# ANEETA HADA v. M/S. GODFATHER TRAVELS &

- **Citation:** [2008] 7 S.C.R. 1054
- **Court:** Supreme Court of India
- **Decided:** 2008-05-08
- **Case number:** Criminal Appeal No. 838 of 2008
- **Bench:** S.B. Sinha, V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/aneeta-hada-v-m-s-godfather-travels-24635
- **Pages:** 48

## Headnote

,.. .
J.
Negotiable Instruments Act, 1881; Ss. 7, 138, 139 and
141:
c
Dishonour of cheque - Liability of signatory of cheque
and company - Held (Per Sinha, J.): Cheque was drawn by
company and not by the appellant who was only the authorized
signatory of the company -
Moreover, she has not been
maintaining an account with the banker - Thus, she does not
D answer either of the description of 'such persons' in terms of s.
138 of the Act- The company is the principal offef"der in terms
•
t
of provisions uls. 141 of the Act - For making the appellant,
signatory of the cheque vicariously liable, the company should
have been made an accused - Company, although a juristic
E person, is a separate entity - Nobody, without any authority of
law, can sentence it without hearing it - No statute can be
construed in such a manner so as to refuse an opportunity of
being heard to a person - Thus, prosecution of the company
is sine qua non for prosecution of other persons -
Since
F appellant was not the drawer of the cheque, no offence uls.
138 of the Act could be made out against her - Interpretation
of Statutes.
Held (Per Sirpurkar, J.): Appellant had the authority to
use the cheque book and sign on behalf of the company and
G that too for discharging the debt - Her act is squarely covered
uls. 138 of the Act - Even if it is presumed that the account
was meant to be maintained by the company, the appellant
had the authority to operate it- Cheque in question signed by
/,.
the appellant had bounced - Under the circumstances, it would
H
105'1
ANEETA HADA v. M/S. GODFATHER TRAVELS &
1055
TOURS PVT. LTD.
~-1
have to be presumed that the signatory of the cheque shall A
also be deef1Jed to be guilty of the offence u/s. 138 of the ActLiability is of the company or of the appellant is yet to be
decided - It cannot be said that unless the company joined
as an accused, it is not possible to proceed against the
'
signatory of the cheque - The principle underlying the maxim B
-1
A
'lex non cogit ad impossibilia' would apply in view of the
language of s. 141 of the Act - In view of settled position of law,
appellant would be completely liable since the cheque signed
by her had bounced - Interpretation of Statutes.
Order of the Court - In view of the difference of opinion, c
the matters referred to a three Judge Bench of the Supreme
Court.
Principles/Maxims:
•
Principle 'Lex non cogit ad impossibilia' - Applicability D
....
of in the context of s. 141 of the Negotiable lnstn1ments Act,
1881.
Appellant, an authorized signatory of a company,
issued a cheque on behalf of the company for certain E
amount in favour of respondent-company. The cheque
was dishonoured. Respondent filed a complaint against
the appellant uls.138 of the Negotiable Instruments Act,
1881. However, the company was not arrayed as an
accused, even the notice was served only on the appellant
F
and not upon the company. The Magistrate took
cognizance of the offence against her. Appellant filed a
petition for quashing the proceedings, which was
dismissed by the High Court. Hence the present appeals.
Referring the matters to three Judge Bench, the Court G
HELD, Per 5.8. Sinha, J.: 1.1 A company being a body
--'.
corporate is capable of suing and being sued in its own
name. (Para - 4) [1067-G]
1.2 The authorised signatory of a company does not H
1056
SUPREME COURT REPORTS
[2008) 7 S.C.R.
A become the drawer of the cheque only because he has
been authorised to do so for the purpose of banking
operations. Admittedly, the bank account was also in the
name of the company. The account was, therefore,
B
maintained by the Company. (Para - 4) [1067-G-H]
1.3 The person referred to in s.138 of the Negotiable
Instruments Act must not only be the drawer of the cheque
but should have been maintaining an account with the
banker. (Para - 7) [1069-D]
c
1.4 Appellant does not answer either of the
descriptions of such 'the person' referred to in Section
138 of the Act. Admittedly, she was only an authorised
sign

## Text

_Characters 0–39,985 of 95,563. This is a partial read: ask again with offset=39985 for what follows._

(2008] 7 S.C.R. 1054
A
ANEETA HADA
}-·
II.
M/S. GODFATHER TRAVELS & TOURS PVT. LTD.
(Criminal Appeal No. 838 of 2008)
B
MAY 8, 2008
(S.B. SINHA AND V.S. SIRPURKAR, JJ.)
,.. .
J.
Negotiable Instruments Act, 1881; Ss. 7, 138, 139 and
141:
c
Dishonour of cheque - Liability of signatory of cheque
and company - Held (Per Sinha, J.): Cheque was drawn by
company and not by the appellant who was only the authorized
signatory of the company -
Moreover, she has not been
maintaining an account with the banker - Thus, she does not
D answer either of the description of 'such persons' in terms of s.
