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CASE NO.: Appeal (crl.)  838 of 2008

PETITIONER: Aneeta Hada

RESPONDENT: M/s Godfather Travels & Tours Pvt.Ltd.

DATE OF JUDGMENT: 08/05/2008

BENCH: S.B. SINHA & V.S. Sirpurkar

JUDGMENT: JUDGMENT                                                            REPORTABLE

                 IN THE SUPREME COURT OF INDIA

               CRIMINAL APPELLATE JURISDICTION

             CRIMINAL APPEAL NO. 838                OF 2008                [Arising out of SLP (Crl.) No. 2094 of 2007]

Aneeta Hada                                             ...Appellant

                               Versus

M/s. Godfather Travels and Tours Pvt. Ltd.              ...Respondent

                                 WITH

             CRIMINAL APPEAL NO. 842                OF 2008                [Arising out of SLP (Crl.) No. 2117 of 2007]

                           JUDGMENT

S.B. SINHA, J :

1.    Leave granted.

2.    Appellant is said to be an authorised signatory of M/s. Intel Travels

Ltd (Company). The said Company as also the respondent company had

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business transactions. Appellant on behalf of the company issued a cheque

dated 17.1.2001 for a sum of Rs.5,10,000/- in favour of respondent which

was dishonoured. Respondent filed a complaint petition against the

appellant under Section 138 of the Negotiable Instruments Act, 1881 (’the

Act’ for short).

     The Company which is a juristic person was not arrayed as an

accused.

     The learned Magistrate took cognizance of the offence against her.

Respondent had not even served any notice upon the Company in terms of

Section 138 of the Act. It served a notice only on the appellant presumably

on the premise that she was in charge and responsible to the company for its

day to day affairs.

3.    The High Court by reason of the impugned judgment refused to quash

the proceedings, as prayed for by the appellant, holding:

             "This section does not say that the cheques should               have been drawn for the discharge of any debt or               other liability of the drawer towards the payee.               Even the Section 139 of the Negotiable               Instruments Act, by which a legal presumption is               created, the Parliament has only fixed the               presumption that the cheque was issued ’for the               dishcarge, in whole or in part, or any debt or other               liability.’ This would mean that the debt or other               liability includes the due from any other person. It

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           is not necessary that the debt or liability should be             due from the drawer himself. It can be issued for             the discharges of any other man’s debt liability.             Legally enforceable debt or liability would have a             reference to the nature of the debt or liability and             not the person against whom the debt or liability             can be enforced. One has to go by the averments             in the complaint. The complainant has averred that             it is the petitioner who had purchased the tickets             from the complainant and the cheque in question             was given by them in discharge of their liability.             The demand notice dated 8.5.2001 is also sent to             the two petitioners and not to the company. What             the petitioners state here may be their defence."

4.    A company being a body corporate is capable of suing and being sued

in its own name.

           Section 7 of the Act defines "drawer" to mean the maker of a

bill of exchange or a cheque. The authorised signatory of a company does

not become the drawer of the cheque only because he has been authorised to

do so for the purpose of banking operations. Admittedly, the bank account

was also in the name of the company.           The account was, therefore,

maintained by the Company.

5.    Section 138 of the Act reads as under:

           "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

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           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 for a term which may             be extended to two years, or with fine which may             extend to twice the amount of the cheque, or with             both;                   Provided that nothing contained in this             section shall apply unless-                    (a) the cheque has been presented to the             bank within a period of six months from the date             on which it is drawn or within the period of its             validity, whichever is earlier;                    (b) the payee or the holder in due course of             the cheque, as the case may be, makes a demand             for the payment of the said amount of money by             giving a notice in writing, to the drawer of the             cheque, within thirty days of the receipt of             information by him from the bank regarding the             return of the cheque as unpaid; and                   (c) the drawer of such cheque fails to make             the payment of the said amount of money to the             payee or as the case may be, to the holder in due             course of the cheque within fifteen days of the             receipt of the said notice."

6.   A complaint petition may be maintainable at the instance of the

person in whose favour the cheque was drawn only when:-

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(i) the cheque was drawn by ‘a person’; and

(ii) the cheque was drawn 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 the drawer is insufficient to honour the

    cheque or that it exceeds the amount to be paid from that account; and

(iii)in that event ‘such a person’ shall be deemed to have committed an

    offence.

7.      The person referred to in the said provisions, therefore, must not only

be the drawer of the cheque but should have been maintaining an account

with the banker.

8.      Appellant does not answer either of the descriptions of such ‘the

person’ referred to in Section 138 of the Act. Admittedly, she was only an

authorised signatory and the amount with the banker was to be maintained

by the Company. Cheque was drawn by the Company and not by the

appellant. She did not do so on her own behalf. She issued the cheque in

course of ordinary business transaction.

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9.     The Parliament for meeting a contingency of this nature, namely,

where a company is an offender, has raised a legal fiction in terms whereof

any person who at the time the offence was committed, was incharge of and

was responsible for the conduct of business of the company, shall be

deemed to be guilty of the offence.

10.    For the said purpose, the company itself must be made an accused. It

has been so held by this Court in a number of decisions to which I would

refer to a little later.

11.    In this case, indisputably the company is the principal offender. A

director of the company inter alia can be proceeded against if he is found to

be responsible therefor as envisaged under Section 141 of the Act.

12.    The said provision reads, thus:

              "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:

              Provided that nothing contained in this sub-section                shall render any person liable to punishment if he                proves that the offence was committed without his

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knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

2 "Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this chapter."

(2) Notwithstanding anything contained in sub- section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.-- For the purposes of this section,--

 ( a ) "company" means any body corporate and includes a firm or other association of individuals; and   ( b ) "director", in relation to a firm, means a partner in the firm."

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13.   If a person, thus, has to be proceeded with as being vicariously liable

for the acts of the company, the company must be made an accused. In any

event, it would be a fair thing to do. Legal fiction is raised both against the

Company as well as the person responsible for the acts of the Company.

Unlike other statutes, this Act raises a presumption not only in tems of

Section 139 of the Act but also under Section 118(a) thereof.           Those

presumptions in given cases may have to be rebutted. The accused must be

given an opportunity to rebut the said presumption. An accused is entitled

to be represented in a case so as to enable it to establish that allegations

made against it are not correct.

14.   Section 141 of the Act raises a legal fiction. Such a legal fiction can

be raised only when the conditions therefor are fulfilled; one of it being that

company is also prosecuted.

15.   The Section uses the terms "as well as the company". The company

which is, thus, the principal offender must be included in the category of the

accused. Here, I am not dealing with a case where an individual act of a

person is purporting to represent a company.         In relation to business

transactions, a company as a corporate entity may have created its own

reputation. It must maintain it. If a complaint is filed, in a given case, only

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on the basis of the presumptions raised in the statute, it may be held to be

guilty as a result whereof the reputation of the company shall suffer. It may,

thus, suffer grave civil consequences.

