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SUPREME COURT OF INDIA
KRISHNA MURARI, BELA M. TRIVEDI, JJ.
Pawan Kumar Goel – Appellant
Versus
State of U.P. and Another – Respondents
Criminal Appeal Nos. 1999, 2000, 2001, 2002, 2003 of 2022, Special Leave Petition (Crl.) Nos. 1697, 3563, 3566, 3567, 4471 of 2020
Decided On : 17-11-2022
Negotiable Instruments Act, 1881 – Sections 138 and 141 – Criminal Procedure Code, 1973 – Section 482 – Dishonour of cheque – Offence by company – If complainant fails to make specific averments against company in complaint for commission of offence under Section 138 of NI Act, same cannot be rectified by taking recourse to general principles of criminal jurisprudence – Provisions of Section 141 impose vicarious liability by deeming fiction which pre-supposes and requires commission of offence by company or firm – Unless company or firm has committed offence as a principal accused, persons mentioned in Sub-Section (1) and (2) would not be liable to be convicted on the basis of principles of vicarious liability – For maintaining prosecution under Section 141 of NI Act, arraigning of company as an accused is imperative and non-impleadment of company would be fatal for complaint – Once limitation prescribed for taking cognizance of offence under Section 142 of NI Act has expired, additional accused cannot be impleaded subsequent to filing of complaint – Besides, simply because a person is a Director of a company, it does not necessarily mean that he fulfils requirements so as to make him liable – Without being a Director a person can be in charge of and responsible to company for conduct of its business – Criminal proceedings rightly quashed by High Court – Appeals dismissed. (Paras 19, 21, 23, 28, 32 and 33)
Facts of the case:
High Court vide impugned judgment and order dated 19.11.2019 allowed Writ Petition and quashed the entire proceedings including the summoning order dated 18.3.2013 passed by the Magistrate for offence punishable under Section 138 Negotiable Instruments Act, 1881.
Findings of Court:
No hesitation in holding that no error has been committed by High Court in allowing the Writ Petition filed by the respondent no. 2 and quashing the impugned order and the proceedings.
Result : Appeals dismissed.
The key legal principles derived from the provided judgment are as follows:
Mandatory Arraignment of the Company: For a prosecution under the relevant section concerning dishonour of cheques issued by a company, it is imperative that the company itself is arraigned as an accused. Failure to do so renders the complaint legally defective and the proceedings liable to be quashed. This requirement is strict and cannot be rectified later by amendments or additional pleadings (!) (!) .
Vicarious Liability and Responsible Persons: The liability of individuals such as directors or officers in charge of the company is vicarious and depends on their role at the time the offence was committed. It is essential to specifically allege that such individuals were in charge of and responsible for the conduct of the company's business at that time. Merely holding a designation or being a director does not automatically establish liability unless such specific averments are made and proved (!) (!) .
Specific Allegations in the Complaint: The complaint must contain clear and specific allegations that demonstrate the accused was in charge of and responsible for the conduct of the company's business at the relevant time. General or vague descriptions are insufficient to establish the requisite liability under the applicable sections (!) (!) .
Prohibition on Subsequent Addition of Accused: Once the prescribed limitation period for initiating proceedings has expired, the addition of new accused persons, such as the company itself or other responsible persons, is not permissible. The procedural timeline and the requirement for specific averments are strictly enforced, and no subsequent amendments can bypass these statutory constraints (!) (!) .
Strict Construction of Penal Provisions: The criminal statutes related to offences by companies are to be construed strictly. The provisions impose a legal fiction of vicarious liability, which necessitates strict compliance with procedural and substantive requirements. This includes the necessity of specific pleadings and averments to establish the involvement of responsible persons (!) (!) .
Role of the Court in Examination of Complaint: The court's initial examination of a complaint must verify that the necessary factual allegations are present to meet the statutory requirements. If the complaint lacks specific averments that the accused was in charge of and responsible for the conduct of the company's business at the relevant time, the proceedings are liable to be quashed (!) (!) .