138 of the Act- The company is the principal offef"der in terms
•
t
of provisions uls. 141 of the Act - For making the appellant,
signatory of the cheque vicariously liable, the company should
have been made an accused - Company, although a juristic
E person, is a separate entity - Nobody, without any authority of
law, can sentence it without hearing it - No statute can be
construed in such a manner so as to refuse an opportunity of
being heard to a person - Thus, prosecution of the company
is sine qua non for prosecution of other persons -
Since
F appellant was not the drawer of the cheque, no offence uls.
138 of the Act could be made out against her - Interpretation
of Statutes.
Held (Per Sirpurkar, J.): Appellant had the authority to
use the cheque book and sign on behalf of the company and
G that too for discharging the debt - Her act is squarely covered
uls. 138 of the Act - Even if it is presumed that the account
was meant to be maintained by the company, the appellant
had the authority to operate it- Cheque in question signed by
/,.
the appellant had bounced - Under the circumstances, it would
H
105'1
ANEETA HADA v. M/S. GODFATHER TRAVELS &
1055
TOURS PVT. LTD.
~-1
have to be presumed that the signatory of the cheque shall A
also be deef1Jed to be guilty of the offence u/s. 138 of the ActLiability is of the company or of the appellant is yet to be
decided - It cannot be said that unless the company joined
as an accused, it is not possible to proceed against the
'
signatory of the cheque - The principle underlying the maxim B
-1
A
'lex non cogit ad impossibilia' would apply in view of the
language of s. 141 of the Act - In view of settled position of law,
appellant would be completely liable since the cheque signed
by her had bounced - Interpretation of Statutes.
Order of the Court - In view of the difference of opinion, c
the matters referred to a three Judge Bench of the Supreme
Court.
Principles/Maxims:
•
Principle 'Lex non cogit ad impossibilia' - Applicability D
....
of in the context of s. 141 of the Negotiable lnstn1ments Act,
1881.
Appellant, an authorized signatory of a company,
issued a cheque on behalf of the company for certain E
amount in favour of respondent-company. The cheque
was dishonoured. Respondent filed a complaint against
the appellant uls.138 of the Negotiable Instruments Act,
1881. However, the company was not arrayed as an
accused, even the notice was served only on the appellant
F
and not upon the company. The Magistrate took
cognizance of the offence against her. Appellant filed a
petition for quashing the proceedings, which was
dismissed by the High Court. Hence the present appeals.
Referring the matters to three Judge Bench, the Court G
HELD, Per 5.8. Sinha, J.: 1.1 A company being a body
--'.
corporate is capable of suing and being sued in its own
name. (Para - 4) [1067-G]
1.2 The authorised signatory of a company does not H
1056
SUPREME COURT REPORTS
[2008) 7 S.C.R.
A become the drawer of the cheque only because he has
been authorised to do so for the purpose of banking
operations. Admittedly, the bank account was also in the
name of the company. The account was, therefore,
B
maintained by the Company. (Para - 4) [1067-G-H]
1.3 The person referred to in s.138 of the Negotiable
Instruments Act must not only be the drawer of the cheque
but should have been maintaining an account with the
banker. (Para - 7) [1069-D]
c
1.4 Appellant does not answer either of the
descriptions of such 'the person' referred to in Section
138 of the Act. Admittedly, she was only an authorised
signatory and the amount with the banker was to be
maintained by the Company. Cheque was drawn by the
0
Company and not by the appellant. She did not do so on
her own behalf. She issued the cheque in course of
ordinary business transaction. (Para - 8) [1069-E-F]
2.1 The company is the principal offender. A director
of the company inter alia can be proceeded against if
E he is found to be responsible therefor as envisaged
under Section 141 of the Negotiable Instruments Act.
(Para - 11) (1070-A]
2.2 If a person has to be proceeded with as being
vicariously liable for the acts of the company, the company
F must be made an accused. In any event, it would be a fair
i
thing to do. Legal fiction is raised both against the
Company as well as the person responsible for the acts
of the Company. Unlike other statutes, this Act raises a
presumption not only in terms of Section 139 of the Act
G but also under Section 118(a) thereof. Those
presumptions in given cases may have to be rebutted.
The accused must be given an opportunity to rebut the
i..
said presumption. An accused is entitled to be represented
in a case so as to enable it to establish that allegations
H
ANEETA HADA v. MIS. GODFATHER TRAVELS &
1057
-1
TOURS PVT. LTD.
made against it are not correct. (Para - 13) [1071-8-D]
A
2.3 Section 141 of the Act raises a legal fiction. Such
a legal fiction can be raised only when the conditions
therefor are fulfilled; one of it being that company is also
"'
prosecuted. The Section uses the terms "as well as the 8
·-'
company". The company which is, thus, the principal
offender must be included in the category of the accused.
