NEGOTIABLE INSTRUMENTS ACT, 1881 Section 141 - Offences by companies

*[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.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.] Synopsis 1. Repealing and Amending Act, 2001 (Act 30 of 2001) _ effect on sections 138 to 142 2. Sub-sections (1) & (2) _ essential elements and distinction 3. Company 4. Liability of sister concern 5. Sick company 6. Partnership firm

7. Dissolution of a partnership firm 8. Non-registration of partnership firm _ effect 9. Proprietary concern _ status 10. Complaint by and against proprietary concern 11. Proprietary concern _ De facto partner 12. `Other association of individuals' 13. Association of individuals _ Wife issuing cheque to discharge husband's liability _ effect 14. Prosecution 15. Categories of offenders 16. Liability of a Director 17. Notice of demand to Director _ necessity _ section 138 (b) and section 141 18. Complaint against Directors not quashed _ instances 19. Complaint quashed against Directors _ instances 20. Liability of partner 21. Complaint on behalf of company _ anthorised persons _ sections 26, 27 & 141 22. Non prosecution of partnership firm 23. Offence by company _ necessity 24. Complaint on behalf of a company 25. Cheque issued in personal capacity 1. Repealing and Amending Act, 2001 (Act 30 of 2001) _ effect on sections 138 to 142 The Negotiable Instruments Act, 1881 was enacted and came into force in December, 1881. It deals with negotiable instruments, such as Promissory Notes, Bills of Exchange, Cheques, etc. The said Act is hereinafter referred to as the Original Act. By the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (hereinafter referred to as "the Amending Act"), certain amendments were made by Parliament in the Original Act. It, inter alia, inserted Chapter XVII ("Of Penalties in case of Dishonour of certain cheques for Insufficiency of Funds in the Accounts") contained in sections 138 to 142. By the Repealing and Amending Act, 2001 (Act 30

of 2001), published in the Gazette of India, on September 3, 2001, certain statutes were repealed as shown in the First Schedule. Several statutes were mentioned in the said Schedule along with the extent of repeal. At Serial No. 66, the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, is referred to and it is stated that it is repealed as "the whole". The question arises that since the Amending Act of 1988 is represented as "the whole", whether the provision of Chapter XVII i.e., sections 138 to 142 also stood repealed.1 It is clear that once an amendment was made in 1881 Act by the Amending Act of 1988 and it had been brought into force, it has served its purpose and amended the Original Act. Its object was to plant necessary amendment in the 1881 Act. Once such planting has been effected, the Amending Act (Planting Act), having achieved its object, lost its efficacy. It was thereafter not necessary to continue the Amending Act, in a statute book. There are several such Amending Acts under which amendments have been made in Original Acts. Once the plant takes root in the Original Act, an appropriate step is required to be taken by the Legislature. If no action is taken, hundreds and thousands of such Amending Acts continue to remain in statute books. A device is, therefore, adopted by the Legislature to repeal all such Amending Acts, which would repeal only those Acts, i.e., Amending Acts. But such repeal does not affect original Acts already stood amended. As observed in Clarke v. Bradlough, 1881 (1) QBD 63: "Where a statute is incorporated by reference into a second statute, the repeal of the first statute by third does not affect the second. Therefore the amendment made in the Original Act of 1881 by the Amending Act of 1988 remains in force and repeals of Amending Act in 2001 has not affected the amendment. The contention is, hence, rejected.2 There is an additional reason for holding that the Repealing and Amending Act, 2001 will not affect the amendment already made by the Amending Act of 1988 in the Original Act of 1881. Section 4 of the Repealing and Amending Act saves the operation of the amendments inserted in the original Act by the Repealed Act. The amendments, therefore, are clearly covered by the saving clause of section 6A of the General Clauses Act.2 Thus, even considering section 6A of the General Clauses Act read with section 4 of the Repealing and Amending Act, we are satisfied that the amendment in the Original Act remains in operation and does not get abrogated.2 The legal position is well settled. Since the Amending Act has already been enacted and implemented by making necessary amendment and insertion in the original Act, the Amending Act has lost its utility as its purpose has already been served. Hence, the Amending Act was repealed `as a whole'2 2. Sub-sections (1) & (2) _ essential elements and distinction While the essential element for implicating a person under sub-section (1) is his being incharge of and responsible to the Company in the conduct of its business at the time of commission of the offence, the emphasis in sub-section (2) is upon the holding of an office and consent, connivance or negligence of such officer irrespective of his being or not being actually in charge of and responsible to the Company in the conduct of its business. Thus, the important and distinguishing feature in sub-section (1) is the control of a responsible person over the affairs of the Company rather than his holding of an office or his designation while the liability under sub-section (2) arises out of holding an office and consent connivance or neglect. While all the persons covered by sub-section (1) and sub-section (2) are liable to be proceeded against and also punished upon proof of their being either in charge of and responsible to the Company in the conduct of its business or of their holding of the office and having been guilty of consent, connivance or neglect in the matter of commission of the offence by the Company, the person covered by sub-section (1) may, by virtue of the proviso, escape only punishment

if he proves that the offence was committed without his knowledge or despite his due diligence.3 Director appointed subsequently after issuance of notice is not liable.4 Chairman resigning from company prior to date of issue of cheque. No averment showing consent or connivance on his part. He is not liable.5 When offence by company, and directors other than those who had issued cheques, consent or connivance cannot be inferred without material6 The wordings contained in section 141(1) of the Act are slightly different from the wordings contained in section 141(2) of the Act with reference to the presumption. It is mentioned under section 141(1) of the Act that when a company has committed the offence, every person, who was in-charge and responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty. But under section 141 (2) of the Act, the presumption would arise against the director, manager, etc., only when it is proved that the offence has been committed with consent or connivance of or is attributable to , any neglect on the part of those persons. Therefore, mere words that the petitioner-directors are responsible for the failure to make the payment of the cheque amount without any further material would not be sufficient to conclude that it would cover section 141 (2) of the Act.6 3. Company "Section 141 of the Negotiable Instruments Act, 1881 deals with offences by Companies and the Explanation to the said section is as follows: (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." It is needless to say that a company is a juristic person, a legal entity. A company, though is legal entity, does not have soul, mind, body and limbs to walk to Court for preference of a complaint. The dictates of common sense, practical wisdom, prudence and expedience impel the Courts in such a situation to allow a Company to be represented by some person concerned with the affairs of the Company. Similarly, in case of a firm also, though strictly not a legal entity for all purposes, but a legal entity for the purpose of this Act, has to act through some human agency connected with the affairs of the firm. In the normal course, such legal entities are managed by manager, partner, managing partner, director, managing director or principal officers like other executives in charge of affairs and administration. When the law expressly recognizes the right of such persons and executives to represent the interest of legal entity, like corporate body, company, firm, etc., no special and express authorization should be required for initiating any legal proceedings. In the instant case, the 1st respondent is a Private Limited Company having a legal entity, a juristic person incorporated under the Companies Act and the complaints have been filed in the name of the said legal entity, of course, by its manager Sri Ramesh Kumar Gupta. Hence, in one's considered opinion, no authority is required specially keeping in mind the Explanation to section 141 of the Negotiable Instruments Act, which is extracted above."7 From the above, it would be clear that section 141 is in two parts, sub-section (1) of section 141 of the Act provides that if the person committing an offence under section 138 of the Act 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 shall be liable to be proceeded against and punished accordingly. Sub-section (2) of section 141 of the Act provides that notwithstanding anything contained in sub-section (1), where any `offence under the said Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance if, or is attributable to, any neglect on

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. Related This would show that subSearches: section (2) of section 141 of the Act is in addition to sub-section (1) of section 141 of the Act. This would mean that a person, who is Free Law covered by sub-section (1) of section 141 of the Act, shall be deemed to be guilty of the offence and shall be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Besides that, those persons who are covered under sub-section (2) of section 141 of the Act, shall also be in deemed to be guilty of the offence and shall also be liable to be proceeded Legal against News and punished accordingly, in addition to the persons who are covered in sub-section (1) of section 141 of the Act. With regard to the persons who are covered by sub-section (1) of section 141 of the Act, it has been provided that nothing contained in the said sub-section shall render any College Of all Law person liable to punishment if he proves that the offence was committed without his knowledge or that he had exercised due diligence to prevent the commission of such offence. Thus, in respect of the persons covered by sub-section (1) of section 141 of the Act, the Legislature has already provided a safeguard inasmuch as those persons having been given a right to show that In the offence was Holidays India committed without their knowledge or that they had exercised all due diligence to prevent the commission of such offence.8 Vicariously liability to be determined at the time of framing charge and complaint cannot be quashed on the ground that he had retired at the time of expiry of 15 days after notice. It is to be decided at time of trial.9

