LexANIL HADA versus INDIAN ACRYLIC LIMITED
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A ANIL HADA ' .. v, INDIAN ACRYLIC LIMITED NOVEMBER 26, 1999 -- B [K.T. THOMAS AND D.P. MOHAPATRA. JJ.] Negotiable Instruments Act-Sections 138, 141-Dishonoured Cheques-By legal fiction, Section 141 of the Act casts a penal liability on c the officers/directors of a company even though it is the company which is the offender under Section 138-While establishing the offence by the company is sine qua non for starting prosecution against the company or its directors/ officers responsible for the offence, prosecution of the company itself is not necessary for starting proceedings against the directors or other officers- Ever if the company is not prosecuted for any legal hurdle or otherwise, the D directors/officers can be prosecuted and they can defend and deny the allegation-The legal presumption that. a cheque is issued for discharging an antecedent· fiability is in favour of the holder of the cheque. In this appeal against the judgment of a Single Judge of the High Court who held that prosecution against the directors of a company under Section E 138 read with Section 141 of the Negotiable instruments Act was in order even when the company itself was not prosecuted due to legal hurdles.,It was submitted on behalf of the appellants that prosecution of the company was·sine qua non for prosecuting the directors; that there being a legal presumption under section 139 that the cheque was issued to discharge an antecedent F liability and this presumption can be assailed only by the company which issued the cheque and ifthe actual drawer of the cheque who is the company is not made an accused, the other accused will be at a disadvantage. On behalf of the respondents it was pointed out that there is no legal r~quirement for the company to be made an accused for proceeding against the directors. ., G Dismissing the appeal, the Court HELD: I. Even ifthe prosecution proceedings against 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 (I) and (2) of Section 141 of the Act. The offender in Section 138 of the Act is the drawer of the . .H cheque. He alone would have been the offender thereunder if the Act did not 6 t . -· ANIL HADA v. INDIAN ACRYLIC LIMITED 7 contain other provisions. It is because of Section 141 of the Act that penal A liability under Section 138 is cast on other persons connected with the ~ompany. [lS-E; 10-H; 11-A] 2. Three categories of persons can be discerned from the provision who are brought within the purview of the penal liability through the legal fiction B envisaged in Section 141. They are: (1) The company which committed the offence, (2) Everyone who was in charge of and was responsible for the business of the company, (3) any other person who is a director or a manager or a secretary or officer of the company, with whose connivance or due to whose -. neglect the company, has committed the offence. Normally an offence can be committed by human beings who are natural persons. Such offence can be C tried according to the procedure established by law. But there are offences which could be attributed to juristic reasons also. If the drawer of the cheque happens to be a juristic person like a body corporate it can be prosecuted for ) ' the offence under Section 138 of the Act. There is no scope for doubt regarding that aspect in view of the clear language employed in Section 141 of the Act In the expanded ambit of the word "company" even firms or any D other association of persons are included and as a necessary adjunct thereof a partner of the firm is treated as director of that company. 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 "as well as" used E 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 par with the offending company. Similarly the words "shall also" in sub-section (2) are capable of bringing the third category persons additionally within the dragnet of the offence on an equal par. The effect of reading Section 141 is that when the company is the drawer of the F cheque such company is the principal offender und
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