(Paras - 14 - 15) [1071-D-E]
Standard Chartered Bank and Others vs. Directorate of
Enforcement and Others (2005) 4 SCC 530; Asstt. c
Commissioner vs. Velliappa Textiles Ltd. (2003) 11 SCC 405;
Madhumilan Syntex Ltd. & Ors. vs. Union of India & Anr. AIR
(2007) SC 1481; S. M. S. Pharmaceuticals Ltd. vs. Neeta
Bhalla and Another (2005) 8 SCC 89; Sabitha Ramamurthy
..
and Anr. vs. R.B.S. Channabasavaradhya (2006) 9 SCALE D
t
212; S. V Muzumdar and Ors. vs. Gujarat State Fertilizer Co.
Ltd. and Anr. (2005) 4 SCC 173; Sarav Investment and
Financial Consultants Pvt. Ltd. and Anr. vs. L/yods Register
of Shipping Indian Office Staff Provident Fund and Anr. (2007)
12 SCALE 123; K. Srikanth Singh vs. North East Securities E
Ltd. and Anr. (2007) 9 SCALE 371 ; Suryalakshmi Cotton Mills
Ltd. vs. Rajvir Industries Ltd. and Ors. (2008) 1 SCALE 331;
Municipal Corporation of Delhi sv. Ram Kishan Rohtagi and
Ors. (1983) 1 SCC 1; N. Rangachari vs. Bharat Sanchar
Nigam Ltd. (2007) 5 SCALE 821; Everest Advertising Pvt.
F
1
Ltd. vs. State, Govt. of NCT of Delhi and Ors. (2007) 5 SCALE
479; Pharmaceuticals (supra) and Saroj Kumar Poddar vs.
State (NCT of Delhi)and Anr. (2007) 2 SCALE 36; N.K. Wahi
vs. Shekhar Singh and Ors. (2007) 4 SCALE 188 and Balaji
Trading Company vs. Kejriwal Paper Ltd.· and Anr. (2005) 2
ALO (Cri) 162:2005 Cri L J 3805 - referred to.
G
~..\.
2.4 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. Company, although a juristic
person, is a separai.t:! entity. Directors may come and go. H
1058
SUPREME COURT REPORTS
[2008) 7 S.C.R.
>--
A 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 offence. Before recording
a finding that it is guilty of commission of a serious
8
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 of change in management of the
c 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. (Para - 28) [1085-G-H; 1086-A-B]
State of Madras vs. C. V Parekh and another, (1970) 3
D SCC 491 and Sehoratan Agarwal and another vs. State of
t
...
Madhya Pradesh {1984) 4 SCC 352 - referred to.
2.5 Any person accused of commission of an offence,
whether natural or juristic, has some rights. If it is to be
E 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.
In determining such an issue all relevant aspects of the
matter must be kept in mind. The ground realities cannot
F
be lost sight of. Accused persons are being convicted for
commission of an offence under Section 138 of the Act
inter alia 01 drawing statutory presumptions. 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
G provisions. The Act is a penal statute. Unlike offences
under the general law it provides for reverse burden. The
onus of proof shifts to the accused if some foundational
J.
facts are established. It is, therefore, in interpreting a
statute of this nature difficult to conceive that it would be
H
-
• 1.
ANEETA HADA v. M/S. GODFATHER TRAVELS &
TOURS PVT. LTD.
1059
legally permissible to hold a company, the prime offender, A
liable for commission 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 B
opportunity of being heard to a person. It would not only
offend a common-sense, it may be held to be
unconstitutional. Such a construction, therefore, should
be avoided. (Para - 29) [1086-C-G]
2.6 The ratio laid down by this Court in the case of C
Anil Hada vs. Indian Acrylic Ltd. is to be understood in the
factual matrix obtaining therein, namely, the company
could not have been prosecuted due to a legal snag,
although was made an accused. However, the
_,
~
observations of the court that 'company need not be D
proceeded against', is obiter dicta and not its ratiodecidendi. (Para - 31) [1088-B-D]
Anil Hada vs. Indian Acrylic Ltd. (2000) 1 SCC 1 -
distinguished.
E
2.7 It is one thing to say that the complaint petition
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
F
made an accused at all. (Para - 32) [1088-D-E]
2.8 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 G
business of the 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. (Para ·-
32) [1088-E-F]
H
1060
SUPREME COURT REPORTS
[2008] 7 S.C.R.
)-.
A
2.9 True interpretation of the provision u/s. 141 of
the Act would be that a company has to be made an
accused but applying the principle "lex non cogit ad
impossibilia", i.e., if for some legal snag, the company
cannot be proceeded against without obtaining sanction
B of a court of law or other authority, the trial as against the
..
other accused may be proceeded against if the
>
ingredients of Sections 138 as also 141 are otherwise
fulfilled. In such an event, it would not be a case where
the company had net been made an accused but would
c be one where the company cannot be proceeded against
due to existence of a legal bar. A distinction must be borne
in mind between c.:lses where a company had not been
made an accused and the one where despite making it
an accused, it cannot be proceeded against because of a
D legal bar. (Para - 34) [1089·E-G]
.._
t
2.10 In som"' of the decisions of this Court a liber'!I
interpretation of notice had been advocated to suggest
that a notice served upon a managing director of the
E
company or a director of the company shall satisfy t.he
requirements of law. (Para - 36) [1091-B]
Bilakchand Gyanchand Co. vs. A. Chinnaswami JT 1999
(10) SC 236 and Rajneesh Aggarwal vs. Amit J. Bhalla JT
2001 (1) SC 325 - relied on.
