Himachal Pradesh High Court
Devender Sharma & Others vs Rajesh Kumar on 23 December, 2024
Author: Virender Singh
Bench: Virender Singh
( 2024:HHC:15925 )
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Cr.MMO No. 1011 of 2024
Reserved on : 16.12.2024
Decided on : 23.12.2024
Devender Sharma & Others …Petitioners
Versus
Rajesh Kumar …Respondent
Coram
The Hon’ble Mr. Justice Virender Singh, Judge.
Whether approved for reporting?1 Yes
For the petitioners : Mr. Hemant Kumar Thakur,
Advocate.
For the respondent : None.
Virender Singh, Judge
Petitioners have filed the present petition, under
Section 528 of the Bharatiya Nagarik Suraksha Sanhita,
2023 (hereinafter referred to as ‘BNSS’), read with Section
142 of the Negotiable Instruments Act (hereinafter referred
to as the ‘NI Act‘), with a prayer to quash the proceedings
pending against them, before the Court of learned Judicial
Magistrate First Class, Anni, District Kullu (hereinafter
referred to as ‘the trial Court’), in case No.2423 of 2019,
1
Whether Reporters of local papers may be allowed to see the judgment? Yes.
2 ( 2024:HHC:15925 )
titled as Rajesh Kumar versus Managing Director and
others, filed under Section 138 of the NI Act.
2. For the sake of convenience, the parties to the
lis are hereinafter referred to in the same manner, in
which, they were referred to, by the learned trial Court.
3. The factual position, in brief, which had given
the occasion to the petitioners to file the present petition,
before this Court, may be summed up as under:
3.1. ComplainantRajesh Kumar has filed a
complaint under Section 138 of the Negotiable Instruments
Act, before the learned trial Court, against the accused.
Accused No.1 to 5 are being referred as Managing
Directors/Directors, whereas, accused No.6 has been
referred to as the cashier of the Company, namely
Himudayath Producer Company Limited, having its
registered office at Negi Building, Upper Khalini, Shimla2.
3.2. The said complaint has been filed on the
ground that the accused persons are Managing
Directors/Directors/Cashier of registered Company
working in the name and style of Himdyuath Producer
3 ( 2024:HHC:15925 )
Company Ltd. And they were running their business
collectively in Nirmand Tehsil.
3.3. According to the complainant, the accused
persons, were carrying out the business of collecting milk,
as well as, daily RD by collecting Rs.200/ per day. When,
the said amount was required to be returned to the
complainant, at that time, the accused persons were not
having cash, in hand, as such, they had issued cheque
No.518108, dated 4.8.2018, for a sum of Rs.77,760/,
drawn at H.P. Gramin Bank Branch Shimla8941, where
the accused persons were having their Bank Account
bearing No.89412100000925, and assured the
complainant that they will get the said amount, when, the
said cheque would be presented. However, when the said
cheque was presented with the Gramin Bank Branch Arsu,
the same could not be encashed and was returned to the
complainant, with memo dated 2.11.2018. The reason for
nonencashment had been mentioned ‘insufficient funds’.
3.4. Thereafter, the requisite legal notice was issued
to the accused persons, which was duly replied by them, in
which, they have sought three months’ time for making the
4 ( 2024:HHC:15925 )
payment. But, despite the said period, payment was not
made. The cheque, in question, was issued by the accused
persons, despite having the knowledge that they were not
having the sufficient funds to honour the said cheque.
4. On the basis of the above facts, a prayer has
been made to take action against the accused persons, for
commission of the offence punishable under Section 138 of
the NI Act, as well as, Section 420 of the IPC.
5. Thereafter, the learned trial Court has recorded
the preliminary evidence and issued process, under
Section 138 of the NI Act.
6. Against the said process, as well as, against the
filing of complaint against them, out of six accused, three
are before this Court. They have sought the relief of
quashing mainly, on the ground that the complaint, before
the learned trial Court, is not maintainable, as, the cheque,
in question, was issued on behalf of M/s Himudayath
Producer Company Limited and not by the accused, in
their individual capacity.
7. According to the petitionersaccused, account
No.89412100000925, was opened in the name of
5 ( 2024:HHC:15925 )
Himudayath Producer Company Ltd., and not in the name
of an individual.
8. As per the case of the petitionersaccused, the
learned trial Court has wrongly issued the process, under
Section 138 of the NI Act, ignoring the fact that the
Company has not been impleaded, as accused, in this
case. As such, according to them, the proceedings cannot
be initiated and allowed to be continued against them.
8. It is the further case of the accused persons
that they are not liable for the dishonouring of the cheque,
as, they were not responsible for dishonouring the same.