16.   It is no longer res integra that a company can be proceeded against in

a criminal proceeding, even where imposition of substantive sentence is

provided for.

17.   The question as to whether a company can be proceeded against when

a mandatory imprisonment is prescribed in law came up for consideration

before a Constitution Bench of this Court in Standard Chartered Bank and

Others v. Directorate of Enforcement and Others [(2005) 4 SCC 530]

wherein this Court upon considering a large number of decisions as also the

principle "lex non cogit ad impossibilia" opined:

            "30. As the company cannot be sentenced to              imprisonment, the court has to resort to              punishment of imposition of fine which is also a              prescribed punishment. As per the scheme of              various enactments and also the Indian Penal              Code, mandatory custodial sentence is prescribed              for graver offences. If the appellants’ plea is              accepted, no company or corporate bodies could              be prosecuted for the graver offences whereas they              could be prosecuted for minor offences as the              sentence prescribed therein is custodial sentence              or fine. We do not think that the intention of the

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legislature is to give complete immunity from prosecution to the corporate bodies for these grave offences. The offences mentioned under Section 56(1) of the FERA Act, 1973, namely, those under Section 13; clause ( a ) of sub-section (1) of Section 18; Section 18-A; clause ( a ) of sub- section (1) of Section 19; sub-section (2) of Section 44, for which the minimum sentence of six months’ imprisonment is prescribed, are serious offences and if committed would have serious financial consequences affecting the economy of the country. All those offences could be committed by company or corporate bodies. We do not think that the legislative intent is not to prosecute the companies for these serious offences, if these offences involve the amount or value of more than Rs. one lakh, and that they could be prosecuted only when the offences involve an amount or value less than Rs. one lakh.

                   (Emphasis supplied)

31. As the company cannot be sentenced to imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company. Such a discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discretion as regards a natural person. Then the court would not be passing the sentence in accordance with law. As regards company, the court can always impose a sentence of fine and the sentence of imprisonment can be ignored as it is impossible to be carried out in respect of a company. This appears to be the intention of the legislature and we find no difficulty in construing the statute in such a way. We do not think that

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           there is a blanket immunity for any company from             any prosecution for serious offences merely             because the prosecution would ultimately entail a             sentence of mandatory imprisonment. The             corporate bodies, such as a firm or company             undertake a series of activities that affect the life,             liberty and property of the citizens. Large-scale             financial irregularities are done by various             corporations. The corporate vehicle now occupies             such a large portion of the industrial, commercial             and sociological sectors that amenability of the             corporation to a criminal law is essential to have a             peaceful society with stable economy."

                                     (Emphasis supplied)

     An earlier decision of this Court in Asstt. Commissioner v. Velliappa

Textiles Ltd. [(2003) 11 SCC 405] was overruled by the Constitution

Bench.

     In the context of the provisions of the Income Tax Act, recently a

Division Bench of this Court in Madhumilan Syntex Ltd. & Ors. v. Union of

India & Anr. [AIR 2007 SC 1481], held :

           "23. From the above provisions, it is clear that             wherever a Company is required to deduct tax at             source and to pay it to the account of the Central             Government, failure on the part of the Company in             deducting or in paying such amount is an offence             under the Act and has been made punishable. It,             therefore, cannot be said that the prosecution

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           against a Company or its Directors in default of             deducting or paying tax is not envisaged by the             Act.             24. It is no doubt true that Company is not a             natural person but ’legal’ or ’juristic’ person. That,             however, does not mean that Company is not             liable to prosecution under the Act. ’Corporate             criminal liability’ is not unknown to law. The law             is well settled on the point and it is not necessary             to discuss it in detail."

18.   Section 141 of the Act even does not provide for a mandatory

minimum imprisonment. A fine can be imposed upon the offender for

commission of an offence under Section 138 of the Act.

19.   Interpretation of Section 141 of the Act came up for consideration

before a Three-Judge Bench of this Court in S.M.S. Pharmaceuticals Ltd. v.

Neeta Bhalla and Another [(2005) 8 SCC 89] wherein it was opined that

criminal liability on account of dishonour of cheque primarily falls on the

drawer company and is extended to the officers of the company. Analysing

Section 141 of the Act, the Bench observed:

           "...Section 141 of the Act is an instance of             specific provision which in case an offence under             Section 138 is committed by a company, extends             criminal liability for dishonour of a cheque to             officers of the company. Section 141 contains             conditions which have to be satisfied before the             liability can be extended to officers of a company.

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           Since the provision creates criminal liability, the             conditions have to be strictly complied with. The             conditions are intended to ensure that a person             who is sought to be made vicariously liable for an             offence of which the principal accused is the             company, had a role to play in relation to the             incriminating act and further that such a person             should know what is attributed to him to make him             liable. In other words, persons who had nothing to             do with the matter need not be roped in. A             company being a juristic person, all its deeds and             functions are the result of acts of others.             Therefore, officers of a company who are             responsible for acts done in the name of the             company are sought to be made personally liable             for acts which result in criminal action being taken             against the company. It makes 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, liable for the offence. The proviso to             the sub-section contains an escape route for             persons who are able to prove that the offence was             committed without their knowledge or that they             had exercised all due diligence to prevent             commission of the offence."

                                     [underlining is mine]

20.   In Sabitha Ramamurthy and Anr. v. R.B.S. Channabasavaradhya

[2006 (9) SCALE 212], this court held that though a person was not

personally liable for the offences committed by the company, however, he

would only be liable vicariously for the acts of company in terms of Section

141 of the Act only if the requisite averments, are made in the complaint

petition.

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21.    In S.V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and

Anr. (2005) 4 SCC 173, this Court explicitly laid down the following

categories of persons who are covered under Section 141 of the act:

(1)    The company who committed the offence.

(2)    Everyone who was in charge of and was responsible for the business

      of the company.

(3)    Any other person who is a director or a manager or a secretary or

      officer of the company with whose connivance or due to whose

      neglect the company has committed the offence.

22.    In Sarav Investment and Financial Consultants Pvt. Ltd. and Anr. v.

Llyods Register of Shipping Indian Office Staff Provident Fund and Anr.

2007 (12) SCALE 123, this Court opined that the director of the company is

only vicariously liable for the acts of the company, and could be prosecuted

only if the conditions precedent laid down in Section 141 of the Act are

satisfied.

      In K. Srikanth Singh v. North East Securities Ltd. and Anr. [2007 (9)

SCALE 371], a Criminal complaint was filed for the dishonour of cheque.

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Appellant therein had been proceeded against for alleged commission of an

offence under Section 138 of the Negotiable Instruments Act by the Trial

Court. Before the High Court, quashing of proceedings under Section 482

of the Code of Criminal Procedure, 1973 was sought.

     It was contended by the appellant that at the relevant point of time

since he was not the Director of the Company, hence no cognizance could

be taken as the same does not satisfy the requirements of Section 141. The

High Court dismissed the petition holding the same as fact in respect thereof

was required to be established before the Trial Court.