Free Legal Research

From a glance at relevant provisions, it is obvious that the Act has created a deemed offence under a legal fiction, whenever a cheque drawn by a person on an account maintained by him is bounced either for insufficiency of the funds in theIndia account or it exceeds the Vacation arrangements made. It is apparent that the person who has drawn the cheque on an account maintained by him alone is liable in the Packages event of bouncing of the cheque later. The Act has not envisaged any penal consequences for an attempt, abetment, and conspiracy to commit the said offence. In other words, no vicarious liability has been envisaged under the Act except the person who has drawn the Journal LawAct. From a cheque. However, a situation where the person happens to be a company, it has been taken care of under section 14 Of of the perusal of the said provision, three categories of persons can be discerned, who could be brought within the purview of the penal liability through the legal fiction envisaged in the said section and they are (i) the company which committed the offence; (ii) every one who is inKashmir Conflict charge of and is responsible for the business of the company; and (iii) any other person who is a Director or a Manager or a Secretary or Officer of the company with whose connivance or due to whose negligence the company has committed the offence. Thus, when the Ina firm, the criminal drawer of the cheque who falls within the ambit of section 138 of the Act is human being or a body corporate,Hotels or even proceedings can be initiated against such drawer. When the company is the drawer of the cheque, such company is the principal offender, Chandigarh and the remaining persons are made offenders by virtue of the legal fiction created by the Legislature as per the said section. The actual
10 vide Anil offence should be committed by the company and then alone the other two categories would also become liable for the offence Corporate Law

Hada v. Indian Acrylic Limited.11 Relying on the said judgment, the same was held in Mohd Isaq Gulsani v. J. Rajamouli,12 in Criminal Attorney Petition No. 3464 of 2000 dated 17-11-2000. That was a case where the question arose was as to whether the Directors of the company could be proceeded when no proceedings were taken against the company. The Apex Court held that the provision of the Act do not Lawshould have contain a condition that the prosecution of a company is sine qua non for prosecution of other persons, but University actual offence been committed by the company and then alone the other two categories of persons could also become liable for the offence. School When no averment is made in complaint about the directors being in charge of the affairs of the company, the documents filed in support thereof cannot be relied on.13 In Sheoratan Agarwal v. State of Madhya Pradesh,14 the Apex Court while interpreting the provisions of section 10 of the Essential Commodities Act which are in pari materia with section 141 of the Negotiable Instruments Act in the middle of para 5 of its judgment held as follows:

"The section appears to our mind to be plain enough. If the contravention of the order made under section 3 is by a company, the persons who may be held guilty and punished are: (1) the company itself; (2) 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 who for short we will describe as the person-in-charge of the company, and (3) any Director, Manager, Secretary or other Officer of the company with whose consent or connivance or because of neglect attributable to whom for short we shall describe an officer of the company. Anyone or more all of them may be prosecuted and punished. The company alone may be prosecuted. The person-in-charge only may be prosecuted. The conniving officer may individually be prosecuted, one, some or all may be prosecuted. There is no statuary compulsion that the person-in-charge or an officer of the company may not be prosecuted unless he be ranged alongside the company itself. Section 10 indicates the person who may be prosecuted where the contravention is made by the Company. It does not lay down any conditions that the person-in-charge or an officer of the company may not be separately prosecuted if the company itself is not prosecuted. Each or any of them may be separately prosecuted or along with company. Section 10 lists the persons who may be held guilty and punished when it is a company that contravenes an order made under section 3 of the Essential Commodities Act." When Director resigns after date of cheque but before date of notice, cause of action partly arise on drawal of cheque and proceedings cannot be quashed at trial stage.15 4. Liability of sister concern If a sister concern (of accused) issues cheque drawn on its account in discharge of a part of the cheque owed by the co-accused Company, it cannot escape the liability on the premise that it is not maker/drawer of the cheque.16 5. Sick company Section 138 has been incorporated into the Negotiable Instruments Act so as to see the banking transaction run shortly. A deemed offence has been created under the statute, the penal consequences cannot be escaped on the provisos that it is the Company Court alone that has jurisdiction and the provision of the Companies Act will prevail over the provisions of the Negotiable Instruments Act. There is no legal basis for such a contention and therefore it merits more consideration.17 The pendency of the proceedings before the B.I.F.R. is no bar for the criminal prosecution.18 Section 22 of SIC (Special Provisions) Act, 1985 does not take within its sweep criminal proceedings under section 138.19 The institution and contamination and criminal proceedings under section 138 are not affected by section 22 of the SIC (Special Provisions) Act, 1985.20 Section 138 is a penal provision and incorporates strict liability. Section 22 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 does not take within its sweep criminal prosecution against the company.21 6. Partnership firm The explanation to section 141 says: "(a) "company" means any body corporate and includes a firm or other association of individual; and

(b) "director" in relation to a firm, means a partner in the firm." Thus the definition of a company would take in firm also in view of the above explanation. In view of section 141 the partners who are responsible to the firm for the conduct of the business of the firm as well as the firm are to be deemed to be guilty of the offence under section 138 of the Negotiable Instruments Act if the cheque issued by the firm is dishonoured due to any of the grounds mentioned in section 138 of the Act. The proviso to sub-section (1) of section 141 would make it clear that the burden would be on the partner to prove that the offence was committed without his knowledge or that he had exercised due diligence to prevent the commission of the offence. In fact that stage would come only if he was made an accused in the case. Thus, all the partners of the firm who are responsible for the conduct of the business of the company or firm are to be arrayed as accused and all of them are liable to be proceeded for the offence under section 138 of the Negotiable Instruments Act. Whether any of the accused is liable to be proceeded against for the alleged offence has to be decided on the basis of the allegations made in the complaint and also on the basis of the sworn statement of the complainant.22 Accused stating that they were not partners at all. Averments in complaint then they were partners and responsible, partnership deed not produced. Held averment not sufficient.23 Filing of partnership deed at a later stage to show that the partners were actively involved in business is of no consequence when no such document was filed along with complaint.24 In absence of requisite averment in complaint, offence against accused partners cannot be made out and partners are entitled to be discharged.24 Vicarious liability is fastened only on those partners who at the time offence was committed were in charge of and responsible to firm for conduct of its business.24 7. Dissolution of a partnership firm A Partnership can be dissolved only in the mode prescribed by sections 40 to 44. According to section 40, a firm may be dissolved with the consent of all the partners or in accordance of a contract between the partners. Section 41 provides for compulsory dissolution of a firm. Section 42 provides dissolution of a partnership firm on the happening of certain contingencies. Section 43 provides dissolution by notice of partnership-at-will. According to section 43, where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. Section 44 provides dissolution of a partnership firm by the Court.1 Mutual consent of partners in dissolution of firm can be expressed or implied1, According to section 32 a partner may retire with the consent of all the other partners or in accordance with an express agreement by the partners or where the partnership is at will, by giving notice in writing to all other partners of his intention to retire.25 8. Non-registration of partnership firm _ effect The section 69(2), Partnership Act postulates that if a firm is not registered one, it or any body on its behalf cannot maintain a `suit' against a third party to enforce a right arising from a contract. So, what is barred is a `suit' that has been filed to enforce a right arising from a contract. In other words, the liability of a third person to the firm arising out of a contract cannot be enforced by way of suit if the firm is unregistered. The word `suit' has not been defined in the aforesaid Act. It is, therefore, desirable to refer to `Law of Lexicon' and

the judicial pronouncements to ascertain the true meaning of word `suit' in the legal context. `Suit' means `a proceeding instituted in Civil Court by presentation of a plaint. The word `suit' ought to be confined to such proceedings as, under that description, are directly dealt with in the Code of Civil Procedure, or such as by the operation of the particular Act which regulates them are treated as suits (see Law of Lexicon, 1997 Edition). The word `suit' in common parlance means a process instituted in a Court for recovery or protection of a right, enforcement of a claim, or to redress civil injuries.26 Section 142 of the Act under caption "Cognizance of offences" provides that cognizance of the offence under section 138 can be taken upon a `complaint' in writing made by the payee or the holder in due course of the cheque. The word `complaint' defined in section 2 (d) of the Code of Criminal Procedure means any allegation made orally or in writing to a Magistrate, with a view to taking action under the said Code, that some person, whether known or unknown, has committed an offence, but does not include a police report. Since section 138 is a penal provision that prescribes punishment for bouncing of cheque on any of the grounds mentioned therein, the Legislature in its wisdom has used the word `complaint' and not `suit' in section 142 because a `suit' can be maintained for recovery of money or for any other civil remedies. So the bar created for maintaining a suit in section 69 of the Partnership Act by an unregistered firm cannot be stretched and applied to maintain a criminal proceeding under section 138 of Act.27 Effect of non-registration of the partnership firm under section 69(2) of the Indian Partnership Act is applicable only to cases involving civil rights and not to criminal cases _ Prosecution is maintainable.28 Further, the Supreme Court in the case B.S.I. Ltd. v. Gift Holdings Pvt Ltd.,29 has held that: "....A criminal prosecution is neither recovery of money nor for enforcement of any security etc. Section 138 of the Negotiable Instruments Act is a penal provision the commission of which offence entails a conviction and sentence on proof of the guilt in duly conducted criminal proceedings. Once the offence under section 138 is completed the prosecution proceedings can be initiated not for recovery of the amount covered by the cheque but for bringing the offender to penal liability." Even plain reading of section 69 (2) of the Partnership Act leaves no scope for doubt that what is barred by the said section is the institution of a suit to enforce right arising from a contract or conferred by the Partnership Act by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person in suit is or has been shown as a partner in the Register of Firms.30 A careful reading of section 69 (2) of the Partnership Act clearly shows that an unregistered partnership firm is barred from filing a civil suit and there is no bar as such to file a private complaint and it is purely criminal liability on the part of the person who has issued the cheque. Even if the cheque is issued by a partner of an unregistered firm for legally recoverable debt or otherwise and if such cheque is dishonoured when it is presented for encashment, it amounts to a criminal liability.30 In the case of Abdul Gafoor v. Abdurahiman,31 the Kerala High Court held that an unregistered firm can prosecute a complaint under section 138 of the Negotiable Instruments Act and the effect of non-registration of a firm under section 69 of the Partnership Act is applicable only to a case involving civil rights. Under these circumstances it could be said that section 69 (2) of the Partnership Act is applicable only where the civil rights are invoked and not in criminal cases. Non-registration of the firm has no legal bearing on the criminal case.30