9. On the basis of the above facts, Shri Hemant
Kumar Thakur, Advocate, has prayed that the present
petition may kindly be allowed, by quashing the
summoning order, as well as, the complaint.
10. In this case, respondent has put appearance on
19.11.2024, through his counsel, but thereafter, on
16.12.2024, no one has put appearance, on his behalf.
11. Perusal of the record shows that the complaint,
under Section 138 of the NI Act, read with Section 420 IPC,
was initiated, on account of the fact that the cheque
6 ( 2024:HHC:15925 )
No.518108, which was issued in this case, had not been
encashed, when, the same was presented for encashment.
The cheque, against account No.89412100000925, was
issued by the Directors of Himudayath Producer Company
Ltd.
11. Admittedly, the said Company has neither been
impleaded, as, accused in the complaint, under Section
138 of the NI Act, nor in the legal notice issued against the
Company, before filing the complaint.
12. The complaint, as well as, legal notice was
issued against the Managing Directors, Directors and
Cashier, by giving the following description of the accused:
1. Managing Director Shri Devender
Sharma;
2. Managing Director Shri Devender
Kumar;
3. Director Shri Aman Kumar;
4. Director Smt. Veena Sharma;
5. Director Smt. Reena Sharma; and
6. Yog Raj Kharadi S/o Shri Ganga
Ram (Cashier).
13. Nonimpleading of the Company, in the present
case, as accused, is fatal to the case of the complainant.
While holding so, the view of this Court is being guided by
the decision of the Hon’ble Supreme Court in Aneeta
7 ( 2024:HHC:15925 )
Hada versus M/s. Godfather Travels and Tours Pvt.
Ltd., (2012) 5 SCC 661., Relevant paragraphs 1, 53, 58
and 59 of the judgment, are reproduced, as under:
[1] In Criminal Appeal Nos. 838 of 2008 and
842 of 2008, the common proposition of law
that has emerged for consideration is whether
an authorised signatory of a company would be
liable for prosecution under Section 138 of the
Negotiable Instruments Act, 1881 (for brevity
‘the Act’) without the company being arraigned
as an accused. Be it noted, these two appeals
were initially heard by a twoJudge Bench and
there was difference of opinion between the
two learned Judges in the interpretation of
Sections 138 and 141 of the Act and, therefore,
the matter has been placed before us.
xxx xxx xxx
[53] It is to be borne in mind that Section 141 of
the Act is concerned with the offences by the
company. It makes the other persons
vicariously liable for commission of an offence
on the part of the company. As has been stated
by us earlier, the vicarious liability gets
attracted when the condition precedent laid
down in Section 141 of the Act stands satisfied.
There can be no dispute that as the liability is
penal in nature, a strict construction of the
provision would be necessitous and, in a way,
the warrant.
xxx xxx xxx
[58] Applying the doctrine of strict construction,
we are of the considered opinion that
commission of offence by the company is an
express condition precedent to attract the
vicarious liability of others. Thus, the words “as
well as the company” appearing in the section
8 ( 2024:HHC:15925 )
make it absolutely unmistakably clear that
when the company can be prosecuted, then
only the persons mentioned in the other
categories could be vicariously liable for the
offence subject to the averments in the petition
and proof thereof. One cannot be oblivious of
the fact that the company is a juristic person
and it has its own respectability. If a finding is
recorded against it, it would create a concavity
in its 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. The other categories of
offenders can only be brought in the dragnet
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 [(1970) 3 SCC 491] which is a
three Judge Bench decision. Thus, the view
expressed in Sheoratan Agarwal [(1984) 4 SCC
352], does not correctly lay down the law and,
accordingly, is hereby overruled. The decision
in Anil Hada [(2000) 1 SCC 1] is overruled with
the qualifier as stated in paragraph 37. The
decision in Modi Distilleries [AIR 1988 Supreme
Court 1128] has to be treated to be restricted to
its own facts as has been explained by us
hereinabove.
14. Similar view has again been taken by the two
judge Bench of Hon’ble Supreme Court in Himanshu v. B.
Shivamurthy & Another, (2019) 3 SCC 797. Relevant
9 ( 2024:HHC:15925 )
paragraphs 11 to 14 of the judgment, are reproduced, as
under:
“[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 of the CrPC, 1973.”
