HC Allahabad (10.02.2021) in Sanjay Singh Vs, State of U.P. and Another. [Application U/S 482 No. - 2162 of 2016] held that;
for maintaining a prosecution against the person in charge of and responsible for conduct of the business of the company under Section 138 N.I. Act., arraigning of the Company as an accused is imperative in view of Section 141 of the Act, as such a person can only be held vicariously liable. Consequently, on point No.1 it is so determined. Such a person cannot be prosecuted unless there is prosecution of the company.
if a document which is beyond suspicion or doubt, even if filed by the accused, can be looked into, the document filed by the complainant forming the basis of the complaint which is beyond doubt can also be looked into for the purpose of ascertaining if prima facie offence is made out for summoning the accused.
Excerpts of the order;
# 5. The opposite party No.2 complainant filed complaint registered as Complaint Case No. 1153 of 2015 (Manoj Kumar vs. Sanjay Singh) under section 138 N.I. Act, Police Station, Sigra, District-Varanasi, on the averments, inter alia, that the complainant had advanced rupees 5,50,000/- to the applicant for purchase of land as the applicant was engaged in the business of property dealing but the land was not transferred. The complainant made repeated demands for return of money and consequently the applicant gave a cheque of rupees 5,00,000/- dated 30.4.2015 to the complainant, which, on presentation in bank was dishonored. The complainant served the applicant with legal notice within the stipulated period but as the amount under cheque was not paid, the complaint was filed.
# 6. The Additional Chief Judicial Magistrate, Court No.10 Varanasi, on consideration of the statement of the complainant recorded under Section 200 Cr.P.C. and the material placed before him passed the summoning order dated 17.8.2015. This order was challenged by the applicant in Criminal Revision No. 317 of 2015, but the same was rejected by the order dated 2.9.2015 passed by the Additional Sessions Judge, Court No.4, Varanasi.
# 7. The learned counsel for the applicant has submitted that the orders under challenge suffer from illegality and amount to abuse of the process of the court. His submission is that the cheque in question was issued by the company. The applicant had signed the cheque in the capacity of the authorised signatory of the company. He had not issued the cheque nor signed in his personal capacity, but, the company was not made party accused in the complaint. The applicant, Director of the company, could not be held liable for the alleged offence as there was no prosecution of the company. Consequently, no prosecution of the applicant could be launched and summons could not be issued to him to face the trial. Learned counsel for the applicant has placed Sections 138 and 141 of the N.I. Act and relied upon the judgement of the Hon’ble Supreme Court in the case of Aneeta Hada Vs. M/s Godfather Travels and Tours Pvt. Ltd., reported in (2012) 5 SCC 661, in support of his contention that there could be only vicarious liability of the person who, at the time the offence was committed, was incharge of the business of the company but even such person can not be held liable if the company is not arrayed as an accused.
# 8. Learned counsel for the applicant has further submitted that the cheque, undisputedly the very basis of the complaint, evidenced that it was issued in the capacity of authorized signatory for the company. Any legal notice was not served to the company. There was non compliance with the provisions of Sections 138 and 141 of N.I. Act and no offence was made out even, prima facie, against the applicant.
# 9. Learned A.G.A., Shri Pankaj Saxena has submitted that there is no illegality in the summoning order as the Magistrate was satisfied, on consideration of the material before him, that prima facie, offence under Section 138 N.I. Act was made out, for summoning of the applicant to face the trial.
# 12. In the light of the submissions advanced the following points arise for consideration:
(i) Whether the Criminal prosecution against the person in charge of, and responsible for conduct of the business of the company under Section 138 Negotiable Instruments Act, can be maintained, in the absence of any prosecution of the Company for such offence and without making the company an accused, in view of Section 141 of the Negotiable Instruments Act?
(ii) Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of director of Udit Infraheights Pvt. Ltd. Company?
(iii) Whether the orders under challenge and the criminal proceedings against the applicant deserve to be quashed in the exercise of jurisdiction under Section 482 Cr.P.C.?
# 16. The essential ingredients of offence under Section 138 of the N.I. Act are :
(i)The person drew a cheque on an account maintained by him with the banker;
(ii) when such a cheque is presented to the bank is returned by the bank unpaid;
(iii) such cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity, which ever is earlier;
(iv) the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to the payee;
(v) Such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding return of the cheque, as unpaid and
(vi) inspite of the demand notice the drawer of the cheque failed to make the payment within a period of 15 days from the date of receipt of the demand notice.
# 17. In order to constitute the offence under Section 138 N.I. Act all the aforesaid ingredients (i) to (vi) must co-exist. Each one of the ingredients (i) to (v) flows from the document, which evidences the existence of such an ingredient. The only other ingredient no. (vi) the complainant can only assert but cannot prove. The burden is essentially on the drawer of the cheque to prove that he had in fact made the payment pursuant to the demand.
# 19. In Standard Chartered Bank Vs. State of Maharashtra and others (2016) 6 SCC 62, also, it has been held that there cannot be any vicarious liability unless there is a prosecution against the Company. Paras 9,11 and 12 of the report read as under:
9. On a studied scrutiny of the aforesaid provision, it is quite limpid that to constitute the criminal liability the complainant is required to show that a cheque was issued; that it was presented in the bank in question; that on due presentation, it was dishonoured; that, as enshrined in the provision, requisite notice was served on the person who was sought to be made liable for criminal liability; and that in spite of service of notice, the person who has been arraigned as an accused did not comply with the notice by making payment or fulfilling other obligations within the prescribed period, that is, 15 days from the date of receipt of notice.
