# ANEETA HADA v. M/S. GODFATHER TRAVELS & TOURS PVT. LTD

- **Citation:** [2012] 5 S.C.R. 503
- **Court:** Supreme Court of India
- **Decided:** 2012-04-27
- **Case number:** Criminal Appeal No. 838 of 2008
- **Bench:** Dalveer Bhandari, Sudhansu Jyoti Mukhopadhaya, Dipak Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/aneeta-hada-v-m-s-godfather-travels-tours-pvt-ltd-28299
- **Pages:** 44

## Headnote

A
B
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
F
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
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 nonpayment 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 autho

## Text

_Characters 0–39,966 of 82,489. This is a partial read: ask again with offset=39966 for what follows._

[2012] 5 S.C.R. 503
ANEETA HADA
v.
M/S. GODFATHER TRAVELS & TOURS PVT. LTD.
(Criminal Appeal No. 838 of 2008)
APRIL 27, 2012
[DALVEER BHANDARI, SUDHANSU JYOTI
MUKHOPADHAYA AND DIPAK MISRA, JJ.)
A
B
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
F
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
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 nonpayment 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] [529B-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
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
liability on account of dishonour of cheque primarily falls
on the drawee company and is extended to the officers
E
F
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
0 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.
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;
0 Rajneesh Aggarwal v. Amit J. Bhalla JT 2001 (1) SC 325;
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
G
2007 (10) SCR 1110
referred to
Para 5,9
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
A
B
c
D
E
F
G
512
SUPREME COURT REPORTS
[2012) 5 S.C.R.
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
1955 SCR 603
relied on
Para 29
1970 SCR 821
relied on
Para 30
1996 (8) Suppl. SCR 193 relied on
Para 31
1962 SCR 9
relied on
Para 31
1988 SCR 700
relied on
Para 31
1994 (1) SCR 433
relied on
Para 31
1995 (1) SCR 56
relied on
Para 31
2005 (3) Suppl. SCR 371 relied on
Para 5
AIR 1988 SC 1128
distinguished Para 38
(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 PELLA TE JURISDICTION : Criminal Appeal
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.
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.
The initiation of prosecution was challenged under Section 482
of the Code of Criminal Procedure before the High Court and
F
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 others1; 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
expressed the view as follows: -
E
1.
(2005) 4 sec 530.
2.
AIR 2007 SC 1481 : (2007) 11 sec 297.
3.
c2005) 8 sec 89.
4.
(2006) 10 sec 581.
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.
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.
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"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.
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
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
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.
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.
·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.
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
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. Venkat16,
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
1 s. c2000) 1 sec 1.
1s. c2001) 10 sec 91.
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[2012] 5 S.C.R.
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.
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
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."
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
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
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
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
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
F
the complaint which are to the effect that the two accused
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.
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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: -
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(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
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,
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
provision makes the company the principal
offender.
(b)
The essence of vicarious liability is inextricably
intertwined with the liability of the principal offender.
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 c
deemed concept compartment on certain guided
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)
The decision in Sheoratan Agarwal and Another
E
(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
F
Section 10(1) of the Essential Commodities Act,
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
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[2012] 5 S.C.R.
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".
(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
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: -
E
F
G
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(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
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
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
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
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.
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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
has been placed on D. Vinod Shivappa v. Nanda
Befliappa20, Mis. Modi Cement Ltd. v. Shri Kuchil
Kumar Nandi21, Goaplast Pvt. Shri Ltd. v. Chico
Ursula D'souza and Anr. 22, NEPC Micon Ltd and
Ors. v. Magma Leasing Ltd. 23, Dalmia Cement
(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
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
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,
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
(v)
PVT. LTD. [DIPAK MISRA, J.]
been placed upon Mis Bilakchand Gyanchand Co.
A
v. A. Chinnaswami27, Rajneesh Aggarwal v. Amit
J. Bhalla28, SMS Pharmaceuticals Ltd. v. Neeta
Bhalla (supra), Anil Hada v. Indian Acrylic Ltd.
(supra) and R. Rajgopal v. S.S. Venkat29•
B
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.