Gujarat High Court
Ravi Chetwani Proprietor Of M/S ... vs State Of Gujarat on 6 June, 2023
Bench: Nisha M. Thakore
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION NO. 8653 of 2022
In R/CRIMINAL APPEAL NO. 944 of 2022
With
R/CRIMINAL APPEAL NO. 944 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE NISHA M. THAKORE sd/-
==============================================================
1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of NO
the judgment ?
4 Whether this case involves a substantial question of NO
law as to the interpretation of the Constitution of
India or any order made thereunder ?
==============================================================
RAVI CHETWANI PROPRIETOR OF M/S LAXMI STORE
Versus
STATE OF GUJARAT
==============================================================
Appearance:
MR NIKUL K SONI(5122) for the Applicant(s) No. 1
MR DHRUV K DAVE(6928) for the Respondent(s) No. 2
Mr. Bhargav Pandya Addl. PUBLIC PROSECUTOR for the
Respondent(s) No. 1
==============================================================
CORAM:HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 06/06/2023
ORAL JUDGMENT
1.0. Heard Mr. Nikul Soni, learned advocate for the applicant -
original complainant, Mr. Dhruv Dave, learned advocate for the
respondent no.2 and Mr. Bhargav Pandya, learned Additional
Public Prosecutor for the respondent State.
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
2.0. This application is filed under Section 378(4) of the Code
of Criminal Procedure seeking leave to challenge the impugned
judgment and order dated 28.02.2022 passed by the learned
10th Additional Chief Judicial Magistrate, Vadodara in Criminal
Case No.24510 of 2016. By the said judgment and order, the
learned Magistrate has recorded order of acquittal of the
respondent no.2 - original accused for the offence punishable
under Section 138 of the Negotiable Instruments Act.
3.0. The gist of the complaint as contended in the criminal case
by the complainant is as under:
3.1. The complainant is running a shop in the name of Laxmi
Store and the accused viz. Hemant Shah who is referred as
proprietor of M/s.Vadiyawala Logistic Private Limited is running
his business in the name of " M/s. Vadiyawala Logistic Private
Limited". It is the case of the complainant that having business
relationship, the complainant was knowing the accused very
well. It is further alleged that the accused had requested to
complainant to deliver goods and against the outstanding
amount of purchase of goods, the accused had issued cheque
bearing no.925949 of ICICI Bank, Suraj Plaza, Vadodara Branch
dated 29.12.2015 for an amount of Rs.1,50,000/-.
3.2. It is further alleged that as instructed by the accused, the
complainant had presented the aforementioned cheque on
16.1.2016 with the Bank viz. State Bank of India, Akshar
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Chawk Branch, Vadodara. However, the said cheque had been
dishonored on 19.1.2016 with an endorsement of account
closed.
3.3. In such circumstances, the complainant was constrained
to raise demand notice dated 29.1.2016 which was sent on the
known address of the accused. It is further contended that
inspite of the aforesaid notice being duly served upon the
accused, the accused had choose not to reply to such notice.
Even the amount outstanding was not repaid.
3.4. The complainant was, therefore, constrained to initiate
proceedings under Section 138 of the Negotiable Instruments
Act by lodging complaint against the accused. The said
complaint was presented before the Court of 10 th Additional
Judicial Magistrate, First Class, Vadodara on 09.06.2016 which
was registered as Criminal Case No.24510 of 2016.
4.0. The verification of the complainant was recorded and
summons came to be issued upon the accused. The accused
had appeared before the learned Magistrate and plea of the
accused was recorded vide Exh.21. The accused denied the case
of the complainant and the learned Magistrate had proceeded
with the recording of evidence. The complainant was examined
at Exh.33. The complainant had also led various documentary
evidence which include the disputed cheque dated 29.12.2015
at Exh.27, Bank slip dated 16.1.2016 at Exh.28, legal notice
raising demand dated 29.1.2016 at Exh.29, postal slip of such
notice being served by RPAD at Exh.30, the track report of the
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postal department at Exh.31 and track report certificate issued
by postal department at Exh.19.
