Karnataka High Court
Gulab S/O Narasu Rathod vs Mohan S/O Danasing Rathod on 1 February, 2025
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CRL.A No. 200075 of 2023
IN THE HIGH COURT OF KARNATAKA,
KALABURAGI BENCH
DATED THIS THE 1ST DAY OF FEBRUARY, 2025
BEFORE
THE HON'BLE MR JUSTICE RAJESH RAI K
CRIMINAL APPEAL NO. 200075 OF 2023
(378(Cr.PC)/419(BNSS)
BETWEEN:
GULAB S/O NARASU RATHOD
AGE: 43 YEARS, OCC: BUSINESS,
R/O. UTNAL L.T NO. 2,
TQ & DIST: VIJAYAPURA - 586203.
...APPELLANT
(BY SRI SHIVANAND V. PATTANASHETTI, ADVOCATE)
AND:
MOHAN S/O DANASING RATHOD
AGED ABOUT 53 YEARS, OCC: CONTRACTOR,
R/O. UTNAL L.T NO. 2,
Digitally signed TQ & DIST: VIJAYAPURA - 586203.
by RAMESH
MATHAPATI ...RESPONDENT
Location: HIGH
COURT OF
KARNATAKA (BY SRI S.S. MAMADAPUR, ADVOCATE)
THIS CRIMINAL APPEAL IS FILED U/S. 378 (4) OF CR.P.C,
PRAYING TO ALLOW THIS APPEAL BY SETTING ASIDE THE
JUDGMENT AND ORDER OF ACQUITTAL PASSED BY THE I
ADDL. CIVIL JUDGE AND JMFC VIJAYAPURA DATED 05.01.2023
IN C.C.NO.330/2016 ACQUITTING THE RESPONDENT AND
FURTHER THE HON'BLE COURT MAY BE PLEASED TO CONVICT
THE RESPONDENT FOR THE OFFENCE PUNISHABLE U/SEC.138
OF N.I. ACT BY IMPOSING FINE OR COMPENSATION TWICE
THE DISHONORED CHEQUE AMOUNT ALONG WITH
APPROPRIATE SENTENCE OF IMPRISONMENT.
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CRL.A No. 200075 of 2023
THIS APPEAL, COMING ON FOR HEARING, THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE RAJESH RAI K
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE RAJESH RAI K)
This appeal is directed against the judgment dated
05.01.2023 passed in C.C.No.330/2016 by the I-Additional
Civil Judge and JMFC, Vijayapura, wherein the learned
Judge acquitted the respondent/accused for the offence
punishable under Section 138 of Negotiable Instruments
Act, 1881 (for short 'NI Act').
2. The parties are referred to as per their ranking
before the trial Court.
3. The facts apposite for consideration of this
appeal as borne out from the pleadings are as under:
The appellant-complainant and respondent-accused
are the relatives and the respondent approached the
appellant and requested for a hand loan of Rs.29,00,000/-
on 10.01.2015 with an assurance that he would refund the
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amount within one month. Subsequently, he has issued a
cheque bearing No.056176 dated 01.06.2015 as per Ex.P1
to the complainant for repayment of the aforesaid amount.
The said cheque was presented for encashment by the
complainant on 01.06.2015, however, the said cheque was
returned with an endorsement that there are no sufficient
funds. Thereafter, the complainant got issued a legal
notice on 11.06.2015 calling him to repay the amount.
However, accused neither replied the said notice nor
refunded the amount. Hence, the complainant filed
complaint under Section 200 of Cr.P.C., against the
accused for the offence punishable under Section 138 of
NI Act.
4. To prove the case of the complainant before the
trial Court, he himself was examined as P.W.1 and also got
examined one witness as P.W.2, so also got marked 22
documents. However, accused himself was examined as
DW.1 and got marked 2 documents.
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5. After assessment of oral and documentary
evidence, the trial Court acquitted the accused for the
offence punishable under Section 138 of NI Act.
6. I have heard the learned counsel for the
appellant so also the learned counsel for respondent and
carefully perused the entire evidence on record.
7. Before dwelling into the merits of the case, it
could be seen from the records while dismissing the
complaint, the Trial Court has considered the aspect that
cheque in question was issued by the accused on behalf of
the company i.e., Rohan Constructions. However, the
complainant failed to array the company as party to the
proceedings before the Trial Court. The complainant also
failed to issue legal notice to the company of the accused.
It is also not stated either in the legal notice or in the
complaint about the specific role and designation of the
accused in the said company. In such circumstance, the
complainant is duty bound to array the company of the
accused as a necessary party to the proceedings.
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8. The Apex Court in the case of Aneeta Hada v.
God fathers Travels Tours and Pvt. Limited reported
in (2012) 5 SCC 661 has held as follows:
48. In Anil Hada [(2000) 1 SCC 1: 2001
SCC (Cri) 174] 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: (SCC pp. 7- 8,
paras 12-13)
"12. Thus when the drawer of the
cheque who falls within the ambit of
Section 138 of the Act is a human being
or a body corporate or even firm,
prosecution proceedings can be initiated
against such drawer. In this context the
phrase 'as well as' used in sub-section
(1) of Section 141 of the Act has some
importance. The said phrase would
embroil the persons mentioned in the
first category within the tentacles of the
offence on a par with the offending
company. Similarly the words 'shall also'
in sub-section (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
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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."
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 141 of the Act stands
satisfied. There can be no dispute that as the
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liability is penal in nature, a strict
construction of the provision would be
necessitous and, in a way, the warrant."
