2008 INSC 1243
                                    SUPREME COURT OF INDIA

                                                Aneeta Hada

                                                      Vs.

                               M/s Godfather Travels & Tours Pvt. Ltd.

                                           Crl.A.No.838 of 2008

                                   (S.B. Sinha and V.S. Sirpurkar JJ.)

                                                 08.05.2008

                                                JUDGMENT

S.B. Sinha, J.

1. Leave granted.

2. Appellant is said to be an authorised signatory of M/s. Intel Travels Ltd (Company). The
said Company as also the respondent company had business transactions. Appellant on
behalf of the company issued a cheque dated 17.1.2001 for a sum of Rs.5,10,000/- in favour
of respondent which was dishonoured. Respondent filed a complaint petition against the
appellant under Section 138 of the Negotiable Instruments Act, 1881 ('the Act' for short).

        "The Company which is a juristic person was not arrayed as an accused.

        The learned Magistrate took cognizance of the offence against her. Respondent had
        not even served any notice upon the Company in terms of Section 138 of the Act. It
        served a notice only on the appellant presumably on the premise that she was in
        charge and responsible to the company for its day to day affairs."

3. The High Court by reason of the impugned judgment refused to quash the proceedings, as
prayed for by the appellant, holding:

        "This section does not say that the cheques should have been drawn for the discharge
        of any debt or other liability of the drawer towards the payee. Even the Section 139 of
        the Negotiable Instruments Act, by which a legal presumption is created, the
        Parliament has only fixed the presumption that the cheque was issued 'for the
        dishcarge, in whole or in part, or any debt or other liability.' This would mean that the
        debt or other liability includes the due from any other person. It is not necessary that
        the debt or liability should be due from the drawer himself. It can be issued for the
        discharges of any other man's debt liability. Legally enforceable debt or liability
        would have a reference to the nature of the debt or liability and not the person against

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        whom the debt or liability can be enforced. One has to go by the averments in the
        complaint. The complainant has averred that it is the petitioner who had purchased the
        tickets from the complainant and the cheque in question was given by them in
        discharge of their liability. The demand notice dated 8.5.2001 is also sent to the two
        petitioners and not to the company. What the petitioners state here may be their
        defence."

4. A company being a body corporate is capable of suing and being sued in its own name.

        Section 7 of the Act defines "drawer" to mean the maker of a bill of exchange or a
        cheque. The authorised signatory of a company does not become the drawer of the
        cheque only because he has been authorised to do so for the purpose of banking
        operations. Admittedly, the bank account was also in the name of the company. The
        account was, therefore, maintained by the Company.

5. Section 138 of the Act reads as under:

        "Dishonour of cheque for insufficiency, etc., of funds in the account.- Where any
        cheque drawn by a person on an account maintained by him with a banker for
        payment of any amount of money to another person from out of that account for the
        discharge, in whole or in part, of any debt or other liability, is returned by the bank
        unpaid, either because of the amount of money standing to the credit of that account is
        insufficient to honour the cheque or that it exceeds the amount arranged to be paid
        from that account by an agreement made with that bank, such person shall be deemed
        to have committed an offence and shall, without prejudice to any other provision of
        this Act, be punished with imprisonment for a term which may be extended to two
        years, or with fine which may extend to twice the amount of the cheque, or with both;

        Provided that nothing contained in this section shall apply unless- (a) The cheque has
        been presented to the bank within a period of six months from the date on which it is
        drawn or within the period of its validity, whichever is earlier;

        (b) The payee or the holder in due course of the cheque, as the case may be, makes a
        demand for the payment of the said amount of money by giving a notice in writing, to
        the drawer of the cheque, within thirty days of the receipt of information by him from
        the bank regarding the return of the cheque as unpaid; and

         (c) The drawer of such cheque fails to make the payment of the said amount of
        money to the payee or as the case may be, to the holder in due course of the cheque
        within fifteen days of the receipt of the said notice."

6. A complaint petition may be maintainable at the instance of the person in whose favour
the cheque was drawn only when:-

        "(i) The cheque was drawn by `a person'; and

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        (ii) The cheque was drawn on an account maintained by `him' with a banker for
        payment of any amount of money to `another person' from out of that account for the
        discharge, in whole or in part, of any debt or other liability, is returned by the bank
        unpaid, either because of the amount of money standing to the credit of the drawer is
        insufficient to honour the cheque or that it exceeds the amount to be paid from that
        account; and

        (iii) In that event `such a person' shall be deemed to have committed an offence."

7. The person referred to in the said provisions, therefore, must not only be the drawer of the
cheque but should have been maintaining an account with the banker.

8. Appellant does not answer either of the descriptions of such `the person' referred to in
Section 138 of the Act. Admittedly, she was only an authorised signatory and the amount
with the banker was to be maintained by the Company. Cheque was drawn by the Company
and not by the appellant. She did not do so on her own behalf. She issued the cheque in
course of ordinary business transaction.

9. The Parliament for meeting a contingency of this nature, namely, where a company is an
offender, has raised a legal fiction in terms whereof any person who at the time the offence
was committed, was incharge of and was responsible for the conduct of business of the
company, shall be deemed to be guilty of the offence.

10. For the said purpose, the company itself must be made an accused. It has been so held by
this Court in a number of decisions to which I would refer to a little later.

11. In this case, indisputably the company is the principal offender. A director of the
company inter alia can be proceeded against if he is found to be responsible therefor as
envisaged under Section 141 of the Act.

12. The said provision reads, thus:

        "141. Offences by companies.--(1) If the person committing an offence under Section
        138 is a company, every person who, at the time the offence was committed, was in
        charge of, and was responsible to the company for the conduct of the business of the
        company, as well as the company, shall be deemed to be guilty of the offence and
        shall be liable to be proceeded against and punished accordingly:

        Provided that nothing contained in this sub-section shall render any person liable to
        punishment if he proves that the offence was committed without his knowledge, or
        that he had exercised all due diligence to prevent the commission of such offence:

        2 "Provided further that where a person is nominated as a Director of a company by
        virtue of his holding any office or employment in the Central Government or State

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        Government or a financial corporation owned or controlled by the Central
        Government or the State Government, as the case may be, he shall not be liable for
        prosecution under this chapter."

        (2) Notwithstanding anything contained in sub- section (1), where any offence under
        this Act has been committed by a company and it is proved that the offence has been
        committed with the consent or connivance of, or is attributable to, any neglect on the
        part of, any director, manager, secretary or other officer of the company, such
        director, manager, secretary or other officer shall also be deemed to be guilty of that
        offence and shall be liable to be proceeded against and punished accordingly.

