2024 TaxPub(CL) 47 (HP-HC)
NEGOTIABLE INSTRUMENTS ACT, 1881
Sections
138 & 142
Society took loan and issued cheque the society was primary accused but it
was not arrayed as a party in complaint, therefore, the complaint against
office bearers without impleading the society as a necessary party was not
maintainable, petition for quashing of the proceedings was allowed.
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Dishonour of cheque - Petition for
quashing of proceedings - Society being a primary accused not arrayed as
party in complaint - Whether complaint against office bearers is maintainable
Society issued cheque in favour of lender
regarding repayment of loan, but the cheque was dishonoured due to insufficient
funds. Therefore, the lender filed complaint under sections 138 and 142 against
office bearers of the society including the petitioner, wherein Trial Court
issued summons against them. The petitioner filed petition for quashing of the
summons as well as the complaint on the ground that the complaint against the
office bearers without impleading the society was not maintainable. Held:
The society is a body corporate having its independent existence. As per the
complaint, the loan was taken by the society and the cheque was issued by the
society. The society is the primary accused but it was not arrayed as a party.
The complaint against the petitioner and other is not maintainable in the
absence of a society. Thus, the proceedings against the office bearers are
quashed.
REFERRED : Pawan Kumar Goel v.
State of U.P., 2022 SCC OnLine SC 1598; Dilip Hariramani v. Bank of Baroda,
2022 SCC OnLine SC 579
FAVOUR : In favour of petitioner
A.Y. :
IN THE HIMACHAL PRADESH HIGH
COURT
RAKESH KAINTHLA, J.
Anjana Kumari v. State
of Himachal Pradesh
Cr. MMO No. 1159 of
2022
15 December, 2023
Petitioner by: R.L. Chaudhary, Advocate
Respondent No. 1 by: R.P. Singh, Deputy Advocate General
Respondent No. 2 by: Ajay Chandel Advocate complainant
Respondent No. 3 by: P.K. Bhatti Advocate
Rakesh Kainthla, J.
The complainant filed a
complaint (Annexure P-4) before the learned Trial Court against the petitioner
and respondent no. 3 for the commission of an offence punishable under section
138 read with section 142 of the Negotiable Instruments Act. (Parties shall
hereinafter be referred to in the same manner as they were arrayed before the
learned Trial Court for convenience). It was asserted that Himalyan Mahila Avam
Jan kalyan Sansthan H.O. Basi, Hamirpur is registered under the Society
Registration Act, 2006. Accused no. 1 is the Chairman and accused no. 2 is the
Secretary of the Society. The Society had taken a loan of Rs. 1 lac from the
complainant and assured him to return the same on demand. The complainant is an
employee of the Society. The Society did not pay his salary for 14 months. The
complainant requested the society to pay the money due to him and the Society
issued a cheque for Rs. 5 lac in discharge of its legal liability. The
complainant presented the cheque for its realisation but it was dishonoured.
Hence, the complaint was filed for taking action against the accused.
2. The learned Trial Court found sufficient reasons to summon the
accused for the commission of an offence punishable under section 138 of the
Negotiable Instruments Act.
3. Being aggrieved from the filing of the complaint and the order
summoning the accused, the petitioner approached this Court for quashing of the
complaint and the summoning order. It was asserted that no salary was fixed.
The Society is a non-governmental organization/NGO and is working on a no
profit and no-loss basis. The NGO paid the amount due to the complainant. The
cheque was signed by accused no. 1 and 2 in their official capacity. The
Society was not made an accused and the complaint was filed only against the
office bearers of the Society. A complaint against the office bearers without
impleading the Society is not maintainable. Therefore, it was prayed that the
present petition be allowed and the complaint as well as the summoning order be
quashed.
4. I have heard Mr. R.L. Chaudhary, learned counsel for the
petitioner-accused, Mr. R.P. Singh, learned Deputy Advocate General, for
respondent no. 1-State, Mr. Ajay Chandel learned counsel for the respondent No.
2/complainant and Mr. P.K. Bhatti learned counsel for the respondent no. 3.
5. Mr. R.L. Chaudhary learned counsel for the petitioner submitted that
the Society is a body corporate having its independent existence. As per the
complaint, the loan was taken by the Society and the cheque was issued by the
society. The Society is the primary accused but it was not arrayed as a party.
