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TMI Blog2024 (12) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... re the drawer of the cheque under Section 138 is a corporate person. The question as to whether a person who was not the drawer of the cheque upon an account maintained by him could be held to be liable for an offence under Section 138 of the NI Act fell for the consideration of this Court in the case of P.J. Agro Tech Ltd. and Others v. Water Base Ltd. [ 2010 (7) TMI 280 - SUPREME COURT] . The Court construed the provision strictly and answered the question in the negative. As per the legislative scheme it is only the drawer of the cheque who is sought to be made liable for the offence punishable under Section 138 of the NI Act. Thus, the next question that requires consideration is whether a Director of a company, who is also the authorised signatory, to sign and issue cheques on its behalf could be said to be the drawer of a cheque drawn upon the bank account held in the name of the company. In other words, whether such an authorised signatory could be said to maintain the bank account upon which the dishonoured cheque has been drawn for the reason that such a person has the authority to enter into transactions using the bank account of the company and also look after the day-to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company as an accused. Scope of the expression any debt or other liability appearing in Section 138 of the NI Act - HELD THAT:- Section 138 of the NI Act does not envisage that only those cases where a cheque issued towards the discharge of the personal liability of the drawer towards the payee gets dishonoured would come within the ambit of the provision. The expression of any debt or other liability appearing in Section 138 when read with the Explanation to the provision is wide enough to bring any debt or liability which is legally enforceable within its fold. Thus, the requirement under the provision is that the debt or any other liability has to be legally enforceable and the emphasis is not on the existence of such debt or other liability between the drawer and the payee. A number of decisions of this Court have clarified that even those cases where a person assumes the responsibility of discharging the debt of some other person, and in furtherance thereof draws a cheque on an account maintained by him, which subsequently gets dishonoured upon being presented before the drawee, would be covered by Section 138 if the payee is able to establish that there was some sort of an ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anayak, Adv. Mr. Agnibha Chatterjee, Adv. For the Respondent : Mr. Gaurav Kejriwal, Adv. Mr. Abhijit Sengupta, AOR Mr. Navneet Singh, Adv. Ms. Kuheli Mitra, Adv. Mr. Harsh Dahiya, Adv. Mr. Kunal Chatterji, AOR Ms. Maitrayee Banerjee, Adv. Mr. Rohit Bansal, Adv. Ms. Mrinalini Mukherjee, Adv. JUDGMENT J. B. PARDIWALA, J. :- For the convenience of exposition, the present judgment is divided into the following parts: INDEX A. FACTUAL MATRIX ............................................................................................ 2 i. Proceedings before the Trial Court ..................................................................... 6 ii. Proceedings before the Sessions Court ............................................................. 11 iii. Proceedings before the High Court ................................................................... 16 B. SUBMISSIONS ON BEHALF OF THE APPELLANT / COMPLAINANT ............................................................................................................................... 19 C. SUBMISSIONS ON BEHALF OF THE RESPONDENT / ACCUSED ........ 20 D. ANALYSIS ......................................................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 2006, the accused was in need of some financial assistance and in such circumstances, he approached the complainant with a request that a particular amount may be lent to him with a promise to repay on demand. c. Accordingly, the complainant issued a bearer cheque for an amount of Rs.7,00,000/- (Rupees Seven Lakh only) which indisputably was encashed by the accused. d. Upon the complainant requesting the accused to repay the amount referred to above, he issued a cheque dated 28.04.2006 drawn on the Standard Chartered Bank, N.S. Road, Kolkata for the amount of Rs.8,45,000/- (Rupees Eight lakh forty five thousand only). It is the case of the complainant that Rs. 7,00,000/- was lent by him by way of a bearer cheque and Rs. 1,45,000/- was subsequently lent in cash. That is how the accused issued a cheque of Rs. 8,45,000/- for the purpose of discharging his debt towards the complainant. e. However, the said cheque was signed by him in his capacity as a Director of Shilabati Hospital Pvt. Ltd. and was drawn upon the bank account maintained in the name of the hospital. f. There is a stamp of Shilabati Hospital Pvt. Ltd. on the cheque and beneath the signature of the accused there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive thousand) within 15 days from the date of receipt of the notice, failing which my client will be constrained to take recourse to law without any further intimation. Thanking you, Yours faithfully, Sd/- Arun Kumar Moni Advocate Dt. 14-08-06 7. It is not in dispute that the accused upon receipt of the above notice failed to give any appropriate reply to the complainant. 8. In such circumstances, the complainant was left with no other option but to file a private complaint in the Court of the A.C.J.M. at Raghunathpur, District Purulia for the offence punishable under Section 138 of the NI Act which came to be registered as Complaint Case No. 39 of 2006. i. Proceedings before the Trial Court 9. As the facts of this case are little peculiar, we deem it necessary to reproduce the entire complaint as under: In the Court of the A.C.J.M. at Raghunathpur, District Purulia. Complaint Case No. 39 of 2006. Bijoy Kumar Moni son of Sri Murari Mohan Moni, resident of Raghunathpur, P.O. P.S. Raghunathpur, Dist. Purulia. Complainant -Versus- Paresh Manna son of not known c/o. Shilabati Hospital SLP(Crl.) No. 13133 of 2024 Page 7 of 59 Pvt. Ltd., P.O. Chatal, P.S. Ghatal, District East Midnapur. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed that he is in dire need of Rs. 7,00,000/- (Seven Lacs) only for a couple of months for incidental expenses relating to his contemplated project. Complainant innocently believed the accused and issued a cheque No. 951764 on his trade loan A/C for Rs. 7,00,000/- in favour of the accused on 28.02.06. 6. That the accused withdrew the sum of Rs. 7,00,000/- and shortly thereafter the accused again approached the complainant for another sum of Rs. 1,45,000/- (One Lac forty five thousand) in presence of the witnesses Nos. 2 and 3. Complainant was hesitant to accede to such request of the accused but latter due to repeatedly insistence the complainant arranged for the sum on the promise of the accused to repay the entire sum very shortly. 7. That the complainant accordingly paid Rs. 1,45,000/- to the accused in presence of Witnesses Nos. 2 and 3 in the early part of March, 2006. 8. That the accused thereafter started avoiding the complainant. However, on 28.04.2006 the accused in discharge of his existing debt and liabilities issued in favour of the complainant at Raghunathpur a cheque bearing No. 997309 for Rs. 8,45,000/- (Eight Lac forty five thousand) on his A/C maintained in Chart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Branch Manager was also examined. 11. In the further statement of the accused recorded under Section 313 of the Criminal Procedure Code, 1973 (for short the Cr.P.C. ), the Trial Court put a specific question: 11; P.W.1 Sri Bijoy Kr Moni, has stated in his examination-in-chief that, since thereafter you started avoiding the complainant. However, on 28/04/06 you in discharge of your existing debts and liabilities issued a cheque bearing No. 997309 for Rs. 8,45,000/- on your account maintained in chartered Bank. N.S Road. Kolkata. Do you have anything to say about this statement? 12. To the aforesaid Question No. 11, the accused replied that he had issued the cheque as a security towards a loan transaction. 13. The Question No. 21 in the further statement of the accused reads thus: 21) Qus:- P.W.1 Sri Bijoy Kumar Moni, further stated during in his evidence that, you have prevailed upon the complainant by gaining his confidence took Rs.8,45,000/- and thereafter issued cheque no. 997309 to him with the knowledge that there is no sufficient fund in the account. What do you have to say about his statement? 14. To the aforesaid question, the answer of the accused was that the cheque was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s debited to the accused/ appellant. Throughout the trial the accused/appellant did not place any document or did not adduce any evidence that he, being the Director of Shilabati Hospital Private Ltd., had joint account with the company and that was operated by him for any transaction with that company. Being questioned about getting the confidence of the respondent/complainant to get the entire amount of Rs. 8,45,000/- and subsequent issuance of cheque bearing no. 997309 in discharging the liability of repayment, the accused/appellant took the plea that the said cheque was issued from the company as security of mortgage. But again to the utter surprise in course of trial no document of any mortgage was produced by him to establish the fact that the cheque bearing no. 997309 was issued in discharging the liability as security and the company was liable also for that ground. The appellant tried to shift the onus upon the respondent/complainant, but he could not succeed to that effect. In my considered opinion I am constrained to take into account the plea of the accused that the company was also the accused of that case ad thus the ruling relied upon by the accused/ appellant do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. Under the Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) 'may presume (rebuttable), (2) 'shall presume (rebuttable) and (3) 'conclusive presumptions' (irrebuttable). The term 'presumptions' is used to designate inference, affirmative or dis-affirmative of the existence of a fact, conveniently called the 'presumed fact drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumptions literally means 'taking as true without examination or proof.... (2009) 2 SCC 513. To disprove the presumption, the accused should bring on record such facts and circumstances, upon consideration of which, the Court may either believe that the consideration and the debt did not exist or there non existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only if the company was made an accused and held guilty. According to the High Court, as the company was not arraigned as an accused person, the accused as a Director of the said company could not be held vicariously liable for the offence. 20. The High Court placed reliance on the decision of this Court in Himanshu v. B. Shivamurthy and Another reported in (2019) 3 SCC 797 and held that in the absence of the company being arraigned as an accused, the complaint against the accused could not be held to be maintainable. It observed that although the complainant was entitled to the benefit of the presumption under Section 139 of the NI Act as the accused had failed in rebutting the presumption cast upon him, yet in the absence of compliance with the requirements necessary for the applicability of vicarious liability as provided under Section 141, the accused could not have been convicted as a sole accused in the absence of the company being arraigned as an accused and convicted as the principal offender first. The observations made by the High Court are reproduced hereinbelow: 27. The Company is neither a party nor was any notice served upon the Company of which the petitioner as dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THE APPELLANT / COMPLAINANT 23. Mr. Uddyam Mukherjee, the learned counsel appearing for the complainant, vehemently submitted that the High Court committed an egregious error in acquitting the accused on the ground that he could not have been held vicariously liable for the offence said to have been committed by the company in the absence of the company being prosecuted and punished. 