F
3. In the case of Girish Saxena vs. Praveen Kumar Jain,
·tthe Delhi High Court inter alia opined that it is settled law
that only drawer of the cheque can be prosecuted under
Section 138 of the Negotiable Instruments Act on the
cheque getting dishonoured. Since the petitioner was
G neither the drawer of the cheque nor it is alleged that he
was partner or proprietor of firm when cheque got
dishonoured or he was the person responsible for non
'- '
payment of cheque amount, no offence under Section 138
of Negotiable Instruments Act can be made out against
H the petitioner. In the said decision, the High Court has laid
Ir
:/'. -
ANEETA HADA v. M/S. GODFATHER TRAVELS &
1061
.
-(
TOURS PVT LTD.
down the correct law. Hence, the impugned judgment A
cannot be sustained and is set aside accordingly. (Paras
- 40, 41 & 42) [1093-0-H]
Pramod vs. CK. Velayudhan & Ors. (200,6) 1 JCC (NI)
.,.
62; B.S.K. Prasad vs. Mis. Laxmi Vessels & Anr. [2005 (1)
"
JCC (NI) 86 and Girish Saxena vs. Praveen Kumar Jain & B
Ors. (2007) 2 JCC (NI) 220 - approved.
Per V.5. Sirpurkar, J.: 1.1 It is not as if the appellant
suggests that she is not, in any way, connected with the
'
company on· whose cheque book she has issued the c
cheque. She had the authority to u~e the cheque book
and sign on behalf of the company: Even if she .wrote a
cheque on the cheque-book of the company for paying
her own debts and the cheque is bounced, the offence
> .f
under s. 138 of the Negotiable Instruments Act will be D
completed atleast against her. That is -the clear import of
the language o·;· s. 138 of the Act and her act is squa;ely
covered under the said Section. The High Court had
correctly relied on Section 139 of the Act. The said filing
of the High Court is accepted. (Para - 4) [1094-0-F]
E
1.2 It is true that for a proper complaint under Section
138 of the Act, the cheque must have been drawn by a
person and secondly the account must be maintained by
"such person" and it should have been given for payment
l
of amount of money to another person from out of that F
account for the discharge of any debt or other liability and
when such cheque is returned by the bank unpaid
~ because of the insufficient funds to honour the cheque.
Then such person would be liable under Section 138 of
the Act. In the present case, the account was being G
maintained by the company and' the appellant had the
·-~
authority to sign the cheque of that account. Therefore,
there will be a clear liability if the appellant used the cheque
which she had the authority to use and that too for
discharging the debt. It must be pointed out at this H
·1062
SUPREME COURT REPORTS
[2008] 7 S.C.R.
A juncture that the words in Section 138 of the Act are "any
debt" or "other liability". In this case since the company
was maintaining the account and the appellant had the
authority to operate the same, the conditions will be
satisfied even if it was given for the discharge of the !!ability
B of the appellant. (Para - 4) (1094-F-H; 1095-A-B]
1.3 Even if it is presumed that the account was meant
to be maintained by the company, since the appellant was
authorized signatory, it will have to be presumed that she
had the authority to operate the account. Again even if it
C is presumed that the cheque was issued by the company,
that will make no difference as the appellant has put her
signatures on the cheque which signature she was
authorized to put. This is apart from the fact that as yet no
evidence is led for proving as to whose debt was sought
D to be discharged by the cheques which were
+
~
dishonoured. (Par:-. - 5) (1095-C-D]
2.1 The legal fiction created by the Legislature under
Section 138 of the Act is to be found via Section 141 where
E along with the company, every person who was incharge
of and was responsible to the company for the conduct
of the business is also ·made guilty. However, sub-section
(2) of Section 141 which starts with non obstante clause
creates an "additional criminal liability". Sub-section (2)
starts with the non obstante clause and fixes additional
F criminal liability. (Para - 6) [1095-E]
2.2 In using the cheque book of the company, which
the appellant was authorized to use and in signing the
same which cheque ultimately bounced, it would have to
G be presumed that the signatory of the cheque shall also
be deemed to be guilty of the offence. (Para - 6) (1096-B]
H
2.3 Even if the liability against the appellant is
vicarious on account of the offence having allegedly been
· committed by the company, it would have to be presumed
I. •
ANEETA HADA v. M/S GOD.FATHER TRAVELS &
1063
.