        Explanation.-- For the purposes of this section,--

         (a) "Company" means any body corporate and includes a firm or other association of
        individuals; and

        (b) "Director", in relation to a firm, means a partner in the firm."

13. If a person, thus, has to be proceeded with as being vicariously liable for the acts of the
company, the company must be made an accused. In any event, it would be a fair thing to do.
Legal fiction is raised both against the Company as well as the person responsible for the acts
of the Company. Unlike other statutes, this Act raises a presumption not only in tems of
Section 139 of the Act but also under Section 118(a) thereof. Those presumptions in given
cases may have to be rebutted. The accused must be given an opportunity to rebut the said
presumption. An accused is entitled to be represented in a case so as to enable it to establish
that allegations made against it are not correct.

14. Section 141 of the Act raises a legal fiction. Such a legal fiction can be raised only when
the conditions therefor are fulfilled; one of it being that company is also prosecuted.

15. The Section uses the terms "as well as the company". The company which is, thus, the
principal offender must be included in the category of the accused. Here, I am not dealing
with a case where an individual act of a person is purporting to represent a company. In
relation to business transactions, a company as a corporate entity may have created its own
reputation. It must maintain it. If a complaint is filed, in a given case, only on the basis of the
presumptions raised in the statute, it may be held to be guilty as a result whereof the
reputation of the company shall suffer. It may, thus, suffer grave civil consequences.

16. It is no longer res integra that a company can be proceeded against in a criminal
proceeding, even where imposition of substantive sentence is provided for.

17. The question as to whether a company can be proceeded against when a mandatory
imprisonment is prescribed in law came up for consideration before a Constitution Bench of
this Court in Standard Chartered Bank and Others v. Directorate of Enforcement and

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Others1 wherein this Court upon considering a large number of decisions as also the principle
"lex non cogit ad impossibilia" opined:

        "30. As the company cannot be sentenced to imprisonment, the court has to resort to
        punishment of imposition of fine which is also a prescribed punishment. As per the
        scheme of various enactments and also the Indian Penal Code, mandatory custodial
        sentence is prescribed for graver offences. If the appellants' plea is accepted, no
        company or corporate bodies could be prosecuted for the graver offences whereas
        they could be prosecuted for minor offences as the sentence prescribed therein is
        custodial sentence or fine. We do not think that the intention of the legislature is to
        give complete immunity from prosecution to the corporate bodies for these grave
        offences. The offences mentioned under Section 56(1) of the FERA Act, 1973,
        namely, those under Section 13; clause ( a ) of sub-section (1) of Section 18; Section
        18-A; clause ( a ) of sub- section (1) of Section 19; sub-section (2) of Section 44, for
        which the minimum sentence of six months' imprisonment is prescribed, are serious
        offences and if committed would have serious financial consequences affecting the
        economy of the country. All those offences could be committed by company or
        corporate bodies. We do not think that the legislative intent is not to prosecute the
        companies for these serious offences, if these offences involve the amount or value of
        more than Rs. one lakh, and that they could be prosecuted only when the offences
        involve an amount or value less than Rs. one lakh. (Emphasis supplied)

        31. As the company cannot be sentenced to imprisonment, the court cannot impose
        that punishment, but when imprisonment and fine is the prescribed punishment the
        court can impose the punishment of fine which could be enforced against the
        company. Such discretion is to be read into the section so far as the juristic person is
        concerned. Of course, the court cannot exercise the same discretion as regards a
        natural person. Then the court would not be passing the sentence in accordance with
        law. As regards company, the court can always impose a sentence of fine and the
        sentence of imprisonment can be ignored as it is impossible to be carried out in
        respect of a company. This appears to be the intention of the legislature and we find
        no difficulty in construing the statute in such a way. We do not think that there is
        blanket immunity for any company from any prosecution for serious offences merely
        because the prosecution would ultimately entail a sentence of mandatory
        imprisonment. The corporate bodies, such as a firm or company undertake a series of
        activities that affect the life, liberty and property of the citizens. Large-scale financial
        irregularities are done by various corporations. The corporate vehicle now occupies
        such a large portion of the industrial, commercial and sociological sectors that
        amenability of the corporation to a criminal law is essential to have a peaceful society
        with stable economy." (Emphasis supplied)

        An earlier decision of this Court in Asstt. Commissioner v. Velliappa Textiles Ltd.2
        was overruled by the Constitution Bench.

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        In the context of the provisions of the Income Tax Act, recently a Division Bench of
        this Court in Madhumilan Syntex Ltd. & Ors. v. Union of India & Anr.3, held:

        "23. From the above provisions, it is clear that wherever a Company is required to
        deduct tax at source and to pay it to the account of the Central Government, failure on
        the part of the Company in deducting or in paying such amount is an offence under
        the Act and has been made punishable. It, therefore, cannot be said that the
        prosecution against a Company or its Directors in default of deducting or paying tax
        is not envisaged by the Act.

         24. It is no doubt true that Company is not a natural person but 'legal' or 'juristic'
        person. That, however, does not mean that Company is not liable to prosecution under
        the Act. 'Corporate criminal liability' is not unknown to law. The law is well settled
        on the point and it is not necessary to discuss it in detail."

18. Section 141 of the Act even does not provide for a mandatory minimum imprisonment.
A fine can be imposed upon the offender for commission of an offence under Section 138 of
the Act.

19. Interpretation of Section 141 of the Act came up for consideration before a Three-Judge
Bench of this Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another4 wherein it
was opined that criminal liability on account of dishonour of cheque primarily falls on the
drawer company and is extended to the officers of the company. Analysing Section 141 of
the Act, the Bench observed:

        "...Section 141 of the Act is an instance of specific provision which in case an offence
        under Section 138 is committed by a company, extends criminal liability for
        dishonour of a cheque to officers of the company. Section 141 contains conditions
        which have to be satisfied before the liability can be extended to officers of a
        company. Since the provision creates criminal liability, the conditions have to be
        strictly complied with. The conditions are intended to ensure that a person who is
        sought to be made vicariously liable for an offence of which the principal accused is
        the company, had a role to play in relation to the incriminating act and further that
        such a person should know what is attributed to him to make him liable. In other
        words, persons who had nothing to do with the matter need not be roped in. A
        company being a juristic person, all its deeds and functions are the result of acts of
        others. Therefore, officers of a company who are responsible for acts done in the
        name of the company are sought to be made personally liable for acts which result in
        criminal action being taken against the company. It makes every person who, at the
        time the offence was committed, was in charge of, and was responsible to the
        company for the conduct of business of the company, as well as the company, liable
        for the offence. The proviso to the sub-section contains an escape route for persons
        who are able to prove that the offence was committed without their knowledge or that
        they had exercised all due diligence to prevent commission of the offence."

