ANIL GUPTAversusSTAR INDIA PVT. LTD. & ANR

                      [2014] 8 S.C.R. 183


                          ANIL GUPTA                                  A
                                v.
                STAR INDIA PVT. LTD. & ANR.
              (Criminal Appeal No.1364 of 2014)
                         JULY 07, 2014
                                                                      B
        [SUDHANSU JYOTI MUKHOPADHAYA AND
               V. GOPALA GOWDA, JJ.]

     NEGOTIABLE INSTRUMENTS ACT, 1881:
                                                                      c
       ss.138 and 141 - Complaint against a Company and its
  Managing Director alleging disonour of cheques issued by
  Company - Summons issued against company quashed by
  High Court - Maintainability of criminal proceedings against
  Managing Director (appellant) alone - Held: Only the drawer         0
  of the cheque falls within the ambit of s. 138 of the Act whether
  human being or a body 'Corporate or even a firm -- The guilt
  of offence u/s 138 will be deemed to be upon other persons
  connected with the Company in view of s.141 - In the instant
  case, High Court ha~held that complaint against Company
  was not maintainable and quashed summons against it -- As           E
  Company is not a party to the proceedings u/s 138 rlw s.141,
  the remaining part of the impugned judgment whereby High
  Court has held that proceedings against appellant can be
  continued, is set aside and summons and proceedings
1
  against him pursuant to the complaint are quashed.                  F

      Respondent no. 1 filed a criminal complaint for
 offences u/ss 138 and 141 of the Negotiable Instruments
 Act, 1988 against respondent no. 2, Company and the
 appellant-Managing Director alleging dishonour of                    G
Icheques issued by respondent no. 2, Company. On a
 petition u/s 482 Cr.PC filed jointly by respondent no. 2,
 Company and the appellant, the High Court quashed the
 summons issued against the company and relying on
                            183                                       H
    184      SUPREME COURT REPORTS           [2014] 8 S.C.R.


A Anil Hada's 1 case held that proceedings against the
  Director could be continued.

      In the instant appeal filed by the Managing Director
  of the Company, it was contended that since the
B proceedings against the company were quashed, the
  same could not be continued against him as he was only
  vicariously liable.

          Allowing the appeal, the Court

c         HELD

       1.1. Only the drawer of the cheque falls within the
  ambit of s.138 of the Negotiable Instruments Act, 1881
  whether human being or a body corporate or even a firm.
  The guilt of offence uls 138 will be deemed to be upon
D other persons connected with the Company in view of
  s.141 of the Act. [paras 10-11] [189-C-D]

        Anil Hada v. Indian Acrylic Ltd. 1999 (5) Suppl. SCR 6
    = (2000) 1 sec 1- stood overruled.
E
          Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd.
    2012 (5) SCR 503 = (2012) 5 SCC 661; and Aneeta Hada
    v. Godfather Travels and Tours Pvt. Ltd. (2008) 13 SCC 703
    - relied on.
F      1.2. In the instant case, the High Court by impugned
  judgment held that the complaint against respondent
  no.2-Company was not maintainable and quashed the
  summons issued by the trial court against respondent
  no.2-Company. Thereby, the Company being not a party
G to the proceedings uls 138 read with s.141 of the Act and
  in view of the fact that part of the judgment referred to
  by the High Court in Anil Hada has been overruled by
  three Judge Bench of this Court in Aneeta Hada, the rest
  part of the impugned judgment whereby the High Court
H 1. 1999 (5) Suppl. SCR 6.
   ANIL GUPTA v. STAR INDIA PVT. LTD. & ANR.                 185


has held that the proceedings against the appellant can             A
be continued even in absence of the Company, has to be
set aside. Accordingly, that part of the impugned
judgment passed by the High Court so far it relates to
appellant is set aside and the summons and proceedings
pursuant to complaint case No.698 of 2001 qua the                   B
appellant are quashed. [paras 15-16] [193-F-H; 194-A-B]
                      Case Law Reference:
    1999 (5) Suppl. SCR 6 Stood overruled             para 6
    (2008) 13 SCC 703          Relied on              para 13       c
    2012 (5) SCR 503           Relied on                 "
                                                      para 14
    CRIMINAL AP PELLATE JURISDICTION : Criminal Appeal
No. 1364 of 2014.
                                                                    D
    From the Judgment and Order dated 13.08.2007 in CMP
No. 2380/2004 of the High Court of Delhi at N. Delhi.
    Ashok Mathur for the Appellant.
    Aman Lekllli, R.N. Karanjawala, Manik Karanjawala,              E
Sandeep Kapue, Shivek Trehan, Prem Prakash for the
Respondents.
    The Judgment of the Court was delivered by.
       SUDHANSU JYOTI MUKHOPADHAYA, J.: 1. Leave                    F
: gran.ted.

