Research › Search › Judgment

Andhra High Court · body

2014 DIGILAW 1077 (AP)

Anil Bhutoria v. State of Andhra Pradesh

2014-08-27

S.RAVI KUMAR

body2014
ORDER S. Ravi Kumar, J. 1. All these petitions arise on the complaints filed by second respondent in all the petitions against the petitioners in respect of three separate complaints for the three dishonored cheques. Petitioners in Crl. P. No. 1861/2012 are A1 to A5 in CC No. 108/2011, petitioners in Crl. P. No. 1862/2012 are A1 to A5 in CC No. 109/2011 and petitioners in Crl. P. No. 1933/2012 are A1 to A5 in CC No. 436/2011 on the file of V Additional Judicial First Class Magistrate, Guntur. Second respondent in all the petitions filed the above referred complaints alleging that the complainant is a civil contractor having main office at Hyderabad and Branch Office at Bangalore, whereas the accused are contractors and doing the work of Airports Authority of India, Mysore Airport and the accused and the complainant have entered into a contract for execution of the works and complainant agreed to do the works mentioned in the work order. As per the contract, the accused has to pay amount for the work done by the complainant on monthly basis and an amount of Rs. 25,69,350/- was due from the accused as on 14.3.2009 the date on which, complainant stopped work due to nonpayment. The accused have issued a cheque bearing No. 585319, dated 15.11.2008 for Rs. 2,50,000/- (subject-matter of CC No. 108/2011), cheque bearing No. 960919, dated 17.12.2008 for Rs. 6,00,000/- (subject-matter of CC No. 436/2011) and cheque bearing No. 961614, dated 14.3.2009, for Rs. 3,00,000/- (subject-matter of CC No. 109/2011) towards part payment, but the first cheque was dishonored on the ground of insufficient funds and the other two cheques were dishonored for the reason payment stopped by the drawer. The complainant issued legal notice and as there was no response from the accused, he filed the above referred complaints to prosecute the petitioners. Challenging all the three cases, the accused filed these petitions. 2. Heard both sides. 3. The main argument of the Advocate for petitioners is that all the petitioners are Managing Director, Directors and Chief Project Manager of BGM Consortium Private Limited, a registered Company, but all the complaints are filed without impleading the company as accused and that all the petitioners cannot be prosecuted without impleading the company, which is the main accused on that ground itself, all the complaints are liable to be quashed. 4. 4. On the other hand, it is the contention of second respondent that necessary allegations required to prosecute Managing Director and Directors apart from the signatory of the cheque are made in the complaint in compliance of Section 141 of Negotiable Instruments Act, therefore, the objection of the petitioners is not tenable. 5. Now the point that would arise my consideration is whether the proceedings in the above referred CCs are liable to be quashed or not? 6. Point: From a plain reading of the complaint and perusal of the disputed cheques, it is crystal clear that cheques were issued on behalf of BGM Consortium Limited. It is the specific case of complainant that he entered into an agreement with BGM Consortium Limited for execution of works namely; Construction of Approach Road & Road perpendicular to Approach Road an East of Service Building and Technical Tower Block and as per the agreement, monthly payments have to be made and as there was no payment as per the agreement, he stopped execution of work on 14.3.2009 and that three cheques were issued towards part payment of the amount due to the complainant. As seen from the work order dated 13.11.2008, it is clear that the agreement was between BGM Consortium Limited and the second respondent. In all the three cheque bounce cases, the company i.e., BGM Consortium Limited is not made as an accused. There is no mention in all the complaints the reasons for not impleading the company on behalf of which disputed cheques were issued. The allegations in the complaint are made as if the accused i.e., petitioners herein have entered into a contract with the complainant in their individual capacity, but factually it is incorrect on the face of the very cheques and the work order, which is the basis for complainant to execute the work. Section 141 of Negotiable Instruments Act deals with offences by companies, which reads as follows: "141. Section 141 of Negotiable Instruments Act deals with offences by companies, which reads as follows: "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." 7. From a plain reading of the above provision, every person in charge of the affairs of the company shall be deemed to be guilty along with the company for the offence committed by the company. So the liability of petitioners either as Managing Director or Directors or Chief Project Manager is only vicarious liability and only if the company is held guilty, then only these petitioners by virtue of their position in the company would be held guilty under the deemed provision provided in Section 141 of N.I. Act. 8. So the liability of petitioners either as Managing Director or Directors or Chief Project Manager is only vicarious liability and only if the company is held guilty, then only these petitioners by virtue of their position in the company would be held guilty under the deemed provision provided in Section 141 of N.I. Act. 8. Advocate for petitioners relied on a decision of Supreme Court in batch of appeals i.e., Aneeta Hada v. Godfather Travels and Tours Private Limited, Crl. A Nos. 838/2008; Anil Hada v. Godfather Travels and Tours Private Limited, Crl. A No. 842/2008; Avinash Bajaj v. State, Crl. A No. 1483/2009 and Ebay India Private Limited v. State and another, Crl. A No. 1484/2009, wherein it is held as follows: "The word "deemed" used in Section 141 of the Act applies to the company and the persons responsible for the acts of the company. It crystallizes the corporate criminal liability and vicarious liability of a person who is in charge of the company. The criminal liability on account of dishonor of cheque primarily falls on the drawer company and is extended to the officers of the company and as there is a specific provision extending the liability to the officers, the conditions incorporated in Section 141 have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable. Relying on the term "as well as" in Section 141, the respondents contend that a prosecution against the Directors or other officers is tenable even if the company is not arraigned as an accused. But, applying the doctrine of strict construction, it is held mat commission of offence by the company is an express condition precedent to attract me vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably clear mat when the company can be prosecuted, men only the persons mentioned in me other categories could be vicariously liable for the offence subject to me averments in the petition and proof thereof. The company is a juristic person and it has its own respectability. 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 indicated. Therefore, it is held mat for maintaining me prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. Needless to emphasise, me matter would stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted. 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." 9. From the above ruling of the Hon'ble Supreme Court, it is clear that impleading company as one of the accused is mandatory and prosecuting Director or authorised signatory of the cheque without arraying company on behalf of which cheque is issued as accused in the complaint is held to be not maintainable. 10. On the above referred principle, the Hon'ble Supreme Court quashed complaints in which the company was not arrayed as accused and that principle is squarely applies to the three complaints on hand. Though Advocate for second respondent vehemently contended that since there are specific allegations against the directors in compliance of Section 141, this argument cannot be accepted as the petitioners cannot be held liable individually and they have to be held liable along with company to which they are representing, therefore, relying on the above referred decision of Hon'ble Supreme Court, I am of the view that continuation of all the three complaints against the petitioners would amount to abuse of process of Court, therefore, to meet the ends of justice, they are liable to be quashed. 11. For the reasons stated above, all the three petitions are allowed and the proceedings in CC Nos. 108/2011, CC No. 109/2011 & CC No. 436/2011 on the file of V Additional Judicial First Class Magistrate, Guntur are hereby quashed. As a sequel, miscellaneous petitions, if any, pending in these criminal petitions, shall stand dismissed.