P.R.VARDANAN S/O RAJAN and JOFFI T.F. v. VIDHAYADARAN and STATE OF KERALA

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE P.D.RAJAN** **WEDNESDAY, THE 26TH DAY OF FEBRUARY 2014/7TH PHALGUNA, 1935** **Crl.MC.No. 3941 of 2012 ()** **--------------------------AGAINST THE ORDER/JUDGMENT IN CC 817/2011 of JUDICIAL FIRST CLASS MAGISTRATE-V,KOZHIKODE** **PETITIONER(S)/ACCUSED:** **-----------------------** **1. P.R.VARDANAN S/O.RAJAN, MANAGING DIRECTOR, CHAKRA MOTORS PULIKKAL HOUSE, KANNIKULANGARA P.O, PUTHENCHIRA THRISSUR DISTRICT.** **2. JOFFI.T.F, S/O.FRANCIS, DIRECTOR, CHAKRA MOTORS THERMADOM HOUSE, THALAKKOTUKARA THRISSUR NOW RESIDING AT SUNDARAM BUILDING NEAR MATHA AMRITHANANDAMAYI TEMPLE, MALAPARAMBU KOZHIKODE.** **BY ADVS.SRI.P.SAMSUDIN SMT.NIMA JACOB** **COMPLAINANT(S):** - **----------------** **1. VIDHAYADARAN AGED 41 YEARS, PULIKKAL HOUSE, NALLALAM PO., KOZHIKODE- 673027** **2. STATE OF KERALA REPRESENTED BY TRHE PUBLIC PROSECUTOR HIGH COURT OF KERALA, ERNAKULAM - 682 031** **R1 BY ADV. SRI.K.PRAVEEN KUMAR** **R BY PUBLIC PROSECUTOR SRI.JITHESH R.** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 26-02-2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **CR** ## **P.D.RAJAN, J.** **----------------------------------Crl.M.C. NO.3941 of 2012 -----------------------------------------** Dated this the 26[th] day of February, 2014 ## ORDER This petition is filed under Section 482 of the Code of Criminal Procedure to quash proceedings in C.C.No.817 of 2011 of the Judicial First Class Magistrate Court-V, Kozhikode. Petitioners are the accused in the above case which was filed under Section 138 of the Negotiable Instruments Act. The above complaint was filed by the 1[st] respondent alleging that while he was working as Managing Director of Chakra Motors, Modern Bazar, Nallalam, Kozhikode, there was arrears of ` 2,50,000/- towards salary and in discharge of that liability petitioners issued a cheque on behalf of the company. When it was presented for encashment, it was dishonoured for the reason of insufficiency of funds. In the circumstance, 1[st] respondent **Crl.M.C. NO.3941 of 2012 2** filed the above complaint in the Judicial First Class Magistrate-V, Kozhikode. In the circumstance, petitioners, who are the Managing Director of the Company approached this court to quash proceedings in the above complaint. 2. The learned counsel appearing for the petitioners contended that 1[st] respondent was removed from the company due to the mismanagement, thereafter, 1[st] respondent having access to the office had taken away the cheque leaves, misused the initials and filed the above complaint in order to wreck personal vengeance. Since company is not made as a party in the above complaint, petitioners have no liability in the above transaction. Hence the above complaint is to be quashed by invoking inherent jurisdiction. He relied the following decisions: _**Aneeta Hada**_ _**v. Godfather Travels & Tours Pvt. Ltd.**_ **(2012 (2) KLT 736),** _**Mahesh Kumar v. Taxi Drivers Co operative Society Ltd.**_ **(2010(4) KLT 544),** _**Harshendra Kumar v. Rebatilata**_ ## **Crl.M.C. NO.3941 of 2012 3** ## _**Koley**_ **(2011 (1) KLT 732).** 3. The learned counsel appearing for the 1[st] respondent submitted that the petitioners are the Managing Director and Director of the company and they are liable to pay the amount as per the complaint. Notice was already served on them and there is no violation of Section 138(B). Section 141 of Negotiable Instruments Act deals with the liability of the company. Section 141 reads as follows: “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, “company” means any body corporate and includes a firm or other association of individuals”. The person was in charge of the company and was responsible to the company, as well as the company shall be deemed to be guilty of the offence u/s. 138 of Negotiable Instruments Act. ## Apex Court in 3 judge Bench decision in _**Aneeta Hada**_ ## **Crl.M.C. NO.3941 of 2012 4** ## _**v. Godfather Travels & Tours Pvt. Ltd.**_ **(2012 (2) KLT 736)** ## held as follows **:-** “We have referred to the aforesaid authorities to highlight that the 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. In this backdrop, S.141 of the Act has to be understood. The said provision clearly stipulated that 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 S.138. Thus, the statutory intendment is absolutely plain”. 