Gujarat High Court
Ashokbhai Nathalal Manvar vs Bhavsinh Gulabsinh Jadeja on 30 April, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 18424 of 2016
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ASHOKBHAI NATHALAL MANVAR
Versus
BHAVSINH GULABSINH JADEJA & ANR.
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Appearance:
MR AM PAREKH(562) for the Applicant(s) No. 1
MR MM TIRMIZI(1117) for the Respondent(s) No. 1
MR BHARGAV PANDYA, ADDL. PUBLIC PROSECUTOR for the
Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 30/04/2025
ORAL ORDER
1. By way of this petition under Section 482 of the Cr.P.C.,
the petitioner has prayed following reliefs :
"(A) YOUR LORDSHIPS may be pleased to admit and
allow this petition.
(B) YOUR LORDSHIPS may be pleased to quash and set
aside the complaint being Criminal Case No. 1764 of
2007 lodged in the court of Ld. Judicial Magistrate First
Class at Khmabhadiya, District: Jamnagar, in the
interest of justice;
(C) Pending admission, hearing and final disposal of
this petition, YOUR LORDSHIPS be pleased to stay the
further proceedings of Criminal Case No. 1764 of 2007
lodged in the court of Ld. Judicial Magistrate First
Class at Khmabhadiya, District: Jamnagar, in the
interest of justice;"
2. The brief facts of the case are as under :
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2.1 It is the case of the petitioner that cheque Nos. 566305 to
566309 were missing from the cheque-book, with no
corresponding entries in the counterfoil. As per one Mr. Ajay
Jani, proprietor of M/s. Shivam Enterprise--the sub-contractor
entitled to a 1.5% commission--the cheques were handed over
merely as security and were not meant to be encashed. Upon
return of the cheque-book and discovery of missing leaves, the
petitioner issued stop payment instructions to the bank on
20.09.2007.
2.2. Subsequently, a cheque bearing No. 566309 dated
15.10.2007 for Rs. 11,00,000/- was presented and dishonoured
with the remark "funds insufficient" on 23.10.2007. The
respondent issued a statutory notice on 17.11.2007 and
thereafter lodged Criminal Case No. 1764 of 2007 under Section
138 of the Negotiable Instruments Act, 1881 before the learned
Judicial Magistrate First Class, Khambhaliya, District Jamnagar.
The petitioner, being a Director of the company in whose name
the account was maintained, has been arraigned as an accused.
The present petition under Section 482 of the Code of Criminal
Procedure, 1973 has been filed seeking quashing of the said
proceedings on the ground that the company itself has not been
impleaded as an accused, and thus vicarious liability cannot be
fastened upon the petitioner.
3. Learned advocate for the petitioner accused assailed the
issuance of process in a criminal case filed u/s 138 of the
Negotiable Instruments Act, 1881 (in short "the Act") mainly on
the ground that the cheque in question, which was returned
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unpaid and the prosecution was launched u/s 132 of the Act,
has been drawn by the private limited company i.e. Jitendra G.
Patel Project Limited and the petitioner accused is the signatory
to the said cheque. He would further submit that though the
petitioner has been arraigned as accused of the company having
legal entity, has not been arraigned as accused in the criminal
case. He would further submit that therefore, legal bar u/s 141
of the Act applies to the present case. He would further submit
that in absence of the company, the accused being Director of
the company, who is vicariously liable, cannot be sent for facing
trial.
3.1 In support of his submission, learned advocate Mr. Parekh
has relied upon the decision of the Hon'ble Supreme Court in
Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. reported in
2012 (5) SCC 661.
3.2 Upon such submission, learned advocate Mr. Parekh prays
to allow the petition.
4. Per contra, learned advocate Mr. Tirmizi for the respondent
No.1 vehemently objected to grant of relief on the ground that
undisputedly, the petitioner accused is the Director of the
private limited company being Jitendra G. Patel Project Limited
and he is the signatory to the cheque. He would further submit
that the cheque issued in favour of Devikrupa Construction has
been dishonoured and even after expiry of statutory time period,
the petitioner accused has not paid back the amount of cheque
and therefore, essential ingredients of section 138 of the Act
since are made out, the learned trial Court has rightly issued the
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process against the petitioner accused. He would further submit
that the contention raised by the petitioner would be examined
during trial, but at this juncture, at threshold, the complaint
could not be questioned and should not be quashed.