15. Although, the cheque has been issued by a
body corporate, but, the same can be prosecuted, under
10 ( 2024:HHC:15925 )
Section 138 of the NI Act. While holding so, the view of
this Court, is being guided, by the decision of Hon’ble
Supreme Court, in Anil Hada versus Indian Acrylic Ltd,
(2000) 1 Supreme Court Cases 1. Relevant paragraphs
12 and 13 of the judgment, are reproduced, as under:
“12. Thus when the drawer of the cheque who
falls within the ambit of Section 138 of the Act is
a human being or a body corporate or even firm,
prosecution proceedings can be initiated against
such drawer. In this context the phrase “as well
as” used in subsection (1) of Section 141 of the
Act has some importance. The said phrase
would embroil the persons mentioned in the first
category within the tentacles of the offence on a
par with the offending company. Similarly the
words “shall also” in 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 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 men alone
the other two categories of persons can also
become liable for the offence.
13. If the offence was committed by a
company it can be punished only if the company
is prosecuted. But instead of prosecuting the
company if a payee opts to prosecute only the
persons falling within the second or third
category the payee can succeed in the case only
if he succeeds in showing that the offence was
actually committed by the company. In such a
11 ( 2024:HHC:15925 )
prosecution the accused can show that the
company has not committed the offence, though
such company is not made an accused, and
hence the prosecuted accused is not liable to be
punished The provisions do not contain a
condition that prosecution of the company is
sine qua non for prosecution of the other
persons who fall with in the second and the
third categories mentioned above. No doubt a
finding that the offence was committed by the
company is sine qua non for convicting those
other persons. But if a company is not
prosecuted due to any legal snag or otherwise,
the other prosecuted persons cannot, on that
score alone, escape from the penal liability
created through the legal fiction envisaged in
Section 141 of the Act.”
16. Similar view has again been taken by the
Hon’ble Supreme Court in Anil Gupta versus Star India
Pvt. Ltd., 2014(10) Supreme Court Cases 373. Relevant
paragraph 12 of the judgment, is reproduced, as under:
12. Again the same question was considered by
three Judge Bench of this Court in Aneeta Hada
v. Godfather Travels and Tours Pvt. Ltd. (2012)
5 SCC 661. The Court noticed the decisions in
Anil Hada (supra) case and Aneeta Hada
(supra) case. The three Judge Bench while
partly overruled the finding of Anil Hada (supra)
affirmed the decision of Aneeta Hada (supra).
This Court 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
12 ( 2024:HHC:15925 )or any other officer can be prosecuted without
impleadment of the company. Needless to
emphasise, the matter would stand on a
different footing where there is some legal
impediment and the doctrine of lex non cogit ad
impossibilia gets attracted.”
xxx xxx xxx
“53. It is to be borne in mind that Section 141 of
the Act is concerned with the offences by the
company. It makes the other persons vicariously
liable for commission of an offence on the part of
the company. As has been stated by us earlier,
the vicarious liability gets attracted when the
condition precedent laid down in Section 141 of
the Act stands satisfied. There can be no
dispute that as the liability is penal in nature, a
strict construction of the provision would be
necessitous and, in a way, the warrant.”
xxx xxx xxx
“58. Applying the doctrine of strict construction,
we are of the considered opinion that
commission of offence by the company is an
express condition precedent to attract the
vicarious liability of others. Thus, the words “as
well as the company” appearing in the section
make it absolutely unmistakably clear that
when the company can be prosecuted, then only
the persons mentioned in the other categories
could be vicariously liable for the offence subject
to the averments in the petition and proof
thereof. One cannot be oblivious of the fact that
the company is a juristic person and it has its
own respectability. If a finding is recorded
against it, it would create a concavity in its
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. The other categories of offenders
13 ( 2024:HHC:15925 )can only be brought in the dragnet 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 threeJudge 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.”
17. In Criminal Appeal No.5556 of 2024, titled
as Bijoy Kumar Moni versus Paresh Manna & Another,
{2024 INSC 1024} Hon’ble Supreme Court has again
taken the similar view. Relevant paragraphs 45 to 47 and
57 of the judgment, are reproduced, as under:
45. It is of vital importance to understand the
import of the expression “on an account
maintained by him with a banker” used in
Section 138 of the NI Act. The expression, in
our considered opinion, describes the
relationship between the account holder and
the banker. This relationship is fundamental
to the application of Section 138. The act of
maintaining an account is exclusively tied to
the account holder and does not extend to any
third party whom the account holder may
authorize to manage the account on its behalf.
Therefore, any delegation of authority to
manage the account does not alter the
intrinsic relationship existing between the
account holder and the banker as envisaged
under the NI Act. Corporate persons like
14 ( 2024:HHC:15925 )
companies, which are mere legal entities and
have no soul, mind or limb to work physically,
discharge their functions through some
human agency recognised under the law to
work. Therefore, if some function is
discharged by such human agency for and on
behalf of the company it would be an act of
the company and not attributable to such
human agent. One such instance of discharge
of functions could be the authority to manage
the bank accounts of the company, issue and
sign cheques on its behalf, etc. which may be
delegated to an authorised signatory.