--{
TOURS PVT LTD .
that the appellant had also committed the offence. A
However, though the company has not been joined as
an accused, that would be of no consequence. (Para -
7) [1096-C]
2.4 It is true that in the case of S.MS. Pharmaceuticals
B
....
Ltd. vs. Neeta Bhalla & Anr, a vicarious liability has been
"-.
found against the person responsible for running the
company where the principal accused is the company.
However, it is nowhere laid down in the said case that
unless the company itself is made an accused, the person c
responsible for running the same, in the present case, the
signatory of the cheque, cannot be joined as an accused.
(Para - 9) [1096-F-G]
S. M. S. Pharmaceuticals Ltd. vs. Neeta Bhalla & Anr
)
(2005) 8 sec 89 - referred to.
D
.f3.1 In the present case it is yet to be decided as to
whether the liability was that of the company or the
appellant herself. It could be personal liability of the
appellant herself for discharging her debt for which she
might have misused the cheque-book of the company. E
Even under such circumstances the offence against her
could be completed is not known at this stage since no
evidence has been led in this regard. Therefore, the
inference that the liability was that of the company and
she was merely vicariously liable would, therefore, be a F
premature finding. On the other hand even if she has
misused the cheque-book to discharge her own liability,
taking advantage of her authorization to put the signatures
on the cheque-book of the company, she still would be liable
to be proceeded against and it would be a question between G
herself and the company whether she has committed any
.. 1
offence vis-a-vis the company also. At this stage, however,
it is not possible to say anything without any evidence
having been led. (Para - 10) [1096-H; 1097-A-C)
3.2 Law laid down by this Court in various decisions_ H
1064
SUPREME COURT REPORTS
[2008] 7 s c f(
A does not even impliedly suggest that unless the compar.y
is joined as an accused it is not possible to proceed against
the signatory of the cheque. (Para -11) [1097-D-E]
S V Muzumdar & Ors vs Gujarat State Fertilizer Co. Ltd.
& Anr. (2005) 4 SCC 173; Sarav Investment and Financial
8
Consultants Pvt Ltd & Anr vs. Llyods Register of Shipping
Indian Office Staff Provident Fund & Anr (2007) 12 SCALE
123 and K. Srikanth Singh vs. North East Securities Ltd. &
Anr (2007) 9 SCALE 371 - relied on.
c
3.3 This Court in the case of SMS Pharmaceuticals
and N. Rangachari held that the prosecution could "le
launched not only against the company on behalf of
which the cheque issued has been dishonoured but it
could also be initiated against every person who, at that
0 time of committing the offence, was incharge and was
responsible for the affairs of the company. However, it
does not mean that both the accused must be joined
together for proper prosecution and that the signatory of
the cheque cannot individually be prosecuted in the
E absence of the company.
(Para - 12) [1097-F-H]
4.1 The. basic complaint in the instant case wa:.;
against two accused persons including the appellant in
their individual capacity, though they might be purchasing
the tickets for the company. However, merely becaus·e of
F that fact one cannot reach <1t a conclusion that in the
absence of the company the two accused persons and
more particularly the appellant herein who was the
signatory to the cheque and whose cheque was bounced
cannot be prosecuted.
(Para - 13) [1098-C-D]
G
Everest Advertising Pvt. Ltd. vs State Govt of NCT of
H
Delhi & Ors. 2007 (5) SCALE 479; S MS. Pharmaceuticals
Ltd. vs.· Neeta Bhalla & Anr (2005) 8 SCC 89 and NK. Wahi
vs: Shekhar Singh & Ors. (2007) 4 SCALE 188 - referred to.
4.2 The question as to whether the persons like
...
ANEETA HADA v. MIS. GODFATHER TRAVELS &
1065
-~
TOURS PVT. LTD.
accused alone in the absence of the company having been
A
made accused could be proceeded against or not had
directly fallen for consideration and it cannot be said that'
any observations in Anil Hada's case by any chance could
be viewed as obiter. This is a binding precedent. The ratio
-..
laid down in the said case was applicable to the factual
B
""
matrix thereof which is identical here. The question has
been directly decided that the prosecution of the company
is not a sine qua non for the prosecution of the other
persons who fall within the second and third categories,
namely, those who were incharge and responsible for the c
business of the company. (Paras - 14 & 15) [1100-B-D]
Anil Hada vs. Indian Acrylic Ltd. (2000) 1 SCC 1 and
Raghu Lakshminarayananan vs. Fine Tubes (2007) 5 SCALE
353 - relied on.
4.3 Since the question under consideration was D
already covered by Anil Hada's cise, the appellant would
be liable to be prosecuted even :.ivhen the company had
not been joined as an accused. (Para - 19) [1100-H]
4.4 The principle "lex non cogit ad impossibilia" would E
not apply in the instant case, because of the language of
Section 141 of the Act and the appellant would be
completely liable since the cheques signed by her were
bounced. (Para - 17) [1100-F]
4.5 The decisions of Andhra Pradesh High Court as
F
reported in the cases of B. S. K. Prasad vs. Mis. Lax mi Vessels
and K. Seetharam Reddy vs. K. Radhika Rani support the
view that the person who has drawn the cheque, in case
the cheque is dishonoured, is liable under Section 138 of
the Act itself. (Para - 20) [1101-8-C]
G
..-)
B.S.K. Prasad vs. Mis. Laxmi Vessels (2005) 1 LJ (NOC)
7: 2004 Cri. LJ 4079 (AP) and K. Seetharam Reddy vs. K.