4.1 Upon such submission, learned advocate for the
respondent No.1 requests to dismiss the petition.
5. Heard learned advocate Mr. A.M. Parekh for the petitioner,
learned advocate Mr. M.M. Tirmizi for the respondent No.1 and
learned APP Mr. Bhargav Pandya for the respondent No.2. I
have also perused the records annexed with the petition.
6. Since the main contention raised by the petitioner that the
petitioner accused being Director of the company cannot be
joined independently in a proceeding u/s 138 of the Act without
joining the company being drawer of the cheque, the prosecution
is not maintainable. To examine the contention, let refer section
141 of the NI Act, which reads as under:-
"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:Provided further
that where a person is nominated as a Director of a
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company by virtue of his holding any office or
employment in the Central Government or State
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."
7. Plain reading of the aforesaid provision demonstrates that
if a 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. Section 141(2) of the Act
demonstrates that where any offence is 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. Thus, the director,
manager, secretary or other officer of the company can be held
vicariously liable for any neglect on their part or any role
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attributed to him or was responsible to the company for the
conduct of the business, however, along with the company.
Therefore, the company having legal entity and considered to be
a person, he is required to be arraigned as accused.
8. In case of Dayle De Souza Versus Government Of India
Through Deputy Chief Labour Commissioner (C), 2021 (20) SCC
135, the Hon'ble Apex Court examined the issue that whether
the prosecution is maintainable against the director without
joining the company. The Hon'ble Apex Court examined the
issue in accordance with the provisions under various Acts
where allegations of the offence levelled against the company and
the director are to be permitted for the purpose of vicarious
liability. Para 22 to 30 are relevant, which reads as under:-
"22. There is yet another difficulty for the prosecution in
the present case as the Company has not been made an
accused or even summoned to be tried for the offence.
The position of law as propounded in State of Madras v.
C.V. Parekh and Another:, (1970) 3 SCC 491. reads:
"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, if the person contravening an order made under
Section 3 (which covers an 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
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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."
23. However, this proposition was later deviated from in
Sheoratan Agarwal and Another v. State of Madhya
Pradesh., (1984) 4 SCC 352. This case pertained to the
pari materia provision under Section 10 of the Essential
Commodities Act, 1955. The court held that anyone
among: the company itself; every person in-charge of
and responsible to the company for the conduct of the
business; or any director, manager, secretary or other
officer of the company with whose consent or
connivance or because of whose neglect offence had
been committed, could be prosecuted alone. However,
the person-in-charge or an officer of the company could
be held guilty in that capacity only after it has been
established that there has been a contravention by the
company as well. However, this will not mean 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.
24. Relying upon the reasoning in Sheoratan Agarwal
(supra) and limiting the interpretation of C.V. Parekh
(supra), this Court in Anil Hada v. Indian Acrylic Ltd.,
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(2000) 1 SCC 1. had held that:
"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."
25. However, subsequent decisions of this Court have
emphasised that the provision imposes vicarious
liability by way of deeming fiction which presupposes
and requires the commission of the offence by the
company itself as it is a separate juristic entity.
Therefore, unless the company as a principal accused
has committed the offence, the persons mentioned in
sub-section (1) would not be liable and cannot be
prosecuted. Section 141(1) of the Negotiable
Instruments Act, extends vicarious criminal liability to
the officers of a company by deeming fiction, which
arises only when the offence is committed by the
company itself and not otherwise. Overruling Sheoratan
Agarwal and Anil Hada, in Aneeta Hada v. Godfather
Travels and Tours Private Limited, (2012) 5 SCC 661. a
3-judge bench of this court expounding on the vicarious
liability under Section 141 of the Negotiable
Instruments Act, has held:
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"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
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."
26. The proposition of law laid down in Aneeta Hada
(supra) was relied upon by this Court in Anil Gupta v.
Star India Private Limited and Another, (2014) 10 SCC
373.:
"13. In the present case, the High Court by the
impugned judgment dated 13-8-2007 [Visionaries Media
Network v. Star India (P) Ltd., Criminal Misc. Case No.
