Case: Anil Hada Vs. Indian Acrylic Ltd

in a case. It is open to any one of the accused to adduce evidence to rebut the said presumption. In a prosecution where both the drawer company and its office-bearers are arrayed as accused, and if the drawer company does not choose to adduce any rebuttal evidence it is open to the other office bearers-accused to adduce such rebuttal evidence. If that be so, even in a case where the drawer company is not made an accused but the office-bearers of the company alone are made the accused such office bearers-accused are well within their rights to adduce rebuttal evidence to establish that the company did not issue the cheque towards any antecedent liability. 15. Hence we are not impressed by the contention that Section 139 of the Act would afford support to the plea that prosecution of the company is sine qua non for persecuting its directors under section 141 of the Act. 16. In State of Madras v. C.V. Parekh and anr., 1970 (3) SCC 491 , a prosecution was launched against the Managing Director of a private limited company for the offence under Section 7 of the Essential Commodities Act with the aid of Section 10 of that Act. (That provision is very much analogous to Section 141 of the N.I. Act). The said private limited company was not included as an accused in the case. When the trial court acquitted the Managing Director the State challenged the acquittal before the High Court and having failed there also the State filed an appeal before this Court by special leave. It was contended before this Court that if the person arrayed as accused was shown to be in charge and was responsible for the conduct of the business of the company such person is liable to be convicted. This Court did not accept the contention and held that it must further be proved that the company has contravened the order issued under the E.C. Act. The following observations of this Court in the said decision are relevant: This argument cannot be accepted, because it ignores the first condition for the applicability of Section 10 to the effect that the person contravening the order must be a company itself. In the present case, there is no finding either by the Magistrate or by the High Court that the sale in contravention of clause (5) of the Iron and Steel Control Order was made by the Company. In fact, the Company was not charged with the offence at all. The liability of the persons in charge of the Company only arises when the contravention is by the Company itself. Since, in this case, there is no evidence and no finding that the Company contravened clause (5) of the Iron and Steel Control Order, the two respondents could not be held responsible. 17. The same provision under the E.C. Act was again considered by this Court in Sheoratan Agarwal and another v. State of Madhya Pradesh, AIR 1984 SC 1824 . In the said decision this Court explained the legal principle enunciated in State of Madras v. C.V. Parekh (supra) that there should be a finding that the contravention was made by the company before convicting the accused and not that the company itself should have been prosecuted along with the accused. We may say with great respect that the above understanding of the ratio in State of Madras v. C.V. Parekh cannot be taken exception to. Chinnappa Reddy, J., who spoke for the two Judge Bench in Sheoratan Agarwal (supra) further observed as follows : Any one or more or all of them may be prosecuted and punished. The Company alone 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. S. 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. 18. Smt. Indira Jaising, learned senior counsel submitted that he observations in the aforesaid two decisions are not exactly to the point involved in this case and on the contrary the decision in U.P. Pollution Control Board v. M/s. Modi Distillery and others, AIR 1988 SC 1128 was endeavoured to be shown as covering the issue involved now. In the said case a prosecution was moved against members of the Board of Directors of M/s. Modi Distillery under Section 44 of the Water (Prevention and Control of Pollution) Act, 1974. Section 47 of that Act is identical to Section 141 of the N.I. Act. M/s. Modi Distillery was not arraigned as an accused in that case and hence the High Court quashed the proceedings as against the others. This Court set aside the judgment of the High Court on the premise that even if there was any such technical flaw it was a curable flaw and directed the trial court to implead the company also as an accused. Of course there is an observation in the said decision, which is sought to be given much emphasis to, as follows: Although as a pure proposition of law in the abstract the learned single Judges view that there can be no vicarious liability of the Chairman, Vice-Chairman, Managing Director and members of the Board of Directors under sub-s. (1) or (2) of S. 47 of the Act unless there was a prosecution against Messrs Modi Industries Limited, the Company owing the industrial unit, can be termed as correct, the objection raised by the petitioners before the High Court ought to have been viewed not in isolation but in the conspectus of facts and events and not in vacuum.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]10. Normally an offence can be committed by human beings who are natural persons. Such offence can be tried according to the procedure established by law. But there are offences which could be attributed to juristic persons also. If the drawer of a cheque happens to be a juristic person like a body corporate it can be prosecuted for the offence under Section 138 of the Act. Now there is no scope for doubt regarding that aspect in view of the clear language employed in Section 141 of the Act. In the expanded ambit of the word company even firms or any other associations of persons are included and as a necessary adjunct thereof a partner of the firm is treated as director of that company11. 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 inn (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 inn (2) are capable of bringing the third category persons traditionally 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 then alone the other two categories of persons can also become liable for the offence12. 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 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 within 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 Act14. The aforesaid presumption is in favour of the holder of the cheque. It is not mentioned in the section that the said presumption would operate only against the drawer. After all a presumption is only for casting the burden of proof as to who should adduce evidence in a case. It is open to any one of the accused to adduce evidence to rebut the said presumption. In a prosecution where both the drawer company and itss are arrayed as accused, and if the drawer company does not choose to adduce any rebuttal evidence it is open to the other officed to adduce such rebuttal evidence. If that be so, even in a case where the drawer company is not made an accused but thes of the company alone are made the accused such officed are well within their rights to adduce rebuttal evidence to establish that the company did not issue the cheque towards any antecedent liability15. Hence we are not impressed by the contention that Section 139 of the Act would afford support to the plea that prosecution of the company is sine qua non for persecuting its directors under section 141 of the Act.