Case: Aneeta Hada &amp; Others Vs. M/s. Godfather Travels &amp; Tours Pvt. Ltd. &amp; Another

4. The appellant, Anita Hada, an authorised signatory of International Travels Limited, a company registered under the Companies Act, 1956, issued a cheque dated 17th January, 2011 for a sum of Rs.5,10,000/- in favour of the respondent, namely, M/s. Godfather Travels & Tours Private Limited, which was dishonoured as a consequence of which the said respondent initiated criminal action by filing a complaint before the concerned Judicial Magistrate under Section 138 of the Act. In the complaint petition, the Company was not arrayed as an accused. However, the Magistrate took cognizance of the offence against the accused appellant.5. Being aggrieved by the said order, she invoked the jurisdiction of the High Court under Section 482 of the Code of Criminal Procedure for quashing of the criminal proceeding and the High Court, considering the scope of Sections 138 and 139 of the Act and various other factors, opined that the ground urged would be in the sphere of defence of the accused and would not strengthen the edifice for quashing of the proceeding. While assailing the said order before the two-Judge Bench, the substratum of argument was that as the Company was not arrayed as an accused, the legal fiction created by the legislature in Section 141 of the Act would not get attracted. It was canvassed that once a legal fiction is created by the statutory provision against the Company aswell as theperson responsible for the acts of the Company, the conditions precedent engrafted under such deeming provisions are to be totally satisfied and one such condition is impleadment of the principal offender. S.B. Sinha, J.dissected the anatomy of Sections 138 and 141 of the Act and referred to the decisions in Standard Chartered Bank and others v. Directorate of Enforcement and others ((2005) 4 SCC 530 ); Madhumilan Syntex Ltd. & others v. Union of India and another (AIR 2007 SC 1481 : (2007) 11 SCC 297 ); S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another ((2005) 8 SCC 89 ); Sabitha Ramamurthy and Another v. R.B.S. Channabasavaradhya ((2006) 10 SCC 581 ); S.V. Mazumdar and others v. Gujarat State Fertilizer Co. Ltd. and Another ((2005) 4 SCC 173 ); Sarav Investment & Financial Consultancy Private Limited and another v. Lloyds Register of Shipping Indian Office Staff Provident Fund and another ((2007) 14 SCC 753 ); K. Srikanth Singh v. North East Securities Ltd. and Anr. ((2007) 12 SCC 788 ); Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. and Ors. ((2008)13 SCC 678) ; N. Rangachari v. Bharat Sanchar Nigam Ltd. ((2007) 5 SCC 108 ); Everest Advertising (P) Ltd. v. State, Govt. of NCT of Delhi and Ors. ((2007) 5 SCC 54 ); Saroj Kumar Poddar v. State (NCT of Delhi) and Anr. ((2007) 3 SCC 693 ); N.K. Wahi v. Shekhar Singh and Ors. ((2007) 9 SCC 481 ); and took note of the two-Judge Bench decision in Sheoratan Agarwal and Another v. State of Madhya Pradesh ((1984) 4 SCC 352 ) wherein the decision of the three-Judge Bench in State of Madras v. C.V. Parekh and Another ((1970) 3 SCC 491 ) was distinguished and expressed the view as follows: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 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.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.Thereafter, the learned Judge referred to Anil Hada v. Indian Acrylic Ltd. ((2000) 1 SCC 1 ) and R. Rajgopal v. S.S. Venkat ((2001) 10 SCC 91), distinguished the decision in Anil Hada and opined that the issue decided in the said case is to be understood in the factual matrix obtaining therein as the Company could not have been prosecuted, it being under liquidation. The observations to the effect that the Company need not be prosecuted against was regarded as obiter dicta and not the ratio decidendi. Sinha J. clearly opined that the Bench was bound by the three-Judge Bench decision in S.M.S. Pharmaceuticalscase (supra) and C.V.case (supra). After stating so, he observed as under: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.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.The learned Judge also took note of the maxim lex non cogit ad impossibilia and expressed thus: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 Section 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.Being of the aforesaid view, he allowed the appeals.9. V.S. Sirpurkar J., after narrating the facts and referring to Section 141(2) of the Act, which deals with additional criminal liability, opined that even if the liability against the appellant is vicarious herein on account of the offence having alleged to have been committed by M/s. International Travels, it would be presumed that the appellant had also committed the offence and non-arraying of M/s. International Travels as an accused would be of no consequence. His Lordship further held that there is nothing in Standard Chartered Bank and others (supra), S.M.S. Pharmaceuticals Limited (supra), Sabitha Ramamurthy and another (supra), S.V. Muzumdar and others (supra), Sarav Investment and Financial Consultants Pvt. Ltd. and another (supra) and K. Srikanth Singh (supra) to suggest that unless the Company itself is made an accused, there cannot be prosecution of the signatory of the cheque alone.Thereafter, the learned Judge referred to the decision in Anil Hada and expressed that in the said case, the decision of C.V. Parekh (supra) and Sheoratan Agarwal (supra) had been referred to and, therefore, it is a binding precedent and cannot be viewed as an obiter dicta. Sirpurkar J. further proceeded to state that the principle of lex non cogit ad impossibilia would not apply. That apart, the learned Judge held that in the case at hand, it is yet to be decided as to whether the flaw was that of the Company or the appellant herself and it could not be made out as to whether the cheque issued by the accused was issued on behalf of the Company or to discharge her personal liability. Eventually, his Lordship referred to the allegations in the complaint which are to the effect that the two accused persons, namely, Anil Hada and Aneeta Hada, used to purchase the air tickets for their clients and they had purchased for the Company from time to time and issued cheques. The accused No. 1 used to conduct the business of the Company and she also used to purchase the tickets from the complainant. On the aforesaid foundation the learned Judge opined that the basic complaint is against the two accused persons in their individual capacity and they might be purchasing tickets for their travelling company. Being of this view, he dismissed both the appeals.

Reasoning:
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.44. We will be failing in our duty if we do not state that all the decisions cited by the learned counsel for the respondents relate to service of notice, instructions for stopping of payment and certain other areas covered under Section 138 of the Act. The same really do not render any aid or assistance to the case of the respondents and, therefore, we refrain ourselves from dealing with the saidanalysis pertaining to Section 141 of the Act would squarely apply to the 2000 enactment. Thus adjudged, the director could not have been held liable for the offence under Section 85 of the 2000 Act. Resultantly, the Criminal Appeal No. 1483 of 2009 is allowed and the proceeding against the appellant is quashed. As far as the company is concerned, it was not arraigned as an accused. Ergo, the proceeding as initiated in the existing incarnation is not maintainable either against the company or against the director.