Company – Dishonour of Cheque – Offence by company – Directors/Other Officer of Company cannot be prosecuted alone – Negotiable Instruments Act, 1881 Sections. 138 and 141:

The common proposition of law that emerged for consideration was, whether an authorised signatory of a company would be liable for prosecution u/s. on 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused. There was difference of opinion between the two learned Judges in the interpretation of sections 138 and 141 of the Act and, therefore, the matter was placed before the larger bench.

The Appellant, Anita Hada, an authorised signatory of International Travels Limited, issued a cheque dated 17th January, 2011 for a sum of Rs.5,10,000/- in favour of the Respondent, namely, M/s. Godfather Travels & Tours Private Limited, which was dishonoured, as a consequence of which, the said Respondent initiated criminal action by filing a complaint before the concerned Judicial Magistrate u/s. 138 of the Act. In the complaint petition, the Company was not arrayed as an accused. However, the Magistrate took cognisance of the offence against the accused Appellant.

The Hon’ble Court observed 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. The vicarious liability gets attracted when the condition precedent u/s. 141 of the Act stands satisfied. The Court also held that the power of punishment is vested in the legislature and that is absolute in section 141 which clearly speaks of commission of offence by the company. The liability created is penal and thus warrants strict construction. It cannot therefore be said that the expression “as well as” in section 141 brings in the company as well as the Director and/or other officers who are responsible for the acts of the company within its tentacles and, therefore, a prosecution against the Directors or other officers is tenable, even if the company is not arraigned as an accused. The words “as well as” have to be understood in the context. Applying the doctrine of strict construction, it is clear that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, it is absolutely clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence, subject to the averments in the petition and proof thereof. It necessarily follows that for maintaining the prosecution u/s. 141 of the Act, arraigning of a company as an accused is imperative. Only then, the other categories of offenders can be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. Accordingly, the proceedings initiated under Section 138 of the Act are quashed.