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2020 (6) TMI 589 - HC - Indian LawsDishonor of Cheque - Framing of Charges - Vicarious Liability against the company or not - HELD THAT - Section 141 of N.I. Act deals with the offences committed by the companies and say that if an offence is committed by a company under Section 138 of the Act, every person, at the time, the offence was committed, was in-charge and responsible to the company in the conduct of the business of the company, is liable along with the company to be proceeded against and punished accordingly. Further, it is provided that no person shall liable to be punished if he proved that an offence was not committed under his knowledge or he has exercised all due diligence to prevent the commission of such offence. In the case of ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. 2012 (5) TMI 83 - SUPREME COURT it has been held that when the company would be prosecuted then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments made in the complaint. To summarize, there cannot be any vicarious liability unless there is prosecution against the company. In the present case, although, the respondent stated that the petitioner borrowed money from him on account of personal need of his business but looking to the fact that the respondent has accepted his business relation with the petitioner and the disputed cheque was given by the petitioner on behalf of the Company. A demand notice was served only on the petitioner/accused, there was no demand notice against company, therefore, without arraying the company as an accused in complaint case, the petitioner can not be prosecuted for the offence of Section 138 N.I. Act. Petition allowed.
Issues Involved:
1. Validity of proceedings under Section 138 of the Negotiable Instruments Act (N.I. Act) when the company is not impleaded as a party. 2. Necessity of specific averments regarding the role of the petitioner on behalf of the company under Section 141 of the N.I. Act. 3. Compliance with the preconditions under Section 138 of the N.I. Act. Detailed Analysis: 1. Validity of Proceedings Under Section 138 N.I. Act Without Impleading the Company: The petitioner argued that the proceedings under Section 138 of the N.I. Act are invalid as the company, on whose behalf the cheque was issued, was not made a party to the complaint. The court noted that the petitioner is the chairman of ‘Well Built Industry India Ltd.’ and the cheque was issued on behalf of the company. According to Section 141 of the N.I. Act, if an offence under Section 138 is committed by a company, every person in charge of and responsible for the conduct of the business of the company, as well as the company, shall be deemed guilty and liable to be proceeded against and punished. The court referred to the case of Aneeta Hada Vs. Godfather Travels and Tours Private Ltd., which established that there cannot be any vicarious liability unless there is prosecution against the company. Similarly, in Anil Gupta Vs. Star India Pvt. Ltd., the Supreme Court held that proceedings against individuals cannot continue in the absence of the company being a party. 2. Necessity of Specific Averments Regarding the Role of the Petitioner: The petitioner contended that the complaint lacked specific averments regarding his role on behalf of the company. The court cited S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, which mandates that a complaint under Section 141 must specifically aver that the accused was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. Merely being a director is insufficient to attract vicarious liability under Section 141. Further, the court referred to K.K. Ahuja Vs. V.K. Vora, which summarized that specific averments are necessary for directors or officers other than Managing Directors or Joint Managing Directors, who are presumed to be in charge of the company’s business by virtue of their positions. 3. Compliance with Preconditions Under Section 138 N.I. Act: The court examined whether the preconditions under Section 138 were met. These conditions include: - Presentation of the cheque to the bank within six months. - A written demand for payment by the payee within thirty days of receiving information about the cheque's dishonour. - Failure of the drawer to make payment within fifteen days of receiving the notice. In Himanshu Vs. B. Shivamurthy and another, the Supreme Court emphasized the importance of fulfilling these conditions. The court found that in this case, the demand notice was served only on the petitioner and not on the company, which is a necessary condition for the offence under Section 138 to be made out. Conclusion: The court concluded that without arraying the company as an accused, the petitioner cannot be prosecuted under Section 138 of the N.I. Act. The impugned order dated 20.05.2019 by the JMFC Narsinghpur was set aside, allowing the petition. The petitioner was granted the liberty to avail any other remedy available in this regard.
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