                                     [underlining is mine]

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20. In Sabitha Ramamurthy and Anr. v. R.B.S. Channabasavaradhya5, this court held that
though a person was not personally liable for the offences committed by the company,
however, he would only be liable vicariously for the acts of company in terms of Section 141
of the Act only if the requisite averments, are made in the complaint petition.

21. In S.V. Muzumdar and Ors. v. Gujarat State Fertilizer Co. Ltd. and Anr.6, this Court
explicitly laid down the following categories of persons who are covered under Section 141
of the act:

        "(1) The company who committed the offence.

        (2) Everyone who was in charge of and was responsible for the business of the
        company.

        (3) Any other person who is a director or a manager or a secretary or officer of the
        company with whose connivance or due to whose neglect the company has
        committed the offence."

22. In Sarav Investment and Financial Consultants Pvt. Ltd. and Anr. v. Llyods Register of
Shipping Indian Office Staff Provident Fund and Anr.7, this Court opined that the director of
the company is only vicariously liable for the acts of the company, and could be prosecuted
only if the conditions precedent laid down in Section 141 of the Act are satisfied.

        In K. Srikanth Singh v. North East Securities Ltd. and Anr.8, a Criminal complaint
        was filed for the dishonour of cheque. Appellant therein had been proceeded against
        for alleged commission of an offence under Section 138 of the Negotiable
        Instruments Act by the Trial Court. Before the High Court, quashing of proceedings
        under Section 482 of the Code of Criminal Procedure, 1973 was sought.

        It was contended by the appellant that at the relevant point of time since he was not
        the Director of the Company, hence no cognizance could be taken as the same does
        not satisfy the requirements of Section 141. The High Court dismissed the petition
        holding the same as fact in respect thereof was required to be established before the
        Trial Court.

        In an appeal to this court, this Court while referring inter-alia to the decisions in
        S.M.S. Pharmaceuticals Ltd.( Supra) and Sabitha Ramamurthy (supra) held that for
        showing a vicarious liability of a Director of a Company, it was incumbent to plead
        that the accused was responsible to the Company for the conduct of the business of
        the Company in the complaint. The allegation in the complaint petition would not
        give rise to an inference that the Appellant was responsible for day-to-day affairs of
        the Company. A negotiation for obtaining financial assistance on behalf of the
        Company by its Directors itself was not an ingredient for the purpose of constituting
        an offence under Section 138. Thus, vicarious liability on the Director of the company

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        part must be pleaded and proved and not inferred. [See also Suryalakshmi Cotton
        Mills Ltd. v. Rajvir Industries Ltd. and Ors.9

        In Municipal Corporation of Delhi v. Ram Kishan Rohtagi and Ors.10, the Respondent
        No. 1 was the manager and respondents No. 2 to 5 were directors of X company .
        Respondents were charged for offences under Sections 7 and 16 of the Prevention of
        Food Adulteration Act, 1954 and Section 482 of Criminal Procedure Code, 1973 as
        the Toffees manufactured by X company was found to be not conforming to the
        standards prescribed for toffees . On appeal, the High Court quashed the proceedings
        against respondents.

        It was held by this court that:

        "So far as the Manager is concerned, we are satisfied that from the very nature of his
        duties it can be safely inferred that he would undoubtedly be vicariously liable for the
        offence; vicarious liability being an incident of an offence under the Act. So far as the
        Directors are concerned, there is not even a whisper nor a shred of evidence nor
        anything to show, apart from the presumption drawn by the complainant, that there is
        any act committed by the Directors from which a reasonable inference can be drawn
        that they could also be vicariously liable."

        However, as regards the Manager of the Company, the court held that since he could
        not fall in the same category as the Directors, and as he was directly incharge of the
        affairs of the company, he should be held to be liable."

23. In S.M.S. Pharmaceuticals Ltd. (supra) it was held that requisite averments must appear
on the face of the complaint petition itself stating:

        "18. To sum up, there is almost unanimous judicial opinion that necessary averments
        ought to be contained in a complaint before a person can be subjected to criminal
        process. A liability under Section 141 of the Act is sought to be fastened vicariously
        on a person connected with a company, the principal accused being the company
        itself. It is a departure from the rule in criminal law against vicarious liability. A clear
        case should be spelled out in the complaint against the person sought to be made
        liable. Section 141 of the Act contains the requirements for making a person liable
        under the said provision. That the respondent falls within the parameters of Section
        141 has to be spelled out. A complaint has to be examined by the Magistrate in the
        first instance on the basis of averments contained therein. If the Magistrate is satisfied
        that there are averments which bring the case within Section 141, he would issue the
        process. We have seen that merely being described as a director in a company is not
        sufficient to satisfy the requirement of Section 141. Even a non-director can be liable
        under Section 141 of the Act. The averments in the complaint would also serve the
        purpose that the person sought to be made liable would know what the case which is
        alleged against him is. This will enable him to meet the case at the trial."

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24. This position was reiterated in N. Rangachari v. Bharat Sanchar Nigam Ltd.11, wherein
this court referring to the observations in S.M. Pharmaceuticals on specific averments in the
complaint itself opined that

        "The scope of Section 141 has been authoritatively
        discussed in the decision in S.M.S. Pharmaceuticals Ltd. (supra) binding on
        us and there is no scope for redefining it in this case. Suffice it to say, that a
        prosecution could be launched not only against the company on behalf of which the
        cheque issued has been dishonoured, but it could also be initiated against every
        person who at the time the offence was committed, was in charge of and was
        responsible for the conduct of the business of the company."

        It was further held:

        "Therefore, a person in the commercial world having a transaction with a company is
        entitled to presume that the directors of the company are incharge of the affairs of the
        company. If any restrictions on their powers are placed by the memorandum or
        articles of the company, it is for the directors to establish it at the trial. It is in that
        context that Section 141 of the Negotiable Instruments Act provides that when the
        offender is a company, every person, who at the time when the offence was
        committed was incharge of and was responsible to the company for the conduct of the
        business of the company, shall also be deemed to be guilty of the offence along with
        the company. It appears to us that an allegation in the complaint that the named
        accused are directors of the company itself would usher in the element of their acting
        for and on behalf of the company and of their being incharge of the company."

