Orissa High Court

Gourav Kumar Hota vs Ajay Kumar Barik .... Opposite Party (S) on 13 March, 2025

Author: S.K. Panigrahi

Bench: S.K. Panigrahi

                                                                    Signature Not Verified
                                                                    Digitally Signed
                                                                    Signed by: BHABAGRAHI JHANKAR
                                                                    Reason: Authentication
                                                                    Location: ORISSA HIGH COURT, CUTTACK
                                                                    Date: 13-Mar-2025 17:54:08




                   IN THE HIGH COURT OF ORISSA AT CUTTACK

                                 CRLREV No.542 of 2014
        (From the order dated 05.05.2014 passed by the learned J.M.F.C.,
        Balasore in I.C.C. No.114 of 2011)

        Gourav Kumar Hota                           ....                 Petitioner(s)
                                         -versus-

        Ajay Kumar Barik                            ....         Opposite Party (s)

      Advocates appeared in the case through Hybrid Mode:

        For Petitioner(s)            :                   Mr. M. K. Mishra, Sr. Adv.
                                                                        Along with
                                                             Mr. B. K. Mishra, Adv.


        For Opposite Party (s)       :                    Mr. Debasish Samal, Adv.


                  CORAM:
                  DR. JUSTICE S.K. PANIGRAHI

                       DATE OF HEARING:-24.02.2025
                      DATE OF JUDGMENT:-13.03.2025

      Dr.S.K. Panigrahi, J.

1. The Petitioner has preferred the present revision petition assailing the

order dated 05.05.2014 passed by the learned J.M.F.C., Balasore in I.C.C.

No.114 of 2011, contending that the proceedings are vitiated in law for

want of compliance with the mandatory requirements of Section 141 of

the Negotiable Instruments Act.

I. FACTS AS PRESENTED BY THE REVISIONIST:

2. The prosecution's case can be summarized as follows:

Location: ORISSA HIGH COURT, CUTTACK

(i). Complainant/Opposite Party is the Sole proprietor of M/s. Maa

Gayatri Transport & Supplier, a business engaged in supplying

building materials such as chips, metal, boulders, sand, and stone

products in Balasore, Odisha.

(ii). Petitioner/Accused is the Executive Director of CCC Builders

Merchant Pvt. Ltd., Gurgaon, Haryana, a company engaged in

construction work. The dispute arises from a business transaction

involving the supply of building materials for the construction of

a concrete road for S.E. Railways at Balasore under the direct

supervision of the petitioner.

(iii). The complainant supplied metal and sand on credit to the

petitioner's company between October and November 2010. The

total outstanding dues against the petitioner/company were as

follows:

a. Materials supplied between 11.10.2010 and 01.11.2010:

₹6,58,300/-.

b. . Previous outstanding balance before October 2010: ₹6,34,045/-.

c. Total outstanding amount: ₹12,92,345/-.

(iv). A partial payment of ₹5,00,000/- was made through a bank

transfer from the company's account to the complainant's account.

The remaining balance of ₹7,92,345/- was due.

(v). To settle part of the outstanding dues, the petitioner (accused)

issued a cheque (No. 255951) dated 19.12.2010 for ₹4,00,000/- from

Axis Bank Ltd. at Balasore. The complainant deposited the cheque

Location: ORISSA HIGH COURT, CUTTACK

on 20.12.2010, but it was dishonored on 29.12.2010 due to

"Payment Stopped by Drawer."

(vi). The complainant was formally notified of the dishonor on

01.01.2011 and received confirmation on 03.01.2011. Multiple

attempts were made to contact the accused but they failed.

(vii). A demand notice under Section 138 of the Negotiable Instruments

Act (NI Act) was issued on 27.01.2011 through registered post

with acknowledgment due (A.D.). The accused received the notice

on 04.02.2011 but failed to respond or make payment within the

statutory period.

(viii). Consequently, the complainant filed ICC Case No. 114 of 2011

before the learned SDJM, Balasore, alleging an offense under

Section 138 of the NI Act (dishonor of cheque). The complaint was

supported by six exhibits, including the dishonored cheque (No.

255951), the deposit slip, the cheque return memo dated

15.11.2010, the statutory advocate notice dated 27.01.2011, the

postal receipts, and the returned acknowledgment due (A.D.) slip.

II. THE FINDINGS OF THE LOWER COURT:

3. Cognizance was taken by the learned SDJM, Balasore, on 15.03.2011,

and the case was later transferred to the learned JMFC, Balasore, for

trial. On 23.09.2011, the substance of the accusation was explained to the

accused, and the trial commenced.

4. The complainant was examined as PW-1 and was cross-examined at

length. At no point during the early stages of the trial did the petitioner

Location: ORISSA HIGH COURT, CUTTACK

raise any objections about the non-inclusion of the company as an

accused.

5. On 2.07.2013, at an advanced stage of the trial, the petitioner filed a

petition before the trial court arguing that the case was not maintainable

because the company was not arraigned as an accused, as required

under Section 141 of the NI Act.

6. The JMFC Court rejected the petition on 05.05.2014, stating that the case

had already substantially progressed, and raising such objections at this

stage would amount to a delay tactic.

III. SUBMISSIONS OF THE REVISIONIST:

7. The counsel for the revisionist urged the following submissions:

(i). Section 141 of the NI Act mandates that when an offense is

committed by a company, the company itself must be arraigned as

an accused. The petitioner argues that since the cheque was issued

on behalf of CCC Builders Merchant Pvt. Ltd., and the company was

not made an accused, the complaint is not legally maintainable. The

company was the actual debtor, and without its prosecution,

vicarious liability cannot be imposed on its officers.

