Supreme Court of India
ANEETA HADAversusM/S. GODFATHER TRAVELS & TOURS PVT. LTD.
- Citation
- 2012 INSC 187
- Decided
- 27 April 2012
- Disposal
- Appeal(s) allowed
- Bench
- DALVEER BHANDARI
Holding
A company must be arraigned as an accused for prosecution under Section 138 NI Act (and similarly under Section 85 IT Act); without such arraignment, an authorised signatory or other officer cannot be held vicariously liable.
Summary
The Supreme Court examined whether an authorised signatory of a company could be prosecuted under Section 138 of the Negotiable Instruments Act, 1881 and Section 67/85 of the Information Technology Act, 2000 without the company itself being named as an accused. The Court held that Section 141 of the Negotiable Instruments Act creates a deemed liability that is triggered only when the company, as the principal offender, is arraigned; consequently, the signatory cannot be vicariously liable unless the company is prosecuted. The same principle was applied to Section 85 of the IT Act. The Court overruled earlier decisions that allowed prosecution of officers without the company’s impleadment, emphasizing strict construction of penal statutes and the need for the company to be an accused before vicarious liability attaches. All the appealed criminal proceedings were quashed.
Issues considered
- Whether an authorised signatory of a company can be prosecuted under Section 138 of the Negotiable Instruments Act without the company being arraigned as an accused.
- Whether Section 141 of the Negotiable Instruments Act requires the company to be prosecuted before vicarious liability attaches to its officers.
- Whether the analogous provision, Section 85 of the Information Technology Act, 2000, follows the same rule.
- Interpretation of the phrase "as well as the company" and the term "deemed" in Sections 141 and 85.
- Whether the doctrine of lex non cogit ad impossibilia can justify prosecution of officers when the company cannot be prosecuted.
Legislation cited
- Indian Penal Code, 1860s. 292, s. 294
- Information Technology Act, 2000s. 67, s. 85
- Negotiable Instruments Act, 1881s. 138, s. 139, s. 140, s. 141
Subjects
vicarious liabilitycorporate criminal liabilityNegotiable Instruments ActSection 138authorised signatorylegal fictionstrict constructionlex non cogit ad impossibiliaInformation Technology ActSection 85
Judgment
[2012] 5 S.C.R. 503
ANEETA HADA A
v.
M/S. GODFATHER TRAVELS & TOURS PVT. LTD.
(Criminal Appeal No. 838 of 2008)
APRIL 27, 2012
B
[DALVEER BHANDARI, SUDHANSU JYOTI
MUKHOPADHAYA AND DIPAK MISRA, JJ.)
Liability: Vicarious liability - Held: An authorised
signatory of a company cannot be held liable for prosecution C
uls.138 of the Negotiable Instruments Act, 1881 or uls.67 rlw
s.85 of Information Technology Act, 2000 without the company
being arraigned as an accused - Information Technology Act,
2000 - ss.67, 85 - Negotiable Instruments Act, 1881 - ss.138,
141. D
Negotiable Instruments Act, 1881 - s.141 - Statutory
intendment of - Held: s. 147 stipulates that if a person who
commits offence uls. 138 of the Act is a company, the
company as well as every person in-charge of and E
responsible to the company for the conduct of business of the
company at the time of commission of offence is deemed to
be guilty of the offence - The criminal liability on account of
dishonour of cheque primarily falls on the drawee company
and is extended to the officers of the company and as there
is a specific provision extending the liability to the officers, the F
conditions incorporated in s.141 are to be satisfied - The
power of punishment is vested in the legislature and that is
absolute in s. 141 of the Act which clearly speaks of
commission of offence by the company - Applying the doctrine
of strict construction, commission of offence by the company G
is an express condition precedent to attract the vicarious
liability of others - Thus, the words "as well as the company"
appearing in the Section make it clear that when the company
503 H
504 SUPREME COURT REPORTS [2012] 5 S.C.R.
A 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 - For
maintaining the prosecution uls.141 of the Act, arraigning of
a company as an accused is imperative - The analysis
B pertaining to s.141 of the Act would squarely apply to the
Information Technology Act, 2000.
Interpretation of statutes: Legal fiction - Held: It is for the
court to ascertain for what purpose the legal fiction has been
C created and to imagine the fiction with all real consequences
and instances unless prohibited from doing so - That apart,
the use of the term 'deemed' has to be read in its context and
further the fullest logical purpose and import are to be
understood - Information Technology Act, 2000 - Negotiable
Instruments Act, 1881.
D
The question which arose for consideration in these
appeals was whether without the company being
arraigned as an accused, an authorised signatory of a
company would be liable for prosecution under Section
E 138 of the Negotiable Instruments Act, 1881 or under
Section 67 rlw Section 85 of Information Technology Act,
2000.
Allowing the appeals, the Court
F HELD: 1. Section 138 of the Negotiable Instruments
Act, 1881 deals with the ingredients of the offence for
dishonour of the cheque and the consequent non-
payment of the amount due thereon. The main part of the
provision can be segregated into three compartments,
G namely, (i) the cheque is drawn by a person, (ii) the
cheque drawn on an account maintained by him with the
banker for payment of any amount of money to another
person from out of that account for the discharge, in
whole or in part, of a debt or other liability, is returned
H unpaid, either because the amount of money standing to
ANEETA HADA v. GODFATHER TRAVELS & TOURS 505
PVT. LTD.
the credit of that account is insufficient to honour the A
cheque or it exceeds the amount arranged to be paid
from that account by an arrangement made with the bank
and (iii) such person shall be deemed to have committed
an offence and shall, without prejudice to any other
provision of the Act, be punished with imprisonment for B
a term which may extend to two years or with fine which
may extend to twice the amount of the cheque or with
both. The proviso to the said section postulates under
what circumstances the section shall not apply. Section
7 of the Act defines 'drawer' to mean the maker of a bill c
of exchange or a cheque. An authorised signatory of a
company becomes a drawer as he has been authorised
to do so in respect of the account maintained by the
company. Section 141 deals with offences by companies.
On a reading of the said provision, it is clear that if a D
person who commits.,offence under Section 138 of the
Act is a company, the· company as well as every person
in charge of and responsible to the company for the
conduct of business of the company at the time of
commission of offence is deemed to be guilty of the E
offence. The first proviso carves out under what
circumstances the criminal liability would not be
fastened. Sub-section (2)·enlarges the criminal liability by
incorporating the concepts of connivance, negligence
and consent that engulfs many categories of officers. In
both the provisions, there is a 'deemed' concept of F
criminal liability. [Paras 13-16) [525-F-G; 526-H; 527-A-D;
F-H; 528-A-G-H, 529-A]
D. Vinod Shivappa v. Nanda Belliappa AIR 2006 SC
2179; Mis. Modi Cement Ltd. v. Shri Kuchil Kumar Nandi AIR G
1998 SC 1057, Goaplast Pvt. Shri Ltd. v. Chico Ursula
D'souza and Anr. AIR 2003 SC 2035: 2003 (2) SCR 712;
NEPC Micon Ltd and Ors. v. Magma Leasing Ltd. (1999) 4
SCC 253: 1999 (2) SCR 932; Dalmia Cement (Bharat) Ltd.
v. Mis. Galaxy Traders and Agencies Ltd and Ors. AIR 2001 H
506 SUPREME COURT REPORTS [2012] 5 S.C.R.
A SC 676: 2001 (1) SCR 461; I. G.D. C. Ltd. v. Beena Shabeer
and Anr. 2002 Crl.L.J. 3935 (SC); S. V. Majumdar and others
v. Gujarat Fertilizers Co. Ltd and Anr. AIR 2005 SC 2436; Ml
s Bilakchand Gyanchand Co. v. A. Chinnaswami JT 1999
(10) SC 236; R. Rajgopal v. S.S. Venkat AIR (2001) SC
B 2432: 2001 (10) SCC 91 - referred to.
2. Section 139 of the Act creates a presumption in
favour of the holder. The said provision has to be read
in conjunction with Section 118(a) which occurs in
Chapter XIII of the Act that deals with special rules of
C evidence. Section 140 stipulates the defence which may
not be allowed in a prosecution under Section 138 of the
Act. Thus, there is a deemed fiction in relation to criminal
liability, presumption in favour of the holder, and denial
of a defence in respect of certain aspects. Section 141
D 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. The
E 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. Section 141 of the Act clearly stipulates
that when a person which is a company commits an
F 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
G be liable and that is by deeming fiction. A deeming fiction
has its own signification. [Paras 13, 17, 18, 25, 26] [529-
B-D; 532-B-D]
Iridium India Telecom Ltd. v. Motorola Inc and Ors.
(2011) 1 SCC 74: 2010 (14) SCR 591; Standard Chartered
H
ANEETA HADA v. GODFATHER TRAVELS & TOURS 507
PVT. LTD.
Bank and others v. Directorate of Enforcement and Others A
(2005) 4 sec 530: 2005 (1) Suppl. SCR 49 - relied on.