     2. This appeal is directed against the judgment dated 13th
August, 2007 passed by the High Court of Delhi at New Delhi
in Criminal Miscellaneous Case No.2380 of 2004. By the
impugned judgment, the High Court held that the complaint           G
under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the, 'Act') was
barred by limitation and quashed the summon order against
respondent no.2-Visionaries Media Network (hereinafter
                                                                    H
    186       SUPREME COURT REPORTS                 [2014] 8 S.C.R.


A   referred to as the, 'Company'). It further held that the dispute
    qua the appellant (petitioner .no.2 before High Court) is within
    limitation and affirmed the summon order against the appellant.

          3. The factual matrix of the case is as follows:
B      A subscription agreement was entered into between
  respondent nos.1 and 2 whereby respondent no.2-Company
  was appointed as distributor of Star Channels and collecting
  subscription fee for the same. On 27.12.2003, respondent no.2-
  Company issued three cheques bearing nos.790913, 790912
C and 790911 for Rs.6,00,000/-, Rs.5,00,000/- and Rs.5,00,000/
  - respectively drawn on the Indian Overseas Bank, Gandhi
  Nagar, Jammu. The aforesaid three cheques were presented
  before the Indian Overseas Bank, Gandhi Nagar, Jammu and
  were dishonoured on 6.01.2004. Respondent No.1 served
D notice on respondent no.2-Company with a demand notice
  separately for all the three cheques. Respondent no.2-Company
  replied to the said notice on 20.01.2004 informed respondent
  no.1 that payments were stopped because of their inability to
  stop the piracy due to which the cable operators did not make
E payments.

         Thereafter, respondent no.1 issued second notice dated
    28.01.2004 on the appellant based on the same facts and
    based on the same memo of dishonor in respect of the
    aforesaid three cheques. Respondent no.1 also issued a
F   corrigendum of the same date to the said notice. The appellant
    submitted reply to the said notice on 3.02.2004.

      4. Respondent no.1 filed a Criminal Complaint under
  Sections 138 and 141 of the Act on 17.03.2004. According to
G appellant, respondent no, 1 concealed the material fact of
  having earlier issued notice dated 14.1.2004 with regard to the
  aforesaid three cheques and by misleading the Court got
  summons issued by Metropolitan Magistrate in Complaint
  No.698 of 2001 to the appellant and respondent no.2-
H Company.
    ANIL GUPTA v. STAR INDIA PVT. LTD. & ANR.              187
      [SUDHANSU JYOTI MUKHOPADHAYA, J.]
      5. Thereafter, respondent no.2-Company and appellant         A
jointly filed Criminal Miscellaneous Petition No.2380 of 2004
under Section 482 of the Criminal Procedure Code, 1973
before the High Court of Delhi at New Delhi for quashing the
aforesaid criminal complaint filed by respondent no.1. In its
reply, respondent no.1 ·taken the plea that first notice dated     B
 14.01.2004 was not a notice under Section 138 of the Act. It
was contended on behalf of the appellant that he was only
vicariously liable on behalf of respondent no.2-Company.
 Learned counsel for the appellant placed reliance on decisions
 of this Court in support of his claim.                            c
      6. The High Court by impugned judgment while recording
 the stand taken by respondent no.1 that letter dated 14.01.2004
 constituted a valid notice under Section 138 of the Act and
 hence the complaint based on second notice against
 respondent no.2-Company was not maintainable and quashed          D
 the summon issued by the Trial Court against respondent no.2-
 Company. However, so far as appellant is concerned, the High
 Court relying on decision of this Court in Anil Hada v. Indian
 Acrylic Ltd., (2000) 1 SCC 1, held that the proceeding against
 the Director can be issued even in absence of the Company         E
 being impleaded, The High Court further held that the
~summoning order was valid since the first notice was not
 addressed to the appellant and the second notice which was
 also addressed to the appellant was issued within time and.
 therefore, criminal complaint filed by respondent no.1 against    F
 the appellant on the basis of the said notice is maintainable.

       7. Learned counsel appearing on behalf of the appellant
 contended that the order of the High Court is contrary to the
 law in as much as this is not a case where proceedings were       G
 initiated against the Managing Director alone. On the contrary,
 the proceedings are instituted against the company/accused
 and its Managing Director. In the event of the company/accused
 being let off, the same cannot continue against the Managing
 Director who admittedly is only vicariously liable.
                                                                   H
    188       SUPREME COURT REPORTS                [2014] 8 S.C.R.