Radhika Rani (2002) 112 Company ·Cases 204 (AP) -
approved.
H
1066
SUPREME COURT REPORTS
[2008] 7 S.C.R.
~~
A
5. Appellant's reliance in the case of Girish Saxena
vs. Praveen Kumar Jain & Ors. is also unnecessary since
in that case the accused was not a signatory to the
cheque. The decision in that case would not be applicable
to the present case. (Para - 22) [1101-F]
B
..--
Girish Saxena vs. Praveen Kumar Jain & Ors. (2007) 2
).
JCC (NI) 220 - disapproved.
CRIMINAL APPELLATE JURISDCTION: Criminal
Appeal No. 838 of 2008.
c
From the Judgment and Order dated 12.1.2007 of the High
Court of Delhi at New Delhi in Criminal M.C. No. 928/2006.
WITH
Criminal Appeal No. 842 of 2008.
D
Mineesh Malhotra, Roh it Nagpal and Pankaj Gupta for the
Appellant.
Rajesh Harnag and Su nil Dutta Mishra for the Respondent.
E
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
2. Appellant is said to be an authorised signatory of Mis.
Intel Travels Ltd (Company). The said Company as also the
F
respondent company had business transactions. Appellant on
behalf of the company issued a cheque dated 17 .1.2001 for a
sum of Rs.5,10,000/- in favour of respondent which was
dishonoured. Respondent filed a complaint petition against the
appellant under Section 138 of the Negotiable Instruments Act,
1881 ('the Act' for short).
G
The Company which is a juristic person was not arrayed
as an accused. The learned Magistrate took cognizance of the
"-·
offence against her. Respondent had not even served any notice
upon the Company in terms of Section 138 of the Act It served
H a notice only on the appellant presumably on the premise that
ANEETA HADA v. MIS. GODFATHER TRAVELS &
1067
·,---{
TOURS PVT. LTD. [S.B. SINHA, J.]
she was in charge and responsible to the company for its day A
to day affairs.
3. The High Court by reason of the impugned judgment
refused to quash the proceedings, as prayed for by the appellant,
holding:
B
..
,
''This section does not say that the cheques should have
A.
been drawn for the discharge of any debt or other liability
of the drawer towards the payee. Even the Section 139 of
the Negotiable Instruments Act, by which a legal
presumption is created, the Parliament has only fixed the c
presumption that the cheque was issued 'for the dishcarge,
in whole or in part, or any debt or other liability.' This would
mean that the debt or other liability includes the due from
any other person. It is not necessary that the debt or liability
should be due from the drawer himself. It can be issued D
for the discharges of any other man's debt liability. Legally
enforceable debt or liability would t.ave a reference to the
nature of the debt or liability and not the person against
whom the debt or liability can be enforced. One has to go
by the averments in the complaint. The complainant has E
averred that it is the petitioner who had purchased the
tickets from the complainant and the cheque in question
was given by them in discharge of their liability. The
demand notice dated 8.5.2001 is also sent to the two
petitioners and not to the company. What the petitioners
F
state here may be their defence.''
4. A company being a body corporate is capable of suing
and being sued in its own name. Section 7 of the Act defines
"drawer" to mean the maker of a bill of exchange or a cheque.
The authorised signatory of a company does not become the G
drawer of the cheque only because he has been authorised to
.--(
do so for the purpose of banking operations. Admittedly, the
bank account was also in the name of the company.
\
The account was. therefore, maintained by the Company.
H
1068
SUPREME COURT REPORTS
[2008] 7 S.C.R
A
5. Section 138 of the Act reads as under:
8
c
D
E
F
G
H
"Dishonour of cheque for insufficiency, etc .. of funds in th '·
account.- Where any cheque drawn by a person o_n ar
account maintained by him with a banker for payment o
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
because of the amount of money standing to the credit of
that account is insufficient to honour the cheque or that 1t
exceeds the amount arranged to be paid from that account
by an agreement made with that bank, such person shall
be deemed to have committed an offence and shall,
without prejudice to any other provision of this Act, be
punished with imprisonment for a term which may be
extended to two years, or with fine which may extend to
twice the amount of the cheque, or with both;
Provided that nothing contained in this ;:;ection shall 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 is
earlier;
(b)
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
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 payment
of the 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."
ANEETA HADA v. MIS. GODFATHER TRAVELS &
1069
TOURS PVT LTD. [S.B. SINHA, J.]
