The Delhi High Court has reiterated that no liability can be fastened on the Directors and other persons responsible conducting business under Section 141 NI Act if the Company hasn't committed an offence.
The single-judge bench of Justice Asha Menon dismissed petition to this reragd and observed that no vicarious liability arises unless there is prosecution against the company or the industrial unit.
The petitioner had filed a complaint case under Section 138 NI Act against the respondent who is the Managing Director of the Company, he entered into a Rent Agreement with.
The Counsel for the petitioner has contested the Trial Court decision and contended that reliance placed on Aneeta Hada Vs. M/S. Godfather Travels & Tours Pvt. Ltd., 2012 Latest Caselaw 253 SC was misplaced as when the lacuna was only of a technical nature, then the Trial Court ought to have allowed amendment of the complaint, rather than dismissing it.
Reliance was placed on S.R. Sukumar Vs. S. Sunaad Raghuram, 2015 Latest Caselaw 427 SC, Rajneesh Aggarwal Vs. Amit J. Bhalla, 2000 Latest Caselaw 5 SC, U.P. Pollution Control Board Vs. Modi Distillery & Ors, 1987 Latest Caselaw 200 SC,
He further submitted that the judgment in Aneeta Hada (supra) was a per incuriam judgment, as the Supreme Court in other cases had held that mis-description of the company or the noninclusion of the company in a complaint case was only a curable defect which could be rectified by way of amendment.
The Court disagreed with the same and observed that in Aneeta Hada. the question of impleadment of a company before vicarious liability could be invoked, was considered in the light of the conflicting views taken by the two Division Benches of the Supreme Court and the question was answered with no ambiguity that is sought to be canvassed before this Court.
"Various judgments were considered and extensive arguments were advanced before the Supreme Court on the question of vicarious liability, the liability of the company, the impleadment and the prosecution of the Directors and other persons in charge of the business of the company. After consideration of all the cited judgments and the arguments advanced, it was held by the Supreme Court that on a reading of the provisions of Section 141 of the N.I. Act “it is plain as day” that where the offence has been committed by a Company, the Company as well as every person incharge and responsible for the conduct of its business at the time of commission of the offence, is “deemed” to be guilty of the offence. It further held that the word “deemed” used in Section 141 of the N.I. Act applied to the company and the persons responsible for the acts of the company, as it crystalized the criminal liability and vicarious liability of the person who is in charge of the company."
The Court thus held that it is the Company upon which the primary liability rests and a person who is sought to be made vicariously liable for an offence of which the principal accused is a company, would need to have a role to play in relation to the incriminating act. Section 141 of the N.I. Act operates only when the offence under Section 138 of the N.I. Act is committed by a company.
"The actual offence should have been committed by the Company and then alone the other two categories of persons would become liable for the offence. It was only if there was a legal snag, where the company, though prosecuted, cannot be proceeded against, the prosecuted persons cannot escape liability created through legal fiction as envisaged under Section 141 of the Act."
If no offence is attributed to the company, it is but the natural corollary, that its Directors and other persons responsible for the conduct of its business cannot be saddled with any liability, the Court stated.
The petition was accordingly dismissed.
Case Title: SHRI HARI SHAMSHER KAUSHIK vs SHRI JASBIR SINGH, MANAGING DIRECTOR, M/S ACCURA CARE PHARMACEUTICALS PVT. LTD
Case Details: CRL.M.C. 1382/2022
Coram: Justice Asha Menon
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