A        8. It is further submitted that even as per law laid down in
    Anil Handa's case, the Director of a company/accused is only
    liable vicariously and upon his showing that the principal
    accused is not liable he cannot be held guilty.

        9. On the other hand, according to counsel for the
8
    respondents, the issue is no longer res integra as held by the
    High Court.

          10. Section 138 of the Act deals with dishonor of cheque
    for insufficiency etc. as follows:
c
          "138. Dishonour of cheque for insufficiency, etc., of funds
          in the account-Where any cheque drawn by a person on
          an account maintained by him with a banker for payment
          of any amount of money to another person from out of that
D         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 it
          exceeds the amount arranged to be paid from that account
          by an arrangement made with that bank, such person shall I
E
          be deemed to have committed an offence and shall,
          without prejudice to any other provisions of this Act, be:
          punished with imprisonment for a term which may extend
          to two years, or with fine which may extend to twice the
          amount of the cheque, or with both:
F
          Provided that nothing contained in this section shall apply
          unless-

          (a) the cheque has been presented to the bank within a
G         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
H
   ANIL GUPTA v. STAR INDIA PVT. LTD. & ANR                189
     [SUDHANSU JYOTI MUKHOPADHAYA, J.]
    the drawer of the cheque, within thirty days of the receipt   A
    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
                                                                  B
    may be, to the holder in due course of the cheque within
    fifteen days of the receipt of the said notice."

      From the aforesaid provision, it is clear that only the
drawer of the cheque falls within the ambit of Section 138 of
the Act whether human being or a body corporate or even a         c
firm.

     11. The guilt for offence under Section 138 will be deemed
to be upon other persons connected with the Company in view
of Section 141 of the Act, which reads as follows:                D
    "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       E
    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     F
    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) Notwithstanding anything contained in sub-section (1),    G
    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

                                                                  H
      190        SUPREME COURT REPORTS - [2014] 8 S.C.R.


 A          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."
 B
          12. Similar question was raised and considered by two
      Judge Bench of this Court in Anil Hada v. India Acrylic Ltd.
      (2000) 1 SCC 1. This Court held:

            "12. Thus when the drawer of the cheque who fails within
 c          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 in sub-section (1) of Section 141 of the
            Act has some importance. The said phrase would embroil
 D          the persons mentioned in the first category within the
            tentacles of the offence on a par with the offending
            company. Similarly the words "shall also" in sub-section
            (2) are capable of bringing the third category persons
            additionally within the dragnet of the offence on an equal
. E         par. The effect of reading Section 141 is that when the
            company is the drawer of the cheque such company is the
            principal offender under Section 138 of the Act and the
            remaining persons are made offenders by virtue of the
            legal fiction crectted by the legislatur~ as per the s,ection.
 F          Hence the actual offence should have been committed by
            the company, and then alone the other two categories of
            persons can also become liable for the offence.

            13.' If the offence was committed by a company it can be
            punished only if the company is prosecuted. But instead
 G          of prosecuting the company if a payee opts to prosecute
            only the persons falling within the second or third category
            the payee can succeed in the case only if he succeeds in
            showing that the offence was actually committed by the
            company. In such a prosecution t_he accused can show that
 H
   ANIL GUPTA v. STAR INDIA PVT. LTD. & ANR.                 191
     [SUDHANSU JYOTI MUKHOPADHAYA, J.]
    the company has not committed the offence, though such           A
    company is not made an accused, and hence the
    prosecuted accused is not liable to be punished. The
    provisions do not contain a condition that prosecution of
    the company is sine qua non for prosecution of the other
    persons who fall within the second and the third categories      B
    mentioned above. No doubt a finding that the offence was
    committed by the company is sine qua non for convicting
    those other persons. But if a company is not prosecuted
    due to any legal snag or otherwise, the other prosecuted
    persons cannot, on that score alone, escape from the penal       c
    liability created through the legal fiction envisaged in
    Section 141 of the Act."

    "21. We, therefore, hold that even if the prosecution
    proceedings against the Company were not taken or could
    not be continued, it is no bar for proceeding against the        D
    other persons falling within the purview of sub-sections (1)
    and (2) of Section 141 of the Act. In the light of the
    aforesaid view we do not consider it necessary to deal with
    the remaining question whether winding-up order of a
    company would render the company non-existent."                  E

      13. In Aneeta Hada v. Godfather Travels and Tours Pvt.
Ltd., (2008) 13 sec 703, taking note of the maxim lex non cogit
ad impossibilia, two Judge Bench of this Court observed:

    "54. True interpretation, in my opinion, of the said provision   F
    would be that a company has to be made an accused but
    applying the principle of 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         G
    proceeded against if the ingredients of Section 138 as
    also Section 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
    ~nnot be proceeded against due to existence of a legal           H
    192        SUPREME COURT REPORTS                 [2014] 8 S.C.R.