The complaint against the
petitioner and the accused no. 2 is not maintainable in the absence of a
Company. Therefore he prayed that the present petition be allowed and the
complaint be quashed.
6. Mr. Ajay Chandel, learned counsel for the complainant submitted that
the Society is not a body corporate and the provisions of section 141 of the
Negotiable Instruments Act apply only to the body corporate; therefore, he
prayed that the present petition be dismissed.
7. Mr. R.P. Singh learned Deputy Advocate General for the
respondent-State submitted that the State is not a necessary party and it was
unnecessarily arrayed.
8. Mr. P.K. Bhatti learned counsel for respondent no. 3 adopted the
submissions of Mr. R.L. Chaudhary, learned counsel for the petitioner.
9. I have given considerable thought to the rival submissions at the
bar and have gone through the record carefully.
10. Section 141 of the Negotiable Instruments Act deals with the
liability of the Company and provides that where the offence is committed by 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 its business as well
as the company, shall be deemed to be guilty of the commission of the offence.
It is apparent from the bare perusal of the provisions that in the case of a
Company, the Company as well as the office bearers are liable. Hence, the
company is primarily liable and the office bearers are vicariously liable. It
was laid down by the Hon'ble Supreme Court in Aneeta Hada v. Godfather
Travels & Tours (P) Ltd., (2012) 5 SCC 661 : 2013 TaxPub(CL) 0214 (SC) that
it is not permissible to prosecute the Directors in the absence of the Company.
It was observed that :--
'58. Applying
the doctrine of strict construction, we are of the considered opinion that the
commission of the 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 to 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.'
11. This judgment was followed by the Hon'ble Supreme Court in Charanjit
Pal Jindal v. L.N. Metalics, (2015) 15 SCC 768: 2015 SCC OnLine SC 1033 and
it was held :--
'11. From the
aforesaid finding, we find that after analysing all the provisions and having
noticed the different decisions rendered by this Court, the three-judge Bench
arrived at the irresistible conclusion that for maintaining the prosecution
under section 141 of the Act, arraigning a company as an accused is imperative.
Hence, in this case, we find no reason to refer the matter to the larger Bench.
12. In the
present case, only the appellant was impleaded as an accused. In that view of
the matter, we are of the view that the complaint with respect to the offence
under section 138 read with section 141 of the Act was not maintainable
following the decision in Aneeta Hada [Aneeta Hada v. Godfather
Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 :
(2012) 3 SCC (Cri) 241 : 2013 TaxPub(CL) 0214 (SC)]. We set aside the Judgment,
dated 17-4-2010 passed by the trial court, the Order, dated 27-5-2011 passed
by the appellate court and the impugned Judgment, dated 9-11-2012 passed
by the High Court of Orissa, Cuttack in Charanjit Pal Jindal v. L.N.
Metalics [Charanjit Pal Jindal v. L.N. Metalics, Criminal Revision No.
467 of 2011, decided on 9-11-2012 (Ori)]. The appellant stands acquitted.'
12. This position was reiterated in Himanshu v. B. Shivamurthy,
(2019) 3 SCC 797 : 2019 SCC OnLine SC 83 and it was held :--
'11. In the
present case, the record before the Court indicates that the cheque was drawn
by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its
Director. A notice of demand was served only on the appellant. The complaint
was lodged only against the appellant without arraigning the company as an
accused.
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 being served on the company and without
compliance with the proviso to section 138, the High Court was in error in
holding that the company could now be arraigned as an accused.
14. We,
accordingly, are of the view that the High Court was in error in rejecting the
petition under section 482 Cr.P.C. We hence allow the appeal and set aside the
judgment of the High Court. In consequence, the complaint, being CRP No. 27
of 2004 shall stand quashed.'
13. Similar is the judgment in Dilip Hariramani v. Bank of Baroda,
2022 SCC OnLine SC 579, wherein it was held :--
15. The
judgment in Dayle De'souza v. Government of India through Deputy Chief
Labour Commissioner (C), answered the question of whether a director or a
partner can be prosecuted without the company being prosecuted. Reference in
this regard was made to the views expressed by this Court in State of Madras
v. C.V. Parekh on the one hand and the divergent view expressed in Sheoratan
Agarwal v. State of Madhya Pradesh and Anil Hada v. Indian Acrylic Ltd. This
controversy was settled by a three-judge Bench of this Court in Aneeta Hada (supra),
in which, interpreting and expounding the difference between the
primary/substantial liability and vicarious liability under section 141 of the
NI Act, it has held :--
'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 binding
precedent. On the aforesaid ratiocination, the decision in Anil Hada has to be
treated as not laying down the correct law as far as 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.
