2023 (6) TMI 894 - HC - Indian Laws

Dishonour of Cheque - vicarious liability of director - whether the complaint was maintainable under Section 138 of the Negotiable Instruments Act against its Director in absence of the company being joined as party respondent accused in the original complaint? - HELD THAT - The issue is no more res-integra. The issue arose for consideration of the Hon ble Supreme Court in the case of Aneeta Handa 2012 (5) TMI 83 - SUPREME COURT . The Hon ble Supreme Court was examining the controversy as to whether any person who has been mentioned in Section 141(1) and 141(2) of the Act can be prosecuted without the company being impleaded as accused. To appreciate the controversy, the Hon ble Supreme Court had proceeded to examine the relevant provisions of the Negotiable Instruments Act. The Court upon careful examination of Section 138 of the Act and upon appreciation of the proviso, notice that cheque has to be drawn by a person on the account maintained by him and must have issued the cheque in discharge of any debt or other liability. The Hon ble Supreme Court further notice that the word drawer has been defined under Section 7 of the Act which mean maker of a bill of exchange or a cheque. Thus, the Court held that even an authorized signatory in company becomes a drawer as he has been authorized to do so in respect of account maintained by the company - The Hon ble Supreme Court upon analysis of the deeming fiction created in the proviso to Section 141 held that it crystallizes the corporate criminal liability and vicarious liability of a person who is in charge of the company. Thus from the aforesaid legal position, there cannot be any iota of doubt for maintaining prosecution under Section 141 of the Act, the company must be joined as an accused. 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. The Court notice that in absence of specific averment as to the role of the respondent and particularly in view of the material at the relevant time, which in no manner connected with the affairs of the company, rejected the appeal of the complainant. In the instant case, the contents of the complaint as reproduced in the impugned order goes to suggest that the complainant has even failed to make necessary averments with regard to the role of the accused by virtue of his position to make him liable or to be proceeded with the prosecution under Section 138 of the Negotiable Instruments Act. As held by the Hon ble Supreme Court in the case of Aneeta Handa, criminal liability can be only imposed if the principal offenders viz. concerned company being joined as party accused - thus no error is committed by the learned Magistrate in not entertaining the complaint having noticed the lacuna of not joining the company as party respondent. The present application of leave to appeal fails and stands rejected.

Summary

Issues Involved:
1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act without joining the company as a party respondent.
2. Whether the accused successfully rebutted the presumption and if the complainant failed to prove the case beyond reasonable doubt.

Summary:

Issue 1: Maintainability of the Complaint

The application was filed under Section 378(4) of the Code of Criminal Procedure to challenge the acquittal of the respondent for the offence under Section 138 of the Negotiable Instruments Act. The trial court dismissed the complaint on two grounds: the complainant did not join the company as a party respondent nor addressed the legal notice to the company, and the accused successfully raised a probable defense.

The appellant argued that it was unnecessary to join the company as a party respondent since the accused, as the authorized signatory, was responsible. The appellant relied on several Supreme Court decisions, including *Jitendra Vora vs. Bhavana Y Shah*, *Mainuddin Abdul Sattar Shaikh vs. Vijay D Salvi*, and *National Small Industries Corporation Limited vs. Harmeet Singh Paintal*, asserting that a person in charge of the company's affairs can be held liable without the company being named in the complaint.

The respondent countered that the complaint was not maintainable without the company being joined as a party respondent, citing *Aneeta Handa vs. Godfather Travels and Tours Private Limited* and *Himanshu vs. B. Shivamurthy and Another* among other cases, which emphasized the necessity of impleading the company as an accused to attract vicarious liability under Section 141 of the Negotiable Instruments Act.

The court, referencing the Supreme Court's decision in *Aneeta Handa*, concluded that for maintaining prosecution under Section 141 of the Act, arraigning the company as an accused is imperative. The absence of the company as a party respondent rendered the complaint not maintainable.

Issue 2: Rebutting the Presumption and Proof Beyond Reasonable Doubt

The trial court also found that the accused had successfully rebutted the presumption and the complainant failed to prove his case beyond reasonable doubt. The court noted that the complainant did not provide necessary averments regarding the accused's role and responsibility in the company, which was essential to establish vicarious liability.

Conclusion:

The court upheld the trial court's decision, rejecting the application for leave to appeal and the criminal appeal, emphasizing the necessity of joining the company as a party respondent to maintain the prosecution under Section 138 of the Negotiable Instruments Act.