Chintan Pranlal Soni vs State Of Gujarat
2022 Latest Caselaw 9760 Guj

     R/SCR.A/3564/2016                                ORDER DATED: 02/12/2022




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

           R/SPECIAL CRIMINAL APPLICATION NO. 3564 of 2016

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                         CHINTAN PRANLAL SONI & 1 other(s)
                                     Versus
                           STATE OF GUJARAT & 1 other(s)
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Appearance:
MR ADITYA MEHTA for UNIVERSAL LEGAL(8409) for the Applicant(s) No.
1,2
MR.ADITYA J PANDYA(6991) for the Respondent(s) No. 2
MS MAITHILI MEHTA, APP for the Respondent(s) No. 1
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 CORAM:HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

                                 Date : 02/12/2022

                                   ORAL ORDER

1. Rule returnable forthwith. Ms. Maithili Mehta, he learned APP waives service of notice of rule for and on behalf of the respondent No.1-State and Mr. Aditya Pandya, the learned advocate waives service of notice of rule for and on behalf of the respondent No.2 - Complainant.

2. By way of present writ-application the writ-applicants herein have prayed for quashing of order of issuance of process qua the present writ-applicants (original accused Nos.1 and 2) and for quashing and setting aside the Criminal Case No.1522 of 2016 pending before the learned 3rd Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar.

3. The brief facts germane for adjudication of the present

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writ-application read thus :-

3.1 The writ-applicant No.1 is the Director of the ECOLIBRIUM ENERGY PVT. LTD., and accused No.1 in Criminal Case No.1522 of 2016 and the writ-applicant No.2 is the authorized signatory of the said Company and accused No.2 in the said criminal case. The Company is not joined as an accused in the proceedings nor has been issued any notice as contemplated under Section 138 of the Negotiable Instruments Act read with Section 141 of the Negotiable Instruments Act.

3.2 The Company in which the writ-applicant No.1 holds the aforesaid post have a working relationship with the complainant for more than 2 (two) years and during that tenure the Company had placed various orders with the Complainant Company valuing more than Rs.1 (one) crore. During the said tenure the Company was facing many quality issues and issues relating to after sales services provided by the Complainant. The details relating to the said Complaints regarding the quality of the product and the quality of services were stated in the reply dated 25.03.2016, sent by the writ- applicants herein to the second notice issued by the Complainant dated 03.03.2016. In the said reply to the second notice issued by the Complainant dated 03.03.2016 the writ-

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applicant had given sufficient bonafide reasons for the action of the Company to stop the payment of the said cheque. On the date when the cheque in question was deposited the Company had sufficient funds to discharge its debts. It is stated that the writ-applicant would rely on the Statement of Account of the Bank of the Company from which the cheque was issued for the period starting from 25.11.2015 to 22.3.2016.

3.3 The respondent No.2 is the original complainant. It is alleged in the complaint that pursuant to the order placed by the writ-applicant Company the complainant had supplied and delivered the goods and that the writ-applicant had issued cheque bearing No.001419 dated 30.11.2015 for an amount of Rs.7,03,339/- drawn on HDFC Bank, Prahladnagar, Ahmedabad Branch (for short the "Cheque") towards fulfillment of the alleged outstanding amount. The respondent No.2 - original complainant on 04.12.2015 for clearing in the Complainant's bank i.e. State Bank of (INDIA) India, GIDC Branch, Gandhinagar deposited the said cheque and the same was alleged to be dishonored on 05.12.2015 on the grounds of "Stop Payment".f

3.4 The Complainant thereafter issued notice dated 01.01.2016 against the writ-applicant no.2 herein which was

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replied by the writ-applicant no.2 vide its reply dated 07.01.2016. The limitation for filing of the Complaint for return of cheque ended on or about 15.02.2016, however the complainant on 16.2.2016 redeposited the cheque without instructions. The said cheque came to be returned on 17.02.2016 on the ground "Stop Payment". The Complainant thereafter issued statutory notice dated 03.03.2016. The writ- applicant replied to the said notice by reply dated 25.03.2016. No notice, in both the notices i.e. 1.1.2016 and 3.3.2013, was issued to the Company, who allegedly had placed the order or was in default of payment. Both the notices were issued to the writ-applicants herein in their personal capacity for payment of the alleged dues to the Complainant. The Complainant thereafter filed impugned complaint before the learned 3rd Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar which was registered as Criminal Case No.1522 of 2016.