     In an appeal to this court, this Court while referring inter-alia to the

decisions in S.M.S. Pharmaceuticals Ltd.( Supra) and Sabitha Ramamurthy

(supra) held that for showing a vicarious liability of a Director of a

Company, it was incumbent to plead that the accused was responsible to the

Company for the conduct of the business of the Company in the complaint.

The allegation in the complaint petition would not give rise to an inference

that the Appellant was responsible for day-to-day affairs of the Company. A

negotiation for obtaining financial assistance on behalf of the Company by

its Directors itself was not an ingredient for the purpose of constituting an

offence under Section 138. Thus, vicarious liability on the Director of the

company part must be pleaded and proved and not inferred. [See also

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Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. and Ors. 2008 (1)

SCALE 331]

     In Municipal Corporation of Delhi v. Ram Kishan Rohtagi and Ors.

[(1983) 1 SCC 1], the Respondent No. 1 was the manager and respondents

No. 2 to 5 were directors of X company . Respondents were charged for

offences under Sections 7 and 16 of the Prevention of Food Adulteration

Act, 1954 and Section 482 of Criminal Procedure Code, 1973 as the Toffees

manufactured by X company was found to be not conforming to the

standards prescribed for toffees . On appeal, the High Court quashed the

proceedings against respondents.

     It was held by this court that:

           "So far as the Manager is concerned, we are             satisfied that from the very nature of his duties it             can be safely inferred that he would undoubtedly             be vicariously liable for the offence; vicarious             liability being an incident of an offence under the             Act. So far as the Directors are concerned, there is             not even a whisper nor a shred of evidence nor             anything to show, apart from the presumption             drawn by the complainant, that there is any act             committed by the Directors from which a             reasonable inference can be drawn that they could             also be vicariously liable."

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         However, as regards the Manager of the Company, the court held that

since he could not fall in the same category as the Directors, and as he was

directly incharge of the affairs of the company, he should be held to be

liable.

23.       In S.M.S. Pharmaceuticals Ltd. (supra) it was held that requisite

averments must appear on the face of the complaint petition itself stating:

               "18. To sum up, there is almost unanimous judicial                 opinion that necessary averments ought to be                 contained in a complaint before a person can be                 subjected to criminal process. A liability under                 Section 141 of the Act is sought to be fastened                 vicariously on a person connected with a                 company, the principal accused being the company                 itself. It is a departure from the rule in criminal                 law against vicarious liability. A clear case should                 be spelled out in the complaint against the person                 sought to be made liable. Section 141 of the Act                 contains the requirements for making a person                 liable under the said provision. That the                 respondent falls within the parameters of Section                 141 has to be spelled out. A complaint has to be                 examined by the Magistrate in the first instance on                 the basis of averments contained therein. If the                 Magistrate is satisfied that there are averments                 which bring the case within Section 141, he would                 issue the process. We have seen that merely being                 described as a director in a company is not                 sufficient to satisfy the requirement of Section                 141. Even a non-director can be liable under                 Section 141 of the Act. The averments in the                 complaint would also serve the purpose that the                 person sought to be made liable would know what                 is the case which is alleged against him. This will                 enable him to meet the case at the trial."

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24.   This position was reiterated in N. Rangachari v. Bharat Sanchar

Nigam Ltd. 2007 (5) SCALE 821, wherein this court referring to the

observations in S.M. Pharmaceuticals on specific averments in the

complaint itself opined that

            "The scope of Section 141 has been authoritatively              discussed     in    the    decision    in    S.M.S.              Pharmaceuticals Ltd. (supra) binding on us and              there is no scope for redefining it in this case.              Suffice it to say, that a prosecution could be              launched not only against the company on behalf              of which the cheque issued has been dishonoured,              but it could also be initiated against every person              who at the time the offence was committed, was in              charge of and was responsible for the conduct of              the business of the company."

     It was further held:

            "Therefore, a person in the commercial world              having a transaction with a company is entitled to              presume that the directors of the company are              incharge of the affairs of the company. If any              restrictions on their powers are placed by the              memorandum or articles of the company, it is for              the directors to establish it at the trial. It is in that              context that Section 141 of the Negotiable              Instruments Act provides that when the offender is              a company, every person, who at the time when              the offence was committed was incharge of and              was responsible to the company for the conduct of              the business of the company, shall also be deemed              to be guilty of the offence along with the

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           company. It appears to us that an allegation in the             complaint that the named accused are directors of             the company itself would usher in the element of             their acting for and on behalf of the company and             of their being incharge of the company."

25.   Again in Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of

Delhi and Ors. 2007 (5) SCALE 479, this court relying on S.M.

Pharmaceuticals (supra) and Saroj Kumar Poddar v. State (NCT of Delhi)

and Anr. 2007 (2) SCALE 36        on the question of the liability of the

company officials held that :

           "The averments must state that the person who is             vicariously liable for commission of the offence             of the Company both was incharge of and was             responsible for the conduct of the business of the             Company. Requirements laid down therein must             be read conjointly and not disjunctively. When a             legal fiction is raised, the ingredients therefor             must be satisfied."

     To the same effect is the decision of this court in N.K. Wahi v.

Shekhar Singh and Ors. 2007 (4) SCALE 188.

     In Balaji Trading Company v. Kejriwal Paper Ltd. and Anr. [2005 (2)

ALD (Cri) 162 : 2005 Cri L J 3805], a similar question arose for the

consideration before the Andhra Pradesh High Court.

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     In the said case, on the dishonour of the cheques issued by the

accused-company, a proceedings was initiated against the company in the

trial court. During the pendency of the said ease, the accused-company filed

a Criminal Misc. Petition under Sections 239 and 245, Cr. P.C. for

discharge and acquittal for the offence under Section 138 read with Section

141 of the Act. In the said application the Director of the company pleaded

that as the complainant did not mention anywhere in the complaint that he

was personally responsible for the day-to-day business of the accused firms,

he is not liable to be prosecuted. The learned Magistrate after hearing both

parties dismissed the application. The accused-company being aggrieved by

the order, preferred an revision before the Sessions court. respondent-

company contended before the Sessions Court that the learned Magistrate

erred in holding that a complaint can be lodged against the company

through its Director without there being any specific allegation that the said

Director was incharge of and was responsible to the company in the conduct

of the business at the relevant point of time and that the offence was

committed with his consent or connivance and the non-pleading of the

Directors in their personal capacity is contrary to Section 141 of the Act, as

such, the Director cannot be made to undergo the trial in the absence of any

allegation or averment in the complaint that he was incharge of the affairs of

the company.

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     The learned Sessions Judge set aside the order on the ground that Section 141 had not been complied with as the said director was not impleaded as an accused.

     Before the High Court it was contended by the revisioner petitioner

that since the cheques issued by the company were dishonoured, the

prosecution against the company is perfectly maintainable under Section

141 of the Act and the non-prosecution of the person in charge of the affairs

of the company or other Directors in their individual capacity is no bar to

maintain the prosecution against the company.