(ii). Section 141(1) of the NI Act provides that if an offense under Section

138 is committed by a company, then both the company and its

responsible officers must be prosecuted. The petitioner, as an

Executive Director, merely signed the cheque in his official capacity

and had no personal liability. Since the company is not an accused,

the petitioner cannot be prosecuted independently.

Location: ORISSA HIGH COURT, CUTTACK

(iii). The cheque was drawn on the company's account and issued for

payments related to the company's transactions, not for any

personal liability of the petitioner. As such, the prosecution of the

petitioner without including the company is unsustainable.

(iv). The trial court misconstrued the petitioner's application as a motion

to quash cognizance, rather than a plea of maintainability. The court

lacked jurisdiction to reject the petition on the ground of lack of

jurisdiction. The trial court's reasoning was legally flawed and

warrants interference by the revisional court.

(v). The petitioner contends that the complaint and proceedings are

legally defective, and allowing them to continue would constitute an

abuse of process. The failure of the complainant to implead the

company shows mala fide intent, rendering the proceedings unfair.

IV. SUBMISSIONS OF THE OPPOSITE PARTY:

8. The counsel for the Opposite Party urged the following submissions:

(i). The petitioner personally signed the cheque and was responsible for

the company's financial transactions. Since the petitioner single-

handedly handled business dealings, including issuing cheques, he

cannot now claim that he was not personally liable.

(ii). The petitioner failed to raise the issue at the beginning of the trial

and only did so after substantial progress had been made. Courts

should not entertain objections that are clearly intended to delay

proceedings.

Location: ORISSA HIGH COURT, CUTTACK

(iii). The cheque issued by the accused was dishonored with the reason

"Payment Stopped by Drawer". The accused received the statutory

notice but remained silent, which fulfils the legal requirements of

Section 138 of the NI Act.

(iv). Reliance is placed on S.P. Mani and Mohan Dairy v. Dr. Snehalatha

Elangovan1, which held that failure to respond to a statutory notice

makes the accused liable under Section 138 NI Act. Furthermore, the

case of Siby Thomas v. Somany Ceramics Ltd.2 establishes that the

liability under Section 141 of the NI Act extends to individuals in

charge of company affairs, and raising factual disputes at a belated

stage is impermissible.

V. COURT'S ANALYSIS AND REASONS:

9. I have given my anxious consideration to the submissions of the counsel

appearing for both the parties.

10. The central issue in this case is whether proceedings under Section 138

of the Negotiable Instruments Act, 1881 (NI Act) can be maintained

against the petitioner, the Executive Director of the company, when the

company itself has not been arraigned as an accused. The dishonored

cheque in question was drawn on the company's account, yet the

prosecution has proceeded solely against the petitioner in his individual

capacity. This raises a fundamental question of law whether, in the

absence of the company, which is the principal drawer of the cheque,

the petitioner can be held vicariously liable under Section 141 of the Act.

AIR 2022 SC 4883.

AIR 2023 SC 4949.

Location: ORISSA HIGH COURT, CUTTACK

11. To address the issue at hand, it is imperative to peruse the relevant

provisions of the NI Act. Section 141 of the Act is produced

hereinbelow:

"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 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.--

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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"

12. A careful reading of the aforesaid provision establishes that the primary

criminal liability for the dishonor of a cheque rests with the drawer,

which, in the present case, is the company. The liability of its officers

arises only when the conditions stipulated under Section 141 of the

Negotiable Instruments Act are duly fulfilled. In this context, the

Supreme Court, in Aneeta Hada v. Godfather Travels & Tours (P) Ltd3.,

authoritatively expounded upon the scope of Section 141, making the

following observations:

"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 liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.

......

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

(2012) 5 SCC 661.

Location: ORISSA HIGH COURT, CUTTACK

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."

13. In the present case, the accused, an Executive Director, had signed the

cheque in question. The prosecution, however, was instituted solely

against him, without impleading the company. This raises a substantial

legal infirmity. The accused was not the drawer of the cheque in his

personal capacity, but rather as an agent of the corporate entity. While

dealing with a similar issue, the Supreme Court in the case of Ashok

Shewakramani v. State of Andhra Pradesh4 held as under:

"Section 141 is an exception to the normal rule that there cannot be any vicarious liability under a penal provision. However, such vicarious liability is attracted only when the person sought to be held liable was 'in charge of' and 'responsible to the Company' for the conduct of its business at the time the offence was committed."

14. Similarly, in the recent case of Bijoy Kumar Moni v. Paresh Manna5 the

Supreme Court provided a compelling insight into this issue. The Court

quashed the proceedings against the accused where the complainant

had failed to array the company as an accused. The Court reiterated that

for a person to be vicariously liable under Section 141, the principal

(2023) 8 SCC 473.

2024 INSC 1024.

Location: ORISSA HIGH COURT, CUTTACK

offender, the Company, must first be prosecuted. The judgment

categorically stated:

"It is the drawer company which must first be held to be the principal offender under Section 138 of the NI Act before culpability can be extended, through a deeming fiction, to the other Directors or persons in charge of and responsible to the Company for the conduct of its business. In the absence of liability of the drawer company, there would naturally be no requirement to hold other persons vicariously liable."

15. Thus, in the absence of the company as a party to the proceedings, the

prosecution against the accused alone is legally unsustainable.

Applying this principle to the present case, since CCC Builders

Merchant Pvt. Ltd. has not been made an accused, the prosecution

against its Executive Director alone fails the legal test mandated under

Section 141.

16. CONCLUSION:

17. From the foregoing discussion, it is evident that the prosecution of the

petitioner is legally untenable. The statutory requirement under Section

141 of the NI Act mandates the arraignment of the company as an

accused before vicarious liability can be imposed on its officers.

Accordingly, the failure of the complainant to implead CCC Builders