Section 141 of the Negotiable Instruments Act lays down that where the person committing an offence under section 138 (i.e., the offence of cheque dishonour) is a company, the company shall be prosecuted along with every person who was in charge of and responsible to the company for the conduct of the business of the company. This section is reproduced below:
“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:
Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this chapter.
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is 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.”
The question that arises is – can the director of a company be prosecuted for a cheque bounce case, where the cheque was issued by the company, without prosecuting the company itself?
This issue was settled by the Supreme Court in the case of Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : AIR 2012 SC 2795, and it was held that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Interpreting the provisions of Section 141 of the Negotiable Instruments Act, the Supreme Court held 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 touchstone of vicarious liability as the same has been stipulated in the provision itself.
It was held that criminal liability on account of dishonour of cheque primarily falls on drawer company and extends to its officers only when conditions incorporated in Section 141 stand satisfied. Explaining the words “as well as the company” occurring in Section 141, the Supreme Court held that for maintaining prosecution under Section 141, arraigning of company as accused is mandatory.
This judgement of a 3-judge bench of the Supreme Court was followed by another judgement in the case of Charanjit Pal Jindal vs. L.N. Metalics, (2015) 15 SCC 768.
In a recent case, Himanshu v. B. Shivamurthy, (2019) 3 SCC 797, the Supreme Court has reiterated that in absence of company being arraigned as accused, prosecution of Director of the company for the cheque bounce case under Section 138 was not maintainable.
In view of the aforesaid judgments of the Supreme Court, it should be clear that if the cheque had been issued by the company which has subsequently been dishonoured, a director of the company cannot be prosecuted for the cheque bounce case unless the company is also prosecuted along with, for the same offence.