      Thus, the point for consideration was Whether the respondent-

company was liable to be prosecuted under Section 138 of the Negotiable

Instruments Act by virtue of Section 141 of the Act in the absence of

prosecution of the person incharge of the affairs or other Directors of the

company?

     The High Court after going through Section 141 opined:

           "The above provision makes it clear that the             company as well as the person in-charge of the             affairs of the company is liable to be prosecuted.             The liability envisaged in Section 141(1) on the             person so incharge of and responsible for the             conduct of the business of the company is directly             responsible for the offence. He can escape from

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            his liability only if he proves that the offence was              committed without his knowledge or that he has              exercised his powers with due diligence to prevent              commission of such offence. Where the offence is              committed by a company, the company as well as              the person incharge of the business of the              company are liable to be prosecuted for the              offence under Section 138 of the Act. Though the              company is an artificial person handicapped of              committing any crime personally, if certain crimes              are committed by its officials, the company is              liable for prosecution. But, when the company is              convicted, the liability can be only in terms of fine              as the company is responsible for the acts of              commissions and omissions of the persons              working for it."

     Referring to a large number of judgments of this court on Section 10

of the Essential Commodities Act as also on Section 141, setting aside the

order of the Sessions Court, it was held:

            "Section 141 is specifically incorporated to              prosecute the companies for the offence under              Section 138 of the Act. The mandate of the section              clearly indicates that the company is liable for              prosecution when a cheque is issued on its behalf              and bounced on presentation of such cheque. The              intendment of the section is not to give scope for              individuals to escape by issuing cheques in the              names of the companies. Therefore, when cheques              are issued in the name of the company, the              company is invariably liable for prosecution for              the offence under Section 138 of the Act.              Regarding the prosecution of the Directors of the

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           company, the legal position makes it clear that the             person who is in charge of and was responsible to             the company in conduct of its business at the             material time is also liable to be prosecuted. But,             the non-prosecution of any of the Directors is no             bar to prosecute the company. The revision             petitioner is pleading that he is prejudiced on             account of mentioning of his name as the person             representing the company. The prosecution never             intended to prosecute Sri Rahul Kejrlwal in his             Individual capacity. The Courts below also made it             clear that Sri Rahul Kejrlwal is not personally             liable for prosecution on account of the absence of             specific allegations that he is in charge of the             affairs of the company or managing its affairs. The             judgments placed on behalf of the revision             petitioner are only regarding the aspect whether a             Director or Directors arc liable to be prosecuted             when there are no specific allegations that he or             they were in charge of and were responsible to the             company in conduct of its business. In the light of             the above circumstances. I find sufficient force in             the grounds of revision. The company is liable for             prosecution despite non-prosecution of the             Director or Directors responsible for the             management of the affairs of the company or in             charge of its affairs."

                                         [Emphasis Supplied]

26.   While saying so, I am not unmindful of views differently taken by

some Benches of this Court. I would notice some of them to place on

record how different Benches took different views.

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27.   I may, however, notice first a three Judge Bench decision of this

Court in State of Madras v. C.V. Parekh and another, [(1970) 3 SCC 491].

     There the company was not made an accused. The Directors of the

company were acquitted. A contention was raised that the accused being

liable to the company should have been convicted. This Court held :-

           "3. Learned Counsel for the appellant, however,             sought conviction of the two respondents on the             basis of Section 10 of the Essential Commodities             Act under which, if the person contravening an             order made under Section 3 (which covers an             order under the Iron and Steel Control Order,             1956), i<a company, every person who, at the time             the contravention 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             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

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            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 contravention was by Kamdar and              Vallabhdas Thacker and any contravention by              them would not fasten responsibility on the              respondents. The acquittal of the respondents is,              therefore, fully justified. The appeal fails and is              dismissed."                                         (Emphasis supplied)

      The clear findings contained in a binding precedent were, however,

sought to be explained by a two Judge Bench of this Court in Sehoratan

Agarwal and another v. State of Madhya Pradesh, [ (1984) 4 SCC 352 ]

stating :-

            "The Section appears to our mind to be plain              enough. If the contravention of the order made              under Section 3 is by a Company, the persons who              may be held guilty and punished are (1) the              Company itself (2) every person who, at the time              the contravention was committed, was in charge              of, and was responsible to, the Company for the              conduct of the business of the Company whom for              short we shall describe as the person-in-charge of              the Company, and (3) any director, manager,              secretary or other officer of the Company with              whose consent or connivance or because of              neglect attributable to whom the offence has been              committed, whom for short we shall describe as an              officer of the Company. Any one or more or all of              them may be prosecuted and punished. The

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Company alone may be prosecuted. The person-in- charge only may be prosecuted. The conniving officer may individually be prosecuted. One, some or all may be prosecuted. There is no statutory compulsion that the person-in-charge or an officer of the Company may not be prosecuted unless he be ranged alongside the Company itself. Section 10 indicates the persons who may be prosecuted where the contravention is made by the Company. It does not lay down any condition that the person- in-charge or an officer of the Company may not be separately prosecuted if the Company itself is not prosecuted. Each or any of them may be separately prosecuted or alongwith the Company. Section 10 lists the person who may be held guilty and punished when it is a Company that contravenes an order made Under Section 3 of the Essential Commodities Act. Naturally, before the person-in- charge or an officer of the Company is held guilty in that capacity it must be established that there has been a contravention of the Order by the Company. That should be axiomatic and that is all that the Court laid down in State of Madias v. C.V. Parekh (supra) as a careful reading of that case will show and not that the person-in-charge or an officer of the Company must be arraigned simultaneously along with the Company if he is to be found guilty and punished. The following observations made by the Court clearly bring out the view of the Court :

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

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            itself. In the present case, there is no finding either              by the Magistrate OR by the High Court that the              sale in convention of Clause 5 of the Iron & 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 &              Steel (Control), Order the two respondents could              not be held responsible. The actual contravention              was by Kamdar and Villabhadas Thacker and any              contravention by them would not fasten              responsibility on the respondents."

28.   With the greatest of respect to the learned judges, it is difficult to

agree therewith. The findings, if taken to its logical corollary lead us to an

anomalous position. The trial court, in a given case although the company

is not an accused, would have to arrive at a finding that it is guilty.

Company, although a juristic person, is a separate entity. Directors may

come and go. The company remains. It has its own reputation and standing

in the market which is required to be maintained. Nobody, without any

authority of law, can sentence it or find it guilty of commission of offence.

Before recording a finding that it is guilty of commission of a serious

offence, it may be heard. The Director who was in charge of the company at

one point of time may have no interest in the company. He may not even

defend the company. He need not even continue to be its Director. He may

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have his own score to settle in view of change in management of the

company. In a situation of that nature, the company would for all intent and

purport would stand convicted, although, it was not an accused and, thus,

had no opportunity to defend itself.

