LSC Infratech Pvt. Ltd. v. Sadbhav Engineering Ltd.
2024-08-28
RAKESH THAPLIYAL
body2024
DigiLaw.ai
JUDGMENT : Rakesh Thapliyal, J. 1. Since in all these applications preferred under Section 528 of the BNSS, 2023 the common issues are involved wherein there is challenge to the cognizance and summoning orders passed by the Magistrate on separate complaints for different cheques between the same parties under Section 138 of the Negotiable Instruments Act, 1881 and as such, being decided by common order. 2. Mr. Piyush Garg, learned counsel for the applicant submits that separate complaints were filed by the present authorized representative of the Company namely M/s LSC Infratech Pvt. Ltd. under Section 138 of the NI Act against the Company namely “Sadbhav Engineering Ltd”, its Directors and Authorized Signatories, however, learned Magistrate while taking cognizance on the said complaints issued summons to only Authorized Signatory and not against the Company and it’s Directors. In reference to this, he submits that in view of Section 141 of the NI Act, if the offence is committed by a Company, then every person, who at the time of the offence, was In-Charge of and responsible for the conduct of the business of the company, as well as the Company itself, shall be deemed to guilty of the offence. 3. Learned counsel for the applicants submits that the trial court while taking cognizance on the complaints filed under Section 138 of the NI Act committed manifest illegality by ignoring the mandate of Section 141 of the NI Act. For examining the issue, Section 141 of the N.I. Act is being reproduced herein as under : “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.” 4. In reference to this, he has placed reliance on the judgment rendered by Hon’ble Supreme Court in the case of Aneeta Hada Vs. Godfather Travels and Tours Private Ltd. (2012) 5 SCC 661 . He has particularly give reference of paragraph nos. 24, 25, 26, 27, 29, 30, 31, 32, 39 and 53 of the said judgment, which are being reproduced hereinbelow : “22. Section 141 uses the term “person” and refers it to a company. There is no trace of doubt that the company is a juristic person. The concept of corporate criminal liability is attracted to a corporation and company and it is so luminescent from the language employed under Section 141 of the Act. It is apposite to note that the present enactment is one where the company itself and certain categories of officers in certain circumstances are deemed to be guilty of the offence. 25. In Halsbury's Laws of England, Vol. 11(1), in Para 35, it has been laid down that in general, a corporation is in the same position in relation to criminal liability as a natural person and may be convicted of common law and statutory offences including those requiring mens rea. 26.
25. In Halsbury's Laws of England, Vol. 11(1), in Para 35, it has been laid down that in general, a corporation is in the same position in relation to criminal liability as a natural person and may be convicted of common law and statutory offences including those requiring mens rea. 26. In 19 Corpus Juris Secundum, in Para 1358, while dealing with liability in respect of criminal prosecution, it has been stated that a corporation shall be liable for criminal prosecution for crimes punishable with fine; in certain jurisdictions, a corporation cannot be convicted except as specifically provided by the statute. 27. In H.L. Bolton (Engg.) Co. Ltd. v. T.J. Graham & Sons Ltd. [(1957) 1 QB 159 : (1956) 3 WLR 804 : (1956) 3 All ER 624 (CA)] Lord Denning, while dealing with the liability of a company, in his inimitable style, has expressed that: (QB p. 172) “… A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are Directors and managers who represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such.” In certain cases, where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of the company. The learned Law Lord referred to Lord Haldane's speech in Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. [1915 AC 705 : (1914-15) All ER Rep 280 : 31 TLR 294 (HL)], AC at pp. 713-14. Elaborating further, he has observed that: “… in criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the Directors or the managers will render the company itself guilty.” 29. In this regard, it is profitable to refer to the decision in Iridium India Telecom Ltd. v. Motorola Inc.
