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2022 (4) TMI 246 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - framing of charges - vicarious liability - whether the complaint under Section 138 of Negotiable Instruments Act without arraigning the company as an accused would be maintainable? - HELD THAT - Dealing with similar issue wherein only directors of company is made the accused, leaving the company, the complaint under Section 138 of Negotiable Instruments Act would not lie. In recent judgment in case of HINDUSTAN UNILEVER LIMITED VERSUS THE STATE OF MADHYA PRADESH 2020 (11) TMI 1021 - SUPREME COURT the Court held the person who is in charge of and responsible to the company for the conduct of business would be guilty of the offence. Likewise in case of HIMANSHU VERSUS B. SHIVAMURTHY ANR. 2019 (3) TMI 294 - SUPREME COURT , the Supreme Court held that commission of offence by the company is an express condition precedent to attract the vicarious liability of others and the word as well as the company makes it clear 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 that the company is a juristic person. The petitions have been filed at the stage of framing of charges. Whether it would be maintainable ? In order to arrive at an answer to the query, the complaint and the orders summoning the accused is examined. Admittedly, the company was not made an accused in the cases expect the Directors, therefore, applying the law laid down by the Supreme Court as cited supra, it appears that while summoning the accused, the Magistrate has failed to see the principles of law and in turn when the objection was made, the learned Sessions Judge also failed to take into account the principles laid down by the Supreme Court - applying the principles as has been decided in case of M/S. PEPSI FOODS LTD. ANR VERSUS SPECIAL JUDICIAL MAGISTRATE ORS 1997 (11) TMI 518 - SUPREME COURT which mandates that the Magistrate has to carefully scrutinize the evidence brought on record and cannot be a silent spectator at the time of recording of preliminary evidence, the petition under Section 482 would be maintainable for the reason that both the Courts below have failed to take into account. Petition allowed.
Issues Involved:
1. Maintainability of complaints under Section 138 of the Negotiable Instruments Act without arraigning the company as an accused. 2. Vicarious liability of directors in the absence of the company being prosecuted. 3. Specific averments regarding the role of directors in the issuance of cheques. 4. Stage of filing petitions under Section 482 CrPC and the scrutiny required by the Magistrate. Issue-Wise Detailed Analysis: 1. Maintainability of complaints under Section 138 of the Negotiable Instruments Act without arraigning the company as an accused: The core legal question addressed was whether a complaint under Section 138 of the Negotiable Instruments Act is maintainable against directors without the company being made an accused. The court referred to the case of Aneeta Hada v. Godfather Travels & Tours (P) Ltd. (2012) 5 SCC 661, which established that for maintaining prosecution under Section 141 of the Act, arraigning the company as an accused is imperative. The court reiterated that the prosecution against directors alone, without the company being prosecuted, is not maintainable. 2. Vicarious liability of directors in the absence of the company being prosecuted: The judgment emphasized that vicarious liability of directors under Section 141 of the Negotiable Instruments Act is contingent upon the company being prosecuted. The court cited Hindustan Unilever Ltd. v. State of Madhya Pradesh (2020) 10 SCC 751 and Himanshu v. B. Shivamurthy & Another (2019) 3 SCC 797, underscoring that the company must be arraigned as an accused for directors to be held vicariously liable. 3. Specific averments regarding the role of directors in the issuance of cheques: The court noted that the complaints lacked specific averments about the role played by the directors in the issuance of the cheques. Citing Ramraj Singh v. State of M.P. (2009) 6 SCC 729, the court held that clear and unambiguous allegations are necessary to establish that directors were in charge and responsible for the conduct of the company’s business. The absence of such specific allegations rendered the prosecution against the directors unsustainable. 4. Stage of filing petitions under Section 482 CrPC and the scrutiny required by the Magistrate: The petitions were filed at the stage of framing of charges. The court examined whether the petitions were maintainable under Section 482 CrPC. Referring to Pepsi Foods Limited & Anr. v. Special Judicial Magistrate (1998) 5 SCC 749, the court held that the Magistrate must carefully scrutinize the evidence and not be a silent spectator. The failure of the Magistrate and the Sessions Judge to apply the principles laid down by the Supreme Court justified the maintainability of the petitions under Section 482 CrPC. Conclusion: The court concluded that the prosecution against the directors without arraigning the company as an accused was not maintainable. Consequently, the petitions were allowed, and the impugned orders and criminal proceedings against the directors were quashed. The court emphasized the necessity of specific averments regarding the directors' roles and the imperative of arraigning the company as an accused for vicarious liability to be attracted.
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