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TMI Blog2025 (4) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... inal appeal are that the appellant/S.C. Garg ('Garg') was the Managing Director of the Company Ruchira Papers Ltd. ('Company') which was engaged in manufacturing craft papers. The Company had business dealings with ID Packaging, a partnership concern of respondent no. 2/R.N. Tyagi ('Tyagi'). In conduct of business between two entities, the parties used to maintain a running account and Tyagi used to issue cheques from time to time in favour of ID Packaging. Between 22.12.1997 to 30.01.1998, Tyagi issued 11 cheques which were initially dishonoured due to insufficiency of funds in the account. To maintain business relations, both the parties agreed to present the 11 cheques again at a later stage upon instructions from Tyagi. In relation to the liabilities other than the amount involved in the 11 cheques, Tyagi made payment by issuing 03 demand drafts in the name of the appellant's company. On 08.06.1998, 11 cheques were again presented for encashment upon which only four cheques were cleared leaving the remaining 07 cheques to be dishonoured again. The appellant's company filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 ('NI Act') against ID Packaging and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckings and another is disposed of as not pressed. b) Criminal Revision No. 52 of 2005, titled M/s I.D. Packings and another versus M/s Ruchira Papers and another is disposed of with the directions that the amount lying deposited in FDR A/c No. 042704PR00001211 dated 11.09.2012 along with interest satisfies the entire claim of the respondents M/s Ruchira Papers subject matter of the revision. c) CMPMO No. 305 of 2012, titled R.N. Tyagi and another versus M/s Ruchira Papers ltd., is also disposed of with this direction that the decree passed in Civil Suit No.47/1 of 2005/01, titled M/s Ruchira Papers versus M/s I.D. packing shall stand fully satisfied on the FDR along with interest having been paid to respondents M/s Ruchira Papers Limited. d) The registry is directed to remit the amount of aforesaid FDR account along with interest accrued thereon to the bank account of M/s Ruchira Papers Limited for which purpose they shall submit the photocopy of their current account to the Registry." 5. From the above extracted order of the High Court, it appears that Garg had instituted a suit for recovery of the amount involved under the 07 dishonoured cheques in which ex-parte decree wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record we are satisfied that the appeal deserves to be allowed, and the impugned chargesheet/criminal proceedings deserve to be quashed on the reasoning hereafter stated. 10. It is to be noted that in 138 NI Act proceedings against Tyagi, he raised a specific defence that there is no outstanding debt qua 07 cheques as the amount involved therein has already been paid by separate demand drafts. Learned Magistrate in its order dated 25.10.2002 rejected the said defence by recording a finding that no request was made by Tyagi to the complainant company to return the bounded cheques to the accused company when the demand drafts were allegedly sent by the accused persons to the complainant company. The Trial Magistrate specifically recorded a finding in paragraph No. 16 in the following manner: "16. Moreover, it may be stated that the accused company was having business dealing with the complainant company. The complainant company has also placed on record the copy of statement of account Ex. P-16 pertaining to the transaction of the accused firm with the complainant company. In the said statement of account, the impugned demand draft No. 859562 for Rs. 55,000/- D.D. No. 859879 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. vs. State of Uttar Pradesh & Anr. ((2009) 7 SCC 495) and Muskan Enterprises & Anr. Vs. The State of Punjab & Anr. ((2024) INSC 1046) in which one of us was a member (Justice Prashant Kumar Mishra), this Court observed in the context of maintainability of second petition under Section 482 Cr.P.C. that principle of res judicata has no application in a criminal matter. Considering divergence of opinion, it would be appropriate for us to have deeper examination and reading of the law laid down by this Court in the earlier decisions. 14. In Pritam Singh (supra), a three Judge Bench of this Court speaking through Natwarlal Harilal Bhagwati, J. placing reliance on Sambasivam vs. Public Prosecutor, Federal of Malaya (1950) AC 458, decided by a Bench of Five Judges of the Judicial Committee, opined that maxim res judicata is no less appliable to criminal than to civil proceedings. In the said matter, accused Pritam Singh was earlier tried for an offence under the Arms Act basing recovery of a weapon from him. In the said case Pritam Singh was acquitted. In a subsequent trial, the same recovery was again sought to be used by the prosecution as one of the circumstances in an offence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order for his acquittal has already been recorded. Reliance in this context was placed upon the observations of the Judicial Committee in the case of Samba Sivam v. Public Prosecutor, Federation of Malaya. [1950 AC 458] In Bhagat Ram case [(1972) 2 SCC 466: 1972 SCC (Cri) 751] a Single Judge of the High Court to whom a limited question had been referred because of a difference of opinion between two Judges of the Division Bench, not only decided the question referred to him, he also interfered with the acquittal of the accused regarding certain offences in respect of which an order for acquittal had already been made earlier by the Division Bench. It was held that it was not within the competence of the Single Judge to reopen the matter and pass the above order of conviction in the face of the earlier order of the Division Bench for acquittal. Although Bhagat Ram case [(1972) 2 SCC 466 : 1972 SCC (Cri) 751] related to acquittal, the principle laid down in that case, in our opinion, holds