H.L. Bolton (Engineering) Co. Ltd. vs. T.J. Graham &
Sons Ltd. (1956) 3 All E.R. 624; Lennard's Carrying Co. Ltd.
v. Asiatic Petroleum Co. Ltd. (1915) AC 705, 713-714; 31 B
T.L.R. 294; Director of Public Prosecutions v. Kent and
Sussex Contractors Ltd. 1994 KB 146: (1994) 1 All ER 119
(DC) - referred to.
Halsbury's Laws of England, Volume 11 (1 ); 9 Corpus
Juris Secundum - referred to. C
3. It is the bounden duty of the court to ascertain for
what purpose the legal fiction has been created. It is also
the duty of the court to imagine the fiction with all real
consequences and instances unless prohibited from D
doing so. That apart, the use of the term 'deemed' has to
be read in its context and further the fullest logical
purpose and import are to be understood. It is because
in modern legislation, the term 'deemed' has been used
for manifold purposes. The object of the legislature has
E
to be kept in mind. 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
F
liability on account of dishonour of cheque primarily falls
on the drawee 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. Section
141 of the Act makes the other persons vicariously liable G
for commission of an offence on the part of the company.
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 H
508 SUPREME COURT REPORTS [2012] 5 S.C.R.
A would be necessitous and, in a way, the warrant. There
has to be strict observance of the provisions regard
being had to the legislative intendment because it deals
with penal provisions and a penalty is not to be imposed
affecting the rights of persons whether juristic entities or
B individuals, unless they are arrayed as accused. It is to
be kept in mind that the power of punishment is vested
in the legislature and that is absolute in Section 141 of
the Act which clearly speaks of commission of offence
by the company. Applying the doctrine of strict
c construction, commission of offence by the company is
an express condition precedent to attract the vicarious
liability of others. Thus, the words "as well as the
company" appearing in the Section make it absolutely
unmistakably clear that when the company can be
prosecuted, then only the persons mentioned in the other
0
categories could be vicariously liable for the offence
subject to the averments in the petition and proof thereof.
One cannot be oblivious of the fact that the company is
a juristic person and it has its own respectability. If a
E finding is recorded against it, it would create a concavity
in its reputation. There can be situations when the
corporate reputation is affected when a director is
indicted. For maintaining the prosecution under Section
141 of the Act, arraigning of a company as an accused
is imperative. The other categories of .offenders can only
F be brought in the dragnet on the touchstone of vicarious
liability as the same has been stipulated in the provision
itself. The proceedings initiated under Section 138 of .the
Act are quashed. [Paras 32, 33, 39, 42, 43, 45] [534-C-H;
535-A; 542-E-F; 543-D-E; 544-A-E; 545-B]
G
The Bengal Immunity Co. Ltd. v. State of Bihar and others
AIR 1955 SC 661: 1955 SCR 603; Hira H. Advani Etc. v.
State of Maharashtra AIR 1971 SC 44: 1970 SCR 821; State
of Tamil Nadu v. Arooran Sugars Ltd. AIR 1997 SC 1815:
H 1996 (8) Suppl. SCR 193; The Chief Inspector of Mines and
ANEETA HADA v. GODFATHER TRAVELS & TOURS 509
PVT. LTD.
another v. Lala Karam Chand Thapar Etc. AIR 1961 SC 838: A
1962 SCR 9; J.K. Cotton Spinning and Weaving Mills Ltd.
and anr. v. Union of India and others AIR 1988 SC 191: 1988
SCR 700; M. Venugopal v. Divisional Manager, Life
Insurance Corporation of India (1994) 2 SCC 323: 1994 (1)
SCR 433; Harish Tandon v. Addi. District Magistrate, B
Allahabad (1995) 1 sec 537: 1995 (1) SCR 56; S. M. S.
Pharmaceuticals Ltd. v. Neeta Bhalla and Another (2005) 8
SCC 89: 2005 (3) Suppl. SCR 371; State of Madras v. C. V.
Parekh and Another (1970) 3 sec 491 • relied on.
U. P. Pollution Control Board v. Mis. Modi Distillery and C
others AIR 1988 SC 1128 - distinguished.
Anil Hada v. Indian Acrylic Ltd. (2000) 1 SCC 1: 1999
(5) Suppl. SCR 6; Sheoratan Agarwal and Another v. State
of Madhya Pradesh (1984) 4 SCC 352: 1985 (1) SCR 719 · D
overruled.
Francis Bennion 's Statutory Interpretation; Maxwell's The
Interpretation of Statutes (12th Edition) - referred to.
4. The analysis pertaining to Section 141 of the Act E
would squarely apply to the 2000 enactment. The director
could not have been held liable for the offence under
Section 85 of the 2000 Act. [Para 48] [546-D-E]
Madhumi/an Syntex Ltd. & others v. Union of India and F
another AIR 2007 SC 1481: (2007) 11 sec 297: 2007 (4)
SCR 378; Sabitha Ramamurthy and Another v. R.B. S.
Channabasavaradhya (2006) 10 SCC 581: 2006 (6) Suppl.
SCR 126; S. V. Mazumdar and others v. Gujarat State
Fertilizer Co. Ltd. and Another (2005) 4 SCC 173: 2005 (3) G
SCR 857; Sarav Investment & Financial Consultancy Private
Limited and another v. Lloyds Register of Shipping Indian
Office Staff Provident Fund and another (2007) 14 SCC 753:
2007 (10 ) SCR 111 O; K. Srikanth Singh v. North East
Securities Ltd. and Anr. (2007) 12 SCC 788: 2007 (8) SCR H
510 SUPREME COURT REPORTS [2012] 5 S.C.R.
A 452; Suryalakshmi Cotton Mills Ltd~ v. Rajvir Industries Ltd.
and Ors. (2008)13 SCC 678: 2008 (1) SCR 432; N.
Rangachari v. Bharat Sanchar Nigam Ltd. (2007) 5 SCC 108:
2007 (5) SCR 329; Everest Advertising (P) Ltd. v. State, Govt.
of NCT of Delhi and Ors. (2007) 5 sec 54: 2007 (4) SCR
B 1055; Saroj Kumar Poddar v. State (NCT of Delhi) and Anr.
(2007) 3 SCC 693: 2007 (1) SCR 907; N.K. Wahi v. Shekhar
Singh and Ors (2007) 9 SCC 481; R. Rajgopal v. S.S. Venkat
(2001) 10 SCC 91; Electronics Trade and Technology
Development Corporation Ltd., Secunderabad v. Indian
C Technologists and Engineers (Electronics) (P) Ltd. and
another (1996) 2 sec 739: 1996 (1) SCR 843; c.c. Alavi
Haji v. Palapetty Mohammed and Another (2007) 6 SCC 555:
2007 (7) SCR 326; Vinay Devanna Nayak v. Ryot Sewa
Sahakaro Bank Ltd. (2008) 2 SCC 305: 2007 (12) SCR 1134;
Rajneesh Aggarwal v. Amit J. Bhalla JT 2001 (1) SC 325;
0
East end Dwellings Co. Ltd. v. Finsbury Borough Council
1952 AC 109; Reserve Bank of India v. Peerless General
Finance and Investment Co. Ltd. and others (1987) 1 SCC
424; Deewan Singh and others v. Rajendra Prasad Ardevi and
others (2007) 10 SCC 528: 2007 (1) SCR 30; Sarabjit Rick
E Singh v. Union of India (2008) 2 SCC 417 - referred to.
Case Law Reference:
2005 (1) Suppl. SCR 49 relied on Para 5,24
F 2007 (4) SCR 378 referred to Para 5
2006 (6) Suppl. SCR 126 referred to Para 5,6,9,33
2005 (3) SCR 857 referred to Para 5,9
2007 (10) SCR 1110 referred to Para 5,9
G
2007 (8) SCR 452 referred to Para 5,9
2008 (1) SCR 432 referred to Para 5,9
2007 (5) SCR 329 referred to Para 5
H
ANEETA HADA v. GODFATHER TRAVELS & TOURS 511
PVT. LTD.