24. According to the learned counsel, the transaction in question was between the accused and the complainant. The company was not at all in picture. He submitted that there is nothing on record to indicate that the accused had borrowed the amount for the company or on behalf of the company. 25. He submitted that although the cheque in question might have been issued by the accused containing a stamp of the hospital on it and signed by him in his capacity as a Director of the company, yet the said cheque was issued in discharge of his personal debt. 26. He further submitted that even before the Trial Court, it was not the defence of the accused that he had issued the cheque to discharge the debt of the company. He led no evidence worth the name in this regard. On the contrary, his defence was that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reasons specifies the legislative intent behind introduction of Chapter XVII to the NI Act in the following words: (xi) to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reason that it exceeds the arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers. 34. Section 138 of the NI Act reads as under: 138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice. 36. In the case on hand, the cheque in question came to be signed by the accused, in his capacity as the Director and Authorised Signatory of the Company Shilabati Hospital Pvt. Ltd., on the account maintained by the Company with the Standard Chartered Bank. Hence, the question that falls for our determination is whether the accused could be said to be covered by the expression account maintained by him as it appears in Section 138 of the NI Act. In other words, could it be said that the accused was maintaining the bank account upon which the dishonoured cheque had been drawn. 37. Section 6 of the NI Act inter alia defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Section 7 defines the drawer as the maker of a bill of exchange or cheque and drawee as the person thereby directed to pay. Sections 30 and 31 of the NI Act respectively define the liability of the drawer and the drawee of a cheque as follows: 30. Liability of drawer. The drawer of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be drawn by a person on an account maintained by him with the banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part of any debt or other liability. It is only such a cheque which is dishonoured which would attract the provisions of Section 138 of the above Act against the drawer of the cheque. 14. In the instant case, the cheque which had been dishonoured may have been issued by Respondent 11 for discharging the dues of Appellant 1 Company and its Directors to Respondent 1 Company and the respondent Company may have a good case against Appellant 1 Company for recovery of its dues before other fora, but it would not be sufficient to attract the provisions of Section 138 of the 1881 Act. The appellant Company and its Directors cannot be made liable under Section 138 of the 1881 Act for a default committed by Respondent 11. An action in respect of a criminal or a quasi-criminal provision has to be strictly construed in keeping with the provisions alleged to have been violated. The proceedings in such matters are in personam and cannot be used to foist an offence on some other person, who under the statute wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be held to be liable for the payment of interim compensation under Section 143A of the NI Act. This Court while answering the issue in the negative, applied the doctrine of separate corporate personality and held that it is only the drawer of the cheque who could be held to be liable for the payment of interim compensation under Section 143A of the NI Act and the authorised signatory of a company cannot be said to be the drawer of the cheque. The relevant observations made by the Court are reproduced hereinbelow: 13. The appellant has challenged the judgment and order of the High Court dated March 29, 2023 as well as the relied upon judgment and order dated March 8, 2023. The present appeal is filed assailing the correctness of these orders vis-a-vis the larger question of law, as framed by the High Court: Whether the signatory of the cheque, authorised by the company , is the drawer and whether such signatory could be directed to pay interim compensation in terms of section 143A of the Negotiable Instruments Act, 1881 leaving aside the company? xxx xxx xxx 28. The High Court's interpretation of section 7 of the Negotiable Instruments Act, 1881 accurately identified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 143A contradicts this principle and would lead to an unjust extension of liability not supported by the statutory text. ( Emphasis supplied ) 44. In yet one another decision of this Court in the case of N. Harihara Krishnan v. J. Thomas reported in (2018) 13 SCC 663, while dealing with the issue of commission of an offence under Section 138 of the NI Act by a company, the Court observed that Section 138 only contemplates the drawer of the cheque to be responsible for the commission of the offence. It is only by virtue of Section 141 that certain persons other than the drawer of the cheque can be made liable for the offence in cases where the offence under Section 138 is committed by a company and not an individual person. The Court, in the facts of the case before it, further held that the identity of the drawer of the cheque was apparent from the cheque itself and thus it was not open to the payee/complainant to seek impleadment of the company, that is, the drawer of the cheque, at a belated stage by filing an impleadment application when it had instituted the complaint only against