4. The concerned Court issued process to the writ-applicants herein below Ex.1 on 12.4.2016. The said order is duly produced at page-18. The being aggrieved by the said order of issuance of process the writ-applicants herein approached this Court seeking quashing of the impugned complaint being Criminal Case No.1522 of 2016.

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Submissions on behalf of the writ-applicants :-

5. Mr. Aditya Mehta, the learned advocate appearing for the writ-applicants submitted that the writ-applicants are innocent and falsely implicated in the impugned complaint which has arisen due to business differences between the Company and the Complainant.

5.1 Mr. Mehta, the learned advocate submitted that the Complainant failed to issue notice to the Company who is alleged to be in default and the cheque was issued on behalf of the Company and not on behalf of the accused, and having failed to join the Company the complainant has waived its right to proceed against the Company.

5.2 Mr. Mehta, the learned advocate submitted that the concerned Court while issuing process to the writ-applicants herein failed to consider the fact that the Company who is alleged to have placed the order and the company who is alleged to have made payments against the liability, has not even been served with the notice nor has been joined as an accused in the said Complaint.

5.3 Mr. Mehta, the learned advocate submitted that the complainant suppressed the fact that the complainant had

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issued notice dated 01.01.2016 and thereby waived its right to file a complaint against the accused or the Company.

5.4 Mr. Mehta, the learned advocate submitted that the limitation for filing the complaint under Section 138 of the Negotiable Instruments Act starts from the receipt of the first notice and once the limitation for the cause of action once started to run, the issuance of second notice would not in any way extend the limitation for filing the Complaint.

5.5 Mr. Mehta, the learned advocate submitted that combined reading of Section 138 and section 142 of the NI Act the cause of action within the meaning of Section 142(c) arises and can only arise once and also it is a well settled principle that if a dishonor of a cheque has once been initiated it is not permitted to the payee to create another cause of action for the same cheque.

5.6 Mr. Mehta, the learned advocate submitted that on the aforesaid grounds the complaint and the summons issued requires to be quashed.

5.7 Mr. Mehta, the learned advocate submitted that the complaint does not make out any case against the writ- applicants much less that at the time of commission of the

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alleged offence the writ-applicant was personally liable to pay any sum of money to the complainant or the cheque was issued by the writ-applicants in their personal capacity or that the writ-applicant issued the said cheque for discharging in whole or in part any of the personal debt or liability towards the complainant. In absence of any specific allegations in the complaint regarding the writ-applicant, both being personally liable and cannot be prosecuted without joining the Company as an accused.

5.8 Mr. Mehta, the learned advocate submitted that for the aforesaid reasons also the complaint impugned requires to be quashed and set aside.

5.9 Placing reliance on the aforesaid submissions Mr. Mehta, the learned advocate submitted that the writ-application requires to be allowed and the Criminal Case No.1522 of 2016 is required to be quashed and set aside.

Submissions on behalf of the respondent No.2 :-

6. Mr. Aditya Pandya, the learned advocate appearing for the respondent No.2 - complainant submitted that the Company had purchased the electronic items like (1) AXPERT

- EAZY ENGINEERED SYSTEM , SUITABLE FOR 175 HP SR

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No-31868 (2) AXPERT - VI240S ENGINEERED SYSTEM , SUITABLE FOR 60 HP MOTOR SR No-32222 And you have issued a Cheque bearing No.001419 of dated 30-11-2015 of Rs. 7.03.339/- (Rupees Seven Lakh Three Thousand Three Hundred thirty Nine only) of HDFC BANK, Shivalik Arcade. Prahladnagar, Ahmedabad Branch duly signed as a Authorised Signatories ECOLIBRIUM ENERGY PVT. LTD. for payment of purchased aforesaid items.