2380 of 2004, decided on 13-8-2007 (Del)] held that the
complaint against Respondent 2 Company was not
maintainable and quashed the summons issued by the
trial court against Respondent 2 Company. Thereby, the
Company being not a party to the proceedings under
Section 138 read with Section 141 of the Act and in view
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of the fact that part of the judgment referred to by the
High Court in Anil Hada has been overruled by a three-
Judge Bench of this Court in Aneeta Hada, we have no
other option but to set aside the rest part of the
impugned judgment [Visionaries Media Network v. Star
India (P) Ltd., Criminal Misc. Case No. 2380 of 2004,
decided on 13- 8- 2007 (Del)] whereby the High Court
held that the proceedings against the appellant can be
continued even in absence of the Company. We,
accordingly, set aside that part of the impugned
judgment dated 13-8- 2007 [Visionaries Media Network
v. Star India (P) Ltd., Criminal Misc. Case No. 2380 of
2004, decided on 13- 8-2007 (Del)] passed by the High
Court so far as it relates to the appellant and quash the
summons and proceeding pursuant to Complaint Case
No. 698 of 2001 qua the appellant."
27. In Sharad Kumar Sanghi v. Sangita Rane, (2015) 12
SCC 781. this Court observed that:
"11. In the case at hand as the complainant's initial
statement would reflect, the allegations are against the
Company, the Company has not been made a party and,
therefore, the allegations are restricted to the Managing
Director. As we have noted earlier, allegations are vague
and in fact, principally the allegations are against the
Company. There is no specific allegation against the
Managing Director. When a company has not been
arrayed as a party, no proceeding can be initiated
against it even where vicarious liability is fastened
under certain statutes. It has been so held by a three-
Judge Bench in Aneeta Hada v. Godfather Travels and
Tours (P) Ltd. in the context of the Negotiable
Instruments Act, 1881.
xx xx xx
13. When the company has not been arraigned as an
accused, such an order could not have been passed. We
have said so for the sake of completeness. In the
ultimate analysis, we are of the considered opinion that
the High Court should have been well advised to quash
the criminal proceedings initiated against the appellant
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and that having not been done, the order is sensitively
vulnerable and accordingly we set aside the same and
quash the criminal proceedings initiated by the
respondent against the appellant."
28. This position was again clarified and reiterated by
this Court in Himanshu v. B. Shivamurthy and
Another., (2019) 3 SCC 797. The relevant portion of the
judgment reads thus:
"6. The judgment of the High Court has been questioned
on two grounds. The learned counsel appearing on
behalf of the appellant submits that firstly, the
appellant could not be prosecuted without the company
being named as an accused. The cheque was issued by
the company and was signed by the appellant as its
Director. Secondly, it was urged that the observation of
the High Court that the company can now be proceeded
against in the complaint is misconceived. The learned
counsel submitted that the offence under Section 138 is
complete only upon the issuance of a notice of demand
and the failure of payment within the prescribed period.
In absence of compliance with the requirements of
Section 138, it is asserted, the direction of the High
Court that the company could be impleaded/arraigned
at this stage is erroneous.
7. The first submission on behalf of the appellant is no
longer res integra. A decision of a three-Judge Bench of
this Court in Aneeta Hada v. Godfather Travels & Tours
(P) Ltd. governs the area of dispute. The issue which fell
for consideration was whether an authorised signatory
of a company would be liable for prosecution under
Section 138 of the Negotiable Instruments Act, 1881
without the company being arraigned as an accused.
The three-Judge Bench held thus: (SCC p. 688, para 58)
"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
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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."
In similar terms, the Court further held: (SCC p. 688,
para 59)
"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 drag-
net on the touchstone of vicarious liability as the same
has been stipulated in the provision itself."
xx xx xx
12. The provisions of Section 141 postulate that if the
person committing an offence under Section 138 is a
company, every person, who at the time when the
offence was committed was in charge of or 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.
13. In the absence of the company being arraigned as
an accused, a complaint against the appellant was
therefore not maintainable. The appellant had signed
the cheque as a Director of the company and for and on
its behalf. Moreover, in the absence of a notice of
demand being served on the company and without
compliance with the proviso to Section 138, the High
Court was in error in holding that the company could
now be arraigned as an accused."