However, such authorisation would not render
the authorised signatory as the maker of
those cheques. It is the company alone which
would continue to be the maker of these
cheques, and thus also the drawer within the
meaning of Section 7 of the NI Act.
46. The authorised signatory is merely the
physical limb that signs and makes the
cheque on behalf of the company’s incorporeal
personality. The company, for all purposes,
continues to remain the drawer of the
cheques. If the interpretation as being
canvassed by the complainant is accepted
then even an employee of the Company, who
on account of his being an authorized
signatory signs a cheque issued by the
Company towards discharge of the debt or
other liability of the Company, would be liable
to prosecution and conviction under Section
138 of NI Act even after he resigns from the
company and is no more in its employment.
This certainly could not have been the
intention of the legislature. Even the vicarious
liability created under Section 138 of NI Act
would not be attracted in respect of a Director
or an employee of the Company who resigns
and severs his connections with the company,
unless the complainant is able to bring his
case within the purview of subSection 2 of
Section 141, by proving that the offence had
15 ( 2024:HHC:15925 )
been committed with his consent or
connivance or was otherwise attributable to
any neglect on his part.
47. We would hasten to add that the above
interpretation should not in any manner be
misconstrued to affix liability upon the joint
account holder of an account unless the
cheque is shown to have been made/drawn
jointly by such joint account holder. A
company visàvis its authorised signatory
stands on a completely different footing as
compared to account holders of a joint
account. In the former, it is only the company
which holds an account with the banker,
whereas in the latter, each joint account
holder can be said to hold an account with the
banker. Thus, while in the case of a cheque
drawn on the account of the company the
authorised signatory cannot be held to be the
drawer, in the case of a cheque drawn upon a
joint account, each account holder affixing his
signature to the cheque may be said to have
drawn such a cheque. The position of law on
this issue has been settled by this Court in
the case of Aparna A. Shah v. Sheth
Developers (P) Ltd. reported in (2013) 8 SCC
71, wherein it was observed thus:
“28. We also hold that under Section
138 of the NI Act, in case of issuance
of cheque from joint accounts, a joint
accountholder cannot be prosecuted
unless the cheque has been signed by
each and every person who is a joint
accountholder. The said principle is
an exception to Section 141 of the NI
Act which would have no application
in the case on hand. The proceedings
filed under Section 138 cannot be
used as armtwisting tactics to recover
the amount allegedly due from the
appellant. It cannot be said that the
complainant has no remedy against
16 ( 2024:HHC:15925 )the appellant but certainly not under
Section 138. The culpability attached
to the dishonour of a cheque can, in
no case “except in case of Section 141
of the NI Act” be extended to those on
whose behalf the cheque is issued.
This Court reiterates that it is only the
drawer of the cheque who can be
made an accused in any proceeding
under Section 138 of the Act. […]”
(Emphasis supplied)
xxx xxx xxx
57. In Himanshu v. B. Shivamurthy (supra),
the Court was examining the legality and
validity of the order quashing a complaint
passed by the High Court in exercise of its
inherent powers under Section 482 of the
CrPC in a case where the Director of the
company was arraigned as the sole accused
for the dishonour of a cheque drawn upon the
bank account held in the name of the
company. Reiterating the principles laid down
in Aneeta Hada (supra), this Court upheld the
decision of the High Court in quashing the
complaint case.
18. Even otherwise, the Company cannot now be
impleaded as accused, in this case, as before filing the
complaint under Section 138 NI Act, certain legal
formalities have to be completed by the complainant, i.e.,
issuance of legal notice, demanding the money, within the
stipulated period.
19. The nonprosecution of the company, from
whose account the cheque was issued and dishonored, is
17 ( 2024:HHC:15925 )
fatal, noncurable illegality and shall lead to the dismissal
of the complaint, being legally defective and not properly
constituted.
20. In the entirety of facts and circumstances, the
petition is allowed and the order of the learned trial Court,
taking cognizance and all consequential proceedings are
quashed and set aside. It is clarified that the dismissal of
the petition shall not come in any way, in case the
complainant/holder of the cheque, wants to take any other
legal remedy, including filing of civil suit, for recovery of
cheque amount etc.
21. Pending application(s), if any, shall also stand
disposed of.
( Virender Singh )
Judge
December 23, 2024(ps)