29.   Any person accused of commission of an offence, whether natural or

juristic, has some rights. If it is to be found guilty of commission of an

offence on the basis whereof its Directors are held liable, the procedures

laid down in the Code of Criminal Procedure must be followed.            In

determining such an issue all relevant aspects of the matter must be kept in

mind. The ground realities cannot be lost sight of. Accused persons are

being convicted for commission of an offence under Section 138 of the Act

inter alia on drawing statutory presumptions.

     Various provisions contained therein lean in favour of a drawer of the

cheque or the holder thereof and against the accused. Sections 20, 118(c),

139 and 140 of the Act are some such provisions. The Act is a penal statute.

Unlike offences under the general law it provides for reverse burden. The

onus of proof shifts to the accused if some foundational facts are

established.

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     It is, therefore, in interpreting a statute of this nature difficult to

conceive that it would be legally permissible to hold a company, the prime

offender, liable for commission of an offence although it does not get an

opportunity to defend itself. It is against all principles of fairness and

justice. It is opposed to the Rule of Law. No statute in view of our

Constitutional Scheme can be construed in such a manner so as to refuse an

opportunity of being heard to a person. It would not only offend a common-

sense, it may be held to be unconstitutional. Such a construction, therefore,

in my opinion should be avoided.

     In any event in a case of this nature, the construction which may be

available in invoking Essential Commodities Act, Prevention of Food

Adulteration Act, which affects the Society at large may not have any

application when only a private individual is involved.

30.   Our attention has also been drawn to a Two-Judge Bench decision of

this Court in Anil Hada v. Indian Acrlic Ltd. [(2000) 1 SCC 1] and R.

Rajgopal v. S.S. Venkat [AIR 2001 SC 2432].

     In Anil Hada v. Indian Acrylic Ltd. [(2000) 1 SCC 1], this court

while construing the meaning of the term "as well as" held that it would

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mean the persons mentioned in the first category within the dragnet of the

offence on a par with the offending company.

31.   In Anil Hada (supra), the company was under liquidation. A question

arose as to whether permission of the company court was necessary to

continue prosecution against the company. The court did not go into the

said question. In that case, the Magistrate accepted the contention raised on

behalf of the accused - company that the winding up had been ordered by

the court and hence no prosecution proceeding could be continued against

the accused - company. The said proposition of law in a situation of this

nature must be understood in the factual matrix involved in the matter. In

the peculiar factual matrix involved therein, it was opined:

            "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 sub-section (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 sub-section (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 141 is that when the company              is the drawer of the cheque such company is the              principal offender under Section 138 of the Act

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           and the remaining persons are made offenders by             virtue of the legal fiction created by the legislature             as per the section. Hence the actual offence should             have been committed by the company, and then             alone the other two categories of persons can also             become liable for the offence."

     The ratio laid down in the said case is to be understood in the factual

matrix obtaining therein, namely, the company could not have been

prosecuted due to a legal snag, although was made an accused.

     However, with utmost respect, the observations of the court that

‘company need not be proceeded against’, in my opinion is obiter dicta and

not its ratio-decidendi. We are otherwise also bound by the Three-Judge

Bench decision of this Court in S.M.S. Pharmaceuticals Ltd (supra) and

C.V. Parekh (supra)

32.   It is one thing to say that the complaint petition proceeded against the

accused persons on the premise that the company had not committed the

offence but the accused did, but it is another thing to say that although the

company was the principal offender, it need not be made an accused at all.

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     I have no doubt whatsoever in our mind that prosecution of the

company is a sine qua non for prosecution of the other persons who fall

within the second and third categories of the candidates, viz., everyone who

was in-charge and was responsible for the business of the company and any

other person who was a director or managing director or secretary or officer

of the company with whose connivance or due to whose neglect the

company had committed the offence.

33.   In Raghu Lakshminarayanan v. Fine Tubes 2007(5) SCALE 353, the

issue before this court was whether having regard to the explanation

appended to the definition of company in section 141 of the Act would

include a proprietary concern. Although the answer was rendered in the

negative, the court however made a very pertinent observation as regards

the liability of the directors of the company. It opined:

            "It is of some significance to note that in view of              the said description of "Director", other than a              person who comes within the purview thereof,              nobody else can be prosecuted by way of his              vicarious liability in such a capacity. If the offence              has not been committed by a Company, the              question of there being a Director or his being              vicariously liable, therefore, would not arise.              Appellant herein categorically contended that              accused No. 1 was a proprietary concern of the              accused No. 2 and he was merely an employee              thereof. If accused No. 1 was not a Company              within the meaning of Section 141 of the

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            Negotiable Instruments Act, the question of an              employee being preceded against in terms thereof              would not arise."

      Indisputably, all the decisions of this Court in no uncertain terms says

- company at the first instance should be proved to be offender and, thus,

only question of proof that the Director is also liable being in charge of its

affairs.

34.    True interpretation, in my opinion, of the said provision would be that

a company has to be made an accused but applying the principle "lex non

cogit ad impossibilia", i.e., if for some legal snag, the company cannot be

proceeded against without obtaining sanction of a court of law or other

authority, the trial as against the other accused may be proceeded against if

the ingredients of Sections 138 as also 141 are otherwise fulfilled. In such

an event, it would not be a case where the company had not been made an

accused but would be one where the company cannot be proceeded against

due to existence of a legal bar.      A distinction must be borne in mind

between cases where a company had not been made an accused and the one

where despite making it an accused, it cannot be proceeded against because

of a legal bar.

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35.   R. Rajgopal (supra) does not lay down any law.

     There are other statutes whose provisions is pari materia with Section

141 of the Act, e.g., Section 35H Wealth Tax Act, Section 14A Employees

Provident Fund and Miscellaneous Provisions Act, Section 34 Drugs and

Cosmetics Act, Section 10 Essential Commodities Act, Section 6 Indian

Merchandise Act, Section 38 Narcotic Drugs and Psychotropic Substances

Act and Section 17 Prevention of Food Adulteration Act.

     In Rajasthan Pharmaceutical Laboratory, Bangalore and Ors. v. State

of Karnataka [1981 (1) SCC 645] on the interpretation of         the words

"punished accordingly" in Section 34 of the Drugs and Cosmetics Act,

1940, this Court observed:

           "It seems clear to us that the words "punished             accordingly" in the context mean that a person             deemed to be guilty of an offence committed by a             company shall receive the punishment that is             prescribed by the Act for that offence."

     To the same effect is the decision of this court in State of Punjab v.

Kasturi Lal and Others [2004(12) SCC 195].

     In R. Banerjee and others v. H.D. Dubey and others[ 1992(2) SCC

552] the question which arose for determination was whether it was

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permissible to launch prosecution under Sub-section (1) of Section 17 of the

Prevention of Food Adulteration Act, 1954 against the Directors and

Managers of public limited companies, for the commission of the alleged

offence punishable under the aforesaid provisions notwithstanding the

nomination made by the said companies as required by Sub-section (2) of

Section 17 of the Act. This court after reading the said provision held as

under:

            "It is clear from the plain reading of Section 17 that              where an offence under the Act is alleged to have been              committed by a company, where the company has              nominated any person to be in charge of, and responsible              to, the company for the conduct of its business that              person will be liable to be proceeded against and              punished for the commission of the offence. Where,              however, no person has been so nominated, every person              who at the time of the commission of the offence was in              charge of, and responsible to, the company for the              conduct of its business shall be proceeded against and              punished for the said crime."