2007 (4) SCR 1055 referred to Para 5 A
2007 (1) SCR 907 referred to Para 5
(2001) 9 sec 481 referred to Para 5
1985 (1) SCR 719 overruled Para 5,11(e), B
34,35,37
(1970) 3 sec 491 relied on Para 5,34,37
1999 (5) Suppl. SCR 6 referred to Para 5,6,
11 (f),35,37 c
2001 (10) sec 91 referred to Para 6
1996 (1) SCR 843 referred to Para 12(i)
2007 (7) SCR 326 referred to Para 12(i)
D
2007 (12) SCR 1134 referred to Para 12(i)
AIR 2006 SC 2179 referred to Para 12(iii)
AIR 1998 SC 1057 referred to Para 12(iii)
2003 (2) SCR 712 referred to Para 12(iii) E
1999 (2) SCR 932 referred to Para 12(iii)
2001 (1) SCR 461 referred to Para 12(iii)
2002 Crl.L.J. 3935 (SC) referred to Para 12(iii) F
AIR 2005 SC 2436 referred to Para 12(iii)
JT 1999 (10) SC 236 referred to Para 12(iv)
AIR (2001) SC 2432 referred to Para 12(iv)
G
2001 (10) sec 91 referred to Para 12 (iv)
JT 2001 (1) SC 325 referred to Para 12(iv)
(1956) 3 All E.R. 624 referred to Para 21
H
512 SUPREME COURT REPORTS [2012) 5 S.C.R.
A 31 T.L.R. 294 referred to Para 21
(1994) 1 All ER 119 (DC) referred to Para 22
2010 (14) SCR 591 relied on Para 23
1952 AC 109 relied on Para 28
B
1955 SCR 603 relied on Para 29
1970 SCR 821 relied on Para 30
1996 (8) Suppl. SCR 193 relied on Para 31
c
1962 SCR 9 relied on Para 31
1988 SCR 700 relied on Para 31
1994 (1) SCR 433 relied on Para 31
D 1995 (1) SCR 56 relied on Para 31
2005 (3) Suppl. SCR 371 relied on Para 5
AIR 1988 SC 1128 distinguished Para 38
E (1987) 1 sec 424 referred to Para 42
2007 (1) SCR 30 referred to Para 42
(2008) 2 sec 417 referred to Para 42
CRIMINAL AP PELLATE JURISDICTION : Criminal Appeal
F
No. 838 of 2008 etc.
From the Judgment & Order dated 12.01.2007 of the High
Court of Delhi in Crl. M.C. No. 928-929 of 2006.
G WITH
Crl. A. Nos. 1483, 1484 of 2009 & 842 of 2008.
P.P. Malhotra, ASG, Arun Mohan, (Amicus Curiae), Dr.
Abhishek Manu Singhvi, Amit Desai, Sidharh Luthra, Muneesh
H Malhotra, Pankaj Gupta, Rajat Bali, Shri Singh, Ruby Singh
ANEETA HADA v. GODFATHER TRAVELS & TOURS 513
PVT. LTD.
Ahuja, Supriya Ahuja, Raunak Dhillon, Udit Mendiratta , Amit A
Bhandari, Manik Karanjawala, Vijay K. Sondhi, Salim Ansari,
Wasim Beg, Suhail Malik, Jaiveer Shergil, Subramonium
Prasad, Rajesh Hamal, Bharat B. Sethi, Jyoti Mendiratta, R.N.
Karanjawala, P.K. Dey, Shailendra Sharma, Sonia Malhotra,
B.V. Balaram Das, Gargi Khanna for the appearing parties. B
The Judgment of the Court was delivered by
DIPAK MISRA, J. 1. In Criminal Appeal Nos. 838 of 2008
and 842 of 2008, the common proposition of law that has
emerged for consideration is whether an authorised signatory C
of a company would be liable for prosecution under Section 138
of the Negotiable Instruments Act, 1881 (for brevity 'the Act')
without the company being arraigned as an accused. Be it
noted, these two appeals were initially heard by a two-Judge
Bench and there was difference of opinion between the two D
learned Judges in the interpretation of Sections 138 and 141
of the Act and, therefore, the matter has been placed before
us.
2. In Criminal Appeal Nos. 1483 of 2009 and 1484 of E
2009, the issue involved pertains to the interpretation of Section
85 of the Information Technology Act, 2000 (for short 'the 2000
Act') which is pari materia with Section 141 of the Act. Be it
noted, a director of the appellant-Company was prosecuted
under Section 292 of the Indian Penal Code and Section 67
of the 2000 Act without impleading the company as an accused. F
The initiation of prosecution was challenged under Section 482
of the Code of Criminal Procedure before the High Court and
the High Court held that offences are made out against the
appellant-Company along with the directors under Section 67
read with Section 85 of the 2000 Act and, on the said base, G
declined to quash the proceeding. The core issue that has
emerged in these two appeals is whether the company could
have been made liable for prosecution without being impleaded
as an accused and whether the directors could have been
prosecuted for offences punishable under the aforesaid H
514 SUPREME COURT REPORTS [2012] 5 S.C.R.
A provisions without the company being arrayed as an accused.
Regard being had to the similitude of the controversy, these two
appeals were linked with Criminal Appeal Nos. 838 of 2008
and 842 of 2008.
B 3. We have already noted that there was difference of
opinion in respect of the interpretation of Sections 138 and 141
of the Act and, therefore, we shall advert to the facts in Criminal
Appeal No. 838 of 2008 and, thereafter, refer to the facts in
Criminal Appeal Nos. 1482 of 2009 and 1484 of 2009.
C 4. The appellant, Anita Hada, an authorised signatory of
International Travels Limited, a company registered under the
Companies Act, 1956, 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
D was dishonoured as a consequence of which the said
respondent initiated criminal action by filing a complaint before
the concerned Judicial Magistrate under Section 138 of the Act.
In the complaint petition, the Company was not arrayed as an
accused. However, the Magistrate took cognizance of the
E offence against the accused appellant.
5. Being aggrieved by the said order, she invoked the
jurisdiction of the High Court under Section 482 of the Code
of Criminal Procedure for quashing of the criminal proceeding
and the High Court, considering the scope of Sections 138 and
F 139 of the Act and various other factors, opined that the ground
urged would be in the sphere of defence of the accused and
would not strengthen the edifice for quashing of the proceeding.
While assailing the said order before the two-Judge Bench, the
substratum of argument was that as the Company was not
G arrayed as an accused, the legal fiction created by the
legislature in Section 141 of the Act would not get attracted. It
was canvassed that once a legal fiction is created by the
statutory provision against the Company as well as the person
responsible for the acts of the Company, the conditions
H precedent engrafted under such deeming provisions are to be
ANEETA HADA v. GODFATHER TRAVELS & TOURS 515
PVT. LTD. [DIPAK MISRA, J.)
totally satisfied and one such condition is impleadment of the A
principal offender. S.B. Sinha, J. dissected the anatomy of
Sections 138 and 141 of the Act and referred to the decisions
in Standard Chartered Bank and others v. Directorate of
Enforcement and others 1; Madhumilan Syntex Ltd. & others
v. Union of India and anothefl; S. M. S. Pharmaceuticals Ltd. B
v. Neeta Bhalla and AnothefJ; Sabitha Ramamurthy and
Another v. R. B. S. Channabasavaradhya4 ; S. V. Mazumdar
and others v. Gujarat State Fertilizer Co. Ltd. and Another°;
Sarav Investment & Financial Consultancy Private Limited
and another v. Lloyds Register of Shipping Indian Office Staff c
Provident Fund and anothe~; K. Srikanth Singh v. North East
Securities Ltd. and Anr. 7 ; Suryalakshmi Cotton Miffs Ltd. v.
Rajvir Industries Ltd. and Ors. 8 ; N. Rangachari v. Bharat
Sanchar Nigam Ltd. 9; Everest Advertising (P) Ltd. v. State,
Govt. of NCT of Delhi and Ors. 10 ; Saroj Kumar Poddar v. State D
(NCT of Delhi) and Anr. 11 ; N.K. Wahi v. Shekhar Singh and
Ors. 12 ; and took note of the two-Judge Bench decision in
Sheoratan Agarwal and Another v. State of Madhya Pradesh 13
wherein the decision of the three-Judge Bench in State of
Madras v. C. V. Parekh and Another14 was distinguished and
E
expressed the view as follows: -
1. (2005) 4 sec 530.
2. AIR 2007 SC 1481 : (2007) 11 sec 297.
3. c2005) 8 sec 89.
4. (2006) 10 sec 581. F
5. c2005) 4 sec 173.
6. c2007) 14 sec 753.
1. c2001) 12 sec 788.
8. (2008) 13 sec 678.
9. c2007) 5 sec 108. G
10. c2007) 5 sec 54.
11. (2007) 3 sec 693.
12. c2001) 9 sec 481.
13. (1984) 4 sec 352.
14. (1970) 3 sec 491. H
516 SUPREME COURT REPORTS [2012] 5 S.C.R.
A "28. With the greatest of respect to the learned judges, it
is difficult to agree therewith. The findings, if taken to its
logical corollary lead us to an anomalous position. The trial
court, in a given case although the company is not an
accused, would have to arrive at a finding that it is guilty.
B Company, although a juristic person, is a separate entity.
Directors may come and go. The company remains. It has
its own reputation and standing in the market which is
required to be maintained. Nobody, without any authority
of law, can sentence it or find it guilty of commission of
c offence. Before recording a finding that it is guilty of
commission of a serious offence, it may be heard. The
Director who was in charge of the company at one point
of time may have no interest in the company. He may not
even defend the company. He need not even continue to
be its Director. He may have his own score to settle in view
D
of change in management of the company. In a situation
of that nature, the company would for all intent and purport
would stand convicted, although, it was not an accused
and, thus, had.no opportunity to defend itself.