6. A complaint petition may be maintainable at the instance A
of the person in whose favour the cheque was drawn only when:-
(i)
the cheque was drawn by 'a person'; and
(ii)
the cheque was drawn on an account maintained by
'him' with a banker for payment of any amount of B
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
because of the amount of money standing to the
credit of the drawer is insufficient to honour the cheque c
or that it exceeds the amount to be paid from that
account; and
(iii)
in that event 'such a person' shall be deemed to
have committed an offence.
~
7. The person r~ferred to in the said provisions, therefore,
must not only be the Jrawer of the cheque but should have beer;
maintaining an account with the banker.
8. Appellant does not answer either of the descriptions of
D
, such 'the person' referred to in Section 138 of the Act.
E
Admittedly, she was only an authorised signatory and the amount
with the banker was to be maintained by the Company. Cheque
was drawn by the Company and not by the appellant. She did
not do so on her own behalf. She issued the cheque in course
of ordinary business transaction.
F
9. The Parliament for meeting a contingency of this nature,
namely, where a company is an offender, has raised a .legal
fiction in terms whereof any person who at the time the offence
was committed. was incharge of and was responsible for the
conduct of business of the company, shall be deemed to be
G
guilty of the offence.
10. For the said purpose. the corr\pany itself must be made
an accused. It has been so held by this Court in a number of
decisions to which I would refer to a little later.
H
1070
SUPREME COURT REPORTS
[2008] 7 S.C.R
A
11. In this case, indisputably the company is the principal
B
c
D
offender. A director of the company inter alia can be proceeded
against .f he is found to be responsible therefor as envisaged
under Section 141 of the Act.
12. The said provision reads, thus:
"141. Offences by companies .-(1) If the person
committing an offence under Section 138 is a company,
every person who, at the time the offence was committed,
was in charge of, and was responsible to the company for
the conduct of the business of the company, as well as the
company, shall be deemed to be guilty of the offence and
shall be liable to be proceeded against and punished
accordingly:
Provided that nothing contained in this sub-section shall
render any person liable to punishment if he proves that
the offence was committed without his knowledge, or that
he had exercised all due diligence to prevent the
commission of such offence: 2 "Provided further that where
a person is nominated as a Director of a company by
E
virtue of his holding any office or employment in the Central
Government or State Government or a financial corporation
owned or controlled by the Central Government or the
State Government, as the case may be, he shall not be
liable for prosecution under this chapter."
F
G
(2) Notwithstanding anything contained in sub-section (1 ),
r
where any offence under this Act has been committed by
a company and it is proved that the offence has been
committed with the consent or connivance of, or is
attributable to. any neglect on the part of, any director,
manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be
-
deemed to be guilty of that offence and shall be liable to
'-·
be proceeded against and punished accordingly.
H
Explanation.- For the purposes of this section,-
ANEETA HADA v. MIS. GODFATHER TRAVELS &
TOURS PVT. LTD. [S.B. SINHA, J.]
1071
(a)
"company" means any body corporate and includes A
a firm or other association of individuals;and
(b)
"director", in relation to a firm, means a partner in the
firm."
13. If a person, thus, has to be proceeded with as being
B
vicariously liable for the acts of the company, the company must
be made an accused. In any event, it would be a fair thing to do.
Legal fiction is raised both against the Company as well as the
person responsible for the acts of the Company. Unlike other
statutes, this Act raises a presumption not only in terns of Section c
139 of the Act but also under Section 11 B(a) thereof. Those
presumptions in given cases may have to be rebutted. The
accused must be given an opportunity to rebut the said
presumption. An accused is entitled to be represented in a case
so as to enable it to establish that allegations made against it 0
are not correct.
14. Section 141 of the Act raises a legal fiction. Such a
legal fiction can be raised only when the conditions therefor are
fulfilled; one of it being that company is also prosecuted.
15. The Section uses the terms "as well as the company".
E
The company which is, thus, the principal offender must be
included in the category of the accused. Here, I am not dealing
with a case where an individual act of a person is purporting to
represent a company. In relation to business transactions, a
company as a corporate entity may have created its own
F
reputation. It must maintain it. If a complaint is filed, in a given
case, only on the basis of the presumptions rai·sed in the statute,
it may be held to be guilty as a result whereof the reputation of
the company shall suffer. It may, thus, suffer grave civil
consequences.
16. It is no longer res integra that a company can be
proceeded against in a criminal proceeding, even where
imposition of substantive sentence is provided for.
G
17. The question as to whether a company can be H
1072
SUPREME COURT REPORTS
[2008] 7 S.C.R.
A
proceeded against when a mandatory imprisonment is
prescribed in law came up for consideration before a
Constitution Bench of this Court in Standard Chartered Bank
and Others v. Directorate of Enforcement and Others [(2005)
4 SCC 530) wherein this Court upon considering a large number
B
of decisions as also the principle "lex non cogit ad impossibilia"
._
opined:
"30. As the company cannot be sentenced to
imprisonment, the court has to resort to punishment of
imposition of fine which is also a prescribed punishment.