6.1 In view of above, the respondent No.2 deposited the said cheque bearing No.001419 dated 30.11.2015 of Rs.7,03,339 which came to be returned on 5.12.2015 with the endorsement of "Payment Stopped by drawer" for which statutory notice came to be issued on 1.1.2016 which came to be replied on 7.1.2016. Mr. Pandya, the learned advocate appearing for the respondent No.2 submitted that rather then filing a complaint the complainant - respondent No.2 thought it fit to re-deposit the said cheque. Accordingly redeposited the said cheque on 16.2.2016 which came to be returned with the endorsement of "Payment Stopped by drawer" on 17.2.2016 for which statutory notice came to be issued on 3.3.2016, to which reply came to be filed by the writ-applicant on 25.3.2016. The impugned complaint came to be filed by the respondent on 14.4.2016.

6.2 Mr. Pandya, the learned advocate placed reliance on the

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provisions of Section 138 of the Negotiable Instruments Act and submitted that there is no bar in depositingcheque before the expiry of period of six months.

6.3 Mr. Pandya, the learned advocate submitted that the cheque having returned for the second time the cause of action arose for the respondent No.2 to file the impugned complaint and further submitted that the said complaint is within the period of limitation.

6.4 Mr. Pandya, the learned advocate submitted that though the cheque was issued for and on behalf of the Company, no separate notice was required to be issued to the Company. The statutory notice issued to the writ-applicant being Director of the Company was a good service.

7. Having heard the learned advocates appearing for the respective parties, it is apposite to consider the provision of law wherein it is held that Section 141 of the Act is concerned with the offences by the Company wherein it makes the person vicariously liable for commission of offence on part of the Company. The vicarious liability gets attracted when the condition precedent in Section 141 of the Act stands satisfied and for maintaining prosecution under Section 141 of the Act arraigning of a Company as an accused is imperative.

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7.1 In the case of Aneeta Hada and Ors., vs. Godfather travels and Tours Pvt. Ltd., and Ors., reported in (2012) 5 SCC 661, Paragraphs 22 to 50 read thus :-

"22. It may be appropriate at this stage to notice the observations made by MacNaghten, J. in Director of Public Prosecutions V/s. Kent and Sussex Contractors Ltd., 1994 KB 146 : (1994) 1 All ER 119 (DC) : (AC p. 156.)

"A body corporate is a "person" to whom, amongst the various attributes it may have, there should be imputed the attribute of a mind capable of knowing and forming an intention - indeed it is much too late in the day to suggest the contrary. It can only know or form an intention through its human agents, but circumstance may be such that the knowledge of the agent must be imputed to the body corporate. Counsel for the respondents says that, although a body corporate may be capable of having an intention, it is not capable of having a criminal intention. In this particular case the intention was the intention to deceive. If, as in this case, the responsible agent of a body corporate puts forward a document knowing it to be false and intending that it should deceive. I apprehend, according to the authorities that Viscount Caldecote, L.C.J., has cited, his knowledge and intention must be imputed to the body corporate.

23. In this regard, it is profitable to refer to the decision in Iridium India Telecom Ltd. V/s. Motorola Inc and Ors., (2011) 1 SCC 74 wherein it has been held that in all jurisdictions across the world governed by the rule of law, companies and corporate houses can no longer claim immunity from criminal prosecution on the ground that they are not capable of

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possessing the necessary mens rea for commission of criminal offences. It has been observed that the legal position in England and United States has now been crystallized to leave no manner of doubt that the corporation would be liable for crimes of intent. In the said decision, the two-Judge Bench has observed thus:-

"The courts in England have emphatically rejected the notion that a body corporate could not commit a criminal offence which was an outcome of an act of will needing a particular state of mind. The aforesaid notion has been rejected by adopting the doctrine of attribution and imputation. In other words, the criminal intent of the "alter ego" of the company/ body corporate i.e. the person or group of persons that guide the business of the company, would be imputed to the corporation."

24. In Standard Charted Bank (supra), the majority has laid down the view that there is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the fact that the corporation cannot commit a crime, the generally accepted modern rule is that a corporation may be subject to indictment and other criminal process although the criminal act may be committed through its agent. It has also been observed that there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment is mandatory imprisonment and fine.

25. We have referred to the aforesaid authorities to highlight

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that the company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain.

