Case: Charanjit Pal Jindal Vs. M/s. L.N. Metalics

2. The facts leading to the present appeal is as follows:Thefiled a complaint case stating therein that it dealt with production, manufacturing, marketing and selling of sponge iron and other allied iron ore products. The appellant who was one of its customers, placed orders through its agent M/s. Jayani Ispat, Raipur during 21.06.2007 and 24.12.2007 under different invoices and challans. Accordingly, various materials were supplied to the appellant by theThe appellant also made payment in intervals. However, by 24.12.2007 an amount of Rs. 72,22,037/remained outstanding on the appellant. As such, a request was made to clear the outstanding amount. On such request, in the month of December, 2007, a sum of Rs. 2,50,000/was paid. On 27.02.2008, a written request was sent by thefor clearing the outstanding dues and submitting `C Form as required by the Sales Tax Department. The appellant in first week of March, 2008, handed over cheques on different dates in total amounting to Rs. 5,00,000/and promised that the entire outstanding dues will be cleared up before 20.4.2008. Seven cheques bearing numbers 678339 dated 21.3.2008, 678340 dated 24.3.2008, 678341 dated 26.3.2008, 678342 dated 29.3.2008, 678343 dated 3.4.2008, 678344 dated 8.4.2008 and 678345 dated 14.04.2008 drawn on Nariman Point Branch of Central Bank of India, Mumbai amounting to Rs. 35,00,000/which had been issued by the appellant in favour of the opposite party were presented before its banker Andhra Bank, Sambalpur on 18.4.2008 for encashsment. The bank informed that the cheques could not be honoured due to stop payment on the account as per the instruction of the drawer.3. As a consequence of the said dishonour of the cheques, the respondent issued notice u/s 138 of the Negotiable Instruments Act (hereinafter referred to as `Act) through one of its Directors asking to make payment within 15 days of the notice. Onof the said amount, a complaint was filed by thebefore the Trial Court, which after hearing the parties and on appreciation of evidence convicted thefor the offence u/s 138 of the Act.4. Aggrieved by the judgment dated 17.04.2010 passed by theJudicial Magistrate, Sambalpur in I.C.C. No. 259/2008, the appellant preferred Criminal Appeal No. 26/2010 before the District & Sessions Judge, Sambalpur which was dismissed on 27.05.2011. Against the same, Criminal Revision was preferred before the High Court which was rejected by the impugned judgment.

Court's reasoning:
8. In Aneeta Hadas case (supra) the question that arose for determination by this Court was whether an authorised signatory of a company would be liable for prosecution u/s 138 of the Act without the company being arraigned as an accused. As there was a difference of opinion between the two learned Judges regarding the interpretation of Sections 138 and 141 of the Act reference was made to the larger Bench of three Judges. In the said case, this Court noticed the ratio laid down in C.V. Parekhs case and the view expressed in Sheoratan Agarwals case while interpreting Section 138 and 141 of the Act, this Court observed asIt 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.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 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 (supra) which is aBench decision. Thus, the view expressed in Sheoratan Agarwal (supra) does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada (supra) is overruled with the qualifier as stated in paragraph 37. The decision in Modi Distilleries (supra) has to be treated to be restricted to its own facts as has been explained by us hereinabove.From the aforesaid finding, we find that after analyzing all the provisions and having noticed the different decisions rendered by this Court, the three Judges Bench arrived at the irresistible conclusion that for maintaining the prosecution u/s 141 of the Act, arraigning a company as an accused is imperative. Hence in this case, we find no reason to refer the matter to the larger Bench.m the aforesaid finding, we find that after analyzing all the provisions and having noticed the different decisions rendered by this Court, the three Judges Bench arrived at the irresistible conclusion that for maintaining the prosecution u/s 141 of the Act, arraigning a company as an accused is imperative. Hence in this case, we find no reason to refer the matter to the larger Bench.