good in a case like the present wherein the question is about the binding effect of the earlier Division Bench judgment regarding the validity of the sanction for the prosecution of the accused-res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal adjudication of merits. While in Devendra (supra), the first petition was for quashing of the FIR and the second petition was preferred after the Magistrate took cognizance of the matter; in Muskan (supra), the first petition was dismissed as withdrawn whereas the second petition was held not maintainable due to earlier withdrawal without any liberty. Thus, these two cases are totally distinguishable. In addition, it is important to bear that Sambasivam (supra) was decided by Five Judges of the Judicial Committee and Pritam Singh (supra) was decided by a three Judge Bench, whereas all subsequent decisions have been rendered by the two Judges Bench. Therefore, Pritam Singh (supra) is binding insofar as the issue concerning the applicability of principle of res judicata in a criminal proceeding is concerned. 20. For the above reason it is absolutely clear that Tyagi cannot maintain a prosecution on the basis of allegations which were precisely his defence in the earlier proceedings wherein he was an accused. Thus, the present criminal proceedings deserve to be quashed on this ground alone. 21. It is also to be seen that the business relation was between the two companies. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. It was urged that the two respondents were in charge of, and were responsible to, the Company for the conduct of the business of the Company and, consequently, they must be held responsible for the sale and for thus contravening the provisions of clause (5) of the Iron and Steel Control Order. This argument cannot be accepted, because it ignores the first condition for the applicability of Section 10 to the effect that the person contravening the order must be a company itself. In the present case, there is no finding either by the Magistrate or by the High Court that the sale in contravention of clause (5) of the Iron and Steel Control Order was made by the Company. In fact, the Company was not charged with the offence at all. The liability of the persons in charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no evidence and no finding that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. The actual contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability created through the legal fiction envisaged in Section 141 of the Act." 25. However, subsequent decisions of this Court have emphasised that the provision imposes vicarious liability by way of deeming fiction which presupposes and requires the commission of the offence by the company itself as it is a separate juristic entity. Therefore, unless the company as a principal accused has committed the offence, the persons mentioned in sub-section (1) would not be liable and cannot be prosecuted. Section 141(1) of the Negotiable Instruments Act, extends vicarious criminal liability to the officers of a company by deeming fiction, which arises only when the offence is committed by the company itself and not otherwise. Overruling Sheoratan Agarwal and Anil Hada, in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. (2012) 5 SCC 661, a three- Judge Bench of this Court expounding on the vicarious liability under Section 141 of the Negotiable Instruments Act, has held : (Aneeta Hada case, SCC pp. 686 & 688, paras 51 & 59) "51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C.V. Parekh which is by a larger Bench and hence, is a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sangita Rane (2015) 12 SCC 781, this Court observed that : (SCC p. 785, paras 11 & 13) "11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881. *** 13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered opinion that the High Court should have been well advised to quash the criminal proceedings initiated against the appellant and that having not been done, the order is sensitively vu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate reputation is affected when a Director is indicted.' In similar terms, the Court further held : (Aneeta Hada case, SCC p. 688, para 59) '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 vicarious liability as the same has been stipulated in the provision itself.' *** 12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. 13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that he holds a managerial position in a company without there being specific allegations regarding his involvement in the offence. The following has been held in paras 13 and 14: "13. This Court has time and again reminded that summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings are manifestly frivolous or vexatious or instituted with the ulterior motive for wreaking vengeance, then in such circumstances the court owes a duty to look into the FIR with care and a little more closely. 10. We say so because once the complainant decides to proceed against the accused with an ulterior motive for wreaking personal vengeance, etc. then he would ensure that the FIR/complaint is very well drafted with all the necessary pleadings. The complainant would ensure that the averments made in the FIR/complaint are such that they disclose the necessary ingredients to constitute the alleged offence. Therefore, it will not be just enough for the court to look into the averments made in the FIR/complaint alone for the purpose of ascertaining whether the necessary ingredients to constitute the alleged offence are disclosed or not. 11. In frivolous or vexatious proceedings, the court owes a duty to look into many other attending circumstances emerging from the record of the case over and above the averments and, if need be, with due care and circumspection try to read in between the lines. The Court while exercising its jurisdiction under Section 482CrPC or Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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