9. Proprietary concern _ status Status of the proprietary concern in the eyes of law _ The proprietary concern is not an independent, legal and juristic entity having legal recognition in the eyes of law. Therefore, neither can it initiate any proceedings nor can proceedings be initiated against it. In the case of a proprietary concern, the proprietor is always the affected person who can either indict or be indicted.32 In Vaidyanathan v. Dodla Dairy Limited, 1999 ILW (Cri) 395, M. Karpagavinayagam, J. held that it is a settled position of law that the proprietorship concern by itself is not a legal entity apart from its proprietor; the proprietary concern and the proprietor are one and the same person. The learned Judge further held, that both proprietorship and proprietrix are one and the same and it can be put in the cause title of the complaint, while prosecuting the drawer, as both the things convey the same meaning.33 10. Complaint by and against proprietary concern In Raman v. Krishna Pharmaceutical Distributors,34 Pratap Singh, J held that the proceedings against Sri Janaki Pharmacy, represented by proprietor, are liable to be quashed, since the proprietary concern is not a legal entity and A. Raman was the drawer of the cheque, who can be prosecuted. In the decision of the Gujarat High Court in Satish Jayantilal Sha v. Pankaj Mashruwala,35 R. R. Jain, J. held that definition of person under section 11 of Indian Penal Code and under section 11 of General Clauses Act does not include `proprietor' and hence a proprietary concern is not a legal entity or juristic person and it can neither initiate any proceedings nor proceedings can be initiated against it. In Anas Industries, rep. by its proprietor S. Ram Mohan v. Suresh Bafna,36 B. Akbar Basha Khadiri, J. held that Anas Industries is the accused and it is not a juridical person and the prosecution against the proprietorship suffers inherent defect and is liable to be quashed. Maintainability of the complaint filed by the proprietor through proprietary concern as such cannot be construed to be barred keeping in view the provisions of sections 138 and 142 of the Act. It was observed in M.M.T.C. Ltd. v. Medchl Chemicals and Pharma (P) Ltd.37 as under: "If any special Statute prescribes offences and makes any special provision for taking cognizance of such offences under the Statute, then the complaint requesting the Magistrate to take cognizance of the offence must satisfy the eligibility criterion prescribed by the Statute. The only eligibility criterion prescribed by section 142 is that the complaint under section 138 must be by the payee or the holder in due course of said cheque. This criterion is satisfied as the complaint is in the name and on behalf of the appellant-company who is the payee of the cheque. Merely because complaint is signed and presented by a person, who is neither an authorised agent nor a person empowered under the Articles of Association or by any resolution of the Board to do so is no ground to quash the complaint. It is open to the de jure complainant company to seek permission of the Court for sending any other person to represent the company in the Court. Thus, even presuming , that initially there was no authority, still the company can, at any stage, rectify that defect. At a subsequent stage the company can send a person who is competent to represent the company." In the above mentioned case reliance was placed on Vishwa Mitter v. O.P. Poddar,38 wherein it was held that any one can set the criminal law in motion by filing a complaint of facts constituting an offence before the Magistrate entitled to take cognizance. It was further laid

down that a Court can decline to take cognizance on the sole ground that the complainant was not competent to file the complaint. In R. Basu v. C. Suresh,39 the Kerala High Court held that, when a cheque is dishonoured, the person who issued it becomes liable for prosecution for the offence under section 138 of the Negotiable Instruments Act, 1881. The drawee can launch a complaint against the person who had drawn the cheque whether it was in his personal capacity or as the proprietor of the proprietary concern. 11. Proprietary concern _ De facto partner It is a matter of common knowledge as well as settled principle of law that a proprietary concern does not have any partners. The partnership and proprietary concern do not go together and they are rather mutually exclusive. That being the situation, if the first accused is described as proprietary concern and the second accused its proprietor, the third accused cannot be impleaded in the complaint as de facto partner.40 12. `Other association of individuals' A reading of Explanation (a) indicates that expression "company" shall mean a body corporate and includes a firm or other association of individuals. The term "other association of individuals" cannot be understood to refer even to informal understandings between individuals. It has to be understood in the context of body corporate and partnership firms. The principal of ejusdem generis gets attracted in such a case. The "association of individuals" should be of similar nature as companies and partnership firms.40 Apart from companies and partnership firms, the law provides for registration of "association of individuals" such as those under Societies Registration Act. The reference can be only to such "association of individuals" and not any other loosely knitted, uncertain amoebic gatherings. In fact, to hold an individual responsible in the absence of such a process of registration or incorporation would be next to impossibility. Conversely, if such a procedure is permitted, even third parties can be held liable though they do not have legal or other relationships with such unincorporated and unregistered agencies.41 Mere issuance of a cheque by one person in discharge of liability of another person cannot make an association. Even if the expression "other association of individuals" as it occurs in section 141 of the Act is loosely interpreted to be not necessarily a juristic person, like a company or a firm, there must be an indication of existence of an association among the individual.42 A reading of Explanation (a) indicates that the expression "Company" shall mean a body corporate and includes a firm or other association of individuals. The term "Other Association of Individuals" cannot be understood to refer even to informal understandings between individuals. It has to be understood in the context of body corporate and partnership firms. The principal of ejusdem generis gets attracted in such a case. The "association of individuals" should be of similar nature as companies and partnership firms.41 Apart from companies and partnership firms, the law provides for registration of "association of individuals" such as those under the Societies Registration Act. The reference can be only to such "association of individuals" and not any other loosely knitted, uncertain and amoebic gatherings. In fact, to hold an individual responsible to the absence of such a process of registration or incorporation would just be next to impossibility. Conversely, if such a procedure is permitted, even third parties can be held liable though they do not have any legal or other relationships with such unincorporated and unregistered agencies. 13. Association of individuals _ Wife issuing cheque to discharge husband's liability _ effect the and just any

Accused husband and wife were allegedly having share dealing with the complainant and in discharge of some debt of wife, a cheque was allegedly issued by her in favour of complainant. A complaint under section 138 was filed against husband and wife. The allegations and averments in complaint were only to the effect that the wife had been doing the business along with her husband and cheque was issued in discharge of her liability although the cheque was neither issued or signed by her nor was the account maintained by her or by a person who could be said to be an "association of individuals." Instead, the account was maintained by human beings and natural persons who happen to be her husband and daughter. The complaint nowhere even alleged that the co-accused persons, i.e., the husband and the wife, were an "association" within the meaning of section 141 of the Act or otherwise. Secondly, the alleged history of the wife maintaining an account with the complainant in respect of her transactions of shares, jointly with her husband, may be indicative of a debt or other liability of the wife towards the complainant. And, the cheque may be for the discharge of such liability of the wife which would make the issuance of cheque a payment in consideration of the debt. In other words, the cheque could be towards a legally enforceable debt or liability since a cheque can de drawn by one person towards a legally enforceable debt or liability of another person and it is not necessary under section 138 of the Act that the cheque must have been drawn by the person for his own debt or liability. In short, even if prima facie, issuance of a cheque were not taken to be without consideration, to extend the criminal liability to the person in discharge of whose debt or liability the cheque was issued, it first requires the linkage of an association. Mere issuance of a cheque by one person in discharge of liability of another person cannot make an association.43 14. Prosecution For an offence committed by a company under section 138 of Negotiable Instruments Act, section 141 provides that the person who was incharge of and was responsible to the firm for the conduct of its business is also liable and proceedings can be initiated against either or both, the company and the person incharge. The very fact that the company has committed the offence is sufficient to make the latter also liable unless he proves at least one of the two defences specified on the proviso. It is also not correct to hold that prosecution of the person in charge of the business of the company is sustainable only if the company is also made an accused. Either the company can be prosecuted or the person mentioned in subsection (1) can be prosecuted or both can be prosecuted together in the same proceedings.44 There is nothing to suggest in section 141 that the same person cannot be made to face prosecution either under sub-section (1) or subsection (2) or both. A Director/Manager can be proved to be guilty as person in charge and responsible to the company as well as the Director of the company who, as such, might have consented to, connived at or been negligent in respect of the offence of dishonour of cheque committed by the company.45 Offences under section 138 Negotiable Instruments Act and section 420, IPC are quiet distinct and different offences, though some times there may be overlapping and sometime accused may commit both offences. Section 300 Cr PC does not bar for separate prosecutions for both offences and the question of application of principle of double jeopardy or rule of estoppel does not come into play.46 15. Categories of offenders When a dishonoured cheque is drawn by or on behalf of a company, the natural persons connected with the commission of the offence are sought to be caught into the net of criminal liability. The natural and juristic person cannot be the same and yet attract a criminal liability.47 Three categories of persons responsible, namely (1) the company or the firm which committed the offence; (2) every one who was