C
As per the scheme of various enactments and also the
Indian Penal Code, mandatory custodial sentence is
prescribed for graver offences. If the appellants' plea is
accepted, no company or corporate bodies could be
prosecuted for the graver offences whereas they could be
D
prosecuted for minor offences as the sentence prescribed
therein is custodial sent1=>nce or fine. We do not think that
the intention of the legislature is to give complete immunity
from prosecution to the corporate bodies for these grave
E
F
G
H
offences. The offences mentioned under Section 56(1) of
the FERA Act, 1973, namely, those under Section 13;
clause ( a ) of sub-section (1) of Section 18; Section 18A; clause (a) of sub-section (1) of Section 19; sub-section
(2) of Section 44, for which the minimum sentence of six
months' imprisonment is prescribed, are serious offences
and 1f committed would have serious financial
consequences affecting the economy ofthe country. All
those offences could be committed by company or
corporate bodies. We do not think that the legislative
intent is not to prosecute the companies for these serious
offences. if these offences invo1ve the amount or value
of more than Rs. one lakh. and that they could be
prosecuted only when the offences involve an amount or
value less than Rs. one lakh.
(Emphasis supplied)
r
ANEETA HADA v. MIS. GODFATHER TRAVELS &
1073
~-{
TOURS PVT LTD [S.B. SINHA, J]
31. As the company cannot be sentenced to imprisonment,
A
the court cannot impose that punishment, but when
imprisonment and fine is the prescribed punishment the
court can impose the punishment of fine which could be
enforced against the company. Such a discretion is to be
,.
read into the section so far as the juristic person is
B
~
concerned. Of course, the court cannot exercise the same
discretion as regards a natural person. Then the court
would not be passing the sentence in accordance with
law. As regards company, the court can always impose a
sentence of fine and the sentence of imprisonment can be c
ignored as it is impossible to be carried out in respect of
a company. This appears to be the intention of the
legislature and we find no difficulty in construing the statute
in such a way. We do not think that there is a blanket
...,
immunity for any company from any prosecution for serious D
}-
offences merely because the prosecution would ultimately
er;cail a sentence of mandatory impriso;1ment. The
corporate bodies; such as a firm or company undertake
a series of activities that affect the life, liberty and property
of the citizens. Large-scale financial irregularities are
E
done by various corporations. The corporate vehicle now
occupies such a large portion of the industrial,
commercial and sociological sectors that amenability of
the corporation to a criminal law is essential to have a
peaceful society with stable economy"
-,
(Emphasis supplied)
F
An earlier decision of this Court in Asstt. Commissioner
v. Ve!liappa Textiles Ltd. [(2003) 11 sec 405] was overruled
by the Constitution Bench.
In the context of the provisions of the Income Tax Act,
G
·-'·
recently a Division Bench of this ourt in Madhumilan Syntex
Ltd. & Ors. v. Union of India & Anr. (AIR 2007 SC 1481], held:
"23. From the abc11e provisions. it is clear that wherever
a Company is required to deduct tax at source and to pay H
1074
SUPREME COURT REPORTS
[2008] "1 S.C.R.
r--~
A
it to the account of the Central Government. failure on the
part of the Company in deducting or in paying such amount
is an offence under the Act and has been made punishable.
It. therefore. cannot be said that the prosecution against
a Company or its Directors in default of deducting or paying
B
tax is not envisaged by the Act.
,,..
>.
24. It is no doubt true that Company is not a natural person
but 'legal' or 'juristic' person. That, however, does not mean
that Company is not liable to prosecution under the Act.
c
'Corporate criminal liability' is not unknown to law. The law
is well settled on the point and it is not necessary to discuss
it in detail."
18. Section 141 of the Act even does not provide for a
mandatory minimum imprisonment. A fine can be imposed upon
D the offender for commission of an offence under Section 138 of
•
the Act.
....
\t!
19. Interpretation of Section 141 of the Act came up for
consideration before a Three-Judge Bench of this Court in
S. M. S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another
E [(2005) 8 sec 89] wherein it was opined that criminal liability
on account of dishonour of cheque primarily falls on the drawer
company and is extended to the officers of the company.
Analysing Section 141 of the Act, the Bench observed:
F
" ... Section 141 of the Act is an instance of specific provision
which in case an offence under Section 138 is committed
r
by a company, extends criminal liability for dishonour 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
G
provision creates criminal liability, the conditions have to
be strictly complied with. The conditions are intended to
ensure that a Qerson who is sought to be made vicariou§ll'.
...... - ....
liable for an offence of which the QrinciQal accused is the
comQany, had a role to Qlay in relation to the incriminating
H
act and further that such a Qerson should know what is
ANEETA HADA v. MIS. GODFATHER TRAVELS &
1075
TOURS PVT LTD. [S.B. SINHA, J]
attributed to him to make him liable. In other words, persons A
who had nothing to do with the matter need not be roped
in.