E 29. Any person accused of commission of an offence,
whether natural or juristic, has some rights. If it is to be
found guilty of commission of an offence on the basis
whereof its Directors are held liable, the procedures laid
down in the Code of Criminal Procedure must be followed.
F ·In determining such an issue all relevant aspects of the
matter must be kept in mind. The ground realities cannot
be lost sight of. Accused persons are being convicted for
commission of an offence under Section 138 of the Act
inter alia on drawing statutory presumptions.
G
Various provisions contained therein lean in favour
of a drawer of the cheque or the holder thereof and against
the accused. Sections 20, 118(c), 139 and 140 of the Act
are some such provisions. The Act is a penal statute. Unlike
offences under the general law it provides for reverse
H
ANEETA HADA v. GODFATHER TRAVELS & TOURS 517
PVT. LTD. [DIPAK MISRA, J.]
burden. The onus of proof shifts to the accused if some A
foundational facts are established.
It is, therefore, in interpreting a statute of this nature
difficult to conceive that it would be legally permissible to
hold a company, the prime offender, liable for commission B
of an offence although it does not get an opportunity to
defend itself. It is against all principles of fairness and
justice. It is opposed to the Rule of Law. No statute in view
of our Constitutional Scheme can be construed in such a
manner so as to refuse an opportunity of being heard to a C
person. It would not only offend a common- sense, it may
be held to be unconstitutional. Such a construction,
therefore, in my opinion should be avoided.
In any event in a case of this nature, the construction
which may be available in invoking Essential Commodities D
Act, Prevention of Food Adulteration Act, which affects the
Society at large may not have any application when only
a private individual is involved."
6. Thereafter, the learned Judge referred to Anil Hada v. E
Indian Acrylic Ltd. 15 and R. Rajgopal v. S.S. Venkat 16,
distinguished the decision in Anil Hada and opined that the
issue decided in the said case is to be understood in the factual
matrix obtaining therein as the Company could not have been
prosecuted, it being under liquidation. The observations to the
effect that the Company need not be prosecuted against was F
regarded as obiter dicta and not the ratio decidendi. Sinha J.
clearly opined that the Bench was bound by the three-Judge
Bench decision in S.M.S. Pharmaceuticals Ltd. 's case (supra)
and C. V Parekh's case (supra). After stating so, he observed
as under: - G
"It is one thing to say that the complaint petition
1s. c2000) 1 sec 1.
1s. c2001) 10 sec 91. H
518 SUPREME COURT REPORTS [2012] 5 S.C.R.
A proceeded against the accused persons on the premise
that the company had not committed the offence but the
accused did, but it is another thing to say that although the
company was the principal offender, it need not be made
an accused at all.
B I have no doubt whatsoever in our mind that
prosecution of the company is a sine qua non for
prosecution of the other persons who fall within the second
and third categories of the candidates, viz., everyone who
was in-charge and was responsible for the business of the
c company and any other person who was a director or
managing director or secretary or officer of the company
with whose connivance or due to whose neglect the
company had committed the offence."
D 7. The learned Judge also took note of the maxim lex non
cogit ad impossibilia and expressed thus: -
"True interpretation, in my opinion, of the said
provision would be that a company has to be made an
accused but applying the principle "lex non cogit ad
E impossibilia", i.e., if for some legal snag, the company
cannot be proceeded against without obtaining sanction
of a court of law or other authority, the trial as against the
other accused may be proceeded against if the ingredients
of Section 138 as also 141 are otherwise fulfilled. In such
F an event, it would not be a case where the company had
not been made an accused but would be one where the
company cannot be proceeded against due to existence
of a legal bar. A distinction must be borne in mind between
cases where a company had not been made an accused
G and the one where despite making it an accused, it cannot
be proceeded against because of a legal bar."
8. Being of the aforesaid view, he allowed the appeals.
9. V.S. Sirpurkar J., after narrating the facts and referring
H
ANEETA HADA v. GODFATHER TRAVELS & TOURS 519
PVT. LTD. [DIPAK MISRA, J.]
to Section 141(2) of the Act, which deals with additional A
criminal liability, opined that even if the liability against the
appellant is vicarious herein on account of the offence having
alleged to have been committed by M/s. International Travels,
it would be presumed that the appellant had also committed
the offence and non-arraying of M/s. International Travels as an B
accused would be of no consequence. His Lordship further held
that there is nothing in Standard Chartered Bank and others
(supra), S.M.S. Pharmaceuticals Limited (supra), Sabitha
Ramamurthy and another (supra), S. V. Muzumdar and others
(supra), Sarav Investment and Financial Consultants Pvt. Ltd. c
and another (supra) and K. Srikanth Singh (supra) to suggest
that unless the Company itself is made an accused, there
cannot be prosecution of the signatory of the cheque alone.
Thereafter, the learned Judge referred to the decision in Anil
Hada and expressed that in the said case, the decision of C. V. D
Parekh (supra) and Sheoratan Agarwal (supra) had been
referred to and, therefore, it is a binding precedent and cannot
be viewed as an obiter dicta. Sirpurkar J. further proceeded
to state that the principle of lex non cogit ad impossibilia would
not apply. That apart, the learned Judge held that in the case
at hand, it is yet to be decided as to whether the flaw was that E
of the Company or the appellant herself and it could not be
made out as to whether the cheque issued by the accused was
issued on behalf of the Company or to discharge her personal
liabillty. Eventually, his Lordship referred to the allegations in
the complaint which are to the effect that the two accused F
persons, namely, Anil Hada and Aneeta Hada, used to
purchase the air tickets for their clients and they had purchased
for the Company from time to time and issued cheques. The
accused No. 1 used to conduct the business of the Company
and she also used to purchase the tickets from the complainant. G
On the aforesaid foundation the learned Judge opined that the
basic complaint is against the two accused persons in their
individual capacity and they might be purchasing tickets for their
travelling company. Being of this view, he dismissed both the
appeals. H
520 SUPREME COURT REPORTS [2012] 5 S.C.R.
A 10. We have heard Mr. Muneesh Malhotra, learned
counsel for the appellant in Criminal Appeal Nos. 838 and 842
of 2008, Dr. Abhishek Manu Singhvi, learned senior counsel
for the appellant in Criminal Appeal No. 1483 of 2009 and for
the respondent in Criminal Appeal No. 1484 of 2009, Mr.
B Sidharth Luthra, learned senior counsel for the appellant in
Criminal Appeal No. 1484 of 2009, Mr. Rajesh Hamal, learned
counsel for the respondents in Criminal Appeal Nos. 838 of
2008 and 842 of 2008, Mr. P.P. Malhotra, learned Additional
Solicitor General for the respondent in Criminal Appeal No.
c 1483 of 2009 and Mr. Arun Mohan, learned Amicus Curiae.
11. The learned senior counsel appearing for the
appellants, in support of the proponement that the impleadment
of the company is a categorical imperative to maintain a
prosecution against the directors, various signatories and other
D categories of officers, have canvassed as follows: -
(a) The language of Section 141 of the Act being
absolutely plain and clear, a finding has to be
returned that the company has committed the
E offence and such a finding cannot be recorded
unless the company is before the court, more so,
when it enjoys the status of a separate legal entity.
That apart, the liability of the individual as per the
provision is vicarious and such culpability arises,
F ipso facto and ipso jure, from the fact that the
individual occupies a decision making position in
the corporate entity. It is patent that unless the
company, the principal entity, is prosecuted as an
accused, the subsidiary entity, the individual, cannot
be held liable, for the language used in the
G
provision makes the company the principal
offender.
(b) The essence of vicarious liability is inextricably
intertwined with the liability of the principal offender.
H If both are treated separately, it would amount to
ANEETA HADA v. GODFATHER TRAVELS & TOURS 521
PVT. LTD. [DIPAK MISRA, J.)
causing violence to the language employed in the A
provision.
(c) It is a fundamental principle of criminal law that a
penal provision must receive strict construction. The
deeming fiction has to be applied in its complete
B
sense to have the full effect as the use of the
language in the provision really ostracizes or gets
away with the concepts like "identification",
"attribution" and lifting the corporate veil and, in fact,
puts the directors and the officers responsible'in a
deemed concept compartment on certain guided
c
parameters.
(d) The company, as per Section 141 of the Act, is the
principal offender and when it is in existence, its
non-impleadment will create an incurable dent in the D
prosecution and further, if any punishment is
inflicted or an unfavourable finding is recorded, it
would affect the reputation of the company which is
not countenanced in law.
E
(e) The decision in Sheoratan Agarwal and Another
(supra) has incorrectly distinguished the decision in
C. V. Parekh (supra) and has also misconstrued the
ratio laid down therein. That apart, in the said
decision, a part of the provision contained in
Section 10(1) of the Essential Commodities Act, F
1955 (for brevity 'the 1955 Act') has been
altogether omitted as a consequence of which a
patent mistake has occurred.
