Vicarious liability under Section 138 of the Negotiable Instruments Act requires the company to be named as an accused; absence of the company renders the complaint against the individual not maintainable.

JUDGMENT :

Ambuj Nath, J.

Petitioner has filed this application for quashing of the entire criminal proceeding including order dated 13.09.2019, passed by Shri Rajeev Tripathi, learned Judicial Magistrate, Ranchi in Complaint Case No. 2902 of 2019, whereby and wherein, the learned Magistrate after inquiry, found the prima facie case to be true under section 138 of the Negotiable Instruments Act and ordered for issuance of summon against the petitioner.

2. Case of the opposite party is that the co-accused Ripunjay Prasad Singh, who was the Director of M/s Morias Infrastructure Private Limited and the present petitioner who was the CEO of M/s Kanodia Builders LLP, Goregaon, Mumbai had entered into an agreement for purchase of land with the opposite party no. 2 appertaining to Khewat No. 10, Khata No. 189, Plot No. 573, ad-measuring an area of 2.81 acres for a consideration amount of Rs. 11,64,50,000/-. The co-accused Ripunjay Prasad Singh, Director of M/s Morias Infrastructure Private Limited issued cheque of Rs. 50.00 lakhs as part payment. However, Co- accused Ripunjay Prasad Singh informed the opposite party no. 2 that he has paid the rest of amount through RTGS. Thereafter, the opposite party no. 2 executed the sale deed. The cheque issued by the Ripunjay Prasad Singh was placed for encashment which got dishonoured.

3. Mr. Kaushik Sarkhel, learned counsel appearing on behalf of the petitioner, submitted that the company of the petitioner M/s Kanodia Builders LLP, Goregaon, Mumbai has not been made an accused in the complaint case. It was further submitted that the petitioner was not the signatory to the cheque which was issued in the name of the opposite party no. 2.

4. Learned lawyer appearing on behalf of the opposite party no. 2 submitted that though, the company has not been made as an accused in the complaint case, but the liability of the petitioner is not diminished, as per provisions of section 141 of the Negotiable Instruments Act.

5. Facts of this case are squarely covered by the decision rendered in the case of Himanshu versus B. Shivamurthy and Another, reported in [(2019) 3 SCC 797] , in which the Hon’ble Supreme Court has held at para-7 to 16, which reads as under:

“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 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.”

8. The judgment of the three-Judge Bench has since been follo