4.1. On the other hand, matter was fixed for recording of
evidence of the accused under Section 313 of the Code of
Criminal Procedure. However, the accused failed to appear and
the matter was taken up for final argument. Learned Magistrate
upon appreciating the evidence which has come on record and
the submissions made by the learned advocates for the
respective parties, proceeded to dismiss the complaint mainly on
two grounds i.e. First, the learned Magistrate notice that in the
cause title of the complaint, the complainant has not joined the
company and has neither addressed the legal notice to the
company and in such circumstances the complaint was not
maintainable and Secondly the learned Magistrate arrived at a
conclusion that the accused had successfully raised probable
defence and on the other hand the complainant had failed to
prove his case beyond reasonable doubt. Hence, this appeal at
the instance of the original complainant with leave to appeal.
5.0. With the consent of the learned advocates for the
respective parties, both the leave to appeal as well as appeal
were taken up for final hearing at the admission stage.
6.0. Mr.Nikul Soni, learned advocate for the appellant- original
applicant has invited attention of this Court to the reasons
recorded by the trial Court and has submitted that the learned
Magistrate on erroneous ground that the company has not been
joined in the original proceedings, has proceeded to pass
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impugned order. He invited attention of this Court to the cause
title of the complaint and submitted that name of the accused
Hemant Shah was reflected as proprietor of M/s. Vadiyawala
Logistic Pvt. Ltd. He further submitted that joining of the
company as a party respondent may not be necessary as it is
the person in charge of and responsible for the affairs of the
company who is made accused. He has further submitted that
Mr. Hemant Shah is the authorized signatory to the disputed
cheque. He further submitted that similar issue arose for
consideration before the Hon'ble Supreme Court, wherein it has
been held that there was no necessity for the complainant to
prove that the respondent- accused was in charge of the affairs
of the company as it can be always be derived by virtue of his
position which he was holding in the company and thereafter
the respondent accused was held liable for the offence under
Section 138 of the Negotiable Instruments Act. Mr. Soni, learned
advocate has relied upon the following decisions in support of
his case:
6.1. Relying upon the decision in the the case of Jitendra Vora
vs. Bhavana Y Shah reported in (2015) 16 SCC 744, Mr. Soni
has submitted that the effect of the reading of Section 141 is
that when the company is 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 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 such offence.
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
6.2. He has further relied upon the decision in the case of
Mainuddin Abdul Sattar Shaikh vs. Vijay D Salvi reported in
(2015) 9 SCC 622 and has submitted that the Hon'ble Supreme
Court has held that in light of the position where the respondent
in his capacity as Director of the Company had undertaken to
make good the payment, the accused can be held liable under
Section 138 of the Act, even though company had not been
named in the notice of the complaint. He, further submitted that
the Court had even held that there was no necessity for the
complainant to prove that the accused was in charge of the
affairs of the company.
6.3. He further relied upon the decision of the Hon'ble Supreme
Court in the case of the National Small Industries Corporation
Limited vs. Harmeet Singh Paintal reported in (2010) 3 SCC 330
for the proposition of law that person who actually look after the
conduct of the business of the company would be responsible to
the company for the conduct of its business.
6.4. He further relied upon the decision of the Hon'ble Supreme
Court in the case of Sunil Todi vs. State of Gujarat reported in
AIR 2022 SC 147 wherein the Hon'ble Supreme Court by relying
upon the decision in the case of SMS Pharmaceuticals (supra)
has taken note of the fact that position of Managing Director or
Joint Managing Director of a Company is a distinct since
persons occupying that position are in charge of and
responsible for the conduct of the business. By relying upon the
aforesaid decisions, Mr. Soni, learned advocate for the appellant
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
has urged this Court to grant leave to appeal.
