What is basic concept of S 141 of Negotiable instruments Act?

 Section 141 of the Negotiable Instruments Act deals with vicarious liability when the drawer of the dishonoured cheque is a company or firm, not a natural person. It says that along with the company, every person who at the time of the offence was in charge of and responsible for the conduct of its business can also be prosecuted, subject to the statutory defence that the offence occurred without his knowledge or despite due diligence.

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Whether managing director can be prosecuted if firm is not made party in case of dishonour of cheque?

The three Judge Bench of the Hon'ble Supreme Court in Aneeta Hada v. M/s. Godfather Travels and Tours Pvt. Ltd., MANU/SC/0335/2012 : 2012 (2) RCR (Criminal) 854, after going through plethora of judgments has held that there could be no vicarious liability of the signatory of the cheque issued from the account of the firm unless there is a prosecution against the firm. Further, if the cheque in question is issued by a firm, arraigning of such a firm as an accused is imperative and only, thereafter, the other categories of offenders could be brought in the dragnet on the touchstone of vicarious liability as has been stipulated by Section 141 of the Act. The relevant observations made by the Hon'ble Supreme Court are reproduced here-below:-

"Be it noted, the two-Judge Bench has correctly stated that there can be no vicarious liability unless there is a prosecution against the company owning the industrial unit but, regard being had to the factual matrix, namely, the technical fault on the part of the company to furnish the requisite information called for by the Board, directed for making a formal amendment by the applicant and substitute the name of the owning industrial unit. It is worth noting that in the said case, M/s. Modi distilleries was arrayed as a party instead of M/s. Modi Industries Limited. Thus, it was a defective complaint which was curable but, a pregnant one, the law laid down as regards the primary liability of the company without which no vicarious liability can be imposed has been appositely stated.

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Applying the doctrine of strict construction, we are of the considered opinion that 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 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 finding is recorded against it, it would create a concavity in its reputation.

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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 dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself."

12. In the present case, as the cheque in question was issued by the firm of which the petitioner was a Managing Director, the petitioner could not be tried in his personal capacity unless and until the firm also stood arraigned as an accused. In the absence of the firm not being arraigned as an accused, the petitioner could not be vicariously liable of the charge levelled against him.

13. Once it is held that the petitioner, in his personal capacity could not be arraigned as an accused unless and until the firm of which he was a Managing Director was also arraigned as an accused, his conviction and sentence, as awarded by the trial Court and upheld by the lower appellate court, cannot be upheld.

IN THE HIGH COURT OF PUNJAB AND HARYANA

Crl. Revision 659 of 2005

Decided On: 14.09.2016

 G.P. Kotyal

Vs.

 Jindal Udyog and Ors.

Hon'ble Judges/Coram:

T.P.S. Mann, J.

Citation: 2017 ALLMR(CRI)JOURNAL 40

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