the authorised signatory who had signed the cheque on behalf of the company. The Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute unless the person who is alleged to have drawn a cheque disputes that very fact. The other facts required to be proved for securing the punishment of the person who drew a cheque that eventually got dishonoured is that the payee of the cheque did in fact comply with each one of the steps contemplated under Section 138 of the Act before initiating prosecution. Because it is already held by this Court that failure to comply with any one of the steps contemplated under Section 138 would not provide cause of action for prosecution . Therefore, in the context of a prosecution under Section 138, the concept of taking cognizance of the offence but not the offender is not appropriate. Unless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the Court cannot take cognizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of law to investigate the offence under Section 138, there would be no person against whom a court can proceed. There cannot be a prosecutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation as being canvassed by the complainant is accepted then even an employee of the Company, who on account of his being an authorized signatory signs a cheque issued by the Company towards discharge of the debt or other liability of the Company, would be liable to prosecution and conviction under Section 138 of NI Act even after he resigns from the company and is no more in its employment. This certainly could not have been the intention of the legislature. Even the vicarious liability created under Section 138 of NI Act would not be attracted in respect of a Director or an employee of the Company who resigns and severs his connections with the company, unless the complainant is able to bring his case within the purview of sub-Section 2 of Section 141, by proving that the offence had been committed with his consent or connivance or was otherwise attributable to any neglect on his part. 47. We would hasten to add that the above interpretation should not in any manner be misconstrued to affix liability upon the joint account holder of an account unless the cheque is shown to have been made/drawn jointly by such joint account holder. A company vis- -vis its authorised signatory sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that in the case at hand, the accused had allegedly borrowed the amount from the complainant on the pretext that he was in need of financial help regarding some infrastructure development project he was undertaking. Nothing was brought on record during the course of the trial which would suggest that there was some sort of an understanding between the complainant and the accused that the debt of the accused would be discharged by the Shilabati Hospital Pvt. Ltd. A perusal of the notice issued by the complainant to the accused as well as a reading of the complaint filed by the complainant before the magistrate clearly brings out that the complainant was under the impression that the cheque was drawn by the accused in personal capacity upon a bank account maintained by him with the Standard Chartered Bank. Further, the defence that the bank account upon which the cheque was drawn was held in the name of Shilabati Hospital and not in the name of the accused was taken for the first time in the appeal filed by the accused before the Sessions Court. Although it can be understood that the complainant had no occasion to believe that the cheque was drawn upon the bank account of Shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s able to establish that there was some sort of an arrangement by way of which the debt was assumed by the drawer. 53. This Court in the case of Anil Sachar and Another v. Shree Nath Spinners Private Limited and Others reported in (2011) 13 SCC 148 observed thus: 15. Upon perusal of the record, we find that the complainants had established before the trial court that there was an understanding among the complainants and the accused that in consideration of supply of goods to M/s Shree Nath Spinners (P) Ltd., M/s AT Overseas Ltd. was to make the payment. The aforestated understanding was on account of the fact that Directors in both the aforestated companies were common and the aforestated companies were sister concerns. In the circumstances, it can be very well said and it has been proved that in consideration of supply of goods to M/s Shree Nath Spinners (P) Ltd., M/s AT Overseas Ltd. had made the payment. In view of the above fact, in our opinion, the trial court was not right when it came to the conclusion that there was no reason for M/s AT Overseas Ltd. to give the cheques to the complainants. xxx xxx xxx 17. The trial court materially erred while coming to a conclusion that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made therein are reproduced hereinbelow: 10. The language, however, has been rather specific as regards the intent of the legislature. The commencement of the section stands with the words Where any cheque . The abovenoted three words are of extreme significance, in particular, by reason of the user of the word any the first three words suggest that in fact for whatever reason if a cheque is drawn on an account maintained by him with a banker in favour of another person for the discharge of any debt or other liability, the highlighted words if read with the first three words at the commencement of Section 138, leave no manner of doubt that for whatever reason it may be, the liability under this provision cannot be avoided in the event the same stands returned by the banker unpaid. The legislature has been careful enough to record not only discharge in whole or in part of any debt but the same includes other liability as well. This aspect of the matter has not been appreciated by the High Court, neither been dealt with or even referred to in the impugned judgment. 