26. As is perceptible, the provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own signification.

27. In this context, we may refer with profit to the observations made by Lord Justice James in Ex Parte Walton, In re, Levy, 1881 (17) Ch D 746, which is as follows:

"When a statute enacts that something shall be deemed to have been done, which, in fact and truth was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to."

28. Lord Asquith, in East end Dwellings Co. Ltd. V/s. Finsbury Borough Council, 1952 AC 109 had expressed his opinion as follows:

"If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents, which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.... The statute says that

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you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs."

29. In The Bengal Immunity Co. Ltd. V/s. State of Bihar and others, AIR 1955 SC 661, the majority in the Constitution Bench have opined that legal fictions are created only for some definite purpose.

30. In Hira H. Advani Etc. V/s. State of Maharashtra, AIR 1971 SC 44, while dealing with a proceeding under the Customs Act, especially sub-section (4) of Section 171-A wherein an enquiry by the custom authority is referred to, and the language employed therein, namely, "to be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code", it has been opined as follows:

"It was argued that the Legislature might well have used the word "deemed" in Sub-section (4) of Section171 not in the first of the above senses but in the second, if not the third. In our view the meaning to be attached to the word "deemed" must depend upon the context in which it is used."

31. In State of Tamil Nadu V/s. Arooran Sugars Ltd., AIR 1997 SC 1815, the Constitution Bench, while dealing with the deeming provision in a statute, ruled that the role of a provision in a statute creating legal fiction is well settled. Reference was made to The Chief Inspector of Mines and another V/s. Lala Karam Chand Thapar Etc., AIR 1961 SC

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838, J.K. Cotton Spinning and Weaving Mills Ltd. and anr. V/ s. Union of India and others, AIR 1988 SC 191, M. Venugopal V/s. Divisional Manager, Life Insurance Corporation of India, (1994) 2 SCC 323 and Harish Tandon V/s. Addl. District Magistrate, Allahabad, (1995) 1 SCC 537 and eventually, it was held that when a statute creates a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, the Court has to examine and ascertain as to for what purpose and between which persons such a statutory fiction is to be resorted to and thereafter, the courts have to give full effect to such a statutory fiction and it has to be carried to its logical conclusion.

32. From the aforesaid pronouncements, the principle that can be culled out is that it is the bounden duty of the court to ascertain for what purpose the legal fiction has been created. It is also the duty of the court to imagine the fiction with all real consequences and instances unless prohibited from doing so. That apart, the use of the term 'deemed' has to be read in its context and further the fullest logical purpose and import are to be understood. It is because in modern legislation, the term 'deemed' has been used for manifold purposes. The object of the legislature has to be kept in mind.

33. The word 'deemed' used in Section 141 of the Act applies to the company and the persons responsible for the acts of the company. It crystallizes the corporate criminal liability and vicarious liability of a person who is in charge of the

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company. What averments should be required to make a person vicariously liable has been dealt with in SMS Pharmaceuticals Ltd. (supra). In the said case, it has been opined that the criminal liability on account of dishonour of cheque primarily falls on the drawee company and is extended to the officers of the company and as there is a specific provision extending the liability to the officers, the conditions incorporated in Section 141 are to be satisfied. It has been ruled as follow:-

"It primarily falls on the drawer company and is extended to officers of the company. The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others. 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 dishonor 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."

After so stating, it has been further held that while analyzing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. In paragraph 19 of the judgment, it has been clearly held as follows: -

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"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."

34. Presently, we shall deal with the ratio laid down in the case of C.V. Parekh (supra). In the said case, a three-Judge Bench was interpreting Section 10 of the 1955 Act. The respondents, C.V. Parekh and another, were active participants in the management of the company. The trial court had convicted them on the ground the goods were disposed of at a price higher than the control price by Vallabhadas Thacker with the aid of Kamdar and the same could not have taken place without the knowledge of the partners of the firm. The High Court set aside the order of conviction on the ground that there was no material on the basis of which a finding could be recorded that the respondents knew about the disposal by Kamdar and Vallabhadas Thacker. A contention was raised before this Court on behalf of the State of Madras that the conviction could be made on the basis of Section 10 of the 1955 Act. The three-Judge Bench repelled the contention by stating thus: -

"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, if the person contravening an order made under Section 3 (which covers an

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order under the Iron and Steel Control Order, 1956), is 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 Vallabhadas Thacker and any contravention by them would not fasten responsibility on the respondents."