incharge of and was responsible for the business of the company or the firm; (3) any other person who is a director or a manager or a secretary or officer of the company, with whose connivance the company or the firm has committed the offence. There must be a specific accusation that such person was incharge of and responsible for the conduct of the business of the company or the firm at the relevant time when the alleged offence was committed.48 There are two categories of persons who can be deemed to be guilty of the offence under section 138 of the Negotiable Instruments Act, if the person who committed an offence under that section is a Company. First category consists of every person who, at the time the offence was committed, was in charge of and was responsible to the Company for the conduct of its business. The second category of persons as given in sub-section (2) of section 141 are those against whom it is proved that the offence has been committed with the consent or connivance of, or attributable to, any neglect on their part.49 Three categories of persons are brought within the purview of the penal liability according to the provisions of section 141 of the Act, 1881: (1) company/firm; (2) every one who was in-charge of and was responsible for the business of the company; and (3) any other person who is a Director or a Manager or Secretary or Officer of the company; with whose connivance or due to whose neglect the company has committed the offence. It is nowhere provided in section 141 that in absence of the company, the persons who was responsible to the company and for the conduct of the business of the company would not be liable.50 Held that in view of the provisions of section 139 of the Act, burden to show that cheque was not issued for a debt or liability lies only on accused. Similar view was taken by this Court in Sunil Kumar Tyagi v. State of Rajasthan.50 16. Liability of a Director Every director is not automatically, vicariously liable for the offence committed by the company _ Only the director incharge and responsible to the company for the conduct of the business at the material time when offence was committed would be liable.51 The liability of a Director of a Company for prosecution for an offence punishable under section 138, Negotiable Instruments Act, apart from the company and the person who signed the cheque is only if he was in-charge of and was responsible to the company for the conduct of the business of the company at the time the offence was committed and complainant makes an averment to that effect in the complaint.52 Provisions similar to section 141, Negotiable Instruments Act, are also found under the Prevention of Food Adulteration Act, 1954. If there is no whisper in the complaint against the Directors nor a shred of evidence, the Directors are not vicariously liable.53 The vicarious liability cannot be attached to directors who have already retired two years before the cheque was issued.54 In the case of Balakrishnan, Unity Drugs Centre v. Jaison P.V.55 a complaint was filed against the petitioners under section 138 of the Negotiable Instruments Act, 1881. In the complaint there was also mention of offences committed which were punishable under section 420 of the Indian Penal Code, 1860. The petitioners were directors of the first accused company and the cheques issued by the company were dishonoured. The respondent alleged that even after receipt of information of dishonour of cheque and demand for payment by way of a notice issued, the petitioners had failed to make payments. Apart from saying that the petitioners were directors of the company, there was no mention in the complaint as to how they were made

liable for the offences under section 138 of the Negotiable Instruments Act, 1881. Section 141 of the Act makes a director liable for an offence under section 138 in two ways, (1) if he was in charge of and was responsible to the company for the conduct of the business, and (2) if the offence was committed with the consent or connivance of or attributable to any neglect on the part of the director. The Kerala High Court held that it was highly necessary to state in the complaint as to how the directors of a company were made liable for an offence committed by the company under section 138 of the Act. Only if the liability for the offence was stated in the complaint would the accused be able to know what defence had to be adopted by him. As there were no sufficient averments to show how the petitioners were liable as directors of the company for the offence, proceedings against he petitioners stood quashed. 17. Notice of demand to Director _ necessity _ section 138(b) and section 141 On a plain reading of section 138 (b) of the Act, it is seen that when a cheque presented to a Bank is dishonoured, the payee or the holder in due course of the said cheque can make a demand for payment of the said amount of money by giving a notice in writing to the drawer of the cheque. In spite of the receipt of the said notice, if the drawer of the cheque fails to make payment of the said amount of money to the payee or as the case may be to the holder in due course of the cheque, he shall be deemed to have committed an offence. Therefore, when the drawer of a cheque is an individual who has been issued with the notice of dishonour of the cheques with a demand for making such payment issued under section 138 (b) of the Act, and fails to make the payment of the said amount of money either to the payee or to the holder in due course, he shall be deemed to have committed the offence. However, when the offence is committed by a company, and by virtue of section 141, 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; whether issue of notice to the company alone is sufficient, is to be considered. In the case of an offence committed by a company, the cheque is drawn by a person who is in charge of the company on behalf of the company. Therefore, in order to make the company and the drawer of the cheque liable for the offences, a notice is necessarily to be issued to the company as well as the drawer of the cheque on behalf of the company as per section 138 (b) of the Act.56 It is immaterial whether cheque is issued by Director in his individual capacity or his saving bank account. All persons in charge of affairs of company are liable to be prosecuted.57 Complaint need not state what the specific duties of director in the company were. It is sufficient of state that director was in-charge of company's affairs at time of offence on offence was committed with his consent or connivance.58 18. Complaint against Directors not quashed _ instances The first paragraph of section 87 makes it clear that the party who consents to the alteration as well as the party who made the alteration are disentitled to complain against such alteration, e.g. if the drawer of the cheque himself altered the cheque for validating or re-validating the same instrument, he cannot take advantage of it later by saying that the cheque became void as there is material alteration thereto. Further, even if the payee or the holder of the cheque made the alteration with the consent of the drawer thereof, such alteration also cannot be used as a ground to resist the right of the payee or the holder thereof. It is always a question of fact whether the alteration was made by the drawer himself or whether it was made with the consent of the drawer. It requires evidence to prove the aforesaid question whenever it is disputed.59

When disputed question of facts are involved, such question can be determined during trial, so complaint under section 138, Negotiable Instruments Act cannot be quashed by High Court by taking recourse to section 482 Cr PC.60 Specific averment made in complaint that a person was director in-charge and responsible for conduct of business at relevant time when offence was committed averment disputed producing minutes showing that he was not the director in-charge at relevant time. Complaint cannot be quashed without taking evidence in trial Court.61 When it is contented that director in question had no concern with day to day affair of company, it is not sufficient to quash complaint. Averment disputed by producing minutes of company.62 Following are the instances in which the complaint on account of dishonour of cheque was not quashed: 1. The question whether the accused was a Director of the company being a question of fact.63 2. Lack of territorial jurisdiction of the trial court by itself is not a ground for quashing proceedings under section 138.64 3. The question as to whether complaint is premature would be open to be decided by the trial magistrate.65 4. The disputed question of fact that director of the company resigned before issue of cheque was raised.66 5. The fact that the de facto complainant has civil remedy, by itself, is not, and cannot be, a ground for quashing the complaint.67 6. The allegation in complaint made out prima facie case under section 138 Negotiable Instruments Act.68 7. When the cheque is returned by the bank with an indorsement `cheque reported stolen', only after examination of parties the Court can come to the conclusion that the cheque was returned unpaid due to insufficiency of funds. Therefore, the complaint cannot be quashed.69 8. Once trial has commenced, no application under section 482 Cr PC should be entertained for quashing the proceedings particularly when accused/petitioner has concealed the material fact that examination of witnesses has commenced.70 9. The defence that the cheque got dishonoured due to mandate issued by Income-Tax department or because the cheque was issued as security for borrowing needs to be examined during trial.71 10. In the face of remedy of discharge provided to the accused under section 245, Cr PC, parallel remedy of quashing summoning order and for recalling the same is impermissible.72 11. The question whether the directors are liable to pay the loan amount or not is purely a matter of evidence.73 12. When complaint is signed and presented by a person who is neither an anthorised agent nor empowered under articles of

association.74 13. Accused opened the bank account as Director on behalf of company and issued cheques.75 14. Whether the cheques issued as securities for loans and loan discharge and whether Managing Director stayed away from companies affairs are questions to be gone into during trial so complaint under section 138 cannot be quashed.76 15. The order of Magistrate for issuing process is not purely an interlocutory but intermediate or quasi-final order, which attracts revisional jurisdiction under section 397, Cr PC. As per settled law, power under section 482, Cr PC should not be resorted to if there is a provision in Cr PC for redressal of the grievance.77 16. Pendency of complaint under section 138 Negotiable Instruments Act is no ground to quash F.I.R. for offence under section 420, IPC in the light of section 210, Cr PC.78 17. High Court cannot quash criminal complaint pending in the Court outside the State.79 18. The single complaint is filed for two dishonoured cheques and two different demand notices.80 19. Non-mentioning of cheque number when all other necessary particulars are given in the notice.81 20. The plea that the cheque was issued only for securing peaceful possession and there was no legal liability is to be decided on merit at the full dressed trial and not at the initial stage.82 21. The accused company was declared `sick' and B.I.F.R. had issued directions restraining company or its Directors not to dispose of its assets without the consent of the Board.83 22. Complaint cannot be quashed merely on the ground that wrong number of dishonoured cheque is mentioned in the notice.84 23. When there is specific averment in the complaint that the accused looked after the complaint of co-accused company and was responsible for its act and conduct and the cheque in question was issued by him.85 Despite the absence of specific words in complaint; 'at the time of issuance of cheque".86 24. If the difference of the amount mentioned in dishonoured cheque and the notice is hardly Rs. 600.87 25. The complainant being stranger to the firm or company will not be in the know of management or affairs or arrangements of the firm/Company. Therefore, partner/director receiving the notice should give the name of person in-charge of and responsible for the conduct/ business of the firm/company and it is not sufficient to reply that he is not responsible without specifying the person responsible. When the person responsible is not specified in reply to the notice, complaint against partner/director cannot be quashed.88

