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REPORTABLE IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.1364 OF 2014 (arising out of SLP(Crl.) No.7039 of 2007)

Anil Gupta  … APPELLANT

VERSUS

Star India Pvt. Ltd. & Anr.             … RESPONDENTS

J U D G M E N T  

SUDHANSU JYOTI MUKHOPADHAYA,J.

Leave granted.

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 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  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:

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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 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  

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 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 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  appellant,  

respondent  no,1  concealed  the  material  fact  of  having  earlier  

issued notice dated 14.1.2004 with regard to the aforesaid three

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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-Company.   

5. Thereafter,  respondent  no.2-Company  and  appellant  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 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.  

 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 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 being impleaded, The High Court further  

held that the summoning order was valid since the first notice was

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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 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 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.  

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 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:

“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 account for the  discharge, in whole or in part, of any debt or

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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  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:

Provided  that  nothing  contained  in  this  section  shall apply unless—

(a)  the  cheque  has  been  presented  to  the  bank  within a 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 the drawer of the cheque,  within thirty days of the receipt 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 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 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:

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“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.

(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.”

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 falls  within 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 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 par. The effect  of reading Section 141 is that when the company is

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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 created by the legislature as  per the section. 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 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 the accused can show that the  company has not committed the offence, though such  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  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  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 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.”

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13. In  Aneeta  Hada  v.  Godfather  Travels  and  Tours  Pvt.  Ltd.,  

(2008) 13 SCC 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 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 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 cannot be proceeded  against  due  to  existence  of  a  legal  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.”

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 and Aneeta Hada (supra) case.  The three Judge  

Bench  while  partly  overruled  the  finding  of  Anil  Hada  (supra)  

affirmed the decision of Aneeta Hada (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 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

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stand on a different footing where there is some  legal impediment 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  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  liability  is  penal  in  nature,  a  strict  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 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. There can be situations when the  corporate reputation is affected when a Director is  indicted.

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 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 and, accordingly, is  hereby  overruled.  The  decision  in  Anil  Hada is  overruled with the qualifier as stated in para 51.

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The decision in Modi Distillery has to be treated  to  be  restricted  to  its  own  facts  as  has  been  explained by us hereinabove.”

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  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 (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 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.  

…………………………………………J.                 (SUDHANSU JYOTI MUKHOPADHAYA)

…………………………………………J.

(V. GOPALA GOWDA)    

NEW DELHI,

JULY 07, 2014.