In this regard, it is profitable to refer to the decision in Iridium India Telecom Ltd. v. Motorola Inc. [ (2011) 1 SCC 74 : (2010) 3 SCC (Cri) 1201] wherein it has been held that in all jurisdictions across the world governed by the rule of law, companies and corporate houses can no longer claim immunity from criminal prosecution on the ground that they are not capable of possessing the necessary mens rea for commission of criminal offences. It has been observed that the legal position in England and the United States has now been crystallised to leave no manner of doubt that the corporation would be liable for crimes of intent. 30. In the said decision, the two-Judge Bench has observed thus: (Motorola Inc. case [ (2011) 1 SCC 74 : (2010) 3 SCC (Cri) 1201], SCC p. 98, para 59) “59. The courts in England have emphatically rejected the notion that a body corporate could not commit a criminal offence which was an outcome of an act of will needing a particular state of mind. The aforesaid notion has been rejected by adopting the doctrine of attribution and imputation. In other words, the criminal intent of the ‘alter ego’ of the company/body corporate i.e. the person or group of persons that guide the business of the company, would be imputed to the corporation.” 31. In Standard Chartered Bank [ (2005) 4 SCC 530 : 2005 SCC (Cri) 961], the majority has laid down the view that: (SCC p. 541, para 6) “6. There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that … a corporation may be subject to indictment or other criminal process, although the criminal act [may be] committed through its agents.” It has also been observed that there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment is mandatory imprisonment and fine. 32. We have referred to the aforesaid authorities to highlight that the company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate.
32. We have referred to the aforesaid authorities to highlight that the company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain. As is perceptible, the provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own signification. 39. 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 crystallises the corporate criminal liability and vicarious liability of a person who is in charge of the company. What averments should be required to make a person vicariously liable has been dealt with in S.M.S. Pharmaceuticals Ltd. [ (2005) 8 SCC 89 : 2005 SCC (Cri) 1975] In the said case, it has been opined that the criminal liability on account of dishonour of cheque primarily falls on the drawee (sic 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 are to be satisfied. 53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant.” 5. I perused the complaints filed by the applicant and cognizance orders. Admittedly, the applicants filed the complaints against the Company, its Directors and Authorized Signatories but the trial court took cognizance and issued summons only against Authorized Signatories and not against Company and its Directors.
I perused the complaints filed by the applicant and cognizance orders. Admittedly, the applicants filed the complaints against the Company, its Directors and Authorized Signatories but the trial court took cognizance and issued summons only against Authorized Signatories and not against Company and its Directors. 6. On perusal of Section 141 of the NI Act, it is clear that if the offence is committed by a Company, then every person, who at the time offence was In-Charge of, was responsible to the Company for the conduct of the business of the company, as well as the Company, shall be deemed to guilty of the offence. 7. Mr. P.K. Chauhan, learned counsel, who appears for the Authorized Signatory – Mr. Vashitha Patel against whom summons have been issued, submits that though he was CEO of the Company at the time of commission of offence but he has not put his signature on the cheques in question, and he has resigned from the post of Director of the Company in 2020 as well as from the post of CEO on 21.11.2022. 8. Since in the present C528 applications filed by the applicants, only cognizance and summoning orders are being challenged in part, therefore, arguments advanced by Mr. P.K. Chauhan, learned counsel for the Authorized Signatory has no relevance since only summons have been issued against him, though he has already resigned from his posts. All these pleas can be taken by the learned counsel for the Authorized Signatory before the trial court. 9. Admittedly, in the present case, complaints have been filed against the Company, its Directors and Authorized Signatories, however, the trial court took cognizance and issued summons without considering the mandate of Section 141 of the NI Act. It is settled principle of law that while taking cognizance on the complaint the Magistrate should apply its judicial mind. Accordingly, all the C528 applications are disposed of with the direction to the trial court to examine all these aspects and issue fresh process, after examining the mandate of Section 141 of the NI Act in the light of the law laid down by Hon’ble Supreme Court in the case of Aneeta Hada (supra). 10. Let copy of this order be placed in all the connected C528 applications.