26. The disputed question of fact whether the accused was sleeping partner or the active partner of the firm can be decided during the trial.89 27. The defence of the accused that he had already retired/resigned from directorship at the time of 15 days after the receipt of demand notice cannot be considered at the initial stage for the purpose of quashing complaint under section 482, Cr PC.90 28. Cheque signed by two persons accused, dismissal of complaint against one accused is no ground for quashing proceedings against the other.91 29. Mere pendency of civil suits between parties cannot be a ground for quashing criminal proceedings.92 19. Complaint quashed against Directors _ instances The basic law is that a complaint under section 138, the Negotiable Instruments Act cannot be quashed by the High Court by taking recourse to section 482, Cr PC if disputed questions of facts are involved which need to be adjudicated after respective evidence of the parties before the trial Court. However an account of legal defects like limitation, etc. in the complaint pertaining to notice by the complainant to the drawer or filing of the complaint, the complaint can be quashed. Following are the instances of cases where the complaint regarding dishonour of cheque was quashed: (1) On deposit of the cheque amount along with interest at the rate of 18% P.A. from the date of cheque till the date of payment, the complaint under section 138 of Negotiable Instruments Act and proceeding under section 82/83, Cr PC against the accused company was quashed.93 (2) When there was no averment in the complaint about petitioners, accused no. 3 to 5 being in charge for conduct of business of accused no. 1 company or the offence under section 138, Negotiable Instruments Act, committed with their consent/connivance.94 (3) Once the first complaint was dismissed in default, filing of 2nd complaint can never postpone the period of limitation or cause of action, the second complaint is therefore liable to be quashed,95 if barred by time. (4) The notice under proviso (b) of section 138 was not sent within 15 days of receipt of information about dishonour of cheque by the bank.96 (5) The accused did not function as Chairman and Director of accused company during the period when cheques were drawn.97 (6) The complainant gave incorrect cheque numbers which according to complainant have been taken back and fresh cheques were issued.98 (7) When the accused was neither signatory to the cheques nor was in charge of day-to-day affairs of the firm.99 (8) When non-payment of the amount of dishonoured cheque is neither wilful nor wanton on the part of accused company or its managing director but only due to the bank order passed by the B.I.F.R. under section 22A of the Sick Industrial Companies

(Special Provisions) Act, 1985.100 (9) The letter is issued by complainant not to the drawer company of the cheque but to another concerned to make payment failing which the matter shall be referred to the legal department, which cannot be treated as a notice contemplated under clause (b) of section 138.101 (10) The material alteration is done in the cheques by alteration of the year 1995 into 1996.102 (11) When employee of a company issued cheque in his individual capacity, he alone is the drawer so proceedings against the company are liable to be quashed.103 (12) When accused is sleeping partner of the firm.104 (13) The accused retired from partnership at least 3 months prior to issuance of cheque.105 (14) The accused not named in the complaint nor averment made to cover him under section 142 Negotiable Instruments Act.106 (15) When the accused is proprietorship firm which is not a legal entity.107 (16) The resolution of the company authorised the complainant to file suit for recovery/realisation of part payment on Inter Corporate Deposit with interest but did not authorise him to file criminal complaint under section 138.108 (17) The cheque is dishonoured on the ground it does not bear signature of the Managing Director of the Company and seal of the Company.109 (18) If despite of the order of the competent Court, the complainant has not returned the cheques to the drawer and instead has presented such cheques to the bank, who dishonoured the cheques, the complaint under section 138 is liable to be quashed.110 (19) When one of the accused is juvenile offender he cannot be jointly proceeded under section 138 with other accused persons who are major.111 (20) If no offence is made out even if allegations made in the complaint and statement of complainant and his witnesses are taken on their face value.112 (21) The accused was neither running a partnership firm nor was a partner nor signed the cheque.113 (22) The notice under section 138 (b) is issued beyond prescribed period.114 (23) If before the expiry of the notice period under section 138 (c), the drawer/accused obtained stay order from ESI Court against the recovery of arrears in respect of which the dishonoured cheque was issued.115

(24) Accused not Director of the Company on the date of commission of the offence.116 (25) Non-assertion of despatch of notice and its service on the accused makes the complaint under section 138 liable to be quashed.117 20. Liability of partner What is required for holding a partner vicariously liable for the offence under section 138 committed by a firm is the actual role played by him in the management and conduct of its business. Simply because it is alleged in the complaint that the accused partner approached the complainant for supply of the goods which were supplied, is not sufficient to make accused partner vicariously responsible. The necessary ingredients of section 141, Negotiable Instruments Act must be alleged in the complaint to make the partner liable for an offence under section 138 of the Act. There must be clear, unambiguous and specific allegations that accused partners were responsible to the firm in the conduct of its business.118 Mere fact that the dishonoured cheque is issued by another partner of the firm or the accused partner is a sleeping partner, does not have any effect on liability of accused as partner of the firm.119 But a person who is neither the signatory of the cheque nor partner of the firm, cannot be arrayed as an accused in the complaint under section 138.120 A partner retired three months prior to issuance of cheque which fact is established by Gazette notification and need not face trial.121 21. Complaint on behalf of company _ authorised persons _ sections 26, 27 and 141 On the basis of the section 141 of the Act though it contemplates a case where a company is an accused, applying the same analogy even in case of a company being the complainant it can be said that a person who can file a complaint on behalf of the company would be a person who is in-charge of or was responsible to the company. Sections 26 and 27 of the Negotiable Instruments Act also deals with similar situation in relation to promissory notes, bills, cheques, etc. Under section 26 of the Act "every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, indorsement, delivery and negotiation of a promissory note, bill of exchange or cheque". From these sections it is clear that such a person to bind the Corporation or a Company, should be a person contracting so as to bind such a Corporation. Hence, the principle evolved is that a duly authorised agent can also file a complaint, suit or any legal proceedings in the competent Court of law. In other words he must be such a person that his action would bind the company which he represents whether he is called as a manager, secretary or by any other designation. In fact, corporations or companies being inanimate legal persons, necessarily should act through such authorised physical persons and on the basis of such authority, can sign the pleadings or defend proceedings for and on behalf of the corporation or a company. This is what the law laid down in the case of Satish and Co., and Ruby Leather Exports.122 In the instant case, no doubt, authorisation as per the complaint is to the Managing Director of the Bank. If Managing Director himself has authorised the Manager by the authorisation letter dated 19-11-1999 to file the complaint and thus both the Manager and the Managing Director who are responsible, are answerable to the company, are persons who can file such complaint.123 22. Non-prosecution of partnership firm In the latest decision reported in Anil Hada v. Indian Acrylic Ltd,124 a question was posed by the Apex Court, when a company which committed offence under section 138 of the Negotiable Instruments Act eludes from being prosecuted therefore, can the directors of that company be prosecuted for that offence? The Apex Court has pointed out that the offender under section 138 of the Negotiable