11. On a perusal of the aforesaid provision, it is clear as crystal that if the person who commits an offence under Section 138 of the Act is a company, the company as well as other person in charge of or responsible to the company for the conduct of the business of the company at the time of commission of the offence is deemed to be guilty of the offence. Thus, it creates a constructive liability on the persons responsible for the conduct of the business of the company. 12. At one point of time, an issue had arisen before this Court, whether a complaint could be held to be maintainable without making the company a party. The said controversy has been put to rest by a three-Judge Bench decision in Aneeta Hada v. Godfather Travels and Tours Private Limited wherein it has been held that: (SCC p. 688, para 58)
“58......... 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.”
# 20. In N. Harihara Krishnan Vs. J Thomas (2018) 13 SCC 663 the Hon’ble Supreme Court held that Section 141 stipulates the liability for the offence punishable under Section 138 N.I. Act when the person committing such an offence happens to be a company. In other words when a drawer of the cheque happens to be a company. Relevant part of paragraphs 20, 21 and 22 of the report read as under:
“20. The offence under Section 138 of the Act is capable of being committed only by the drawer of the cheque. The logic of the High Court that since the offence is already taken cognizance of, there is no need to take cognizance of the offence against Dakshin is flawed. Section 141 stipulates the liability for the offence punishable under Section 138 of the Act when the person committing such an offence happens to be a company - in other words when the drawer of the cheque happens to be a company. Relevant portion of Section 141 reads as follows:-
“141. Offences by companies.— (1) If the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and 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 accordingly:”
21. This Court in Aneeta Hada,(SCC p. 668, para 1), had an occasion to examine the question “whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for brevity “the Act”) without the company being arraigned as an accused” and held as follows:- “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. …”
22. The High Court failed to appreciate that the liability of the appellant (if any in the context of the facts of the present case) is only statutory because of his legal status as the Director of Dakshin. Every person signing a cheque on behalf of a company on whose account a cheque is drawn does not become the drawer of the cheque. Such a signatory is only a person duly authorised to sign the cheque on behalf of the company/drawer of the cheque.”
# 21. It has thus been settled in Aneeta Hada (supra) that for maintaining a prosecution against the person in charge of and responsible for conduct of the business of the company under Section 138 N.I. Act, arraigning of the Company as an accused is imperative in view of Section 141 of the Act, as such a person can only be held vicariously liable. Consequently, on point No.1 it is so determined. Such a person cannot be prosecuted unless there is prosecution of the company.
# 31. In Harshendra Kumar D. Vs. Rebatilata Koley (2011) 3 SCC 351 the Hon'ble Supreme Court has laid down that while exercising jurisdiction under Section 482 Cr.P.C. or criminal jurisdiction under Section 397 Cr.P.C. in a case where complaint is sought to be quashed, in an appropriate case, if on the face of the document which are beyond suspicion or doubt placed by the accused, the accusation against accused cannot stand, it would be travesty of justice if the accused is relegated to trial and is asked to prove his defence before the trial court. In such a matter, for promotion of justice or to prevent injustice or abuse of a process, the High Court may look into the materials which have a significant bearing on the matter at a prima facie stage. In Anita Malhotra Vs. Apparel Export Promotion Council and another (2012) 1 SCC 520, the same principle has been reiterated. Paragraphs 19 and 20 of the Anita Malhotra (supra) read as under:
“19. In Harshendra Kumar D. v. Rebatilata Koley, while considering the very same provisions coupled with the power of the High Court under Section 482 of the Code of Criminal Procedure, 1973 (in short “the Code”) for quashing of the criminal proceedings, this Court held: (SCC pp.361-62, para 25)
“25. In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstance, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. It is fairly settled now that while exercising inherent jurisdiction under Section 482 or revisional jurisdiction under Section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an appropriate case, if on the face of the documents - which are beyond suspicion or doubt - placed by accused, the accusations against him cannot stand, it would be travesty of justice if accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the materials which have significant bearing on the matter at prima facie stage.
20. As rightly stated so, though it is not proper for the High Court to consider the defence of the accused or conduct a roving enquiry in respect of merit of the accusation, but if on the face of the document which is beyond suspicion or doubt placed by the accused and if it is considered the accusation against her cannot stand, in such a matter, in order to prevent injustice or abuse of process, it is incumbent on the High Court to look into those document/documents which have a bearing on the matter even at the initial stage and grant relief to the person concerned by exercising jurisdiction under Section 482 of the Code.”
# 32. In view of the law laid down in the above judgment if a document which is beyond suspicion or doubt, even if filed by the accused, can be looked into, the document filed by the complainant forming the basis of the complaint which is beyond doubt can also be looked into for the purpose of ascertaining if prima facie offence is made out for summoning the accused.
# 33. A perusal of the copy of the cheque shows that it is signed by Sanjay Singh, the applicant, for Udit Infraheights Private Limited, as its authorised signatory.
# 35. The cheque, on its face evidencing to have been issued by the Company and the applicant having signed it in the capacity of authorized signatory, the Magistrate ought to have considered the basic question, going to the root of the maintainability of the complaint against the applicant, for want of the company being arrayed as accused, in view of Section 141 N.I. Act. In the absence of the company, as accused, any offence was not made out, even prima facie, against the applicant for his summoning under Section 138 read with Section 141 of the N.I. Act.
# 44. In view of the above, this court is satisfied that as the complaint has not been filed against the company; as the company has not been made a party accused; no vicarious liability can be imposed on the accused applicant. The complaint cannot proceed against the applicant in his personal capacity as the cheque was issued by the company and the applicant had signed the cheque as its authorized signatory. Any offence, even prima facie, is not made out against the applicant under Section 138 N.I. Act read with Section 141 of the Act.
# 45. The proceedings of the complaint case and the orders under challenge amount to abuse of the process of the Court and deserve to be quashed to secure the ends of justice.
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