(emphasis supplied) The aforesaid paragraph clearly lays down that the first condition is that the company should be held to be liable; a charge has to be framed; a finding has to be recorded, and the liability of the persons in charge of the company only arises when the contravention is by the company itself. The said decision has been distinguished in the case of Sheoratan Agarwal and another (supra). The two-Judge Bench in the said case referred to Section 10 of the 1955 Act and opined that

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the company alone may be prosecuted or the person in charge only may be prosecuted since 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. The two-Judge Bench further laid down that Section 10 of the 1955 Act indicates the persons who may be prosecuted where the contravention is made by the company but 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. The two-Judge Bench referred to the paragraph from C.V. Parekh (supra), which we have reproduced hereinabove, and emphasised on certain sentences therein and came to hold as follows: -

"The sentences underscored by us clearly show that what was sought to be emphasised was that there should be a finding that the contravention was by the company before the accused could be convicted and not that the company itself should have been prosecuted along with the accused. We are therefore clearly of the view that the prosecutions are maintainable and that there is nothing in Section 10 of the Essential Commodities Act which bars such prosecutions." For the sake of completeness, we think it apposite to refer to the sentences which have been underscored by the two-Judge Bench:-

"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 and there is no evidence and no finding that the Company contravened clause

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(5) of the Iron and Steel Control Order, the two respondents could not be held responsible."

35. With greatest respect to the learned Judges in Sheoratan Agarwal (supra), the authoritative pronouncement in C.V. Parekh (supra) has not been appositely appreciated. The decision has been distinguished despite the clear dictum that the first condition for the applicability of Section 10 of the 1955 Act is that there has to be a contravention by the company itself. In our humblest view, the said analysis of the verdict is not correct. Quite apart, the decision in C.V. Parekh (supra) was under Section 10(a) of the 1955 Act and rendered by a three-Judge Bench and if such a view was going to be expressed, it would have been appropriate to refer the matter to a larger Bench. However, the two-Judge Bench chose it appropriate to distinguish the same on the rationale which we have reproduced hereinabove. We repeat with the deepest respect that we are unable to agree with the aforesaid view.

36. In the case of Anil Hada (supra), the two-Judge Bench posed the question: when a company, which committed the offence under Section 138 of the Act eludes from being prosecuted thereof, can the directors of that company be prosecuted for that offence. The Bench referred to Section 141 of the Act and expressed the view as follows: -

"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

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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 (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.

13. 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 Act."

On a reading of both the paragraphs, it is evincible that the two- Judge Bench expressed the view that 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 and, thereafter, proceeded to state that if the

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company is not prosecuted due to legal snag or otherwise, the prosecuted person cannot, on that score alone, escape from the penal liability created through the legal fiction and this is envisaged in Section 141 of the Act. If both the paragraphs are appreciated in a studied manner, it can safely be stated that the conclusions have been arrived at regard being had to the obtaining factual matrix therein. However, it is noticeable that the Bench thereafter referred to the dictum in Sheoratan Agarwal (supra) and eventually held as follows: -

"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."

37. We have already opined that the decision in Sheoratan Agarwal (supra) runs counter to the ratio laid down in the case of C.V. Parekh (supra) which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada (supra) has to be treated as not laying down the correct law as far as it states that the director or any other officer can be prosecuted without impleadment of the company. Needless to emphasize, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted.

38. At this juncture, we may usefully refer to the decision in U.P. Pollution Control Board V/s. M/s. Modi Distillery and others, AIR 1988 SC 1128. In the said case, the company was

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not arraigned as an accused and, on that score, the High Court quashed the proceeding against the others. A two-Judge Bench of this Court observed as follows: -

"Although as a pure proposition of law in the abstract the learned single Judge's view that there can be no vicarious liability of the Chairman, Vice-Chairman, Managing Director and members of the Board of Directors under sub-s.(1) or (2) of S.47 of the Act unless there was a prosecution against Messers Modi Industries Limited, the Company owning the industrial unit, can be termed as correct, the objection raised by the petitioners before the High Court ought to have been viewed not in isolation but in the conspectus of facts and events and not in vacuum. We have already pointed out that the technical flaw in the complaint is attributable to the failure of the industrial unit to furnish the requisite information called for by the Board. Furthermore, the legal infirmity is of such a nature which could be easily cured. Another circumstance which brings out the narrow perspective of the learned single Judge is his failure to appreciate the fact that the averment in paragraph 2 has to be construed in the light of the averments contained in paragraphs 17, 18 and 19 which are to the effect that the Chairman, Vice-Chairman, Managing Director and members of the Board of Directors were also liable for the alleged offence committed by the Company."