36.      I may notice that in some of the decisions of this Court a liberal

interpretation of notice had been advocated to suggest that a notice served

upon a managing director of the company or a director of the company shall

satisfy the requirements of law. [See Bilakchand Gyanchand Co. v. A.

Chinnaswami JT 1999 (10) SC 236 and Rajneesh Aggarwal v. Amit J.

Bhalla JT 2001 (1) SC 325].

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37.   The said decisions proceeded on the premise that what is necessary is

the knowledge of the accused that the cheque has been dishonoured so that

the amount may be paid within a period of fifteen days from the date of such

knowledge.

38.   A learned Single Judge of the Kerala High Court in Pramod v. C.K.

Velayudhan & Ors. [2006 (1) JCC (NI) 62] inter alia relying on a decision

of this Court in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC

15: 2004 Cri LJ 4249] opined:

            "...In other words, commission of offence under              Section 138 of the Act by a juristic person is an              inevitable legal pre-requisite or the condition              precedent to proceed against a person referred to              under Section 141 of the Act and to hold him              guilty of the said offence."

     It was further opined:

            "19. Learned counsel for petitioner placed reliance              upon the decision of the High Court of Andhra              Pradesh in B.S.K. Prasad v. M/s. Laxmi Vessels,              2005 (1) LJ (NOC) 7 : (2004 Cri LJ 4079) (AP) in              which it is held that "as per Section 138 of the Act              the drawer of a dishonoured cheque only is liable              for punishment". He also cited K. Seetharam              Reddy v. K. Radhika Rani, (2002) 112 Comp Cas              204 (AP) in support of his arguments. It is held in              the said decision that "Section 138 of the              Negotiable Instruments Act, 1881, leaves no doubt              that the person who has drawn the cheque on his              account is alone liable in the event the cheque

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           drawn by him is dishonoured". In the light of the             above dictum also, I find that neither first accused-             society nor petitioner, as secretary of the society             can be proceeded against for offence under             Section 138 of the Act.

           20. But, despite all these, trial Court issued             summons to petitioner. The mere description on             the cause-title of the complaint appears to be the             sole persuading factor which propelled learned             Magistrate to summon petitioner. There was no             other ground to proceed against the petitioner.             Needless to say, a criminal Court will not get any             jurisdiction to proceed against a person at the mere             sight of the details on the docket-sheet or the             cause title. No Court shall act upon the sole tag,             label or the badge veiled on the cause-title. No             Court shall be carried away by the prints and dots             on the veil of cause-title. The Court is bound to             unveil the complaint, feel the texure of its contents             and test, the criminality. Criminality lies not on             how a person is christened at the cause-title, but             how he acts, as per the contents of the complaint."

39.   In B.S.K. Prasad v. M/s. Laxmi Vessels & Anr. [2005 (1) JCC (NI)

86], a learned Single Judge of the Andhra Pradesh High Court has laid

down the law in the following terms:

           "4. As per Section 138 of the Act the drawer of a             dishonoured cheque only is liable for punishment.             If the ’person’ that committed the offence under             Section 138 of the Act is a company the Directors             and the per-son-in-charge of the affairs of the             company, who look after the day to day affairs of

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           that company, apart from the company, would also             be liable for the said offence, by virtue of Section             141 of the Act. As stated earlier there is no scope             for invoking Section 141 of the Act because the             dishonoured cheque was not issued for and on             behalf of a company. Since petitioner, admittedly,             did not draw the dishonoured cheque on an             account maintained by him in a bank, and since             there is no scope for invoking Section 141 of the             Act to rope in the petitioner as Managing Director             of a company of which A-1 is the Director, merely             because A-1 is said to have given the dishonoured             cheque in partial or full settlement of a debt due to             1st respondent from a company of which             petitioner is the Managing Director, petitioner             cannot be made liable for an offence under Section             138 of the Act. The fact that 1st respondent has a             right to sue petitioner also for recovery of the debt             due to him is not and cannot be a ground for             making the petitioner liable for an offence under             Section 138 of the Act, when the dishonoured             cheque was not drawn for and on behalf of that             company, on an account maintained by it in a             bank. Therefore the fact that A1 who drew the             dishonoured cheque happens to be a Director in             the company of which petitioner is the Managing             Director, for the debt allegedly due to 1st             respondent from the said company, is of no             consequence."

40.   In Girish Saxena v. Praveen Kumar Jain & Ors. [2007 (2) JCC (NI)

220], a learned Single Judge of the Delhi High Court opined:

           "...It is settled law that only drawer of the cheque             can be prosecuted under Section 138 of the

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            Negotiable Instruments Act on the cheque getting              dishonoured. Since the petitioner was neither the              drawer of the cheque nor it is alleged that he was              partner or proprietor of firm when cheque got              dishonoured or he was the person responsible for              non payment of cheque amount, no offence under              Section 138 of Negotiable Instruments Act can be              made out against the petitioner."

41.   I agree with the aforementioned decisions of the High Courts as

having laid down the correct law.

42.   For the reasons aforementioned, the impugned judgment cannot be

sustained. It is set aside accordingly. Appeals are allowed.

                                            ...................................J.                                              [S.B. Sinha]

New Delhi; May 08, 2008

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        IN THE SUPREME COURT OF INDIA

                   CRIMINAL APPELLATE JURISDICTION

                        CRIMINAL APPEAL NO.838 OF 2008                (arising out of SLP(Crl.) NO. 2094/2007

         Aneeta Hada                                   ...Appellant

                                      Versus

   M/s Godfather Travels & Tours Pvt. .     ...Respondent     Ltd.

                                        With

    Criminal Appeal No.842 /2008      (arising out of SLP(Crl.) No. 2117/2007

                                   O R D E R

                   In view of the difference of opinion, let the matters be placed before three-Judge Bench. The Registry is directed to place the records before the Hon’ble the Chief Justice of India for appropriate orders.

                                                                      ..................... .J.                                             [S.B. SINHA]

                                                                      ..................... .J.                                             [V.S. Sirpurkar] New Delhi, May 8, 2008.

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                                                      "REPORTABLE

                 IN THE SUPREME COURT OF INDIA

                CRIMINAL APPELLATE JURISDICTION

          CRIMINAL APPEAL NO.__838_______OF 2008           (Arising out of SLP (Criminal) No.2094 of 2007)

Aneeta Hada                                     .... Appellant

     Versus

M/s.Godfather Travels & Tours Pvt. Ltd.         .... Respondent

                                 WITH

         CRIMINAL APPEAL NO.___842_______OF 2008           (Arising out of SLP (Criminal) No.2117 of 2007)

Anil Hada                                       .... Appellant

     Versus

M/s.Godfather Travels & Tours Pvt. Ltd.         .... Respondent

                           JUDGMENT

V.S. SIRPURKAR,J.

