- The Appellant issued a cheque dated 17 January 2011, in favour of the Respondent, which was dishonoured. The Respondent initiated criminal action by filing a complaint under Section 138 of the Negotiable Instrument Act, 1881. In the complaint petition, the Company was not arrayed as an accused. However, the Magistrate took cognizance of the offence against the accused Appellant.
- Being aggrieved by the said order, the Appellant invoked the jurisdiction of the Hon’ble High Court for quashing of the criminal proceedings. Due to the difference between the opinions of the judges of the two-judge bench, the matter was placed before the Hon’ble Supreme Court.
Whether any person who has been mentioned in Sections 141(1) and 141(2) of the Act can be prosecuted without the company being impleaded as an accused.
- With regard to Section 138, it is essential that the cheque has to be drawn by a person on the account maintained by him and he must have issued the cheque in discharge of any debt or other liability.
- Company is a juristic person and can be fastened with criminal liability.
- With regard to Section 141, if a person who commits an 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 offence.
- In criminal law, in cases where the law requires a guilty mind as a condition of a criminal offence, the guilty mind of the directors or the managers will render the company itself guilty.
- The company can have criminal liability and further, if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate. Thus, under Section 141, when a person which is a company commits an 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.
Criminal liability on account of dishonour of cheque primarily falls on drawer company and extends to its officers only when the condition stated in Section 141 are fulfilled. Thus, arraiging of the company as the accued under Section 141 is mandatory.