(f) The decision in Anil Hada (supra) has not G
appreciated in proper perspective the ratio
decidendi in C.V. Parekh and further there is an
inherent contradiction in the judgment inasmuch as
at one point, it has been stated that "the payee can
succeed in the case only if he succeeds in showing H
522 SUPREME COURT REPORTS [2012] 5 S.C.R.
A that the offence was actually committed by the
company" but at another place, it has been ruled
that "the accused can show that the company has
not committed the offence, though such company
is not made an accused".
B
(g) The terms used "as well as the company" in Section
141(1) of the Act cannot mean that no offence need
be committed by the company to attract the
vicarious liability of the officers in-charge of the
management of the company because the first
c condition precedent is commission of the offence
by a person which is the company.
12. The learned counsel for the respondents, resisting the
submissions propounded by the learned counsel for the
D appellants, have urged the following contentions: -
(i) If the interpretation placed by the appellant is
accepted, the scheme, aims, objects and the
purpose of the legislature would be defeated
inasmuch as Chapter XVII of the Act as introduced
E
by the Negotiable Instruments Laws (Amendment)
Act, 1988 (66 of 1988)is to promote efficacy of
banking to ensure that in commercial or contractual
transactions, cheques are not dishonoured and the
credibility in transacting business through cheques
F is maintained. The Chapter has been inserted with
the object of promoting and inculcating faith in the
efficacy of the banking system and its operations
and giving credibility to negotiable instruments in
business transactions. The fundamental purpose is
G to discourage people from not honouring their
commitments and punish unscrupulous persons
who purport to discharge their liability by issuing
cheques without really intending to do so. If the
legislative intendment is appositely understood and
H appreciated, the interpretation of the various
ANEETA HADA v. GODFATHER TRAVELS & TOURS 523
PVT. LTD. [DIPAK MISRA, J.]
provisions of the Act is to be made in favour of the A
paying-complainant. To bolster the aforesaid
submission, reliance has been placed on
Electronics Trade and Technology Development
Corporation Ltd., Secunderabad v. Indian
Technologists and Engineers (Electronics) (P) Ltd. B
and another16 , C. C. Alavi Haji v. Palapetty
Mohammed and Another18 and Vinay Devanna
Nayak v. Ryot Sewa Sahakaro Bank Ltd. 19
(ii) The reliance placed by the appellants on the C
decision in C. V. Parekh (supra) is absolutely
misconceived. In the first case, the Court was
considering the question of acquittal or conviction
of the accused persons after considering the entire
evidence led by the parties before the trial court but
in the present case, the challenge has been at the D
threshold where summons have been issued. That
apart, the 1955 Act and the Act in question operate
in different fields having different legislative intents,
objects and purposes and further deal with
offences of various nature. In the case at hand, the E
new dimensions of economic growth development
and revolutionary changes and the frequent
commercial transactions by use of cheques are to
be taken note of. Further, Section 141 creates
liability for punishment of offences under Section F
138 and it is a deemed liability whereas the
criminal liability created for an offence under
Section 7 of the 1955 Act is not a deemed offence.
(iii) After the amendment of the Act, the unscrupulous G
drawers had endeavoured hard to seek many an
escape route to avoid the criminal liability but this
11. (1996) 2 sec 739.
18. (2007) s sec 555.
19. (2008) 2 sec 305. H
524 SUPREME COURT REPORTS [2012] 5 S.C.R.
A Court with appropriate interpretative process has
discouraged the innovative pleas of such accused
persons who had issued cheques as the purpose
is to eradicate mischief in the commercial world. To
buttress the aforesaid submission, heavy reliance
B has been placed on D. Vinod Shivappa v. Nanda
Befliappa 20, Mis. Modi Cement Ltd. v. Shri Kuchil
Kumar Nandi2 1 , Goaplast Pvt. Shri Ltd. v. Chico
Ursula D'souza and Anr. 22, NEPC Micon Ltd and
Ors. v. Magma Leasing Ltd. 23 , Dalmia Cement
c (Bharat) Ltd. v. Mis. Galaxy Traders and Agencies
Ltd and Ors. 24 , l.C.D.C. Ltd. v. Beena Shabeer and
Anr. 25 and S. V. Majumdar and others v. Gujarat
Fertilizers Co. Ltd and Anr. 26
(iv) The company being a legal entity acts through its
D directors or other authorized officers and it
authorizes its directors or other officers to sign and
issue cheques and intimate the bank to honour the
cheques if signed by such persons. The legislature
in its wisdom has used the word 'drawer' in
E Sections 7 and 138 of the Act but not "an account
holder". A notice issued to the Managing Director
of the company who has signed the cheques is
liable for the offence and a signatory of a cheque
is clearly responsible for the incriminating act and,
F therefore, a complaint under Section 138 of the Act
against the director or authorized signatory of the
cheque is maintainable. In this regard, reliance has
20. AIR 2006 SC 2179.
G 21. AIR 1998 SC 1057.
22. AIR 2003 SC 2035.
23. (1999) 4 sec 253.
24. AIR 2001 SC 676.
25. 2002 Crl.L.J. 3935 (SC).
H 26. AIR 2005 SC 2436.
ANEETA HADA v. GODFATHER TRAVELS & TOURS 525
PVT. LTD. [DIPAK MISRA, J.]
been placed upon Mis Bilakchand Gyanchand Co. A
v. A. Chinnaswami27, Rajneesh Aggarwal v. Amit
J. Bhalla 28, SMS Pharmaceuticals Ltd. v. Neeta
Bhalla (supra), Anil Hada v. Indian Acrylic Ltd.
(supra) and R. Rajgopal v. S.S. Venkat29 •
B
(v) There is no postulate under Section 141 of the Act
that the director or the signatory of the cheque
cannot be separately prosecuted unless the
company is arrayed as an accused. The company,
as is well-known, acts through its directors or C
authorised officers and they cannot seek an escape
route by seeking quashment of the proceedings
under Section 482 of the Code of Criminal
Procedure solely on the foundation that the
company has not been impleaded as an accused.
The words "as well as the company" assumes D
significance inasmuch as the deemed liability
includes both the company and the officers in-
charge and hence prosecution can exclusively be
maintained against the directors or officers in-
charge depending on the averments made in the E
complaint petition.
13. The gravamen of the controversy is whether any person
who has been mentioned in Sections 141(1) and 141(2) of the
Act can be prosecuted without the company being impleaded F
as an accused. To appreciate the controversy, certain
provisions need to be referred to. Section 138 of the Act, which
deals with the ingredients of the offence for dishonour of the
cheque and the consequent non-payment of the amount due
thereon, reads as follows: -
G
"138. Dishonour of cheque for insufficiency, etc, of funds
27. JT 1999 (10) SC 236.
28. JT 2001 (1) SC 325.
°29. AIR 2001 SC 2432. H
'
526 SUPREME COURT REPORTS [2012] 5 S.C.R.
A in the account - Where any cheque drawn by a person on
account maintained by him with a banker for the payment
of any amount of money to another person from out of that
account for the discharge, in whole or in part, of any debt
or other liability, is returned by the bank unpaid, either
B because of the amount of money standing to the credit of
that account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account
by an arrangement made with the bank, such person shall
be deemed to have committed an offence and shall
c without prejudice to any other provisions of this Act, be
punished with imprisonment for a term which may be
extended to two years, or with a fine which may extend to
twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall
D apply unless -
(a) the cheque has been presented to the bank within
a period of six months from the date on which it is
drawn or within the period of its validity, whichever
E is earlier,
(bJ the payee or the holder in due course of the cheque,
as the case may be, makes a demand for the
payment of the said amount of money by giving a
notice, in writing, to the drawer of the cheque, within
F thirty days of the receipt of information by him from
the bank regarding the return of the cheque as
unpaid, and
(c) the drawer of such cheque fails to make the
G payment of said amount of money to the payee or,
as the case may be, to the holder in due course of
the cheque, within fifteen days of the receipt of the
said notice."
14. The main part of the provision can be segregated into
H
ANEETA HADA v. GODFATHER TRAVELS & TOURS 527
PVT. LTD. [DIPAK MISRA, J.]
three compartments, namely, (i) the cheque is drawn by a A
person, (ii) the cheque drawn on an account maintained by him
with the banker for payment of any amount of money to another
person from out of that account for the discharge, in whole or
in part, of a debt or other liability, is returned unpaid, either
because the amount of money standing to the credit of that B
account is insufficient to honour the cheque or it exceeds the
amount arranged to be paid from that account by an
arrangement made with the bank and (iii) such person shall be
deemed to have committed an offence and shall, without
prejudice to any other provision of the Act, be punished with c
imprisonment for a term which may extend to two years or with
fine which may extend to twice the amount of the cheque or with
both. The proviso to the said section postulates under what
circumstances the section shall not apply. In the case at hand,
we are not concerned with the said aspect. It will not be out of D
place to state that the main part of the provision deals with the
basic ingredients and the proviso deals with certain
circumstances and lays certain conditions where it will not be
applicable. The emphasis has been laid on the factum that the
cheque has to be drawn by a person on the acaount maintained E
by him and he must have issued the cheque in discharge of
any debt or other liability. Section 7 of the Act defines 'drawer'
to mean the maker of a bill of exchange or a cheque. An
authorised signatory of a company becomes a drawer as he
has been authorised to do so in respect of the account
maintained by the company. F
15. At this juncture, we may refer to Section 141 which
deals with offences by companies. As the spine of the
controversy rests on the said provision, it is reproduced below:-
G
"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
H
528 SUPREME COURT REPORTS [2012) 5 S.C.R.
A 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
B
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
c 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
D 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
E
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."