4. A close analysis of the dictum laid down by the Apex Court shows that when a person which is a company, commits an offence, certainly a person in charge of the company as well as the company will be deemed to be liable for the offence under Section 138 of the Negotiable Instruments Act. The liability of the company was settled by another 3 Bench decision of the apex Court in _**S.M.S.Pharmaceuticals Ltd. v. Neeta Bhalla & Another**_ **Crl.M.C. NO.3941 of 2012 5** ## **(2005 (4) KLT 209)** which held that: “ It primarily falls on the drawer company and is extended to officers of the company. The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in the statutes extending liability to others. S.141 of the Act is an instance of specific provision which in case an offence under S. 138 is committed by a company, extends criminal liability for dishonour of a cheque to officers of the company. S.141 contains conditions which have to be satisfied before the liability can be extended to officers of a company. Since the provision creates criminal liability, the conditions have to be strictly complied with. The conditions are intended to ensure that a person who is sought to be made vicariously liable for an offence of which the principal accused is the company, had a role to play in relation to the incriminating act and further that such a person should know what is attributed to him to make him liable”. While rendering these decisions the Apex Court over ruled the earlier two decisions in _**Sheoratan Agarwal & Another v. State of Madhya Pradesh**_ **(1984(4) SCC 352** ) and partly over ruled (2000)1 SCC 1). From the aforesaid discussions ## **Crl.M.C. NO.3941 of 2012 6** and pronouncement the principle laid down by the Supreme Court is that it is the bounden duty of the defacto complainant to implead the company as a party while prosecuting the Managing Director or the persons in charge of the company and responsibile for the day to day business of the company. If the company is not impleaded as a party it is the responsibility of the court to ascertain for what purpose the legal fiction is created under Section 141 of the Negotiable Instruments Act. The deemed liability under Section 141 of the Negotiable Instruments Act will be attracted only when the responsible company is arrayed as a party. If that be the object of the legislation, if the defacto complainant proceeds under Section 138 of Negotiable Instruments Act without impleading the company as a party, I am of the opinion that the criminal trial will be a mere abuse of process of a court and vicarious liability of a person who is in charge of the company can be held only on **Crl.M.C. NO.3941 of 2012 7** incorporating the company and the person in charge of the company. Therefore, the criminal liability on account of a dishonour of a cheque primarily falls on the drawee company and its extends to the officers of the company only according to the provisions extending the liability through the officers on the phase of a condition imposed under 141 of the Negotiable Instruments Act. If those conditions are not satisfied the trial of the accused is an abuse of process of court and in such cases the inherent jurisdiction under Section 482 of Cr.P.C can be invoked. 5. The inherent jurisdiction under Section 482 can be invoked for the three grounds mentioned therein. Inherent jurisdiction to make such orders necessary to “give effect to any order” under this code or to prevent “abuse of the process” of any court or to secure “the ends of justice”. Apex Court in _**(2008 (SCC) 781) Vineet Kumar Chauhan V. State of UP**_ held that such inherent powers are to be **Crl.M.C. NO.3941 of 2012 8** exercised carefully and continuously only and if such exercise is justified by the test specifically mentioned therein. Analysing the facts and circumstances of this case, it is found that the 1[st] respondent has not impleaded the company while prosecuting as per Section 141. Accepting the legal principle laid down in **(2008 (4) KLT 736)** _**Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd**_ , I am of the opinion that this is a fit case to invoke inherent jurisdiction. Hence, Annexure A1 proceedings in CC No.817 of 2011 pending before the Judicial First Class Magistrate Court-V, Kozhikode u/s.482 Cr.P.C are quashed and this Crl. M.C is allowed. **P.D.RAJAN, JUDGE** pm