7.0. On the other hand, the aforesaid submissions of learned
advocate for the applicant is vehemently objected by Mr. Dhruv
Dave, learned advocate for the respondent no.2- original
accused. He has invited attention of this Court to the cause title
of the original complaint and has submitted that name of the
accused appeared in his capacity as the proprietor of the
M/s.Vadiyawala Logistic Private Limited, which is the company
registered under the Companies Act. He further invited attention
of this Court to the contents of the complaint as reproduced in
the impugned order and submitted that no averments have been
made by the complainant as to in what capacity the respondent
accused was associated with the public limited company. He
further submitted that the name of the company does not
appear in the cause title as being joined as accused. At this
stage, he referred to and relied upon Section 141 of the
Negotiable Instruments Act which deals with the offence by
company. He submitted that on reading of the said provisions
and Section 138 of the Negotiable Instruments Act, it clearly
provides that if a person who commits the offence is a company,
the company as well as every person in charge of and
responsible to the company for the conduct of the business of
the company at the time of commission of offence is deemed to
be guilty of the offence. He submitted that the term person
appearing in Section 141 of the Act reference to the term
"company" appears. It is a settled legal position that company is
a juristic person and to impose criminal liability the category of
officers as appearing in the said provisions are deemed to be
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
guilty of the offence on behalf of the company. In support of the
aforesaid submissions, he relied upon the following decisions:
7.1. In the case of Aneeta Handa vs. Godfather Travels and
Tours Private Limited reported in (2012) 5 SCC 661 for the
proposition that prosecution against without arraigning of
company as accused is not maintainable under Section 138 of
the Negotiable Instruments Act, he submitted that Section 141
provides mandatory requirement of impleading company as one
of the accused.
7.2. He further relied upon the decision of the Hon'ble Supreme
Court in the case of Himanshu vs. B. Shivamurthy and Another
reported in (2019) 3 SCC 797 for the proposition of law that
while prosecuting Directors of the Company, Company must be
arraigned as accused, he further submitted that the principal
liability was on the company and the commission of offence by
company is expressed condition precedent to attract vicarious
liability of others.
7.3. He also relied upon the decision of this Court in the case
Sanjaybhai Jamnadas Dharsandiya @ Gharsandiya vs. State of
Gujarat rendered in Special Criminal Application No,2416 of
2020 dated 18.11.2021 wherein the Court relying upon the
decision of the Hon'ble Supreme Court in the case of Anil
Vasudev Rajgor vs. State of Gujarat reported in 2017(3) GLH
802 and in the case of KK Ahuja vs. V K Vora & Anr reported in
(2009) 10 SCC 48 held that the deeming provisions appearing
in Section 141 of the Act makes it imperative to join principal
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
offenders i.e. company to the criminal proceedings under
Section 138 of the Negotiable Instruments Act r/w Section 141
of the Act.
7.4. He also relied upon the decision of this Court in the case
of Swarn Mukeshbhai Gupta vs. Parth Mukeshbhai Patel and
Ors rendered in Criminal Miscellaneous Application No.29748 of
2016 and allied matters wherein the Court quashed and set
aside the proceedings under the Negotiable Instruments Act in
exercise of powers conferred under Section 482 of the Code of
Criminal Procedure and further held that the application under
Section 319 of the Code of Criminal Procedure to implead the
company as accused at later stage is not maintainable in law as
held in the case of Oanali Ismaiji Sadikot vs. State of Gujarat &
Anr reported in (2016) 3 GLR 1991.
7.5. By referring to the aforesaid decisions, Mr. Dave submitted
that no error can be attributed to the learned Magistrate in
arriving at a finding that the application was not maintainable
in absence of company being joined as party respondent
accused.
8.0. I have extensively heard the learned advocates for the
respective parties and have perused the record. The Court is
conscious of the fact that the learned Magistrate has proceeded
to record the order of acquittal on two grounds firstly where the
learned Magistrate has formed an opinion that the complaint
itself is not maintainable in absence of company being joined as
party accused nor being served with the legal notice. Secondly,
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the Court has appreciated the material which has come on
record in the form of evidence and has concluded that the
accused has been able to successfully rebut the presumption
and complainant has failed to prove his case beyond the
reasonable doubt. This Court considering the nature of dispute
involved has taken up this application seeking leave to appeal
along with appeal for final adjudication. In the opinion of the
Court, the question which falls for consideration to be decided at
the threshold is the maintainability of the complaint itself rather
than going into the merits of the case. The neat question of law
which falls for consideration for this Court in the present appeal
is whether the complaint was maintainable under Section 138 of
the Negotiable Instruments Act against its Director in absence of
the company being joined as party respondent accused in the
original complaint.