F
16. On a reading of the said provision, it is plain as day
that if a person who commits offence under Section 138 of the
Act is a company, the company as well as every person in
charge of and responsible to the company for the conduct of
G business of the company at the time of commission of offence
is deemed to be guilty of the offence. The first proviso carves
out under what circumstances the criminal liability would not be
fastened. Sub-section (2) enlarges the criminal liability by
incorporating the concepts of connivance, negligence and
H consent that engulfs many categories of officers. It is worth
ANEETA HADA v. GODFATHER TRAVELS & TOURS 529
PVT. LTD. [DIPAK MISRA, J.]
noting that in both the provisions, there is a 'deemed' concept A
of criminal liability.
17. Section 139 of the Act creates a presumption in favour
of the holder. The said provision has to be read in conjunction
with Section 118(a) which occurs in Chapter XI II of the Act that
8
deals with special rules of evidence. Section 140 stipulates the
defence which may not be allowed in a prosecution under
Section 138 of the Act. Thus, there is a deemed fiction in
relation to criminal liability, presumption in favour of the holder,
and denial of a defence in respect of certain aspects.
c
18. 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 D
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.
19. In Halsbury's Laws of England, Volume 11 (1 ), in
E
paragraph 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.
20. In 19 Corpus Juris Secundum, in paragraph 1358, F
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 statute. G
21. In H.L. Bolton (Engineering) Co. Ltd. vs. T.J. Graham
& Sons Ltd. 30 Lord Denning, while dealing with the liability of a
30. (1956) 3 All E.R. 624. H
530 SUPREME COURT REPORTS [2012] 5 S.C.R.
A company, in his inimitable style, has expressed that 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
B 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
C 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. 31 •
Elaborating further, he has observed that in criminal law, in
0
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.
22. It may be appropriate at this stage to notice the
E observations made by MacNaghten, J. in Director of Public
Prosecutions v. Kent and Sussex Contractors Ltd. 32 : (AC p.
156.)
"A body corporate is a "person" to whom, amongst the
various attributes it may have, there should be imputed the
F
attribute of a mind capable of knowing and forming an
intention - indeed it is much too late in the day to suggest
the contrary. It can only know or form an intention through
its human agents, but circumstance may be such that the
knowledge of the agent must be imputed to the body
G
corporate. Counsel for the respondents says that, although
a body corporate may be capable of having an intention,
it is not capable of having a criminal intention. In this
31. (1915) AC 705, 713-714; 31 T.L.R. 294.
H 32. 1994 KB 146: (1994) 1 All ER 119 (DC).
ANEETA HADA v. GODFATHER TRAVELS & TOURS 531
PVT. LTD. [DIPAK MISRA, J.]
particular case the intention was the intention to deceive. A
If, as in this case, the responsible agent of a body
corporate puts forward a document knowing it to be false
and intending that it should deceive. I apprehend, according
to the authorities that Viscount Caldecote, L.C.J., has cited,
his knowledge and intention must be imputed to the bo9y B
corporate.
23. In this regard, it is profitable to refer to the decision in
Iridium India Telecom Ltd. v. Motorola Inc and Ors. 33 wherein
it has been held that in all jurisdictions across the world C
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. ~t has been
observed that the legal position in England and United States
has now been crystallized to leave no manner of doubt that the D
corporation would be liable for crimes of intent. In the said
decision, the two-Judge Bench has observed thus:-
"The courts in England have emphatically rejected the
notion that a body corporate could not commit a criminal E
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 F
group of persons that guide the business of the company,
would be imputed to the corporation."
24. In Standard Charted Bank (supra), the majority has laid
down the view that there is no dispute that a company is liable
to be prosecuted and punished for criminal offences. Although G
there are earlier authorities to the fact that the corporation
cannot commit a crime, the generally accepted modern rule is
that a corporation may be subject to indictment and other
33. (2011) 1 sec 74. H
532 SUPREME COURT REPORTS [2012] 5 S.C.R.
A criminal process although the criminal act may be committed
through its agent. 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.
B
· 25. 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
C 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 deemeq to be liable for the offences under Section 138.
Thus, the statutory intendment is absolutely plain.
D
26. 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.
E 27. In this context, we may refer with profit to the
observations made by Lord Justice James in Ex Parte Walton,
In re, Levy34 , which is as follows:
"When a statute enacts that something shall be deemed
to have been done, which, in fact and truth was not done,
F the Court is entitled and bound to ascertain for what
purposes and between what persons the statutory fiction
is to be resorted to."
28. Lord Asquith, in East end Dwellings Co. Ltd. v.
G Finsbury Borough CounciP 5 , had expressed his opinion as
follows:
34. 1881 (17) Ch D 746.
H 35. 1952 AC 109.
ANEETA HADA v. GODFATHER TRAVELS & TOURS 533
PVT. LTD. [DIPAK MISRA, J.]
"If you are bidden to treat an imaginary state of affairs as A
real, you must surely, unless prohibited from doing so, also
imagine as real the consequences and incidents, which,
if the putative state of affairs had in fact existed, must
inevitably have flowed from or accompanied it.. .. The
statute says that you must imagine a certain state of B
affairs; it does not say that having done so, you must cause
or permit your imagination to boggle when it comes to the
inevitable corollaries of that state of affairs."
29. In The Bengal Immunity Co. Ltd. v. State of Bihar and C
others36 , the majority in the Constitution Bench have opined that
legal fictions are created only for some definite purpose.
30. In Hira H. Advani Etc. v. State of Maharashtra 37, while
dealing with a proceeding under the Customs Act, especially
sub-section (4) of Section 171-A wherein an enquiry by the D
custom authority is referred to, and the language employed
therein, namely, "to be deemed to be a judicial proceeding
within the meaning of Sections 193 and 228 of the Indian Penal
Code", it has been opined as follows:
E
"It was argued that the Legislature might well have used
the word "deemed" in Sub-section (4) of Section171 not
in the first of the above senses but in the second, if not
the third. In our view the meaning to be attached to the
word "deemed" must depend upon the context in which it
F
is used."
31. In State of Tamil Nadu v. Arooran Sugars Ltd. 38, the
Constitution Bench, while dealing with the deeming provision
in a statute, ruled that the role of a provision in a statute creating
legal fiction is well settled. Reference was made to The Chief G
Inspector of Mines and another v. Lala Karam Chand Thapar
36. AIR 1955 SC 661.
37. AIR 1971 SC 44.
38. AIR 1997 SC 1815. H
534 SUPREME COURT REPORTS [2012] 5 S.C.R.
A Etc. 39, J.K. Cotton Spinning and Weaving Mills Ltd. and anr.
v. Union of India and others40 , M. Venugopal v. Divisional
Manager, Life Insurance Corporation of lndia 41 and Harish
Tandon v. Addi. District Magistrate, Allahabad42 and eventually,
it was held that when a statute creates a legal fiction saying
B that something shall be deemed to have been done which in
fact and truth has not been done, the Court has to examine and
ascertain as to for what purpose and between which persons
such a statutory fiction is to be resorted to and thereafter, the
courts have to give full effect to such a statutory fiction and it
c has to be carried to its logical conclusion.
32. From the aforesaid pronouncements, the principle that
can be culled out is that it is the bounden duty of the court to
ascertain for what purpose the legal fiction has been created.
It is also the duty of the court to imagine the fiction with all real
D consequences and instances unless prohibited from doing so.
That apart, the use of the term 'deemed' has to be read in its
context and further the fullest logical purpose and import are to
be understood. It is because in modern legislation, the term
'deemed' has been used for manifold purposes. The object of
E the legislature has to be kept in mind.
33. 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
F 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 SMS
Pharmaceuticals Ltd. (supra). In the said case, it has been
opined that the criminal liability on account of dishonour of
G cheque primarily falls on the drawee company and is extended
to the officers of the company and as there is a specific
39. AIR 1961 SC 838.
40. AIR 1988 SC 191.
41. (1994) 2 sec 323.
H 42. (1995) 1 sec 537.
ANEETA HADA v. GODFATHER TRAVELS & TOURS 535
PVT. LTD. [DIPAK MISRA, J.]
provision extending the liability to the officers, the conditions A
incorporated in Section 141 are to be satisfied. It has been
ruled as follow:-
"It primarily falls on the drawer company and is extended
to officers of the company. The normal rule in the cases 8
involving criminal liability is against vicarious liability, that
is, no one is to be held criminally liable for an act of another.