A         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."

B      14. Again the same question was considered by three
   Judge Bench of this Court in Aneeta Hada v. Godfather Travels
   and Tours Pvt. Ltd. (2012) 5 SCC 661. The Court noticed the
  decisions in Anil Hada (supra) case ~nd Aneeta Hada (supra)
  ·case. The three Judge Bench while partly overruled the finding
   of Anil Hada (supra) affirmed the decision of Aneeta Hada
C (supra). This Court held

          "51. We have already opined that the decision in.
          Sheoratan Agarwal runs counter to the ratio laid down in
          C.V. Parekh which is by a larger Bench and hence, is a
D         binding precedent. On the aforesaid ratiocination, the
          decision in Anil Hada has·to be treated as not laying down
          the correct law as far as it states that the Director or any
          other officer can be prosecuted without impleadment of the
          company. Needless to emphasise, the matter would stand
E         on a different footing where there is some legal
          impedimeht and the doctrine of. lex non cogit ad
          impossibilia gets attracted."

          "53. It is to be borne in mind that Section 141 of the Act is
          concerned with the offences by the company. It makes the
F         other persons vicariously liable for commission of an
          offence on the part of the company. As has been stated
          by us earlier, the vicarious liability- gets attracted when the
          condition precedent laid down in Section 141 of the Act
          stands satisfied. There can be no dispute that as the
G         liability is penal in nature, a stri.ct construction of the
          provision would be necessitous and, in a way, the warrant."

          '"58. Applying the doctrine of strict construction, we are of
           the considered opinion th~t commission of offence by the
H          company is an express condition precedent to attract the
   ANIL GUPTA v. STAR INDIA PVT. LTD. & ANR.                  193
     [SUDHANSU JYOTI MUKHOPADHAYA, J.]
    vicarious liability of others. Thus, the words "as well as the    A
    company" appearing in the section make it absolutely
    unmistakably clear that when the company can be
    prosecuted, then only the persons mentioned in the other
    categories could be vicariously liable for the offence
    subject to the averments in the petition and proof thereof.       B
    One cannot be oblivious of the fact that the company is a
    juristic person and it has its own respectability. If a finding
    is recorded against it, it would create a concavity in its
    reputation. There can be situations when the corporate
    reputation is affected when a Director is indicted.               c
    59. In view of our aforesaid analysis, we arrive at the
    irresistible conclusion that for maintaining the prosecution
    under Section 141 of the Act, arraigning of a company as
    an accused is imperative. The other categories of
    offenders can only be brought in the drag-net on the              D
    touchstone of vicarious liability as the same has been
    stipulated in the provision itself. We say so on the basis
    of the ratio laid down in C.V. Parekh17 which is a three-
    Judge Bench decision. Thus, the view expressed in
    Sheoratan Agarwal does not correctly lay down the law             E
    and, accordingly, is hereby overruled. The decision in Anil
    Hada is overruled with the qualifier as stated in para 51.
    The decision in Modi Distillery has to be treated to be
    restricted to its own facts as has been explained by us
    hereinabove."                                                     F

     15. In the present case, the High Court by impugned
judgment dated 13th August, 2007 held that the complaint
against respondent no.2-Company was not maintainable and
quashed the summon issued by the Trial Court against                  G
respondent no.2-Company. Thereby, the Company being not
a party to the proceedings under Section 138 read with Section
 141 of the Act and in view of the fact that part of the judgment
referred to by the High Court in Anil Hada (supra) has been
overruled by three Judge Bench of this Court in Aneeta Hada           H
    194       SUPREME COURT REPORTS              [2014] 8 S.C.R.


A (supra), we have no other option but to set aside the rest part
  of the impugned judgment whereby the High Court held that the
  proceedings against the appellant can be continued even in
  absence of the Company. We, accordingly, set aside that part
  of the impugned judgment dated 13th August, 2007 passed by
B the High Court so far it relates to appellant and quash the
  summon and proceeding pursuant to complaint case No.698 _
  of 2001 qua the appellant.

          16. The appeal is allowed with aforesaid observation.
C   Rajendra Prasad                                  Appeal allowed.