29. Applying the same proposition of law as laid down in
Aneeta Hada (supra), this Court in Hindustan Unilever
Limited v. State of Madhya Pradesh, (2020) 10 SCC 751.
applying pari materia provision in Prevention of Food
Adulteration Act, 1954, held that:
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"23. Clause (a) of sub-section (1) of Section 17 of the Act
makes the person nominated to be in charge of and
responsible to the company for the conduct of business
and the company shall be guilty of the offences under
clause (b) of sub-section (1) of Section 17 of the Act.
Therefore, there is no material distinction between
Section 141 of the NI Act and Section 17 of the Act
which makes the company as well as the nominated
person to be held guilty of the offences and/or liable to
be proceeded and punished accordingly. Clauses (a) and
(b) are not in the alternative but conjoint. Therefore, in
the absence of the company, the nominated person
cannot be convicted or vice versa. Since the Company
was not convicted by the trial court, we find that the
finding of the High Court to revisit the judgment will be
unfair to the appellant-nominated person who has been
facing trial for more than last 30 years. Therefore, the
order of remand to the trial court to fill up the lacuna is
not a fair option exercised by the High Court as the
failure of the trial court to convict the Company renders
the entire conviction of the nominated person as
unsustainable."
30. In terms of the ratio above, a company being a
juristic person cannot be imprisoned, but it can be
subjected to a fine, which in itself is a punishment.
Every punishment has adverse consequences, and
therefore, prosecution of the company is mandatory.
The exception would possibly be when the company
itself has ceased to exist or cannot be prosecuted due to
a statutory bar. However, such exceptions are of no
relevance in the present case. Thus, the present
prosecution must fail for this reason as well."
9. Now, coming to the case on hand, it could be noticed that
cheque was drawn in favour of Devikrupa Construction by the
private limited company i.e. Jitendra G. Patel Project Limited
signed by the petitioner in a capacity of the Director of the
company. The details of the complaint reads as under:-
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"Before the learned Judicial Magistrate, Khambhaliya
Criminal Case No.1764 of 2007
Devikrupa Construction
Through its partner
Bhavsinh Gulabsinh Jadeja
Age: Adult, Occ: Business,
Residing at Gayatri Nagar,
Near Police Line,
At post: Jam Khambhaliya ...Complainant
Vs.
Jitendra G. Patel Project Limited
Through its Director
Ashokbhai Manvar
Age: Adult, Occ: Business,
Residing at C/13, Usha Kiran,
Yagnik Road,
Rajkot ...Accused"
10. Plain reading of the complaint between the lines
demonstrates that company Devikrupa Construction was
carrying business to rent heavy loading machines used for the
purpose of construction. The company has leased Tata Hitachi
machine to private limited company i.e. Jitendra G. Patel Project
Limited and cheque of Rs.11 lakh was issued in favour of
Devikrupa Construction drawn by private limited company i.e.
Jitendra G. Patel Project Limited, but signed by the petitioner in
capacity of the Director, which was returned unpaid on the
ground of "Fund Insufficient" and therefore, the complainant has
filed the complaint u/s 138 of the NI Act after following
procedure laid down. However, the complainant has not joined
Jitendra G. Patel Project Limited as accused - a company, which
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has drawn the cheque through the petitioner - Director of
private limited company i.e. Jitendra G. Patel Project Limited. It
is an admitted fact that the juristic person is not joined in the
matter.
11. In view of above, the petitioner cannot be held vicariously
liable for the act of the company. A clear bar is operating u/s
141 of the Act applying the ratio of the aforesaid judgment on
the case on hand. Hence, the petition deserves consideration.
12. Resultantly, present petition is allowed and proceeding of
complaint being Criminal Case No. 1764 of 2007 lodged in the
court of Ld. Judicial Magistrate First Class at Khmabhadiya,
District: Jamnagar is hereby quashed and set aside qua the
petitioner herein. Rule made absolute to the aforesaid extent.
Direct service is permitted.
(J. C. DOSHI,J)
SHEKHAR P. BARVE