Instruments Act is the drawer of the cheque but by virtue of fiction envisaged in section 141 of the Negotiable Instruments Act, three categories of persons can be discerned within the purview of penal liability. They are (1) the company which committed the offence, (2) everyone who was in-charge of and responsible for the business of the company, (3) any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose neglect the company has committed the offence. Their Lordships of the Apex Court have stated as under in paragraph 12 (page 40 of 99 Comp Cas): "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 a firm, prosecution proceedings can be initiated against such drawer. In this context the phrase `as well as' used in subsection (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 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 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." It would be thus clear that non prosecution of the company does not vitiate the proceedings.125 23. Offence by company _ necessity The effect of reading section 141 is that when the company is the principal offender under section 138 of the Act the remaining persons are made offenders by virtue of the legal fiction created by the Legislature as per the section. Hence 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.126 On a bare reading of the section 141, it is clear that when the drawer of the cheque is a company, the company and every person in charge of the company are liable for the offence. Such person may be Director, Manager, Secretary or other Officer of the company but by virtue of the aforesaid provisions, the company and such person(s) are deemed to be liable to be proceeded against and punished, unless such person(s) proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent commission of such offence. Since a Company/Firm is an artificial person, it cannot by itself, commit any offence personally but if the offence is committed by its Partners/ Officials/Directors, it is the Company/Firm who has committed the offence. Therefore, when the offence is committed by a Company/firm, a Director/Officer/Partner who is not shown to be in charge of and responsible to the Company/Firm for the conduct of the business of the Company/Firm cannot be prosecuted without impleading the Company/Firm as an accused.127 In Uttar Pradesh Pollution, Control Board v. Modi Distillery,128 a question arose whether the Chairman, Vice-Chairman and Members of the Board of the Directors are liable to be proceeded against under section 47 of the Water (Prevention and Control of Pollution) Act in the absence of proceedings launched against the Chairman, Vice-Chairman, etc., of the Company on the ground that there could be no vicarious liability of the Chairman, etc. unless the company was prosecuted. Since the company was not made a party accused, therefore, the proceedings against the Chairman, etc. of the Company were quashed. The matter went up in appeal before the Hon'ble Supreme Court. Though the order of the High Court quashing the proceedings was set aside on the ground that instead of company, a unit thereof was arrayed as a party that too because of the lapses on the part of the company, therefore, the necessary correction by adding the company as the accused could be directed to be made and the proceedings could not be quashed. Regarding impleadment of the company

as an accused in view of the provisions of section 47 of the Water (Prevention and Control of Pollution) Act which are almost similar to the provisions of section 141 of the Act, the Hon'ble Supreme Court held as under (para 6): "Although as a pure proposition of law in the abstract the learned Single judge's view that there can be no vicarious liability of the Chairman, Vice-Chairman, Managing Director and Member of the Board of Directors under sub-section (1) or (2) of section 47 of the Act unless there was a prosecution against Messrs Modi Industries Limited, the company owning the industrial unit can be termed as correct, the objection raised by the petitioners before the High Court ought to have been viewed not in isolation but in the conspectus of facts and events and not in vacuum. We have already pointed out that the technical flaw in the complaint is attributable to the failure of the industrial unit to furnish the requisite information called for by the Board. Furthermore, the legal infirmity is of such a nature which could be easily cured." It is, thus, evident that the liability of the Directors, Officers, etc. is vicarious and will flow from the liability of the company/firm, therefore, the company/firm, which has committed the offence, has essentially to be impleaded as a party accused in the complaint, otherwise the complaint will be rendered defective and liable to be dismissed.129 Following the ratio of Uttar Pradesh Pollution Control Board's130 case, Madras High Court in S. Krishnamoorthy v. B.S. Kesavan,131 held as under: "On a plain reading of section 14(1) , it would be clear that when the offence was committed by the Company, the person responsible alone cannot be prosecuted, leaving out the company. When the offence is committed by a firm, the partner of the firm cannot be prosecuted, leaving out the firm." In Dilip Kumar Jaiswal v. Debapriya Banerjee,132 a cheque signed by the Managing Director of the company, which was the subject matter of an offence under section 138 of the Act, came up for consideration. It was held that the cheque signed by the Managing Director was issued by him for the Company as Director and therefore, the liability to make the payment being that of the company; the company was the drawer of the cheque. In Krishna Bai v. Arti Press,133 the impugned cheque was issued by Mudra Graphics Pvt. Ltd., of which the accused in that case was the Managing Director. The complaint was laid against the Managing Director, Krishna Bai, alone. Mudra Graphics Pvt. Ltd. was not arrayed as an accused. On that ground, the complaint was challenged. Justice Padmini Jesudurai held as follows: "Unless the company is an accused, the person who is in charge of and responsible to the Company for conducting business of the Company, cannot be made an accused. This is the settled position of law reiterated by the Supreme Court in Uttar Pradesh Pollution Control Board v. Modi Distillery,2 where a complaint against the Chairman, Vice-Chairman, Managing Director and Members of the Board of Directors of the Company and the unit of the company, but without the company, was quashed by the High Court on the ground that there could be no vicarious liability on the Chairman and others, unless there was a prosecution of the Company and the Supreme Court upheld that part of the legal finding but on the facts of that case, remitted the matter to the Trial Court to give a direction to the complainant to make a formal amendment of the complaint to make the company also as an accused. In the instant case, the offence is committed by Mudra Graphics Pvt. Ltd. which is not an accused in this case. In such circumstances there can be no prosecution of the Managing Director, when the Company is not prosecuted. In the instant case before me, that debt due was by the firm. The cheque was issued by the firm. No doubt the petitioner, as partner, had signed the agreement as well as the cheque. Inasmuch as the offence was committed by the firm, without the firm being arrayed as an accused, the petitioner alone cannot be arrayed as an accused and be proceeded against. In view of non-compliance with section 141 of

the Act, all these complaints are liable to be quashed. Though Mr. T.K. Sampath had put forth other submissions also, since I feel that it is unnecessary to consider the other submissions, I am not considering the same." 24. Complaint on behalf of a company A complaint on behalf of a company can be filed by any person connected with the affairs of a company, namely a manager, partner or director or any other person authorised. A company is a legal entity and has to be represented by some human agency in preferring a complaint before the court. There is no express or explicit provision in the Act as to the manner in which the company is to be represented in preferring a complaint before the court for violation of the provisions under section 138 of the Negotiable Instruments Act. The person connected with the affairs of the company in the normal run of the things who may be either its manager, partner, managing partner or director or any other person authorised by the company, can represent it during the course of legal proceedings before the court. It was held that a complaint filed by the firm represented by its manager could not be said to be a complaint preferred by a person other than the company which was the payee entitled to prosecute the drawer for an offence under section 138 of the Negotiable Instruments Act, 1881.134 The law in this regard is now well-settled. Anyone can set the criminal law in motion by filing the complaint constituting the offence. For the offences under Negotiable Instruments Act only criteria prescribed by section 142 is that it must be constituted by the payee/holder in due course. The fact that the complaint is lodged by a Manager/other employee who had not been authorised by the Board of Directors to sign and file the complaint cannot be the ground for quashing the complaint.135 25. Cheque issued in personal capacity The Company and its directors are not responsible if a cheque is issued in his personal capacity by the financial advisor. The complaint is to be quashed.136 For a cheque issued by employee of the accused company in his individual capacity he alone is drawer and liable and the company cannot be prosecuted if said cheque is dishonoured.137
___________
* Ins. by Act 66 of 1988, se c. 4 (w.e .f. 1-4-1989). ** Ins. by Act 55 of 2002, se c. 8 (w.e .f. 6-2-2003). 1. K.K. Vasude va Karup v. Union of India, II (2003) BC 481: (2004) 119 C om p C as 951 (Bom ) (DB). 2. K.K. Vasude va Karup v. Union of India, II (2003) BC 481: (2004) 119 C om p C as 951 (Bom ) (DB). 3. K.C . Se thi v. State of Gujarat, III (2003) BC 484: 2003 C ri LJ 1161: (2004) 120 C om p C as 801 (Guj). 4. R .B.F. Nidhi Ltd. v. State of Andhra Prade sh, (2004) 119 com p C as 674.

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26. Gurcharan Singh v. State of Uttar Prade sh, III (2002) BC 164: 2002 (4) C rim e s 165: (2003) 114 C om p C as 434 (All). 27. Ibid., Se e also Ke rala Are caut Store s v. R am k ishore and Sons, AIR 1975 Ke r 144. 28. Abdul Gafoor v. Abdurahim an, (1999) 2 ALT (C ri) 196: (1999) 4 C rim e s 1998: 1999 ISJ (Bank ing) 701 (17-3-1999). 29. I (2002) BC 292 (SC ): I (2000) C C R 226 (SC ): 2000 SC C (C ri) 538: (2000) 2 SC C 737: AIR 2000 SC 926. 30. Be acon Industrie s v. Anupam Ghosh, I (2004) BC 484 (Karn). 31. 1999 (4) C rim e s 1998: 1999 ISJ (Bank ing) 701: (1999) 2 ALT (C ri) 196. 32. Satish Jayantilal Shah v. State of Gujarat, (1999) 95 C om p C as 303 (11-03-1996). 33. S. K. R e al Estate s v. S. K. Krishnam oorthy, I (2002) BC 491: (2002) 111 C om p C as 400: 2002 C ri LJ 1689 (Mad). 34. III (1994) C C R 1601. 35. 1996 C r LJ 3099 (Guj). 36. 1999 (1) LW Guj 405; se e also S. K. R e al Estate s v. S. K. Krishnam oorthy, I (2002) BC 491: (2002) 111 C om p C as 400: 2002 C ri LJ 1689 (Mad). 37. IV (2001) C C R 316 (SC ): VIII (2001) SLT 83: I (2002) BC 280 (SC ): AIR 2001 SC W 4793: (2002) 1 SC C 234: 2002 C ri LJ 266: (2002) 108 C om p C as 48. 38. AIR 1984 SC 5: (1983) 4 SC C 701: 1984 SC C (C ri) 29; se e also Be di Sons Ste e ls and W ire s v. B. G. Brothe rs, II (2002) BC 406: (2002) 112 C om p C as 426 (P&H). 39. (2004) 122 C om p C as 253 (Ke r). 40. Unite d Phorphe rus Ltd. v. Saite ja Fe rtilize rs and Pe sticide s, III (2003) BC 130: (2003) 114 C om p C as 587 (AP). 41. Unite d Phorphe rus Ltd. v. Saite ja Fe rtilize rs and Pe sticide s, III (2003) BC 130: (2003) 114 C om p C as 587 (AP). 42. R itabe n Ashok bhai Shah v. Sanjay Kam bhai Se th, 2004 C r LJ 1058: I (2004) BC 432 (Guj). 43. R itabe n Ashok bhai Shah v. Sanjay Kam bhai Se th, 2004 C r LJ 1058: I (2004) BC 432 (Guj). 44. Ale x v. Vijayan, (1994) 81 C om p C as 910 (Ke r); se e also Dalip Kum ar Jaiswal v. De bapriya Bane rje e , (1992) C om p C as 434 (C al); M.O .H. Iqbal v. M. Utham an, (1995) 82 C om p C as 726 (Ke r). 45. K.C . Se thi v. State of Gujarat, III (2003) BC 484: 2003 C ri LJ 1161 (Guj). 46. V. Kutum ba R ao v. M. C handrase k har R ao, III (2003) BC 500: 2003 C ri LJ 4405 (AP). 47. R itabe n Ashok bhai Shah v. Sanjay Kanubhai Se th, 2004 C r LJ 1058 (Guj): I (2004) BC 432 (Guj).

