued by the company.

Therefore, the court allowed the revisional application, setting aside the impugned order and quashing the proceedings against the petitioners in the case. The trial against other accused persons was directed to continue as per the law.