Be it noted, the two-Judge Bench has correctly stated that there can be no vicarious liability unless there is a prosecution against the company owning the industrial unit but, regard being had to the factual matrix, namely, the technical fault on the part of the company to furnish the requisite information called for by the Board, directed for making a formal amendment by the applicant and substitute the name of the owning industrial unit. It is worth noting that in the said case, M/s. Modi distilleries was arrayed as a

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party instead of M/s Modi Industries Limited. Thus, it was a defective complaint which was curable but, a pregnant one, the law laid down as regards the primary liability of the company without which no vicarious liability can be imposed has been appositely stated.

39. It 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.

40. In this context, we may usefully refer to Section 263 of Francis Bennion's Statutory Interpretation where it is stated as follows: -

"A principle of statutory interpretation embodies the policy of the law, which is in turn based on public policy. The court presumes, unless the contrary intention appears, that the legislator intended to conform to this legal policy. A principle of statutory interpretation can therefore be described as a principle of legal policy formulated as a guide to legislative intention.

41. It will be seemly to quote a passage from Maxwell's The Interpretation of Statutes (12th Edition) : -

"The strict construction of penal statutes seems to manifest itself in four ways: in the requirement of express language for the creation of an offence; in interpreting strictly words

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setting out the elements of an offence; in requiring the fulfilment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction."

42. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the Section is of immense significance and, in its tentacle, it brings in the company as well as the director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context. In Reserve Bank of India V/s. Peerless General Finance and Investment Co. Ltd. and others, (1987) 1 SCC 424 it has been laid down that the entire statute must be first read as a whole, then section by section, clause by clause, phrase by phrase and word by word. The same principle has been reiterated in Deewan Singh and others V/s.

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Rajendra Prasad Ardevi and others, (2007) 10 SCC 528 and Sarabjit Rick Singh V/s. Union of India, (2008) 2 SCC 417. 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.

43. 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 a three-Judge Bench 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

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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.

44. We will be failing in our duty if we do not state that all the decisions cited by the learned counsel for the respondents relate to service of notice, instructions for stopping of payment and certain other areas covered under Section 138 of the Act. The same really do not render any aid or assistance to the case of the respondents and, therefore, we refrain ourselves from dealing with the said authorities.

45. Resultantly, the Criminal Appeal Nos. 838 of 2008 and 842 of 2008 are allowed and the proceedings initiated under Section 138 of the Act are quashed.

46. Presently, we shall advert to the other two appeals, i.e., Criminal Appeal Nos. 1483 of 2009 and 1484 of 2009 wherein the offence is under Section 67 read with Section 85 of the 2000 Act. In Criminal Appeal No. 1483 of 2009, the director of the company is the appellant and in Criminal Appeal No. 1484 of 2009, the company. Both of them have called in question the legal substantiality of the same order passed by the High Court. In the said case, the High Court followed the decision in Sheoratan Agarwal (supra) and, while dealing with the application under Section 482 of the Code of Criminal Procedure at the instance of Avnish Bajaj, the Managing Director of the company, quashed the charges under Sections 292 and 294 of the Indian Penal Code and

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directed the offences under Section 67 read with Section 85 of the 2000 Act to continue. It is apt to note that the learned single Judge has observed that a prima facie case for the offence under Sections 292(2)(a) and 292(2)(b) of the Indian Penal Code is also made out against the company.

47. Section 85 of the 2000 Act is as under: -

"85. Offences by companies -

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is 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 business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place 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 the contravention and shall be liable to be proceeded against and punished accordingly."