1.    I have the benefit of going through the opinion of my esteemed

Brother Justice S.B. Sinha, J.   However, I am unable to agreed with the

said judgment.

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2.    Leave granted in both the cases.

3.    The present judgment will dispose of the Criminal Appeal arising out

of SLP (Criminal) 2094 of 2007 and also Criminal Appeal arising out of SLP

(Criminal) 2117 of 2007. However, for the convenience sake we will be

dealing with the facts arising out of SLP (Criminal) 2094 of 2007 which are

identical with the facts arising out of SLP (Criminal) 2117 of 2007.

4.    The facts have been succinctly stated in the judgment, therefore, the

same need not be referred here.          It is an admitted position that the

appellant herein was a signatory to the cheque and the said cheque was

bounced. It is not as if the appellant herein suggests that she is not, in any

way, connected with M/s.Intel Travels on whose cheque book she has

issued the cheque. The appellant had the authority to use the cheque

book and sign on behalf of M/s.Intel Travels. Even if she wrote a cheque

on the cheque-book of M/s.Intel Travels for paying her own debts and the

cheque is bounced, the offence under Section 138 of the Negotiable

Instruments Act (hereinafter referred to as "the Act") will be complete

atleast against her. That is the clear import of the language of Section 138

of the Act and her act is squarely covered under the said Section. The

High Court had correctly relied on Section 139 of the Act. We accept that

finding of the High Court.    It is true that for a proper complaint under

Section 138 of the Act, the cheque must have been drawn by a person and

secondly the account must be maintained by "such person" and it should

have been given for payment of amount of money to another person from

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out of that account for the discharge of any debt or other liability and when

such cheque is returned by the bank unpaid because of the insufficient

funds to honour the cheque. Then such person would be liable under

Section 138 of the Act.     In the present case, the account was being

maintained by "Intel Travels" and the appellant had the authority to sign the

cheque of that account.     Therefore, there will be a clear liability if the

appellant used the cheque which she had the authority to use and that too

for discharging the debt. It must be pointed out at this juncture that the

words in Section 138 of the Act are "any debt" or "other liability". In this

case since M/s. Intel Travels was maintaining the account and the

appellant had the authority to operate the same, the conditions will be

satisfied even if it was given for the discharge of the liability of the

appellant.

5.    Even if it is presumed that the account was meant to be maintained

by the company, since the appellant was authorized signatory, it will have

to be presumed that she had the authority to operate the account. Again

even if it is presumed that the cheque was issued by the company, that will

make no difference as the appellant has put her signatures on the cheque

which signature she was authorized to put. This is apart from the fact that

as yet no evidence is led for proving as to whose debt was sought to be

discharged by the cheques which were dishonoured.

6.    The legal fiction created by the Legislature under Section 138 of the

Act is to be found via Section 141 where along with the company, every

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person who was incharge of and was responsible to the company for the

conduct of the business is also made guilty. However, sub-section (2) of

Section 141 which starts with non obstante clause creates an "additional

criminal liability", in that, the language of the sub-section is as follows:

     "141(2) Notwithstanding anything contained in sub-section (1),       where any offence under this Act has been committed by a       company and it is proved that the offence has been committed       with the consent or connivance of, or is attributable to, any       neglect on the part of, any director, manager, secretary, or       other officer of the company, such director, manager,       secretary or other officer shall also be deemed to be guilty of       that offence and shall be liable to be proceeded against and       punished accordingly."

A glance at this provision would suggest that sub-section (2) starts with the

non obstante clause and fixes additional criminal liability. That is clear from

the words "such director, manager, secretary or other officer shall also be

deemed to be guilty of that offence". In using the cheque book of M/s. Intel

Travels, which the appellant was authorized to use and in signing the same

which cheque ultimately was bounced, it would have to be presumed that

the signatory of the cheque shall also be deemed to be guilty of the

offence.

7.    Even if the liability against the appellant is vicarious herein on

account of the offence having allegedly been committed by M/s. Intel

Travels, it would have to be presumed that the appellant had also

committed the offence. However, though M/s. Intel Travels has not been

joined as an accused, that would be of no consequences.

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8.    There can be no quarrel against the proposition that a company can

be proceeded against in the criminal proceeding even where the imposition

of sentence is provided for. That law is laid down in Standard Chartered

Bank & Others v. Directorate of Enforcement & Ors. [(2005) 4 SCC

530]. However, there is nothing in that judgment to suggest that there

cannot be a prosecution of the signatory alone in the absence of the

company like Intel Travels in this case.

9.    It is true that in S.M.S. Pharmaceuticals Ltd. V. Neeta Bhalla &

Anr. [(2005) 8 SCC 89] a vicarious liability has been found against the

person responsible for running the company where the principal accused is

the company. However, it is nowhere laid down in SMS Pharmaceuticals

case that unless the company itself is made an accused, the person

responsible for running the same, in the present case, the signatory of the

cheque, cannot be joined as an accused. Even in Sabitha Ramamurty &

Anr. V. R.B.S. Channabasavaradhya [2006 (9) SCALE 212] such precise

observations are not to be found.

10.   In the present case it is yet to be decided as to whether the liability

was that of the company or the appellant herself. It could be personal

liability of the appellant herself for discharging her debt for which she might

have misused the cheque-book of the company.               Even under such

circumstances the offence against her could be complete is not known at

this stage since no evidence has been led in this regard. Therefore, the

inference that the liability was that of the company and she was merely

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vicariously liable would, therefore, be a premature finding. On the other

hand even if she has misused the cheque-book to discharge her own

liability, taking advantage of her authorization to put the signatures on the

cheque-book of M/s.Intel Travels, she still would be liable to be proceeded

against and it would be a question between herself and the company

whether she has committed any offence vis-‘-vis the company also. At this

stage, however, it is not possible to say anything without any evidence

having been led.

11.   Law laid down in S.V. Muzumdar & Ors. V. Gujarat State Fertilizer

Co. Ltd. & Anr. [(2005) 4 SCC 173], Sarav Investment and Financial

Consultants Pvt. Ltd. & Anr. V. Llyods Register of Shipping Indian

Office Staff Provident Fund & Anr. [2007 (12) SCALE 123] as also in K.

Srikanth Singh v. North East Securities Ltd. & Anr. [(2007) 9 SCALE

371] does not even impliedly suggest that unless the company is joined as

an accused it is not possible to proceed against the signatory of the

cheque.

12.   A close examination of the decision in SMS Pharmaceuticals’s

case (cited supra) as also the decision in N. Rangachari v. Bharat

Sanchar Nigam Ltd. [2007 (5) SCALE 821] does not show such extreme

proposition. All that SMS Pharmaceuticals and N. Rangachari say is that

the prosecution could be launched not only against the company on behalf

of which the cheque issued has been dishonoured but it could also be

initiated against every person who, at that time of committing the offence,

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was incharge and was responsible for the affairs of the company.

