Case: T. Stanes and Company Limited Vs. A. Jaffarullah

t filed a private complaint against the respondent for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 alleging that the complainant supplied goods to the accused on credit and as onthe respondent was liable to pay an amount of Rs. 1, 11, 465, towards the portion of the said liability, theissued a cheque datedfor a sum of Rs. 48, 000 in favour of the complainant. The said cheque was dishonoured on the ground that it exceeded the arrangement. By a notice datedthe complainant called upon theto pay the cheque amount within 15 days of the receipt of the notice. As the accused failed to pay the amount aforesaid, a complaint was filed before the IIIrd Judicial Magistrate, Coimbatore. The Magistrate issued process against the accused. That was challenged before the High Court and the High Court has quashed the complaint on the ground that without joining the partnership firm as theprosecution against the drawer of cheque was not maintainable.

Court's reasoning:
It has been rightly pointed out that the said question is covered by the decision rendered by this Court in Anil Hada v. Indian Acrylic Ltd. ( 1999 SC 853) Explaining Section 141 of the Act, this Court observed that 3 categories of persons can be brought within the purview of the penal liability through the legal fiction envisaged in the section. They are : (1) the company which committed the offence, (2) everyone who was in charge of and was responsible for the business of the company, and (3) any other person who is a Director or a Manager or a Secretary of the company, with whose connivance or due to whose neglect the company has committed the offence. The Court further specifically held that 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. The provisions do not contain a condition that prosecution of the company is a sine qua non for prosecution of other persons who fall within the second and the third categories mentioned therein. The Court held that even if the company is not prosecuted for one or the other reason, 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.