9.0. The aforesaid question of law is no more res-integra. The
issue arose for consideration of the Hon'ble Supreme Court in
the case of Aneeta Handa (supra). The Hon'ble Supreme Court
was examining the controversy as to whether any person who
has been mentioned in Section 141(1) and 141(2) of the Act can
be prosecuted without the company being impleaded as
accused. To appreciate the controversy, the Hon'ble Supreme
Court had proceeded to examine the relevant provisions of the
Negotiable Instruments Act. The Court upon careful
examination of Section 138 of the Act and upon appreciation of
the proviso, notice that cheque has to be drawn by a person on
the account maintained by him and must have issued the
cheque in discharge of any debt or other liability. The Hon'ble
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Supreme Court further notice that the word "drawer" has been
defined under Section 7 of the Act which mean maker of a bill of
exchange or a cheque. Thus, the Court held that even an
authorized signatory in company becomes a drawer as he has
been authorized to do so in respect of account maintained by
the company. The Hon'ble Supreme Court further dealt with
Section 141 of the Act which provides with regard to the offence
by the company. The Hon'ble Supreme Court upon careful
examination of the term "person" appearing in Section 141
observed that the company is a juristic person and concept of
corporate criminal liability is attracted to a Corporation and the
company from the language employed under Section 141 of the
Act. The Court notice that Section 141 is specifically with regard
to offence by the company itself and the certain categories of
officers in certain circumstances are deemed to be guilty of the
offence. The Hon'ble Supreme Court upon analysis of the
deeming fiction created in the proviso to Section 141 held that
it crystallizes the corporate criminal liability and vicarious liability
of a person who is in charge of the company. The reliance was placed
on its earlier decision in the case of SMS Pharmaceuticals (supra)
as well as in the case of C V Parekh (supra), the Hon'ble
Supreme Court by following the ratio laid down by the Larger
Bench proceeded to held as under:
"53. 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 141of 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.
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
54. 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.
55. 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 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."
56. 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 141of 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.
57. In Reserve Bank of India v. Peerless General Finance and
Investment Co. Ltd. and others 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
R/CR.MA/8653/2022 JUDGMENT DATED: 06/06/2023
word. The same principle has been reiterated inDeewan
Singh and others v. Rajendra Prasad Ardevi and others[45]
and Sarabjit Rick Singh v. Union of India
58. 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.
59. 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 with
the qualifier as stated in paragraph 51. The decision in Modi
Distilleries (supra) has to be treated to be restricted to its own
facts as has been explained by us hereinabove."
Thus from the aforesaid legal position, there cannot be any
iota of doubt for maintaining prosecution under Section 141 of
the Act, the company must be joined as an accused. 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.
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10. As against the aforesaid legal position, reliance placed by
the learned advocate Mr. Soni in the case of Mainuddin Abdul
Sattar Shaikh (supra) is concerned, it was a case where cheque
was drawn by the respondent accused in his individual capacity
and not in the capacity as a Director of a company or as
proprietor. It is in this background of fact, the Hon'ble Supreme
Court held that even though if the company had not been named
in the notice or the complaint there was no necessity for the
complainant to prove that the said respondent was in charge of
the affairs of the company.
11. So far as decision in the case of Jitendra Vora (supra) is
concerned, the Court noticed that in the aforesaid decision
discharge of liability was taken over by the first accused in his
capacity of the proprietor of M/s. Shah Enterprise and by second
accused in his capacity as power of attorney of M/s Shah
Enterprise. On the facts it has emerged on record that no
evidence was led to show that liability of M/s. Shah Agency was
taken over by M/s. Shah Enterprise. The case made out in the
complaint was that liability of M/s. Shah Enterprise and not of
M/s. Shah Agency. In the appeal before the Hon'ble Supreme
Court when the Court had inquired from the learned advocate
for the appellant as to liability of M/s. Shah Agencies is
concerned, it was submitted that cheques were drawn by M/s.