(Emphasis supplied)
In a later judgment, the Apex Court in the case of Sunil
Bharti Mittal vs.Central Bureau of Investigation reported
in (2015)1 SCR 377 has held as follows:
60. It may be appropriate at this stage
to notice the observations made by
MacNaghten, J. in Director of Public
Prosecutions v. Kent and Sussex Contractors
Ltd. [1944 KB 146 : (1944) 1 All ER 119
(DC)] : (KB 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 circumstances 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.
61. The principle has been reiterated by
Lord Denning in Bolton (H.L.)(Engg.) Co. Ltd.
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v. T.J. Graham & Sons Ltd. [(1957) 1 QB 159
: (1956) 3 WLR 804 : (1956) 3 All ER 624
(CA)] in the following words : (QB p. 172)
A company may in many ways be
likened to a human body. They have a brain
and a nerve centre which controls what they
do. They also have hands which hold the tools
and act in accordance with directions from
the centre. Some of the people in the
company are mere servants and agents who
are nothing more than hands to do the work
and cannot be said to represent the mind or
will. Others are Directors and managers who
represent the directing mind and will of the
company, and control what they do. The state
of mind of these managers is the state of
mind of the company and is treated by the
law as such. So you will find that in cases
where the law requires personal fault as a
condition of liability in tort, the fault of the
manager will be the personal fault of the
company. That is made clear in Lord
Haldane's speech in Lennard's Carrying Co.
Ltd. v. Asiatic Petroleum Co. Ltd. [1915 AC
705 : (1914-15) All ER Rep 280 (HL)] (AC at
pp. 713 & 714). So also in the criminal law, in
cases where the law requires a guilty mind as
a condition of a criminal offence, the guilty
mind of the Directors or the managers will
render the company themselves guilty.
62. The aforesaid principle has been
firmly established in England since the
decision of the House of Lords in Tesco
Supermarkets Ltd. v. Nattrass [1972 AC 153
: (1971) 2 WLR 1166 : (1971) 2 All ER 127
(HL)] . In stating the principle of corporate
liability for criminal offences, Lord Reid made
the following statement of law : (AC p. 170
EG)
'I must start by considering the nature
of the personality which by a fiction the law
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attributes to a corporation. A living person
has a mind which can have knowledge or
intention or be negligent and he has hands to
carry out his intentions. A corporation has
none of these : it must act through living
persons, though not always one or the same
person. Then the person who acts is not
speaking or acting for the company. He is
acting as the company and his mind which
directs his acts is the mind of the company.
There is no question of the company being
vicariously liable. He is not acting as a
servant, representative, agent or delegate.
He is an embodiment of the company or, one
could say, he hears and speaks through the
persona of the company, within his
appropriate sphere, and his mind is the mind
of the company. If it is a guilty mind then
that guilt is the guilt of the company. It must
be a question of law whether, once the facts
have been ascertained, a person in doing
particular things is to be regarded as the
company or merely as the company's servant
or agent. In that case any liability of the
company can only be a statutory or
vicarious liability.'
63. From the above it becomes
evident that a corporation is virtually in
the same position as any individual and
may be convicted of common law as well
as statutory offences including those
requiring mens rea. The criminal liability
of a corporation would arise when an
offence is committed in relation to the
business of the corporation by a person
or body of persons in control of its
affairs. In such circumstances, it would
be necessary to ascertain that the
degree and control of the person or body
of persons is so intense that a
corporation may be said to think and act
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through the person or the body of
persons. The position of law on this issue
in Canada is almost the same. Mens rea
is attributed to corporations on the
principle of 'alter ego' of the company.
64. So far as India is concerned, the
legal position has been clearly stated by the
Constitution Bench judgment of this Court in
Standard Chartered Bank v. Directorate of
Enforcement [(2005) 4 SCC 530 : 2005 SCC
(Cri) 961] . On a detailed consideration of the
entire body of case laws in this country as
well as other jurisdictions, it has been
observed as follows : (SCC p. 541, para 6)
'6. There is no dispute that a company
is liable to be prosecuted and punished for
criminal offences. Although there are earlier
authorities to the effect that corporations
cannot commit a crime, the generally
accepted modern rule is that except for such
crimes as a corporation is held incapable of
committing by reason of the fact that they
involve personal malicious intent, a
corporation may be subject to indictment or
other criminal process, although the criminal
act is committed through its agents.'"
40. It is abundantly clear from the above
that the principle which is laid down is to the
effect that the criminal intent of the "alter
ego" of the company, that is the personal
group of persons that guide the business of
the company, would be imputed to the
company/corporation. The legal proposition
that is laid down in the aforesaid judgment in
Iridium India case [Iridium India Telecom
Ltd. v. Motorola Inc., (2011) 1 SCC 74: (2010)
3 SCC (Cri) 1201] is that if the person or
group of persons who control the affairs of
the company commit an offence with a
criminal intent, their criminality can be
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imputed to the company as well as they are
"alter ego" of the company."
(Emphasis supplied)
9. On careful perusal of the finding of the Hon'ble
Apex Court in the above judgment, the complaint filed by
the complainant against the accused is not maintainable.
10. In that view of the matter, the appeal filed by
the complainant is liable to be dismissed on the sole
ground that the complainant failed to array the company
as party in the proceedings.
11. Accordingly, the appeal filed by the complainant
is dismissed with liberty to approach the appropriate
forum/Court for suitable reliefs as available under law.
Sd/-
(RAJESH RAI K)
JUDGE
VNR
CT: PS