25. Again in Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of Delhi and Ors.12, this
court relying on S.M. Pharmaceuticals (supra) and Saroj Kumar Poddar v. State (NCT of
Delhi) and Anr.13 on the question of the liability of the company officials held that:

        "The averments must state that the person who is vicariously liable for commission of
        the offence of the Company both was incharge of and was responsible for the conduct
        of the business of the Company. Requirements laid down therein must be read
        conjointly and not disjunctively. When a legal fiction is raised, the ingredients
        therefor must be satisfied."

        To the same effect is the decision of this court in N.K. Wahi v. Shekhar Singh and
        Ors.14.

        In Balaji Trading Company v. Kejriwal Paper Ltd. and Anr.15, a similar question
        arose for the consideration before the Andhra Pradesh High Court.

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In the said case, on the dishonour of the cheques issued by the accused-company, a
proceedings was initiated against the company in the trial court. During the pendency
of the said ease, the accused-company filed a Criminal Misc. Petition under Sections
239 and 245, Cr. P.C. for discharge and acquittal for the offence under Section 138
read with Section 141 of the Act. In the said application the Director of the company
pleaded that as the complainant did not mention anywhere in the complaint that he
was personally responsible for the day-to-day business of the accused firms, he is not
liable to be prosecuted. The learned Magistrate after hearing both parties dismissed
the application. The accused-company being aggrieved by the order, preferred an
revision before the Sessions court. respondent- company contended before the
Sessions Court that the learned Magistrate erred in holding that a complaint can be
lodged against the company through its Director without there being any specific
allegation that the said Director was incharge of and was responsible to the company
in the conduct of the business at the relevant point of time and that the offence was
committed with his consent or connivance and the non-pleading of the Directors in
their personal capacity is contrary to Section 141 of the Act, as such, the Director
cannot be made to undergo the trial in the absence of any allegation or averment in
the complaint that he was in charge of the affairs of the company.

The learned Sessions Judge set aside the order on the ground that Section 141 had not
been complied with as the said director was not impleaded as an accused.

Before the High Court it was contended by the revisioner petitioner that since the
cheques issued by the company were dishonoured, the prosecution against the
company is perfectly maintainable under Section 141 of the Act and the non-
prosecution of the person in charge of the affairs of the company or other Directors in
their individual capacity is no bar to maintain the prosecution against the company.

Thus, the point for consideration was Whether the respondent- company was liable to
be prosecuted under Section 138 of the Negotiable Instruments Act by virtue of
Section 141 of the Act in the absence of prosecution of the person incharge of the
affairs or other Directors of the company?

The High Court after going through Section 141 opined:

"The above provision makes it clear that the company as well as the person in-charge
of the affairs of the company is liable to be prosecuted. The liability envisaged in
Section 141(1) on the person so incharge of and responsible for the conduct of the
business of the company is directly responsible for the offence. He can escape from
his liability only if he proves that the offence was committed without his knowledge
or that he has exercised his powers with due diligence to prevent commission of such
offence. Where the offence is committed by a company, the company as well as the
person incharge of the business of the company is liable to be prosecuted for the
offence under Section 138 of the Act. Though the company is an artificial person
handicapped of committing any crime personally, if certain crimes are committed by

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        its officials, the company is liable for prosecution. But, when the company is
        convicted, the liability can be only in terms of fine as the company is responsible for
        the acts of commissions and omissions of the persons working for it."

        Referring to a large number of judgments of this court on Section 10 of the Essential
        Commodities Act as also on Section 141, setting aside the order of the Sessions
        Court, it was held:

        "Section 141 is specifically incorporated to prosecute the companies for the offence
        under Section 138 of the Act. The mandate of the section clearly indicates that the
        company is liable for prosecution when a cheque is issued on its behalf and bounced
        on presentation of such cheque. The intendment of the section is not to give scope for
        individuals to escape by issuing cheques in the names of the companies. Therefore,
        when cheques are issued in the name of the company, the company is invariably
        liable for prosecution for the offence under Section 138 of the Act. Regarding the
        prosecution of the Directors of the company, the legal position makes it clear that the
        person who is in charge of and was responsible to the company in conduct of its
        business at the material time is also liable to be prosecuted. But, the non-prosecution
        of any of the Directors is no bar to prosecute the company. The revision petitioner is
        pleading that he is prejudiced on account of mentioning of his name as the person
        representing the company. The prosecution never intended to prosecute Sri Rahul
        Kejrlwal in his Individual capacity. The Courts below also made it clear that Sri
        Rahul Kejrlwal is not personally liable for prosecution on account of the absence of
        specific allegations that he is in charge of the affairs of the company or managing its
        affairs. The judgments placed on behalf of the revision petitioner are only regarding
        the aspect whether a Director or Directors arc liable to be prosecuted when there are
        no specific allegations that he or they were in charge of and were responsible to the
        company in conduct of its business. In the light of the above circumstances. I find
        sufficient force in the grounds of revision. The company is liable for prosecution
        despite non-prosecution of the Director or Directors responsible for the management
        of the affairs of the company or in charge of its affairs." [Emphasis Supplied]

26. While saying so, I am not unmindful of views differently taken by some Benches of this
Court. I would notice some of them to place on record how different Benches took different
views.

27. I may, however, notice first a three Judge Bench decision of this Court in State of
Madras v. C.V. Parekh and another16.

        There the company was not made an accused. The Directors of the company were
        acquitted. A contention was raised that the accused being liable to the company
        should have been convicted. This Court held:-

        "3. Learned Counsel for the appellant, however, sought conviction of the two
        respondents on the basis of Section 10 of the Essential Commodities Act under which,

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if the person contravening an order made under Section 3 (which covers an order
under the Iron and Steel Control Order, 1956), i<a company, every person who, at the
time the contravention was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company as well as the company, shall
be deemed to be guilty of the contravention and shall be liable to be proceeded
against and punished accordingly. It was urged that the two respondents were in
charge of, and were responsible to, the Company for the conduct of the business of
the Company and, consequently, they must be held responsible for the sale and for
thus contravening the provisions of clause (5) of the Iron and Steel Control Order.
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. The actual
contravention was by Kamdar and Vallabhdas Thacker and any contravention by
them would not fasten responsibility on the respondents. The acquittal of the
respondents is, therefore, fully justified. The appeal fails and is
dismissed." (Emphasis supplied)

The clear findings contained in a binding precedent were, however, sought to be
explained by a two Judge Bench of this Court in Sehoratan Agarwal and another v.
State of Madhya Pradesh17 stating :-