Shah Enterprise but the liability, as would be evident from the
examination-in-chief, is that of M/s. Shah Agency. On the other
hand, the learned counsel for the respondent had disputed the
aforesaid submission and had contended that the appellant had
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not made M/s. Shah Enterprise as party respondent. It is in
light of the aforesaid facts, the Hon'ble Supreme Court confirmed
the order of the High Court by dismissing the appeal. The
reliance was placed upon the decision of the Hon'ble Supreme
Court in the case of Anil Hada vs. Indian Acrylic Limited
reported in (2000) 1 SCC 1, it would be worthwhile to mention
here that aforesaid decision of the Hon'ble Supreme Court in the
case of Anil Hada has been overruled subsequently by the
Hon'ble Supreme Court in the case of Aneeta Handa (supra). In
my opinion, the aforesaid view is not goodf law after the Larger
Bench decision in the case of Aneeta Handa (supra).
12. So far as reliance placed by learned advocate Mr.Soni in
the case of National Small Industries Corporation Limited
(supra), the same is applicable in the facts of the present case. It
was a case where the SLP was filed at the instance of the original
complainant challenging the common judgment and order, High
Court in batch of cases whereby the High Court had quashed the
summoning orders passed by the trial Court against the
respondent -accused under Section 138 r/w Section 141 of the
Act. It was contended in the said appeal before the Hon'ble
Supreme Court that the respondent accused was holding charge
as Director of the company and was liable to be prosecuted
under the provisions. It was contended that the accused person
had issued cheques which were dishonored, the Hon'ble
Supreme Court proceeded to decide the issue as to whether the
order of High Court quashing summoning order insofar as
respondents are concerned, is sustainable and what should be
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the averments in the complaint under Section 138 read with
Section 141 of the Act against the Director of a Company before
he can be subjected to criminal proceedings. The Court after
taking into consideration Section 138 r/w 141 of the Negotiable
Instruments Act, held that the entire matter has to be examined
from the nature of averments made in the complaint. The Court
also took into consideration Section 291 of the of the Companies
Act with regard to category of persons who are held responsible
to the company for the conduct of the business of the company
as against the term "in charge of the business of the company" to
hold him vicariously liable under Section 141 of the Act. In light
of the aforesaid controversy, the Hon'ble Supreme Court held as
under:
"25) From the above discussion, the following principles
emerge :
(i) The primary responsibility is on the complainant to
make specific averments as are required under the law
in the complaint so as to make the accused vicariously
liable. For fastening the criminal liability, there is no
presumption that every Director knows about the
transaction.
(ii)Section 141does not make all the Directors liable for
the offence. The criminal liability can be fastened only
on those who, at the time of the commission of the
offence, were in charge of and were responsible for the
conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company
registered or incorporated under the Companies Act,
1956 only if the requisite statements, which are
required to be averred in the complaint/petition, are
made so as to make accused therein vicariously liable
for offence committed by company along with averments
in the petition containing that accused were in-charge
of and responsible for the business of the company and
by virtue of their position they are liable to be proceeded
with.
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(iv) Vicarious liability on the part of a person must be
pleaded and proved and not inferred.
(v) If accused is Managing Director or Joint Managing
Director then it is not necessary to make specific
averment in the complaint and by virtue of their
position they are liable to be proceeded with.
(vi) If accused is a Director or an Officer of a company
who signed the cheques on behalf of the company then
also it is not necessary to make specific averment in
complaint.
(vii) The person sought to be made liable should be in-
charge of and responsible for the conduct of the
business of the company at the relevant time. This has
to be averred as a fact as there is no deemed liability of
a Director in such cases."
13. Thus, the Court notice that in absence of specific averment
as to the role of the respondent and particularly in view of the
material at the relevant time, which in no manner connected
with the affairs of the company, rejected the appeal of the
complainant. In the instant case, the contents of the complaint
as reproduced in the impugned order goes to suggest that the
complainant has even failed to make necessary averments with
regard to the role of the accused by virtue of his position to make
him liable or to be proceeded with the prosecution under Section
138 of the Negotiable Instruments Act. As held by the Hon'ble
Supreme Court in the case of Aneeta Handa (supra) criminal
liability can be only imposed if the principal offenders viz.
concerned company being joined as party accused. In my
opinion, no error is committed by the learned Magistrate in not
entertaining the complaint having noticed the lacuna of not
joining the company as party respondent.
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14. In view of the above and for the reasons stated above,
present application of leave to appeal fails and stands rejected.
In view of rejection of the leave to appeal, Criminal Appeal
also stands rejected.
sd/-
(NISHA M. THAKORE,J)
KAUSHIK J. RATHOD