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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. We say so on the basis of the
ratio laid down in C.V. Parekh which is a three-judge Bench decision. Thus, the
view expressed in Sheoratan Agarwal does not correctly lay down the law and,
accordingly, is hereby overruled. The decision in Anil Hada is overruled with
the qualifier as stated in para 51. The decision in Modi Distillery has to be
treated to be restricted to its own facts as has been explained by us
hereinabove.'
16. The
provisions of section 141 impose vicarious liability by deeming fiction which
presupposes and requires the commission of the offence by the company or firm.
Therefore, unless the company or firm has committed the offence as a principal
accused, the persons mentioned in sub-section (1) or (2) would not be liable
and convicted as vicariously liable. Section 141 of the NI Act extends
vicarious criminal liability to officers associated with the company or firm
when one of the twin requirements of section 141 has been satisfied, which
person(s) then, by deeming fiction, is made vicariously liable and punished.
However, such vicarious liability arises only when the company or firm commits
the offence as the primary offender. This view has been subsequently followed
in Sharad Kumar Sanghi v. Sangita Rane, Himanshu v. B. Shivamurthy and Hindustan
Unilever Limited v. State of Madhya Pradesh. The exception carved out in Aneeta
Hada (supra), which applies when there is a legal bar for prosecuting a
company or a firm, is not felicitous for the present case. No such plea or
assertion is made by the respondent.'
14. This position was reiterated in Pawan Kumar Goel v. State of
U.P., 2022 SCC OnLine SC 1598 and it was held :--
25. This Court
has been firm with the stand that if the complainant fails to make specific
averments against the company in the complaint for the commission of an offence
under section 138 of the NI Act, the same cannot be rectified by taking
recourse to general principles of criminal jurisprudence. Needless to say, the
provisions of section 141 impose vicarious liability by deeming fiction which
pre-supposes and requires the commission of the offence by the company or firm.
Therefore, unless the company or firm has committed the offence as a principal
accused, the persons mentioned in sub-section (1) and (2) would not be liable
to be convicted on the basis of the principles of vicarious liability.
15. Therefore, in view of the binding precedents of the Hon'ble Supreme
Court, the submission that the prosecution of the Company is necessary before
prosecuting its office bearers has to be accepted as correct.
16. It was submitted that the Himalayan Mahila Avam Jankalyan Sanstha is
not a Company and these judgments do not apply to the present case. This
submission is not acceptable. Explanation to section 141(2) provides that a
Company means any body corporate and includes a firm or other association of
individuals. Therefore, the term Company is not restricted to only those
entities which are registered under the Companies Act but will include any body
corporate.
17. It is an admitted position that the Himalayan Mahila Avam Jan Kalyan
Sansthan is registered under the Societies Registration Act. This fact was
mentioned in para 1 of the complaint. Section 14 of the H.P. Societies
Registration Act provides that every Society shall be a body corporate by the
name under which it is registered having perpetual succession and a common
seal, It reads as under :--
14. Society
to be a body corporate.--Every Society shall be a
body corporate by the name under which it is registered having perpetual
succession and a common seal, and shall have powers to acquire, hold and
dispose of property, both movable and immovable, enter into contract, institute
and defend suits and other legal proceedings and to do all other things
necessary for the purpose for which it is constituted, and shall by the said
name, sue or be sued.
18. This Section specifically provides that the Society shall be a body;
hence, the submission that the Society is not a body corporate is not
acceptable.
19. Therefore, the complainant could not have filed a complaint against
the petitioner and respondent no. 3 without impleading the Company to an
accused. The prosecution of the petitioner in the absence of the Company is
bad.
20. In view of the above, the present petition is allowed and the
complaint titled Mukesh Kumar v. Anjana Kumari and another quashed
qua the petitioner pending before the learned Additional Chief Judicial
Magistrate, Sarkaghat against the petitioner and the consequent proceedings
arising out of the same are ordered to be quashed qua the petitioner.
21. The observation made hereinbefore shall remain confined to the
disposal of the petition and will have no bearing whatsoever on the merits of
the case.