"The Section appears to our mind to be plain enough. If the contravention of the order
made under Section 3 is by a Company, the persons who may be held guilty and
punished are (1) the Company itself (2) every person who, at the time the
contravention was committed, was in charge of, and was responsible to, the Company
for the conduct of the business of the Company whom for short we shall describe as
the person-in-charge of the Company, and (3) any director, manager, secretary or
other officer of the Company with whose consent or connivance or because of neglect
attributable to whom the offence has been committed, whom for short we shall
describe as an officer of the Company. Any one or more or all of them may be
prosecuted and punished. The Company alone may be prosecuted. The person-in-
charge only 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. Section 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 alongwith the Company. Section 10 lists the person

12  SpotLaw
        who may be held guilty and punished when it is a Company that contravenes an order
        made Under Section 3 of the Essential Commodities Act. Naturally, before the
        person-in- charge or an officer of the Company is held guilty in that capacity it must
        be established that there has been a contravention of the Order by the Company. That
        should be axiomatic and that is all that the Court laid down in State of Madias v. C.V.
        Parekh (supra) as a careful reading of that case will show and not that the person-in-
        charge or an officer of the Company must be arraigned simultaneously along with the
        Company if he is to be found guilty and punished. The following observations made
        by the Court clearly bring out the view of the Court :

        It was urged that the two respondents were in charge of, and were responsible to, the
        company for the conduct of the business of the Company and, consequently, they
        must be held responsible for the sale and for thus contravening the provisions of
        Clause 5 of the Iron and Steel (Control) Order. 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
        convention of Clause 5 of the Iron & 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 & Steel (Control), Order the two
        respondents could not be held responsible. The actual contravention was by Kamdar
        and Villabhadas Thacker and any contravention by them would not fasten
        responsibility on the respondents."

28. 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

13  SpotLaw
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."

30. Our attention has also been drawn to a Two-Judge Bench decision of this Court in Anil
Hada v. Indian Acrlic Ltd.18 and R. Rajgopal v. S.S. Venkat19.

        "In Anil Hada v. Indian Acrylic Ltd.20, this court while construing the meaning of the
        term "as well as" held that it would mean the persons mentioned in the first category
        within the dragnet of the offence on a par with the offending company."

31. In Anil Hada (supra), the company was under liquidation. A question arose as to
whether permission of the company court was necessary to continue prosecution against the
company. The court did not go into the said question. In that case, the Magistrate accepted
the contention raised on behalf of the accused - company that the winding up had been
ordered by the court and hence no prosecution proceeding could be continued against the
accused - company. The said proposition of law in a situation of this nature must be
understood in the factual matrix involved in the matter. In the peculiar factual matrix
involved therein, it was opined:

        "12. 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 in
        sub-section (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" in sub-section

14  SpotLaw
        (2) are capable of bringing the third category persons additionally 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 offence."

        The ratio laid down in the said case is to be understood in the factual matrix obtaining
        therein, namely, the company could not have been prosecuted due to a legal snag,
        although was made an accused.

        However, with utmost respect, the observations of the court that`company need not be
        proceeded against', in my opinion is obiter dicta and not its ratio-decidendi. We are
        otherwise also bound by the Three-Judge Bench decision of this Court in S.M.S.
        Pharmaceuticals Ltd (supra) and C.V. Parekh (supra)

32. It 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."

33. In Raghu Lakshminarayanan v. Fine Tubes21, the issue before this court was whether
having regard to the explanation appended to the definition of company in section 141 of the
Act would include a proprietary concern. Although the answer was rendered in the negative,
the court however made a very pertinent observation as regards the liability of the directors
of the company. It opined:

        "It is of some significance to note that in view of the said description of "Director",
        other than a person who comes within the purview thereof, nobody else can be
        prosecuted by way of his vicarious liability in such a capacity. If the offence has not
        been committed by a Company, the question of there is being a Director or his being
        vicariously liable, therefore, would not arise. Appellant herein categorically
        contended that accused No. 1 was a proprietary concern of the accused No. 2 and he
        was merely an employee thereof. If accused No. 1 was not a Company within the
        meaning of Section 141 of the Negotiable Instruments Act, the question of an
        employee being preceded against in terms thereof would not arise."

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        Indisputably, all the decisions of this Court in no uncertain terms says - company at
        the first instance should be proved to be offender and, thus, only question of proof
        that the Director is also liable being in charge of its affairs.

34. True 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 Sections 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.

35. R. Rajgopal (supra) does not lay down any law. There are other statutes whose provisions
is pari materia with Section 141 of the Act, e.g., Section 35H Wealth Tax Act, Section 14A
Employees Provident Fund and Miscellaneous Provisions Act, Section 34 Drugs and
Cosmetics Act, Section 10 Essential Commodities Act, Section 6 Indian Merchandise Act,
Section 38 Narcotic Drugs and Psychotropic Substances Act and Section 17 Prevention of
Food Adulteration Act.

        In Rajasthan Pharmaceutical Laboratory, Bangalore and Ors. v. State of Karnataka
        [1981 (1) SCC 645] on the interpretation of the words "punished accordingly" in
        Section 34 of the Drugs and Cosmetics Act,1940, this Court observed:

        "It seems clear to us that the words "punished accordingly" in the context mean that a
        person deemed to be guilty of an offence committed by a company shall receive the
        punishment that is prescribed by the Act for that offence."

        To the same effect is the decision of this court in State of Punjab v. Kasturi Lal and
        Others22.

        In R. Banerjee and others v. H.D. Dubey and others23 the question which arose for
        determination was whether it was permissible to launch prosecution under Sub-
        section (1) of Section 17 of the Prevention of Food Adulteration Act, 1954 against the
        Directors and Managers of public limited companies, for the commission of the
        alleged offence punishable under the aforesaid provisions notwithstanding the
        nomination made by the said companies as required by Sub-section (2) of Section 17
        of the Act. This court after reading the said provision held as under:

        "It is clear from the plain reading of Section 17 that where an offence under the Act is
        alleged to have been committed by a company, where the company has nominated
        any person to be in charge of, and responsible to, the company for the conduct of its
        business that person will be liable to be proceeded against and punished for the

16  SpotLaw
        commission of the offence. Where, however, no person has been so nominated, every
        person who at the time of the commission of the offence was in charge of, and
        responsible to, the company for the conduct of its business shall be proceeded against
        and punished for the said crime."