This normal rule is, however, subject to exception on
account of specific provision being made in the statutes
extending liability to others. Section 141 of the Act is an C
instance of specific provision which in case an offence
under Section 138 is committed by a company, extends
criminal liability for dishonor of a cheque to officers of the
company. Section 141 contains conditions which have to
be satisfied before the liability can be extended to officers
of a company. Since the provision creates criminal liability, D
the conditions 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 E
person should know what is attributed to him to make him
liable."
After so stating, it has been further held that while analyzing
Section 141 of the Act, it will be seen that it operates in cases F
where an offence under Section 138 is committed by a
company. In paragraph 19 of the judgment, it has been clearly
held as follows: -
"There is almost unanimous judicial opinion that necessary
averments ought to be contained in a complaint before a G
person can be subjected to criminal process. A liability
under Section 141 of the Act is sought to be fastened
vicariously on a person connected with a Company, the
principal accused being ·the company itself. It is a
H
536 SUPREME COURT REPORTS [2012] 5 S.C.R.
A departure from the rule in criminal law against vicarious
liability."
34. Presently, we shall deal with the ratio laid down in the
case of C. V. Parekh (supra). In the said case, a three-Judge
B Bench was interpreting Section 10 of the 1955 Act. The
respondents, C.V. Parekh and another, were active
participants in the management of the company. The trial court
had convicted them on the ground the goods were disposed
of at a price higher than the control price by Vallabhadas
Thacker with the aid of Kamdar and the same could not have
C taken place without the knowledge of the partners of the firm.
The High Court set aside the order of conviction on the ground
that there was no material on the basis of which a finding could
be recorded that the respondents knew about the disposal by
Kamdar and Vallabhadas Thacker. A contention was raised
D before this Court on behalf of the State of Madras that the
conviction could be made on the basis of Section 10 of the
1955 Act. The three-Judge Bench repelled the contention by
stating thus: -
E "Learned counsel for the appellant, however, sought
conviction of the two respondents on the basis of Section
10 of the Essential Commodities Act under which, if the
person contravening an order made under Section 3
(which covers an order under the Iron and Steel Control
F Order, 1956), is a company, 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 of the company as well as the company, shall be
deemed to be guilty of the contravention and shall be liable
to be proceeded against and punished accordingly. It was
G
urged that the two respondents were in charge of, and were
responsible to, the Company for the conduct of the
business of the Company and, consequently, they must
be held responsible for the sale and for thus
contravening the provisions of clause (5) of the Iron and
H
•
ANEETA HADA v. GODFATHER TRAVELS & TOURS 537
PVT. LTD. [DIPAK MISRA, J.]
Steel Control Order. This argument cannot be accepted, A
becausf] it ignores the first condition for the applicability
of Section 10 to the effect that the person contravening
the order must be a company itself In the present case,
there is no finding either by the Magistrate or by the High
Court that the sale in contravention of clause (5) of the B
Iron and Steel Control Order was made by the Company.
In fact, the Company was not charged with the offence at
all. The liability of the persons in charge of the Company
only arises when the contravention is by the Company
itself Since, in this case, there is no evidence and no c
finding that the Company contravened clause (5) of the Iron
and Steel Control Order, the two respondents could not be
held responsible. The actual contravention was by Kamdar
and Vallabhadas Thacker and any contravention by them
would not fasten responsibility on the respondents." D
(emphasis supplied)
The aforesaid paragraph clearly lays down that the first
condition is that the company should be held to be liable; a
charge has to be framed; a finding has to be recorded, and E
the liability of the persons in charge of the company only arises
when the contravention is by the company itself. The said
decision has been distinguished in the case of Sheoratan
Agarwal and another (supra). The two-Judge Bench in the said
case referred to Section 10 of the 1955 Act and opined that F
the company alone may be prosecuted or the person in charge
only may be prosecuted since there is no statutory compulsion
that the person in charge or an officer of the company may not
be prosecuted unless he be ranged alongside the company
itself. The two-Judge Bench further laid down that Section 10 G
of the 1955 Act indicates the persons who may be prosecuted
where the contravention is made by the company but it does
not lay down any condition that the person in-charge or an
officer of the company may not be separately prosecuted if the
company itself is not prosecuted. The two-Judge Bench
H
•
538 SUPREME COURT REPORTS [2012] 5 S.C.R.
A referred to the paragraph from C. V. Parekh (supra), which we
have reproduced hereinabove, and emphasised· on certain
sentences therein and came to hold as follows: -
"The sentences underscored by us clearly show that what
was sought to be emphasised was that there should be a
B
finding that the contravention was by the company before
the accused could be convicted and not that the company
itself should have been prosecuted along with the accused.
We are therefore clearly of the view that the prosecutions
are maintainable and that there is nothing in Section 10
c of the Essential Commodities Act which bars such
prosecutions."
For the sake of completeness, we think it apposite to refer
to the sentences. which have been underscored by the two-
D Judge Bench:-
"because it ignores the first condition for the applicability
of Section 10 to the effect that the person contravening the·
order must be a company itself. In the present case, there is
E no finding either by the Magistrate or by the High Court that the
sale in contravention of clause (5) of the Iron and Steel Control
Order was made by the Company and there is no evidence and
no finding that the Company contravened clause (5) of the Iron
and Steel Control Order, the two respondents could not be held
responsible."
F
35. With greatest respect to the learned Judges in
Sheoratan Agarwal (supra), the authoritative pronouncement in
C. V. Parekh (supra) has not been appositely appreciated. The
decision has been distinguished despite the clear dictum that
G the first condition for the applicability of Section 10 of the 1955
Act is that there has to be a contravention by the company itself.
In our humblest view, the said analysis of the verdict is not
correct. Quite apart, the decision in C. V. Parekh (supra) was
under Section 1O(a) of the 1955 Act and rendered by a three-
H Judge Bench and if such a view was going to be expressed, it
ANEETA HADA v. GODFATHER TRAVELS & TOURS 539
PVT. LTD. [DIPAK MISRA, J.]
would have been appropriate to refer the matter to a larger A
Bench. However, the two-Judge Bench chose it appropriate to
distinguish the same on the rationale which we have
reproduced hereinabove. We repeat with the deepest respect
that we are unable to agree with the aforesaid view.
B
36. In the case of Anil Hada (supra), the two-Judge Bench
posed the question: when a company, which committed the
offence under Section 138 of the Act eludes from being
prosecuted thereof, can the directors of that company be
prosecuted for that offence. The Bench referred to Section 141
of the Act and expressed the view as follows: -
c
"12. 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 firm, prosecution proceedings can
be initiated against such drawer. In this context the phrase D
"as well as" used in Sub-section (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 a par with the offending
company. Similarly the words "shall also" in Sub-section E
(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 F
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.
G
13. If the offence was committed by a company it can be
punished only if the company is prosecuted. But instead
of prosecuting the company if a payee opts to prosecute
only the persons falling within the second or third category
the payee can succeed in the case only if he succeeds in H
540 SUPREME COURT REPORTS [2012] 5 S.C.R.
A showing that the offence was actually committed by the
company. In such a prosecution the accused can show that
the company has not committed the offence, though such
company is not made an accused, and hence the
prosecuted accused is not liable to be punished. The
B provisions do not contain a condition that prosecution of
the company is sine qua non for prosecution of the other
persons who fall within the second and the third categories
mentioned above. No doubt a finding that the offence was
committed by the company is sine qua non for convicting
c those other persons. But if a company is not prosecuted
due to any legal snag or otherwise, the other prosecuted
persons cannot, on that score alone, escape from the penal
liability created through the legal fiction envisaged in
Section 141 of the Act."
D On a reading of both the paragraphs, it is evincible that
the two-Judge Bench expressed the view that 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 and, thereafter, proceeded to state that if the
E company is not prosecuted due to legal snag or otherwise, the
prosecuted person cannot, on that score alone, escape from
the penal liability created through the legal fiction and this is
envisaged in Section 141 of the Act. If both the paragraphs are
appreciated in a studied manner, it can safely be stated that
F the conclusions have bE~en arrived at regard being had to the
obtaining factual matrix therein. However, it is noticeable that
the Bench thereafter referred to the dictum in Sheoratan
Agarwal (supra) and eventually held as follows: -
"We, therefore, hold that even if the prosecution
G
proceedings agains.t the Company were not taken or could
not be continued, it is no bar for proceeding against the
other persons falling within the purview of sub-sections (1)
and (2) of Section 141 of the Act."
H 37. We have already opined that the decision in Sheorat?n
ANEETA HADA v. GODFATHER TRAVELS & TOURS 541
PVT. LTD. [DIPAK MISRA, J.]