48. Keeping in view the anatomy of the aforesaid provision, our analysis pertaining to Section 141 of the Act would squarely apply to the 2000 enactment. Thus adjudged, the director could not have been held liable for the offence under

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Section 85 of the 2000 Act. Resultantly, the Criminal Appeal No. 1483 of 2009 is allowed and the proceeding against the appellant is quashed. As far as the company is concerned, it was not arraigned as an accused. Ergo, the proceeding as initiated in the existing incarnation is not maintainable either against the company or against the director. As a logical sequeter, the appeals are allowed and the proceedings initiated against Avnish Bajaj as well as the company in the present form are quashed.

49. Before we part with the case, we must record our uninhibited and unreserved appreciation for the able assistance rendered by the learned counsel for the parties and the learned amicus curiae.

50. In the ultimate analysis, all the appeals are allowed."

7.2 In the case of Dilip Hariramani vs. Bank of Baroda, reported in 2022(4) GLR 2797, Paragraphs 12 to 14 read thus :-

"12. The demand notice issued on 04th November 2015 by the Bank, through its Branch Manager, was served solely to Simaiya Hariramani, the authorised signatory of the Firm. The complaint dated 07th December 2015 under Section 138 of the NI Act before the Court of Judicial Magistrate, Balodabazar, Chhattisgarh, was made against Simaiya Hariramani and the appellant. Thus, in the present case, the Firm has not been

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made an accused or even summoned to be tried for the offence.

13. The judgment in Dayle De'souza v. Government of India through Deputy Chief Labour Commissioner (C) and Another, 2021 SCC OnLine SC 1012 answered the question of whether a director or a partner can be prosecuted without the company being prosecuted. Reference in this regard was made to the views expressed by this Court in State of Madras v. C.V. Parekh and Another, (1970) 3 SCC 491 on the one hand and the divergent view expressed in Sheoratan Agarwal and Another v. State of Madhya Pradesh, (1984) 4 SCC 352 and Anil Hada v. Indian Acrylic Ltd., (2000) 1 SCC 1 This controversy was settled by a three Judge Bench of this Court in Aneeta Hada (supra), in which, interpreting and expounding the difference between the primary/substantial liability and vicarious liability under Section 141 of the NI Act, it has held:

"51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C.V. Parekh which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the company. Needless to emphasise, the matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted.

xx xx xx

59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the

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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 drag- net 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 which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove."

14. The provisions of Section 141 impose vicarious liability by deeming fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-section (1) or (2) would not be liable and convicted as vicariously liable. Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 has been satisfied, which person(s) then, by deeming fiction, is made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender. This view has been subsequently followed in Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781 Himanshu v. B. Shivamurthy and Another, (2019) 3 SCC 797 and Hindustan Unilever Limited v. State of Madhya Pradesh., (2020) 10 SCC 751 The exception carved out in Aneeta Hada

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(supra),20 which applies when there is a legal bar for prosecuting a company or a firm, is not felicitous for the present case. No such plea or assertion is made by the respondent."

Analysis :-

8. The writ-applicant No.2 herein issued the cheque bearing No.001419 dated 30.11.2015 amounting to Rs.7,03,339/- on behalf of the Company i.e. ECOLIBRIUM ENERGY PVT. LTD. The aforesaid fact is not in dispute. The said cheque came to be returned with the endorsement of "Payment Stopped by drawer". The said cheque came to be deposited by the respondent No.2 - complainant on 4.12.2015 which came to be returned on 5.12.2015 with the endorsement of "Payment Stopped by drawer". The respondent No.2 issued statutory notice for the return of the said cheque on 1.1.2016 to respondent No.2 herein. The said notice is duly produced at Annexure-B (page-20/A). The writ-applicant No.2 duly replied to the said notice on 7.1.2016 which is duly produced at Annexure-C (page-22) denying the liability and further stating that the notice under Section 138 of the Negotiable Instruments Act issued to the writ-applicant No.2 is baseless in view of the fact that the writ-applicant No.2 has not issued the cheque in discharge of any debt or liability in her personal capacity.