36. I may notice that in some of the decisions of this Court a liberal interpretation of
notice had been advocated to suggest that a notice served upon a managing director of the
company or a director of the company shall satisfy the requirements of law. [See Bilakchand
Gyanchand Co. v. A. Chinnaswami24 and Rajneesh Aggarwal v. Amit J. Bhalla25].

37. The said decisions proceeded on the premise that what is necessary is the knowledge of
the accused that the cheque has been dishonoured so that the amount may be paid within a
period of fifteen days from the date of such knowledge.

38. A learned Single Judge of the Kerala High Court in Pramod v. C.K. Velayudhan &
Ors.26 inter alia relying on a decision of this Court in Monaben Ketanbhai Shah v. State of
Gujarat27 opined:

        "...In other words, commission of offence under Section 138 of the Act by a juristic
        person is an inevitable legal pre-requisite or the condition precedent to proceed
        against a person referred to under Section 141 of the Act and to hold him guilty of the
        said offence."

        It was further opined:

          "19. Learned counsel for petitioner placed reliance upon the decision of the High
        Court of Andhra Pradesh in B.S.K. Prasad v. M/s. Laxmi Vessels28, in which it is held
        that "as per Section 138 of the Act the drawer of a dishonoured cheque only is liable
        for punishment". He also cited K. Seetharam Reddy v. K. Radhika Rani29, in support
        of his arguments. It is held in the said decision that "Section 138 of the Negotiable
        Instruments Act, 1881, leaves no doubt that the person who has drawn the cheque on
        his account is alone liable in the event the cheque drawn by him is dishonoured". In
        the light of the above dictum also, I find that neither first accused- society nor
        petitioner, as secretary of the society can be proceeded against for offence under
        Section 138 of the Act.

        20. But, despite all these, trial Court issued summons to petitioner. The mere
        description on the cause-title of the complaint appears to be the sole persuading factor
        which propelled learned Magistrate to summon petitioner. There was no other ground
        to proceed against the petitioner. Needless to say, a criminal Court will not get any
        jurisdiction to proceed against a person at the mere sight of the details on the docket-
        sheet or the cause title. No Court shall act upon the sole tag, label or the badge veiled
        on the cause-title. No Court shall be carried away by the prints and dots on the veil of
        cause-title. The Court is bound to unveil the complaint, feel the texure of its contents

17  SpotLaw
        and test, the criminality. Criminality lies not on how a person is christened at the
        cause-title, but how he acts, as per the contents of the complaint."

39. In B.S.K. Prasad v. M/s. Laxmi Vessels & Anr.30, a learned Single Judge of the Andhra
Pradesh High Court has laid down the law in the following terms:

        "4. As per Section 138 of the Act the drawer of a dishonoured cheque only is liable
        for punishment. If the 'person' that committed the offence under Section 138 of the
        Act is a company the Directors and the per-son-in-charge of the affairs of the
        company, who look after the day to day affairs of that company, apart from the
        company, would also be liable for the said offence, by virtue of Section 141 of the
        Act. As stated earlier there is no scope for invoking Section 141 of the Act because
        the dishonoured cheque was not issued for and on behalf of a company. Since
        petitioner, admittedly, did not draw the dishonoured cheque on an account maintained
        by him in a bank, and since there is no scope for invoking Section 141 of the Act to
        rope in the petitioner as Managing Director of a company of which A-1 is the
        Director, merely because A-1 is said to have given the dishonoured cheque in partial
        or full settlement of a debt due to 1st respondent from a company of which petitioner
        is the Managing Director, petitioner cannot be made liable for an offence under
        Section 138 of the Act. The fact that 1st respondent has a right to sue petitioner also
        for recovery of the debt due to him is not and cannot be a ground for making the
        petitioner liable for an offence under Section 138 of the Act, when the dishonoured
        cheque was not drawn for and on behalf of that company, on an account maintained
        by it in a bank. Therefore the fact that A1 who drew the dishonoured cheque happens
        to be a Director in the company of which petitioner is the Managing Director, for the
        debt allegedly due to 1st respondent from the said company, is of no consequence."

40. In Girish Saxena v. Praveen Kumar Jain & Ors.31, a learned Single Judge of the Delhi
High Court opined:

        "...It is settled law that only drawer of the cheque can be prosecuted under Section
        138 of the Negotiable Instruments Act on the cheque getting dishonoured. Since the
        petitioner was neither the drawer of the cheque nor it is alleged that he was partner or
        proprietor of firm when cheque got dishonoured or he was the person responsible for
        non payment of cheque amount, no offence under Section 138 of Negotiable
        Instruments Act can be made out against the petitioner."

41. I agree with the aforementioned decisions of the High Courts as having laid down the
correct law.

42. For the reasons aforementioned, the impugned judgment cannot be sustained. It is set
aside accordingly. Appeals are allowed.

__________________________________________________________________________
_________________________________________________

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ORDER

In view of the difference of opinion, let the matters be placed before three-Judge Bench. The
Registry is directed to place the records before the Hon'ble the Chief Justice of India for
appropriate orders.

__________________________________________________________________________
________________________________________________

V.S. Sirpurkar,J.

1. I have the benefit of going through the opinion of my esteemed Brother Justice S.B.
Sinha, J. However, I am unable to agreed with the said judgment.

2. Leave granted in both the cases.

3. The present judgment will dispose of the Criminal Appeal arising out of SLP (Criminal)
2094 of 2007 and also Criminal Appeal arising out of SLP (Criminal) 2117 of 2007.
However, for the convenience sake we will be dealing with the facts arising out of SLP
(Criminal) 2094 of 2007 which are identical with the facts arising out of SLP (Criminal)
2117 of 2007.

4. The facts have been succinctly stated in the judgment, therefore, the same need not be
referred here. It is an admitted position that the appellant herein was a signatory to the
cheque and the said cheque was bounced. It is not as if the appellant herein suggests that she
is not, in any way, connected with M/s.Intel Travels on whose cheque book she has issued
the cheque. The appellant had the authority to use the cheque book and sign on behalf of
M/s.Intel Travels. Even if she wrote a cheque on the cheque-book of M/s.Intel Travels for
paying her own debts and the cheque is bounced, the offence under Section 138 of the
Negotiable Instruments Act (hereinafter referred to as "the Act") will be complete atleast
against her. That is the clear import of the language of Section 138 of the Act and her act is
squarely covered under the said Section. The High Court had correctly relied on Section 139
of the Act. We accept that finding of the High Court. It is true that for a proper complaint
under Section 138 of the Act, the cheque must have been drawn by a person and secondly the
account must be maintained by "such person" and it should have been given for payment of
amount of money to another person from out of that account for the discharge of any debt or
other liability and when such cheque is returned by the bank unpaid because of the
insufficient funds to honour the cheque. Then such person would be liable under Section 138
of the Act. In the present case, the account was being maintained by "Intel Travels" and the
appellant had the authority to sign the cheque of that account. Therefore, there will be a
clear liability if the appellant used the cheque which she had the authority to use and that too
for discharging the debt. It must be pointed out at this juncture that the words in Section 138
of the Act are "any debt" or "other liability". In this case since M/s. Intel Travels was
maintaining the account and the appellant had the authority to operate the same, the

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conditions will be satisfied even if it was given for the discharge of the liability of the
appellant.

