Case: Anil Hada Vs. Indian Acrylic Ltd

When a company, which committed the offence under Section 138 of the Negotiable Instruments Act (hereinafter referred to as `the Act) eludes from being prosecuted thereof, can the Directors of that company be prosecuted for that offence ? This is the hub of the issue mooted before us by one of the Directors of the company. He approached the High Court of Punjab and Haryana with the contention that prosecution in such a situation is not maintainable as against the directors. But a single Judge of the High Court spurned down the contention by the judgment which is now being challenged in this appeal.

Court's reasoning:
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.