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

Judgment

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 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 F 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 non payment 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] [529- B-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 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 F E 508 SUPREME COURT REPORTS [2012] 5 S.C.R. B 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 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 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. 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] E 0 G