However, it does not mean that both the accused must be joined together

for proper prosecution and that the signatory of the cheque cannot

individually be prosecuted in the absence of the company.

13.   A complaint has been made against the two accused persons,

namely, Smt.Aneeta Hada who is described as Director of M/s.Intel Travels

and also Anil Hada who has also been described as Director of the

company.    It is then specifically suggested in the complaint that the

accused persons used to purchase the air-tickets for their clients and that

they had purchased the air-tickets from the complainant from time to time

and issued the cheques worth Rs.5,10,000/- and Rs.4,21,000/-.         It is

specifically stated that Accused No.1 also used to conduct the business of

her company and she also used to purchase the tickets from the

complainant.   The basic complaint, therefore, is against two accused

persons in their individual capacity, though they might be purchasing the

tickets for their traveling company. However, merely because of that fact

one cannot reach at a conclusion that in the absence of M/s. Intel Travels

the two accused persons and more particularly the appellant herein who

was the signatory to the cheque and whose cheque was bounced cannot

be prosecuted. That could not be the import of the decision in Everest

Advertising Pvt. Ltd. V. State Govt. of NCT of Delhi & Ors. [2007 (5)

SCALE 479], SMS Pharmaceuticals (cited supra) or the decision in N.K.

Wahi v. Shekhar Singh & Ors. [2007 (4) SCALE 188].

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14.   In the decision in Anil Hada v. Indian Acrylic Ltd. [(2000) 1 SCC 1],

it so happened that the company itself was in liquidation and the Division

Bench of this Court was considering the question as to whether the

signatory to the cheque could be proceeded against. The expressions in

paragraph 12 of this judgment are apposite. The words used in Section

141(1) of the Act as also the words "shall also" used in sub-section (2) of

Section 141 had been held to bring the third category of persons

additionally within the dragnet of the offence on an equal path. The words

"company need not be proceeded against" cannot be held as obiter dicta.

Further there is nothing conflicting in the aforesaid two judgments in the

cases of Anil Hada & SMS Pharmaceuticals.           On the other hand a

reading of the judgment in Anil Hada’s case would suggest that the court

therein considered the law laid down in State of Madras v. C.V. Parekh

[(1970) 3 SCC 491] wherein the analogous provisions under Section 7 of

the Essential Commodities Act read with Section 10 of that Act fell for

consideration. There also the private limited company was not included as

an accused and the question was as to whether the Managing Director

alone could be proceeded against. This judgment was considered in the

celebrated judgment in Sehoratan Agarwal v. State of M.P. [(1987) 3

SCC 684]. The Court not only explained the observations earlier made in

C.V. Parekh’s case [cited supra) but went on to hold further as follows:

     "Any one or more or all of them may be prosecuted and       punished. The company alone may be prosecuted. The       person in charge only may be prosecuted. The conniving       officer may individually be prosecuted. One, some or all may

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     be prosecuted. There is no statutory compulsion that the       person in charge or an officer of the company may not be       prosecuted unless he be ranged alongside the company itself.       Section 10 indicates the persons who may be prosecuted       where the contravention is made by the company. It does not       lay down any condition that the person in charge or an officer       of the company may not be separately prosecuted if the       company itself is not prosecuted. Each or any of them may be       separately prosecuted or along with the company." (Emphasis       Supplied)

Ultimately the law laid down in Sheoratan Aggarwal’s case was approved

by the Bench. The Court ultimately held in para 21 as under:

     "We, therefore, hold that even if the prosecution proceedings       against the company were not taken or could not be       continued, it is no bar for proceeding against the other persons       falling within the purview of sub-sections (1) and (2) of Section       141 of the Act. In the light of the aforesaid view we do not       consider it necessary to deal with the remaining question       whether winding up order of a company would render the       company non-existent." (Emphasis Supplied)

It will, therefore, be seen that the question as to whether the persons like

accused alone in the absence of the company having been made accused

could be proceeded against or not had directly fallen for consideration and

it cannot be said that any observations in Anil Hada’s case by any chance

could be viewed as obiter. This is a binding precedent.

15.   The ratio laid down in Anil Hada’s case was applicable to the factual

matrix thereof which is identical here.    The question has been directly

decided that the prosecution of the company is not a sine qua non for the

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prosecution of the other persons who fall within the second and third

categories, namely, those who were incharge and responsible for the

business of the company.

16.   Even the law laid down in Raghu Lakshminarayananan v. Fine

Tubes [2007 (5) SCALE 353], would not be apposite. In that case the

question was whether the persons in the second category, as in the

present case, could be prosecuted in the absence of the company.

17.   The principle "lex non cogit ad impossibilia" would not apply here,

because of the language of Section 141 of the Act and the present

appellant would be completely liable since the cheques signed by her were

bounced.

18.   Since the decision in Sheoratan Agarwal’ case (cited supra) has

already been considered by the Division Bench of this Court and relied

upon in the decision in Anil Hada, it need not be considered afresh.

19.   Lastly, since this question was already covered by Anil Hada’s

case, the appellant would be liable to be prosecuted even when M/s.Intel

Travel had not been joined as an accused. It is in the light of decision in

Anil Hada that subsequent decisions in Bilakchand Gyanchand Co. v. A.

Chinnaswami [JT 1999 (10) SC 236] and Rajneesh Aggarwal v. Amit J.

Bhalla [JT 2001 (1) SC 325] would have to be read. The other cases

referred to, one of Kerala High Court in Pramod v. C.K. Velayudhan &

Ors. [(2006) 1 JCC (NI) 62] and Monaben Ketanbhai Shah v. State of

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Gujarat [(2004) 7 SCC 15: 2004 Cri. LJ 4249] in my opinion are not

apposite to the present controversy.

20.     The decisions in Andhra Pradesh High Court reported in B.S.K.

Prasad v. M/s.Laxmi Vessels [2005 (1) LJ (NOC) 7: 2004 Cri. LJ 4079

(AP)]     and K. Seetharam Reddy v. K. Radhika Rani [(2002) 112

Company Cases 204 (AP) support the view that the person who has

drawn the cheque, in case the cheque is dishonoured, is liable under

Section 138 of the Act itself.

21.     No comment is required on the reported decision in B.S.K. Prasad’s

case (cited supra) since the decision in that case turns on the evidence

led in that case.      That opportunity has still not been given to the

prosecution in this case and it is not known uptil now as to whether the

cheque issued by the accused was issued on behalf of the company or to

pay off her own debts. Again the judgment does not say anywhere that the

signatory to the cheque cannot alone be prosecuted.

22.     Appellant’s reliance on the last case in Girish Saxena v. Praveen

Kumar Jain & Ors. [(2007) 2 JCC (NI) 220] is also unnecessary since in

that case the accused was not a signatory to the cheque. The decision in

that case would not be applicable to the present case.

23.     In view of the above I would be of the opinion that the appeals must

be dismissed.

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                  ..............................J.                    (V.S. SIRPURKAR)

New Delhi, May 8, 2008