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TMI Blog2025 (1) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... t requires the company to be named as an accused. Directors and officers can only be held vicariously liable if the company is prosecuted. Petition allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as, against the filing of complaint against them, out of six accused, three are before this Court. They have sought the relief of quashing, mainly, on the ground that the complaint, before the learned trial Court, is not maintainable, as, the cheque, in question, was issued on behalf of M/s Himudayath Producer Company Limited and not by the accused, in their individual capacity. 7. According to the petitioners accused, account No.89412100000925, was opened in the name of Himudayath Producer Company Ltd., and not in the name of an individual. 8. As per the case of the petitioners accused, the learned trial Court has wrongly issued the process, under Section 138 of the NI Act, ignoring the fact that the Company has not been impleaded, as accused, in this case. As such, according to them, the proceedings cannot be initiated and allowed to be continued against them. 9. It is the further case of the accused persons that they are not liable for the dishonouring of the cheque, as, they were not responsible for dishonouring the same. 10. On the basis of the above facts, Shri Hemant Kumar Thakur, Advocate, has prayed that the present petition may kindly be allowed, by quashing the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [14] We, accordingly, are of the view that the High Court was in error in rejecting the petition under section 482 of the CrPC, 1973." 17. Although, the cheque has been issued by a body corporate, but, the same can be prosecuted, under Section 138 of the NI Act. While holding so, the view of this Court, is being guided, by the decision of Hon'ble Supreme Court, in Anil Hada versus Indian Acrylic Ltd, (2000) 1 Supreme Court Cases 1. Relevant paragraphs 12 and 13 of the judgment, are reproduced, as under : " 12. Thus when the drawer of the cheque who falls within the ambit of Section 138 of the Act is a human being or a body corporate or even firm, prosecution proceedings can be initiated against such drawer. In this context the phrase "as well as" used in subsection (1) of Section 141 of the Act has some importance. The said phrase would embroil the persons mentioned in the first category within the tentacles of the offence on a par with the offending company. Similarly the words "shall also" in subsection (2) are capable of bringing the third category persons additionally within the dragnet of the offence on an equal par. The effect of reading Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it states that the Director or any other officer can be prosecuted without impleadment of the company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted." xxx xxx xxx "53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant." 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, if some function is discharged by such human agency for and on behalf of the company it would be an act of the company and not attributable to such human agent. One such instance of discharge of functions could be the authority to manage the bank accounts of the company, issue and sign cheques on its behalf, etc. which may be delegated to an authorised signatory. However, such authorisation would not render the authorised signatory as the maker of those cheques. It is the company alone which would continue to be the maker of these cheques, and thus also the drawer within the meaning of Section 7 of the NI Act. 46. The authorised signatory is merely the physical limb that signs and makes the cheque on behalf of the company's incorporeal personality. The company, for all purposes, continues to remain the drawer of the cheques. If the interpretation 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 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. [...]" (Emphasis supplied) xxx xxx xxx 57. In Himanshu v. B. Shivamurthy (supra), the Court was examining the legality and validity of the order quashing a complaint passed by the High Court in exercise of its inherent powers under Section 482 of the CrPC in a case where the Director of the company was arraigned as the sole accused for the dishonour of a cheque drawn upon the bank account held in the name of the company. Reiterating the principles laid down in Aneeta Hada (supra), this Court upheld the decision of the High Court in quashing the complaint case. 20. Even otherwise, the Company cannot now be impleaded as accused, in this case, as before filing the complaint under Section 138 NI Act, certain legal formalities have to be completed by the complainant, i.e., issuance of legal notice, demanding the money, within the stipulated period. 21. The nonprosecution of the company, from whose account the cheque was issued and dishonored, is fatal, noncurable illegality and shall lead to the dismissal of the complaint, being legally defective and not properl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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