48. Saraswathy Am m a. v. Swil Lim ite d, 83 (2000) DLT 75: (2000) 100 C om p C as 12: (2000) 2 C om p LJ 240. 49. O rie nt Synte x Lim ite d v. Be sant C apital Te ch Lim ite d, II (1999) BC 609: (2000) 100 C om p C as 12: (2000) 2 C om p LJ 240. 50. Sure ndar Sum e r Singh v. Am it Ente rprise s, I (2003) BC 595: (2001) 104 C om p C as 669: (2000) 38 C LA 154 (R aj). 51. Se cunde rabad He alth C are Ltd. v. Se cunde rabad Hospitals Pvt. Ltd., II (1999) BC 277: (1999) 96 C om p C as 106: (2001) 40 C LA 136: 1998 C ri LJ 4521. 52. R am asita Finance and Inve stm e nts Pvt. Ltd. v. Me e nak shi Nagappa Halam anavar, 2004 C r LJ 1029 (Karn). 53. Municipal C orporation of De lhi v. R am Kishan R ohatgi, AIR 1983 SC 67: 1983 C r LJ 159: (1983) C ri LJ 159: 1983 SC C (C ri) 115 (SC ); se e also State of Haryana v. Brij Lal Mittal, AIR 1998 SC 2327: 1998 C r LJ 3287: (1998) 5 SC C 343: (1998) 93 C om p C as 329. 54. Ashok Muthanna v. Escorts Finance Ltd., I (2002) BC 320 (Mad). 55. (2004) 122 C om p C as 820 (Ke r). 56. Harish C . C hadda v. XS Financial Se rvice s Ltd., II (2002) BC 720: (2001) 107 C om p C as 169 (Mad). 57. Moham m e d Idrose v. Dugar Insulation India Pvt. Ltd., (2004) 21 C om p C as 826. 58. Sanje e v R . Apte v. Gove rnm e nt of NC T of De lhi, (2004) 119 C om p C as 907. 59. Ve e ra Ex ports v. T. Kalavathy, AIR 2002 SC 38: (2002) 1 SC C 97: 2002 C ri LJ 203. 60. Aravali Pipe s Ltd. v. Haryana State Industrial De ve lopm e nt C orporation Ltd., Haryana, III (2003) BC 176 (2000) 100 C om p C as 800 (P&H). 61. K.S. Jayanth Kum ar v. B.N.R . Pare bai, (2004) 118 C om p C as 686. 62. Dushyant & Gadjil v. Shanta Godila, (2004) 118 C om p C as 318. 63. P. Sudha Ve nk atalak shm i v. Sre e C hak ra C otton C om pany, III (2002) BC 120 (AP); se e also Gajanand Agarwal v. Sharm a Trade rs Indus. Pvt. Ltd., II (2002) BC 66: (2002) 109 C om p C as 909 (AP). 64. Asanam m al Kasim v. C e at Financial Se rvice s Ltd., III (2002) BC 127: (2002) 112 C om p C as 287 (AP). 65. Archna Mangal v. Kapil De v, III (2002) BC 162 (P&H). 66. R aje sh Kum ar Jain v. Swaroop C hand Jain, II (2002) BC 180: 2002 C ri LJ 2462 (MP). 67. Ve je ndla Srinivasaprasad v. State of Andhra Prade sh, III (2002) BC 448 (AP). 68. Prane sh Kum ar v. State of Jhark hand, III (2002) BC 488 (Jhar). 69. T.P. C handran v. M.K. Sathyanandan, III (2002) BC 695 (Ke r).

70. Zoom Vision v. P. Manick am and C o., II (2002) BC 13 (Mad); se e also P. Sum athi v. M.P. Ashok , I (2003) BC 194 (Mad); Am ar C hand Agarwal v. Shanthi Bose , AIR 1973 SC 799: (1973) 4 SC C 10: 1973 C ri LJ 577. 71. Dr. J. Gopalak rishnan v. N. Shanthi, II (2002) BC 129: (2001) 106 C om p C as 571 (Mad). 72. Bhopal Sugar Industrie s Ltd. v. State of Uttar Prade sh, II (2002) BC 257: 2002 C ri LJ 1905 (All). 73. De ve e ram m a v. Shivalingappa, II (2002) BC 262 (Karn); se e also L. De ve e ram m a v. Shivalingappa, II (2002) BC 491 (Karn). 74. C . Prabhu v. Sangam C orporation (Finance and Inve stm e nt), II (2002) BC 369: 2002 C ri LJ 2142 (Karn). 75. Urjit Singh v. State of Punjab, II (2002) BC 423: (2002) 112 C om p C as 183 (P&H). 76. Te chno Futura Inte rnational Ltd. v. T.S. Anthony Sam y, II (2002) BC 667 (Mad). 77. Jagdish Pande y v. State of Bihar, I (2002) BC 120 (Jhar); se e also R aje ndra Kum ar, Sitaram Pande y v. Uttam , (1999) 3 SC C 134: AIR 1999 SC 1028: 1999 C ri LJ 1620: I (1999) C C R 82 (SC ): II (1999) SLT 35: (1999) 2 PLJR (SC ) 5. 78. R ajat Mittal v. State , I (2002) BC 250: 2002 (108) C om p C as 55 (De l). 79. Krishna Kum ar Me non v. Ne ote ric Inform ation (P) Ltd., I (2002) BC 512: 2002 C ri LJ 706 (Ke r) (DB). 80. Y. Sharm a v. Surya Fine cap Ltd., I (2002) BC 588 (De l). 81. Nityanand v. Jam una Prak ash, I (2002) BC 610 (Karn). 82. De vam m a v. A.R . R aghu, 2004 C r LJ 1357 (Karn). 83. W orld Te x Ltd. v. State of R ajasthan, 2004 C r LJ 420 (R aj); se e also S.K. Pharm ace uticals Ltd. v. Ve d Prak ash Gupta, I (2003) BC 379 (MP). 84. Kavuri Suwarna Bala Sundaram v. Karm ati Poorna C handra R ao, 2004 C r LJ 712 (AP). 85. Paras Mark e ting C o. v. R uchira Pape rs Ltd., I (2004) BC 372 (MP). 86. R am a Mohan R ao v. S. Nagu Bai, I (2004) BC 368 (Mad). 87. Krishna Bhupati v. C handana C onstructions, I (2004) BC 467 (Karn). 88. Prude ntial Engine e rs Builde rs and De ve lope rs Bangalore v. Kurk oor Bharath R am , I (2004) BC 609 (Karn). 89. Shak ti Bhak oo v. Varun Khe m k a, III (2003) BC 24 (P&H); se e also Poonam Mahajan v. Mohan Lal Swara, III (2003) BC 589: 2003 C ri LJ 2442 (J&K). 90. K.C . Se thi v. State of Gujarat, III (2003) BC 484: 2003 C ri LJ 1161 (Guj). 91. Sham sul Islam v. 16th Addl. Distt. Judge , Kanpur Nagar, II (2003) BC 42: 2002 C ri LJ 4564 (All).