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8.1 The respondent No.2 redeposited the same cheque as referred above on 16.2.2016 for clearances in State Bank of (INDIA) India, GIDC Branch, Gandhinagar which came to be returned on 17.2.2016 with the same endorsement i.e. "Payment Stopped by drawer". The statutory notice came to be issued to the writ-applicant in their personal capacity on 25.3.2016 which was duly replied by the writ-applicant on 14.4.2016. Resultantly the respondent No.2 filed complaint being Criminal Case No.1522 of 2016 before the learned 3 rd Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar which resulted in issuance of process qua the writ-applicant herein. Being aggrieved by the same the writ-applicants have approached this Court seeking quashing of the process issued.

9. In the facts and circumstances of the present case the cheque bearing No.001419 dated 30.11.2015 to the tune of Rs.7,03,339/- by the respondent No.2 - original complainant for the first time on 04.12.2015 for clearing in the Complainant's bank i.e. State Bank of (INDIA) India, GIDC Branch, Gandhinagar which came to be dishonored/returned on 05.12.2015 on the ground of "Stop Payment by drawer". The respondent No.2 - Complainant issued a statutory notice dated 01.01.2016 under the Negotiable Instruments Act against the writ-applicant no.2 herein which was duly replied by the writ-

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applicant no.2 vide its reply dated 07.01.2016. The respondent No.2 re-deposited the same cheque in the same Bank for the second time on 16.2.2016 which came to be dishonoured/returned with the endorsement of "Payment Stopped by drawer" on 17.2.2016 for which statutory notice came to be issued for the second time by the respondent No.2 on 3.3.2016 to the writ-applicant No.1 and writ-applicant No.2 in their personal capacity which came to be replied by both the writ-applicants on 25.3.2016 by a composite reply. The cheque which was drawn on 30.12.2015 would be valid for a period of six months.

9.1 Considering the aforesaid facts, the cheque which came to be redeposited on 16.2.2016 for the second time in the State Bank of (INDIA) India, GIDC Branch, Gandhinagar came to be dishonoured/returned on 17.2.2016 for which statutory notice came to be issued by the respondent No.2 and the complaint in question came to be filed by the respondent No.2 being Criminal Case No.1522 of 2016 on 12.4.2016 i.e. within a period of three months from the date on which the cheque came to be deposited is held to be within limitation satisfying the ingrements of Section 138 Clause (a) of the NI Act.

9.2 Further the cheque in question could be deposited more than once, if the same satisfies the requirements stipulated

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under the proviso to Section 138 of the Negotiable Instruments Act i.e. every time a cheque is presented in a manner and within the time stipulated under proviso to Section 138 of the NI Act followed by a notice within meaning of Clause (b) of the proviso of Section 138 of the NI Act and the drawer fails to make the payment of the amount within the stipulated period of fifteen days after the receipt of the said notice, a cause of action accrues to the holder of the cheque to institute proceedings for prosecution against the drawer. It is well settled principle of law that there is no restriction regarding the number of times a cheque can be presented and that every subsequent representation and dishonour give rise to fresh cause of action for filing complaint. Considering the aforesaid ratio the complaint could not be said to be barred by limitation.

10. This Court has perused the cheque in question, the same is taken on record. Mr. Pandya, the learned advocate appearing for the respondent No.2 - Complainant has also not disputed the fact that the cheque was issued by the writ- applicant for and on behalf of the Company i.e. ECOLIBRIUM ENERGY PVT. LTD. Considering the ratio as laid down by the Hon'ble Supreme Court as referred to above and the facts of the present case the impugned complaint being Criminal Case No.1522 of 2016 pending before the learned 3 rd Additional

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Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar is held to be not maintainable without arraigning the Company i.e. ECOLIBRIUM ENERGY PVT. LTD as accused in the impugned complaint. It was imcumbent for the respondent No.2 - complainant to arraign the Company as an accused and only if the Company is joined as accused, the Directors can be held to be vicariously liable for the act which was undertaken by the respondent No.2 for and on behalf of the Company.

11. In view of the aforesaid, the present writ-application is allowed. The proceedings being Criminal Case No.1522 of 2016 pending before the learned 3rd Additional Senior Civil Judge and Additional Chief Judicial Magistrate, Gandhinagar and the summons issued are herein quashed and set aside. Rule is made absolute to the aforesaid extent. Direct service is permitted.

(VAIBHAVI D. NANAVATI,J) K.K. SAIYED