In summary, the legal framework emphasizes the importance of precise, specific allegations against the correct parties, strict adherence to procedural timelines, and the necessity of arraigning the company as an accused to sustain a prosecution under the relevant section concerning dishonour of cheques issued by a company.
JUDGMENT :
KRISHNA MURARI, J.
1. Leave granted.
2. The present appeals are directed against the final judgment and order dated 19.11.2019 passed by the High Court of Judicature at Allahabad (hereinafter referred to as “High Court”) in four Criminal Miscellaneous Writ Petitions filed by the Respondents seeking quashing of the summoning order dated 18.03.2013 passed by the Additional Chief Judicial Magistrate-II, Muzaffarnagar (hereinafter referred to as “Magistrate”) and order dated 02.12.2013 passed by the Additional Sessions Judge, Muzaffarnagar (hereinafter referred to as “Sessions Court”). The High Court allowed the Writ Petition and quashed the entire proceedings including the summoning order dated 18.03.2013 as well as order dated 02.12.2013.
3. As the present appeals are filed by the same Appellant challenging the same impugned judgment, for the sake of brevity they are being disposed of by this common Judgment. Criminal Appeal arising out of Special Leave Petition (Crl.) No. 1697 of 2020 is taken up as a lead case and the parties arrayed thereunder are to be taken in the same manner for the other cases as well.
Factual background:
4. The Appellant is engaged in the business of sales of machinery and spare parts under the name and style of M/s Pawan Hardware Store. Respondent No. 2 herein is one of the Director of Ravi Organics Limited, a private limited company, engaged in the manufacturing and sales of various types of chemicals. Both of them were having business dealings and Ravi Organics Limited was having a running account with the appellant. Respondent No. 2 is alleged to have issued an account payee cheque for a sum of Rs. 10 Lakhs payable at Union Bank of India, Muzaffarnagar, in favor of the Appellant towards discharge of its liability for supply of materials made by the appellant. When the appellant presented the cheque before the banker, it was dishonored on 24.12.2012. The Appellant, thereafter, sent a legal notice dated 01.01.2013 to Respondent No. 2 through registered post, which, though, was served, however, there was no response from Respondent No. 2.
5. Despite service of notice, when neither there was any response from the accused nor payment was made, appellant filed four criminal complaints against Respondent no. 2 for the offence punishable under Section 138 Negotiable Instruments Act, 1881 (hereinafter referred to as ‘NI Act’) on the allegations that the account payee cheque bearing no. 802276 of Union Bank of India, Muzaffarnagar, for a sum of Rs. 10 lakhs dated 20.11.2012 issued by the respondent no. 2 towards the outstanding bills when presented for clearance was dishonored on the ground that the cheque amount exceeds arrangement.
6. The Magistrate took cognizance of the said complaint and required the Appellant to get his statement recorded under Section 200 of the Code of Criminal Procedure (hereinafter referred to as ‘Cr.P.C’). However, on 07.02.2013, the Appellant filed an affidavit to this effect seeking that it be read as a statement under Section 200 Cr.P.C. The Magistrate passed an order dated 18.03.2013 summoning Respondent No. 2 for trial in Criminal Case No. 162 of 2013.
7. Being aggrieved by the summoning order dated 18.03.2013, Respondent no. 2 filed Criminal Revision No. 212 of 2013 before the Sessions Court. Vide order dated 02.12.2013, the Sessions Court dismissed the criminal revision petition and held that the cheque was issued against outstanding payments arising out of commercial transactions between Respondent No. 2 and Appellant.
8. Respondent No. 2 aggrieved by the dismissal of the Criminal Revision approached the High Court by way of Criminal Miscellaneous Writ Petition No. 24632 of 2013 seeking quashing of the summoning order dated 18.02.2013 passed by the Magistrate and also the order dated 02.12.2013 passed by the Sessions Court. The High Court vide impugned judgment and order dated 19.11.2019 allowed the Writ Petition and quashed the entire proceedings including the summoning
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