Agarwal (supra) runs counter to the ratio laid down in the case A
of C. V. Parekh (supra) which is by a larger Bench and hence,
is a binding precedent. On the aforesaid ratiocination, the
decision in Anil Hada (supra) has to be treated as not laying
down the correct law as far as it states that the director or any
other officer can be prosecuted without impleadment of the B
company. Needless to emphasize, the matter would stand on
a different footing where there is some legal impediment and
the doctrine of lex non cogit ad impossibilia gets attracted.
38. At this juncture, we may usefully refer to the decision C
in UP. Pollution Control Board v. Mis. Modi Distillery and
others4 3 . In the said case, the company was not arraigned as
an accused and, on that score, the High Court quashed the
proceeding against the others. A two-Judge Bench of this Court
observed as follows: -
D
"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 members of the Board of Directors under
sub-s.(1) or (2) of S.47 of the Act unless there was a E
prosecution against Messers 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. F
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. Another circumstance which brings G
out the narrow perspective of the learned single Judge is
his failure to appreciate the fact that the averment in
paragraph 2 has to be construed in the light of the
averments contained in paragraphs 17, 18 and 19 which
43. AIR 1988 SC 1128. H
542 SUPREME COURT REPORTS [2012] 5 S.C.R.
A are to the effect that the Chairman, Vice-Chairman,
Managing Director and members of the Board of Directors
were also liable for the alleged offence committed by the
Company."
B Be it noted, the two-Judge Bench has correctly stated that
there can be no vicarious liability unless there is a prosecution
against the company owning the industrial unit but, regard being
had to the factual matrix, namely, the technical fault on the part
of the company to furnish the requisite information called for by
the Board, directed for making a formal amendment by the
C applicant and substitute the name of the owning industrial unit.
It is worth noting that in the said case, M/s. Modi distilleries was
arrayed as a party instead of M/s Modi Industries Limited. Thus,
it was a defective complaint which was curable but, a pregnant
one, the law laid down as regards the primary liability of the
D company without which no vicarious liability can be imposed
has been appositely stated.
39. 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
E 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
F construction of the provision would be necessitous and, in a
way, the warrant.
40. In this context, we may usefully refer to Section 263 of
Francis Bennion's Statutorf Interpretation where it is stated as
follows: -
G
"A principle of statutory interpretation embodies the
policy of the law, which is in turn based on public policy.
The court presumes, unless the contrary intention appears,
that the legislator intended to conform to this legal policy.
H A principle of statutory interpretation can therefore be
,ANEETA HADA v. GODFATHER TRAVELS & TOURS 543
PVT. LTD. [DIPAK MISRA, J.]
described as a principle of legal policy formulated as a A
guide to legislative intention.
41. It will be seemly to quote a passage from Maxwell's
The Interpretation of Statutes (12th Edition) : -
"The strict construction of penal statutes seems to B
manifest itself in four ways: in the requirement of express
language for the creation of an offence; in interpreting
strictly words setting out the elements of an offence; in
requiring the fulfilment to the letter of statutory conditions
precedent to the infliction of punishment; and in insisting C
on the strict observance of technical provisions concerning
criminal procedure and jurisdicti9n."
42. We have referred to the aforesaid passages only to
highlight that there has to be strict observance of the provisions D
regard being had to the legislative intendment because it deals
with penal provisions and a penalty is not to be imposed
affecting the rights of persons whether juris~ic entities or
individuals, unless they are arrayed as accused. It is to be kept
in mind that the power of punishment is vested in the legislature E
and that is absolute in Section 141 of the Act which clearly
speaks of commission of offence by the company. The learned
counsel for the respondents have vehemently urged that the use
of the term "as well as" in the Section is of immense
significance and, in its tentacle, it brings in the company as well
as the director and/or other officers who are responsible for the F
acts of the company 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. In Reserve Bank of India v. Peerless
General Finance and Investment Co. Ltd. and others44 it has G
been laid down that the entire statute must be first read as a
whole, then section by section, clause by clause, phrase by
phrase and word by word. The same principle has been
44. (1987) 1 sec 424. H
544 SUPREME COURT REPORTS [2012] 5 S.C.R.
A reiterated in Deewan Singh and others v. Rajendra Prasad
Ardevi and others 45 and Sarabjit Rick Singh v. Union of lndia 46 .
Applying the doctrine of strict construction, we are of the
considered opinion that commission of offence by the company
is an express condition precedent to attract the vicarious liability
B of others. Thus, the words "as well as the company" appearing
in the Section make it absolutely unmistakably clear that when
the company can be prosecuted, then only the persons
mentioned in the other categories could be vicariously liable
for the offence subject to the averments in the petition and proof
C thereof. One cannot be oblivious of the fact that the company
is a juristic person and it has its own respectability. If a finding
is recorded against it, it would create a concavity in its
reputation. Thern can be situations when the corporate
reputation is affected when a director is indicted.
D 43. In view of our aforesaid analysis, we arrive at the
irresistible conclusion that for maintaining the prosecution under
Section 141 of the Act, arraigning of a company as an accused
is imperative. The other categories of offenders can only be
brought in the dragnet on the touchstone of vicarious liability
E as the same has been stipulated in the provision itself. We say
so on the basis of the ratio laid down in C.V. Parekh (supra)
which is a three-Judge Bench decision. Thus, the view
expressed in Sheoratan Agarwal (supra) does not correctly lay
down the law and, accordingly, is hereby overruled. The
F decision in Anil Hada (supra) is overruled with the qualifier as
stated in paragraph 37. The decision in Modi Distilleries
(supra) has to be treated to be restricted to its own facts as
has been explained by us hereinabove.
44. We will b13 failing in our duty if we do not state that a!I
G the decisions cited by the learned counsel for the respondents
relate to service of notice, instructions for stopping of payment
and certain other areas covered under Section 138 of the Act.
45. (2007) 10 sec 52.8.
H 46. (2008) 2 sec 417.
ANEETA HADA v. GODFATHER TRAVELS & TOURS 545
PVT. LTD. [DIPAK MISRA, J.]
The same really do not render any aid or assistance to the case A
of the respondents and, therefore, we refrain ourselves from
dealing with the said authorities.
45. Resultantly, the Criminal Appeal Nos. 838 of 2008 and
842 of 2008 are allowed and the proceedings initiated under
Section 138 of the Act are quashed. B
46. Presently, we shall advert to the other two appeals, i.e.,
Criminal Appeal Nos. 1483 of 2009 and 1484 of 2009 wherein
the offence is under Section 67 read with Section 85 of the
2000 Act. In Criminal Appeal No. 1483 of 2009, the director of c
the company is the appellant and in Criminal Appeal No. 1484
of 2009, the company. Both of them have called in question the
legal substantiality of the same order passed by the High Court.
In the said case, the High Court followed the decision in
Sheoratan Agarwal (supra) and, while dealing with the D
application under Section 482 of the Code of Criminal
Procedure at the instance of Avnish Bajaj, the Managing
Director of the company, quashed the charges under Sections
292 and 294 of the Indian Penal Code and directed the offences
under Section 67 read with Section 85 of the 2000 Act to
E
continue. It is apt to note that the learned single Judge has
observed that a prima facie case for the offence under Sections
292(2)(a) and 292(2)(b) of the Indian Penal Code is also made
out against the company.
47. Section 85 of the 2000 Act is as under: - F
"85. Offences by companies - (1) Where a person
committing a contravention of any of the provisions of this
Act or of any rule, direction or order made thereunder is a
company, every person who, at the time the contravention
was committed, was in charge of, and was responsible to, G
the company for the conduct of business of the company
as well as the company, shall be guilty of the contravention
and shall be liable to be proceeded against and punished
accordingly:
H
546 SUPREME COURT REPORTS [2012] 5 S.C.R.
A Provided that nothing contained in this sub-section
shall render any such person liable to punishment if he
proves that the contravention took place without his
knowledge or that he exercised all due diligence to preveRt
such contravention.
B (2) Notwithstanding anything contained in sub-section (1 ),
where a contravention of any of the provisions of this Act
or of any rule, direction or order made thereunder has been
committed by a company and it is proved that the
contravention has taken place with the consent or
c 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 the contravention and
shall be liable to be proceeded against and punished
D accordingly."
48. Keeping in view the anatomy of the aforesaid provision,
our analysis pertainin~J to Section 141 of the Act would squarely
apply to the 2000 enactment. Thus adjudged, the director could
E not have been held liable for the offence under Section 85 of
the 2000 Act. Resultantly, the Criminal Appeal No. 1483 of 2009
is allowed and the proceeding against the appellant is quashed.
As far as the company is concerned, it was not arraigned as
an accused. Ergo, the proceeding as initiated in the existing
F incarnation is not maintainable either against the company or
against the director. As a logical sequeter, the appeals are
allowed and the proc:eedings initiated against Avnish Bajaj as
well as the company in the present form are quashed.
49. Before we part with the case, we must record our
G uninhibited and unreserved appreciation for the able assistance
rendered by the learned counsel for the parties and the learned
amicus curiae.
50. In the ultimate analysis, all the appeals are allowed.
H D.G. Appeals allowed.
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