11. The issue as regards the coextensive liability of the guarantor and the principal debtor, in our view, is totally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded as an accused. To appreciate the controversy, certain provisions need to be referred to. xxx xxx xxx 58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the section make it absolutely unmistakably clear that 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. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicariou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court acquitted the accused on the ground that the company was not made a party to the proceedings. However, this Court set aside the order of acquittal and held the accused liable for the offence under Section 138. It was observed by this Court that as the cheque was drawn by the accused on an account maintained by him, the Company or any of its directors could not be made liable for the offence, even if the cheque was issued by the accused towards the discharge of the debt of the company. The relevant observations made by the Court are reproduced hereinbelow: 10. In the present case, it is an admitted fact that the drawer of the cheque was the respondent, who had drawn the cheque, bearing No. 075073 for Rs 74,200 on a bank account maintained by him towards the refund of the booking amount. Therefore, he was the drawer of the cheque. The case of the appellant, apart from being supported by the provision of Section 138 of the NI Act, also gets buttressed by the judgment in P.J. Agro Tech Ltd. v. Water Base Ltd. [(2010) 12 SCC 146 : (2010) 4 SCC (Civ) 588 : (2011) 2 SCC (Cri) 164] , where this Court has dealt with the scope of Section 138 and held that : (SCC p. 150, para 13) 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the section make it absolutely unmistakably clear that 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. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. ( Emphasis supplied ) 60. Following the rationale in Aneeta Hada (supra), this Court in Anil Gupta v. Star India Private Limited and Another reported in (2014) 10 SCC 373 held that the guilt for the offence under Section 138 is only deemed upon the other persons who are connected with the Company as a consequence of Section 141 of the NI Act. Herein, since the complaint against the respondent Company was not maintainable, the High Court had quashed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence under Section 138 was committed. In circumstances where such persons are indeed found vicariously liable, those persons as well as the Company shall be deemed to be guilty of the offence under Section 138 of the NI Act. The relevant observations made by the Court are reproduced hereinbelow: 21. Section 141 is an exception to the normal rule that there cannot be any vicarious liability when it comes to a penal provision. The vicarious liability is attracted when the ingredients of sub-section (1) of Section 141 are satisfied. The section provides that every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of business of the Company, as well as the Company shall be deemed to be guilty of the offence under Section 138 of the NI Act. ( Emphasis supplied ) 62. It follows from a conspectus of the aforesaid decisions that it is the drawer Company which must be first held to be the principal offender under Section 138 of the NI Act before culpability can be extended, through a deeming fiction, to the other Directors or persons in-charge of and responsible to the Company for the conduct of its business. In the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the proprietorix concern. 66. The position of law as has been settled by this Court and reiterated in a legion of decisions is that it is only the drawer of the cheque who can be held liable for an offence under Section 138 of the NI Act. Further, this Court has also declared through several pronouncements on the subject that an authorised signatory acting on behalf of the principal cannot be said to be the drawer of the cheque on an account maintained by him with a banker under Section 138. 67. It is also pertinent to note that the High Court in the aforesaid decision also referred to the decision of this Court in Raghu Lakshminarayanan v. Fine Tubes reported in (2007) 5 SCC 103 wherein it was categorically held by this Court that Section 141 of the NI Act will have no application to proprietorship concerns as they are owned by individuals and do not have a separate corporate identity. However, the High Court distinguished the said decision by holding that although the signatory of a cheque issued on behalf of a proprietorship concern cannot be said to be vicariously liable under Section 141 yet he could be held liable in his capacity as the drawer of the cheque under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the discussion in the preceding parts of this judgment, the requirement of Section 138 of the NI Act is that for fastening criminal liability on the accused, the cheque which was dishonoured for insufficiency of funds etc., must have been drawn on an account maintained by the accused. The mere fact that the cheque signed by the accused in his capacity as a Director of the Company would in the normal course be honoured by the Bank to which it was presented does not satisfy the statutory requirement of Section 138 of the Act. 72. Section 138 of the Act exposes the person who has drawn the cheque and which has been returned for insufficiency of funds to criminal liability. The provision, therefore, must be construed strictly. However, such a strict construction should not result in defeating the very purpose for which the provision has been enacted as held by this Court in the case of NEPC Micon Limited and Others v. Magma Leasing Limited reported in (1999) 4 SCC 253. At the same time, the statutory provisions creating penal liability cannot be stretched too far to embrace the persons and situations patently excluded from its purview as discernible from clear and unequivocal languag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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