92. T. Aparna v. R uk m ini Le asing Ltd., I (2003) BC 284 (AP). 93. Dalm ia R e sorts Inte rnational Pvt. Ltd. v. De e pak Gupta, III (2002) BC 114. (De l). 94. Shaile nde r Tiwari v. Me e nak shi Anhal, III (2002) BC 462 (De l); se e also Sharda Agarwal v. Addl. C hie f Me tropolitan Magistrate , 1992 (1) C rim e 812: (1973) 78 C om p C as 123 (All); Mahe ndra Pratap Singh R atra v. N.K. Me tals, IV (1998) C C R 117: 75 (1998) DLT 155 (De l); Mohan Kum ar Muk he rje e v. Le do Te a C o. Ltd., 1998 (4) C rim e s 270; K.P.G. Nair v. Jindal Me nthol India Ltd., I (2001) BC 243 (SC ): VII (2001) SLT 189: IV (2001) C C R 100: (2001) 10 SC C 218 (SC ); Ne e ta Bhalla v. S.M.S. Pharm ace utical, III (2002) BC 600: (2002) 111 C om p C as 793 (AP); S.K. Sood v. Tata Iron and Ste e l C o. Ltd., II (2002) BC 523 (P&H); P.K. Kurian Me non and Pai v. R . R ank ara R am an, I (2002) BC 252 (Ke r); Inde r Se hgal v. Thak ar Pe tro-C he m ical Ltd., 2004 C r LJ (NO C ) 102 (P&H): (2003) 4 R C R 327: I (2004) BC 1 (P&H); Ve te ran C o. (P) Ltd. v. State , 2004 C r LJ 1258 (C al); R am asita Finance and Inve stm e nts Pvt. Ltd. v. Me e nak shi Nagappa Halam anabar, 2004 C r LJ 1029 (Karn); Subhash C handra Sariya v. Am ara Nagarjuna C otton C oope ration, I (2004) BC 418 (AP); Muk e sh Gupta v. Kabsons Gas Equipm e nt Ltd., III (2003) BC 59 (AP): II (2003) BC 332: (2003) 114 C om p C as 728 (AP); Madanlal v. Banwarilal, II (2003) BC 551 (R aj). 95. Dilip Kum ar Patra v. Jayante Kum ar Mohanty, III (2002) BC 694: (2003) 114 C om p C as 728 (O ri). 96. Nathusingh Gangrade v. Jaswant Singh, II (2002) BC 239 (MP); se e also R . D. Jindal C otton Factory v. Surje e t Udyog Kotk apura, II (2002) BC 455 (Bom ). 97. S.B. Shank ar v. Am m an Ste e l C orp., II (2002) BC 351: (2002) 51 C LA 341: (2002) 110 C om p C as 50: 2002 C ri LJ 836 (Mad). 98. Kum ar R ubbe r Industrie s Kapurthala v. Sohan Lal, II (2002) BC 467 (P&H). 99. P. Dham odharan v. Palini Andavari Mills Ltd., II (2002) BC 489 (Mad). 100. Kusum Ingots and Alloys Ltd. v. Pe nnar Pe te rson Se curitie s Ltd., (2002) 2 SC C 745: AIR 2000 SC 954: I (2002) BC 300: 2000 SLT 375 SC : I (2000) C C R 308 (SC ): (2000) C r LJ 1464 SC ; se e also Sivananda Mills Ltd. v. Thirum alai Trade rs, II (2002) BC 497: (2002) 108 C om p C as 889 (Mad). 101. Mayfair Knitting Industrie s Ltd. v. G.P. Vijaya Kum ars, I (2002) BC 123 (Mad). 102. T. Kalavathy v. Ve e ra Ex ports, I (2002) BC 247 (Mad). 103. Kite x Garm e nts Ltd. v. Ajay Kaushik , I (2002) BC 388 (Mad). 104. Shak ti Bhak oo v. R aj Lak shm i Mills (R e gd.), I (2002) BC 401: 2002 C ri LJ 1994 (P&H). 105. B. Sham bhu Kum ar v. R aghve ndra Ste e ls Ltd., I (2002) BC 438 (Mad). 106. C haranjit Singh v. D.B. Me rchant Bank ing Se rvice s Ltd., I (2002) BC 489: (2001) 105 C om p C as 299 (De l). 107. S.K. R e al Estate s v. S. Ahm e d Me e ram , I (2002) BC 491: (2002) 111 C om p C as 400 (Mad); se e also Sri Sivasak thi Industrie s v. Arik ant Me tal C orporation 1992: LW (C ri) 347 (Mad); R am an v. Krishna Pharm ace uticals Distributors, III (1994) C C R 1601; Satish Jayantilal Sha v. Pank aj Mashruwala, 1996 C r LJ 3099; Anas Industrie s v. Sure sh Bafna, 1999 (1) LW (C ri) 405; Baidyanathan v. Dodla Dairy Ltd., 1999 (1) LW (C ri) 395. 108. Bhai Manjit Singh v. Sangam India Ltd., I (2002) BC 576 (De l); se e also BSI Ltd. v. Gift Holdings Pvt. Ltd., I (2000) BC 292 (SC ): II (2000) SLT 184: I (2000) C C R 226: (2000) 2 SC C 737: AIR 2000 SC 926: 2000 C ri LJ 1424 (SC ).

109. Jindal Parax ir O x yge n C o. Ltd., Managing Dire ctor v. Assistant C om m issione r of Entry Tax , Hospe t, (2001) 106 C om p C as 185: I (2002) BC 582 (Karn). 110. Kishore Shank ar Singapurk ar v. State of Maharashtra, I (2004) BC 398 (Bom ). 111. P. De e ptha v. V.S. C handrase k aran, III (2003) BC 479: 2003 C ri LJ 4660 (Mad). 112. W orld Te x Ltd. v. State of R ajasthan, II (2003) BC 261 (R aj). 113. Gangadhar v. Shre nik am al, II (2003) BC 331 (MP). 114. Abani Bhusan Bhanja v. Subir Be he ra, I (2003) BC 29 (O ri). 115. M. Lak shm ipathi v. Em ploye e s State Insurance C orporation, I (2003) BC 328 (Karn). 116. G. Hube rt Fe ne lon v. D. Sridharan, I (2003) BC 419: (2004) 119 C om p C as 279 (Mad). 117. C handrak ant Am bani v. Inde r R aj Khanna, I (2003) BC 634 (MP). 118. Subhash C handra Sariya v. Am ara Nagarjuna C otton C orporation, II (2004) BC 418 (AP). 119. Poonam Mahajan v. Mohan Lal Swara, III (2003) BC 589: 2003 C ri LJ 2442 (J&K). 120. Gangadhar v. Shre nik am al, II (2003) BC 331 (MP). 121. B. Sham bhu Kum ar v. R aghve ndra Ste e ls Ltd., I (2002) BC 438 (Mad). 122. Satish and C o. v. S.R . Trade rs, 1998 C r LJ 419: (1999) 95 C om p C as 836 (AP); R uby Le athe r Ex ports v. K. Ve nu, 1994 (1) C rim e s 820: (1995) 82 C om p C as 776 (Mad). 123. N.K. R am aswam y Iye nge r v. Bangalore District and Bangalore R ural District C o-ope rative C e ntral Bank Ltd., (2003) 115 C om p C as 667: III (2002) BC 650 (Karn). 124. II (1999) BC 170: X (1999) SLT 1: IV (1999) C C R 285 (SC ): (2000) 1 LW (C ri) 422. 125. N. Krishnan v. S. A. Nanjan, II (2002) BC 461: (2002) 108 C om p C as 849 (Mad). 126. Anil Hada v. Indian Acrylic Ltd., AIR 2000 SC 145: (2001) 1 SC C 1: 2000 C ri LJ 373: (2000) 1 KLT 141. 127. Unite d Phorphe rus Ltd. v. Saite ja Fe rtilize rs and Pe sticide s, (2003) 114 C om p C as 587: III (2003) BC 130 (AP). 128. AIR 1988 SC 1128: (1987) 3 SC C 684: 1987 SC C (C ri) 632. 129. Unite d Phorphe rus Ltd. v. Saite ja Fe rtilize rs and Pe sticide s, (2003) 114 C om p C as 587: III (2003) BC 130 (AP). 130. AIR 1988 SC 1128: (1987) 3 SC C 684: 1987 SC C (C ri) 632.

131. II (1995) BC 265: (1994) 80 C om p C as 755. 132. I (1992) BC 403: (1992) 73 C om p C as 434 (C al). 133. (1994) 80 C om p C as 750 (Mad). 134. Gopalak rishna Trading C o. v. D. Bask aran, (1994) 80 C om p C as 53 (Mad). 135. Standard C harte re d Bank v. R avi Bhandari, III (2002) BC 118: (2002) 111 C om p C as 544 (De l); se e also D.K. C hande l v. W ock hardt Ltd., III (2002) BC 435 (P&H); C . Prabhu v. Sangam C orp. (Finance and Inve stm e nt), II (2002) BC 369: 2002 C ri LJ 2142 (Karn). 136. R e liance Be ach Industrie s Ltd. v. Margare t Mascare nhas, 1998 (91) 681 C om p C as. 137. Kite x Garm e nts Ltd. v. Ajay Kaushik , I (2002) BC 388 (Mad).

Law R e lating to The Ne gotiable Instrum e nts Act (9th Edition) By S. K. Aiyar Unive rsal Law Publishing C o. Pvt. Ltd.

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