5. Even if it is presumed that the account was meant to be maintained by the company,
since the appellant was authorized signatory, it will have to be presumed that she had the
authority to operate the account. Again even if it is presumed that the cheque was issued by
the company that will make no difference as the appellant has put her signatures on the
cheque which signature she was authorized to put. This is apart from the fact that as yet no
evidence is led for proving as to whose debt was sought to be discharged by the cheques
which were dishonoured.

6. The legal fiction created by the Legislature under Section 138 of the Act is to be found
via Section 141 where along with the company, every person who was incharge of and was
responsible to the company for the conduct of the business is also made guilty. However,
sub-section (2) of Section 141 which starts with non obstante clause creates an "additional
criminal liability", in that, the language of the sub-section is as follows:

        "141(2) Notwithstanding anything contained in sub-section (1), where any offence
        under this Act has been committed by a company and it is proved that the offence has
        been committed with the consent or connivance of, or is attributable to, any neglect
        on the part of, any director, manager, secretary, or other officer of the company, such
        director, manager, secretary or other officer shall also be deemed to be guilty of that
        offence and shall be liable to be proceeded against and punished accordingly."

        A glance at this provision would suggest that sub-section (2) starts with the non
        obstante clause and fixes additional criminal liability. That is clear from the words
        "such director, manager, secretary or other officer shall also be deemed to be guilty of
        that offence". In using the cheque book of M/s. Intel Travels, which the appellant was
        authorized to use and in signing the same which cheque ultimately was bounced, it
        would have to be presumed that the signatory of the cheque shall also be deemed to
        be guilty of the offence.

7. Even if the liability against the appellant is vicarious herein on account of the offence
having allegedly been committed by M/s. Intel Travels, it would have to be presumed that
the appellant had also committed the offence. However, though M/s. Intel Travels has not
been joined as an accused, that would be of no consequences.

8. There can be no quarrel against the proposition that a company can be proceeded against
in the criminal proceeding even where the imposition of sentence is provided for. That law is
laid down in Standard Chartered Bank & Others v. Directorate of Enforcement & Ors.32.
However, there is nothing in that judgment to suggest that there cannot be a prosecution of
the signatory alone in the absence of the company like Intel Travels in this case.

9. It is true that in S.M.S. Pharmaceuticals Ltd. V. Neeta Bhalla & Anr.33 a vicarious
liability has been found against the person responsible for running the company where the

20  SpotLaw
principal accused is the company. However, it is nowhere laid down in SMS Pharmaceuticals
case that unless the company itself is made an accused, the person responsible for running
the same, in the present case, the signatory of the cheque, cannot be joined as an accused.
Even in Sabitha Ramamurty & Anr. V. R.B.S. Channabasavaradhya34 such precise
observations are not to be found.

10. In the present case it is yet to be decided as to whether the liability was that of the
company or the appellant herself. It could be personal liability of the appellant herself for
discharging her debt for which she might have misused the cheque-book of the company.
Even under such circumstances the offence against her could be complete is not known at
this stage since no evidence has been led in this regard. Therefore, the inference that the
liability was that of the company and she was merely vicariously liable would, therefore, be a
premature finding. On the other hand even if she has misused the cheque-book to discharge
her own liability, taking advantage of her authorization to put the signatures on the cheque-
book of M/s.Intel Travels, she still would be liable to be proceeded against and it would be a
question between herself and the company whether she has committed any offence vis-`-vis
the company also. At this stage, however, it is not possible to say anything without any
evidence having been led.

11. Law laid down in S.V. Muzumdar & Ors. V. Gujarat State Fertilizer Co. Ltd. & Anr.35,
Sarav Investment and Financial Consultants Pvt. Ltd. & Anr. V. Llyods Register of Shipping
Indian Office Staff Provident Fund & Anr.36 as also in K. Srikanth Singh v. North East
Securities Ltd. & Anr.37 does not even impliedly suggest that unless the company is joined as
an accused it is not possible to proceed against the signatory of the cheque.

12. A close examination of the decision in SMS Pharmaceuticals's case (cited supra) as also
the decision in N. Rangachari v. Bharat Sanchar Nigam Ltd.38 does not show such extreme
proposition. All that SMS Pharmaceuticals and N. Rangachari say is that the prosecution
could be launched not only against the company on behalf of which the cheque issued has
been dishonoured but it could also be initiated against every person who, at that time of
committing the offence, was incharge and was responsible for the affairs of the company.
However, it does not mean that both the accused must be joined together for proper
prosecution and that the signatory of the cheque cannot individually be prosecuted in the
absence of the company.

13. A complaint has been made against the two accused persons, namely, Smt.Aneeta Hada
who is described as Director of M/s.Intel Travels and also Anil Hada who has also been
described as Director of the company. It is then specifically suggested in the complaint that
the accused persons used to purchase the air-tickets for their clients and that they had
purchased the air-tickets from the complainant from time to time and issued the cheques
worth Rs.5,10,000/- and Rs.4,21,000/-. It is specifically stated that Accused No.1 also used
to conduct the business of her company and she also used to purchase the tickets from the
complainant. The basic complaint, therefore, is against two accused persons in their
individual capacity, though they might be purchasing the tickets for their traveling company.
However, merely because of that fact one cannot reach at a conclusion that in the absence of

21  SpotLaw
M/s. Intel Travels the two accused persons and more particularly the appellant herein who
was the signatory to the cheque and whose cheque was bounced cannot be prosecuted. That
could not be the import of the decision in Everest Advertising Pvt. Ltd. V. State Govt. of NCT
of Delhi & Ors.39, SMS Pharmaceuticals (cited supra) or the decision in N.K. Wahi v.
Shekhar Singh & Ors.40.

14. In the decision in Anil Hada v. Indian Acrylic Ltd.41, it so happened that the company
itself was in liquidation and the Division Bench of this Court was considering the question as
to whether the signatory to the cheque could be proceeded against. The expressions in
paragraph 12 of this judgment are apposite. The words used in Section 141(1) of the Act as
also the words "shall also" used in sub-section (2) of Section 141 had been held to bring the
third category of persons additionally within the dragnet of the offence on an equal path. The
words "company need not be proceeded against" cannot be held as obiter dicta. Further there
is nothing conflicting in the aforesaid two judgments in the cases of Anil Hada & SMS
Pharmaceuticals. On the other hand a reading of the judgment in Anil Hada's case would
suggest that the court therein considered the law laid down in State of Madras v. C.V.
Parekh42 wherein the analogous provisions under Section 7 of the Essential Commodities
Act read with Section 10 of that Act fell for consideration. There also the private limited
company was not included as an accused and the question was as to whether the Managing
Director alone could be proceeded against. This judgment was considered in the celebrated
judgment in Sehoratan Agarwal v. State of M.P.43. The Court not only explained the
observations earlier made in C.V. Parekh's case [cited supra) but went on to hold further as
follows:

        "Any one or more or all of them may be prosecuted and punished. The company
        alone may be prosecuted. The person in charge only 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.
        Section 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." (Emphasis Supplied)

        Ultimately the law laid down in Sheoratan Aggarwal's case was approved by the
        Bench. The Court ultimately held in para 21 as under:

        "We, therefore, hold that even if the prosecution proceedings against the company
        were not taken or could not be continued, it is no bar for proceeding against the other
        persons falling within the purview of sub-sections (1) and (2) of Section 141 of the
        Act. In the light of the aforesaid view we do not consider it necessary to deal with the
        remaining question whether winding up order of a company would render the
        company non-existent." (Emphasis Supplied)

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        It will, therefore, be seen that the question as to whether the persons like accused
        alone in the absence of the company having been made accused could be proceeded
        against or not had directly fallen for consideration and it cannot be said that any
        observations in Anil Hada's case by any chance could be viewed as obiter. This is a
        binding precedent."

15. The ratio laid down in Anil Hada's case was applicable to the factual matrix thereof
which is identical here. The question has been directly decided that the prosecution of the
company is not a sine qua non for the prosecution of the other persons who fall within the
second and third categories, namely, those who were incharge and responsible for the
business of the company.

16. Even the law laid down in Raghu Lakshminarayananan v. Fine Tubes44, would not be
apposite. In that case the question was whether the persons in the second category, as in the
present case, could be prosecuted in the absence of the company.

17. The principle "lex non cogit ad impossibilia" would not apply here, because of the
language of Section 141 of the Act and the present appellant would be completely liable
since the cheques signed by her were bounced.

18. Since the decision in Sheoratan Agarwal' case (cited supra) has already been considered
by the Division Bench of this Court and relied upon in the decision in Anil Hada, it need not
be considered afresh.

19. Lastly, since this question was already covered by Anil Hada's case, the appellant would
be liable to be prosecuted even when M/s.Intel Travel had not been joined as an accused. It is
in the light of decision in Anil Hada that subsequent decisions in Bilakchand Gyanchand Co.
v. A. Chinnaswami45 and Rajneesh Aggarwal v. Amit J. Bhalla46 would have to be read. The
other cases referred to, one of Kerala High Court in Pramod v. C.K. Velayudhan & Ors.47
and Monaben Ketanbhai Shah v. State of Gujarat48 in my opinion are not apposite to the
present controversy.

20. The decisions in Andhra Pradesh High Court reported in B.S.K. Prasad v. M/s.Laxmi
Vessels49 and K. Seetharam Reddy v. K. Radhika Rani50 support the view that the person who
has drawn the cheque, in case the cheque is dishonoured, is liable under Section 138 of the
Act itself.

21. No comment is required on the reported decision in B.S.K. Prasad's case (cited supra)
since the decision in that case turns on the evidence led in that case. That opportunity has
still not been given to the prosecution in this case and it is not known uptil now as to whether
the cheque issued by the accused was issued on behalf of the company or to pay off her own
debts. Again the judgment does not say anywhere that the signatory to the cheque cannot
alone be prosecuted.

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22. Appellant's reliance on the last case in Girish Saxena v. Praveen Kumar Jain & Ors.51 is
also unnecessary since in that case the accused was not a signatory to the cheque. The
decision in that case would not be applicable to the present case.

23. In view of the above I would be of the opinion that the appeals must be dismissed.

1(2005) 4 SCC 530        2(2003) 11 SCC 405        3AIR 2007 SC 1481
4(2005) 8 SCC 89         52006 (9) SCALE 212       6(2005) 4 SCC 173

72007 (12) SCALE 123     82007 (9) SCALE 371       92008 (1) SCALE 331
10(1983) 1 SCC 1
132007 (2) SCALE 36      112007 (5) SCALE 821      122007 (5) SCALE 479

                         142007 (4) SCALE 188      152005 (2) ALD (Cri) 162: 2005 Cri L J 3805

16(1970) 3 SCC 491       17(1984) 4 SCC 352           18(2000) 1 SCC 1
19AIR 2001 SC 2432       20(2000) 1 SCC 1]          212007(5) SCALE 353
222004(12) SCC 195       231992(2) SCC 552         24JT 1999 (10) SC 236

25JT 2001 (1) SC 325     262006 (1) JCC (NI) 62 27(2004) 7 SCC 15: 2004 Cri LJ 4249

282005 (1) LJ (NOC) 7: (2004 Cri LJ 4079) (AP) 29(2002) 112 Comp Cas 204 (AP) 302005 (1) JCC (NI)

86

312007 (2) JCC (NI) 220  32(2005) 4 SCC 530             33(2005) 8 SCC 89
342006 (9) SCALE 212     35(2005) 4 SCC 173        362007 (12) SCALE 123
37(2007) 9 SCALE 371     382007 (5) SCALE 821      392007 (5) SCALE 479

402007 (4) SCALE 188     41(2000) 1 SCC 1          42(1970) 3 SCC 491
43(1987) 3 SCC 684
46JT 2001 (1) SC 325     442007 (5) SCALE 353      45JT 1999 (10) SC 236

                         47(2006) 1 JCC (NI) 62 48(2004) 7 SCC 15: 2004 Cri. LJ 4249

492005 (1) LJ (NOC) 7: 2004 Cri. LJ 4079 (AP)      50(2002) 112 Company Cases 204 (AP)
51(2007) 2 JCC (NI) 220

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